According to Navy documents, producing a significantly less costly submarine would allow the Navy to maintain a force level of 45 to 55 submarines and maintain the current submarine industrial base. The NSSN program is intended to address the Navy’s requirement for 10 to 12 new attack submarines by the year 2012 that are as quiet as the Seawolf, but at lower cost and without compromising military utility. Before design evaluation, the Chief of Naval Operations set the attributes and requirements for the NSSN based on the Navy’s prospective need to defeat a very sophisticated future Russian threat and to operate in littoral (coastal) areas. The submarine’s attributes and requirements are the NSSN’s major cost drivers; these include speed, quietness, diving depth, weapons load, and sensor performance. According to the Navy, the NSSN will be a highly effective multimission platform capable of performing antisubmarine and antisurface ship missions and land attack strikes as well as mine missions, special operations, battle group support, and surveillance. During submarine design and development, the Navy initiated several acquisition reform measures intended to keep costs under control. According to the Navy, the cost of the submarine will be reduced by about one third, because of the use of Integrated Product and Process Development teams, computer-aided design, commercial off-the-shelf technology, and a performance-based acquisition strategy. The Navy also claims it can save as much as $100 million per ship by incorporating lessons learned from previous submarine programs. The savings expected from these initiatives are included in the Navy’s estimated acquisition cost for the fifth ship NSSN. Based on Navy estimates for a 30-ship, single shipyard program, the Seawolf’s average acquisition cost was estimated to be about $1.85 billion compared to the NSSN’s estimate of about $1.5 billion. Based on a 30-ship, two shipbuilder program, the Navy’s estimated acquisition cost for the fifth ship of the NSSN class has already risen from about $1.5 billion to about $1.8 billion as of March 1996. According to the Navy, most of the $250 million increase in the estimated cost of the fifth NSSN is the result of the direction in Public Law 104-106 to add a second shipbuilder to the program and to accelerate the procurement of two of the first four submarines. The Navy’s original plan, approved in May 1995, was to build one ship in fiscal year 1998, a second ship in fiscal year 2000, and two ships per year beginning in fiscal year 2002—all at Electric Boat Corporation, Groton, Connecticut. The 1-year gap between construction of the first and second ships, according to Navy officials, would allow the Navy to “mature” the NSSN design and gain experience constructing the first ship before beginning construction of the second ship. The Navy currently maintains two nuclear-capable shipyards—one to build submarines (Electric Boat, Groton, Connecticut) and one to build nuclear-powered aircraft carriers (Newport News Shipbuilding and Drydock Company, Newport News, Virginia). According to Navy officials, the use of the single contractor to build the NSSN would increase savings by avoiding overhead and design transfer costs and achieving the benefits of the experience gained by building 30 ships at one shipyard. The Navy adopted this strategy in response to a recommendation in DOD’s Bottom-Up Review to use a single contractor. However, Public Law 104-106 directed the Navy to start construction of an NSSN at Newport News Shipbuilding and Drydock Company (Newport News) in 1999 and submit a plan for building four NSSNs between fiscal year 1998 and 2001, two of which were to be built by Electric Boat (one in 1998 and one in 2000) and two by Newport News (one in 1999 and one in 2001). The intent of the legislation in introducing competition was to obtain a cost benefit. The act requires that each of the first four submarines develop and demonstrate new technologies that will make each more capable and more affordable than its predecessor. In its required March 1996 report, DOD indicated it would need an additional $3.8 billion for fiscal years 1997 through 2001 in shipbuilding and conversion (SCN) funds to implement the act. Even with this additional funding, new submarine construction would require about 23 to 38 percent of the available SCN funds versus the historical 22 to 25 percent. The additional funding is to build the baseline design only and does not include funding for new technology insertion or nonrecurring costs related to design changes. DOD said that it would also need an additional $787 million in research, development, test, and evaluation funds to accelerate and develop new technology not included in the current design. According to DOD and Navy officials, the NSSN, as currently designed, is expected to meet all requirements for carrying out its missions. DOD noted in its report that it would be difficult to afford the plan directed by Public Law 104-106 in the context of other modernization programs. The Department developed and proposed