The U.S. Navy Isn’t Revealing How Much Its New Carriers Really Cost
Congressional watchdog calls out the Navy for its lack of independent cost estimates
The U.S. Navy has learned a lot of lessons trying to develop its next generation aircraft carrier. The trouble is, as a report by the Government Accountability Office mentions, the Navy is so far refusing to put these lessons into practice, and the taxpayers end up paying the price.
The GAO recently released the report detailing many problems that have plagued the Ford-class carrier program over the years as it developed the carrier around new and unproven technologies. Costs for the first ship increased from $10.5 billion to $12.9 billion as a result. The GAO estimates that both the Gerald R. Ford and the second-in-class ship, the John F. Kennedy, will continue to face cost increases.
The GAO found that “a high degree of concurrency between ongoing technology development and ship detail design hampered the design process,” which inflated the costs of the ship by 23 percent and led to “a reduced capability expected at delivery.”
Instead of challenging the Navy’s acquisition strategy, Congress opted to set a cost cap in the budget for $12.9 billion for the first-in-class ship, while the subsequent ships would be capped at $11.4 billion each, according to a Congressional Research Service report. GAO notes that Congress established this cap “to help ensure that the Navy adhered to its cost estimates.”
However, the CRS report notes that in 2015 the Office of the Secretary of Defense estimated that the costs of the second carrier, the Kennedy, would exceed the cap by $235 million, and in February 2017 the Congressional Budget Office estimated it could exceed it by about $400 million.
Recently, the Navy requested $20 million in additional funding for repairs for the Ford. At a June 15, 2017, Senate Armed Services Committee hearing, Sen. John McCain (R-AZ) pressed Acting Navy Secretary Sean Stackley on the possibility of the program exceeding the cap with this request. Stackley responded that “the Navy is still evaluating whether the expenditure needed will breach the cost cap and the Navy would notify Congress if it finds that will be the case.”
McCain went on to ask “for an explanation in writing on whether there was a $20 million cost overrun that was allowable and required Congress be notified or the expense of the carrier breached the cost cap.” All of this seems to confirm GAO’s findings that the program will continue facing increased costs.
The Navy had predicted that construction and labor hour costs would be reduced for the follow-on ships because of lessons learned building the first. However, according to the GAO, the Navy is being optimistic about the costs “based on a projected reduction in construction labor hours that is unprecedented in aircraft carrier construction.”
Not only that, but GAO notes that the Navy and DoD provided little to no data on labor hours to the Naval Center for Cost Analysis [NCCA] and the Pentagon’s Cost Assessment and Program Evaluation [CAPE] office, and those that were provided were delivered too late to make informed decisions about budget levels, leading to the overly optimistic budget for John F. Kennedy.
That data is necessary to help NCCA and CAPE to make a more accurate estimate on labor hour costs. NCCA officials estimate “labor costs could potentially increase by over $100 million” for both Ford and Kennedy, based on estimates using labor hour reduction data from previous aircraft carrier projects.
Moreover, the GAO faulted the Navy and the Pentagon for failing to secure independent cost estimates from NCCA and CAPE for the Ford program before requesting funds for development and construction. According to the report, reliable estimates “provide the basis for informed investment decision making, realistic budget formulation and program funding, meaningful progress measurement, proactive course correction when warranted, and accountability for results.”
But for an 11-year period, between 2004 and 2015, not a single independent cost estimate was conducted on either the Ford or the Kennedy. They were finally conducted by NCCA and CAPE in 2015, after the program had received $15 billion in funding. The GAO recommends that NCCA and CAPE provide independent cost estimates before the Navy makes its budget and construction requests for future follow-on ships.
Shipbuilders lower the stern of USS ‘John F. Kennedy’ in Newport News, Virginia in June 2017. U.S. Navy photo
They also recommend separate Selected Acquisition Reports for each ship rather than an aggregate of the entire program. The GAO writes that the practice of submitting aggregate reports “obscures individual ship cost growth and does not provide insight into cost performance against the specific cost