several alternative construction schedules that would add a second shipbuilder and lead to competition. The report states, however, that DOD would face major near-term affordability issues if it pursued the congressional plan or any of the alternatives presented in its report. DOD did not report the individual cost for each of the first four ships, which we provide in table 1. In addition to construction costs, the Navy estimates it will cost about $3.8 billion (then-year dollars) to design and develop the NSSN. As a result, the Navy will spend a total of about $13.8 billion to develop and buy the first four NSSNs under the revised shipbuilding plan. Under the strategy to use the two shipbuilders, the Navy estimates that the cost of the fifth ship of the NSSN class in fiscal year 1995 dollars will rise from about $1.5 billion to about $1.8 billion as of March 1996. According to the Navy, this change in strategy will result in increased costs such as increased overhead and the loss of experience in building both the lead and follow-on ships when using two shipbuilders and decreased costs such as lower production costs due to competition. The Navy estimates that the net effect for the total program is a cost increase of about $3 billion. Although we believe the cost categories seem reasonable, we have no basis to agree or disagree with the total program estimate because the Navy has not provided support for the costs associated with the individual categories. Historical evidence shows that some cost increases may occur. The impact of competition is generally expected to result in decreases in production costs. Such results will depend on the Navy’s acquisition strategy, which has not yet been determined. Even without adding a second shipbuilder to the program, there is a potential for cost increases, because of a variety of program risks. A highly complex and optimistic C3I system development and integration program, concurrent system development and ship design and construction, and the lack of fallback systems in the event a system fails suggest that major cost increases are likely. Moreover, major systems historically encounter unforeseen problems during development, resulting in cost increases of about 20 to 40 percent. Further, the Navy’s estimates for transferring the design to the second shipbuilder may be understated by hundreds of millions of dollars. The estimated start-up costs for the second shipbuilder range from $1 million to $1 billion. The Congress authorized and appropriated funds for advance procurement of the first two NSSNs—the 1998 start of construction at Electric Boat and the 1999 start at Newport News. The National Defense Authorization Conference Report for fiscal year 1997 modified the House National Security Committee’s recommended provision, which would have authorized funds for both shipyards to (1) design improvements for incorporation into the first four NSSNs and (2) design another new attack submarine that would be more capable but less costly than the NSSN. Instead, the National Defense Authorization Act for fiscal year 1997 provides that the shipbuilders can propose any design improvements to the first four submarines to the Secretary of the Navy. The Secretary will be required to submit an annual report to the authorization committees on actions taken on the proposed design improvements. If any shipbuilder design improvements for the first four submarines are proposed and accepted, it would further increase the cost of the NSSN program for the new design work and the technology insertion. A new estimated cost would need to be determined if another new design is proposed and accepted. If a new design is proposed and accepted, the estimated cost would depend on the submarine’s attributes and requirements. The Navy is developing a C3I combat system that will integrate 15 subsystems upon delivery to the shipyard. The integration will be at the system level using an open system architecture. For this integration, the Navy plans to use new and existing technology, commercial off-the-shelf (COTS) equipment, and reengineered systems. The ship’s prime contractor will provide four of the subsystems—exterior communications, interior communications, nontactical data processing, and ship monitoring. The government will provide the remaining subsystems, including those for radar, navigation, navigation data distribution and display, imaging, and electronics support measures. The government will also provide three subsystems from a C3I system prime contractor—sonar, combat control, and architecture and the system-level integration of all subsystems. In its April 1995 early operational assessment report on the NSSN, OPTEVFOR considered the C3I open system architecture a high risk because it is a very extensive and ambitious effort with a very short development and integration time frame. The report noted that the development schedule is extremely optimistic for the complexity and scope of the effort. OPTEVFOR officials stated that the Navy has never attempted such a large-scale integration effort on a submarine.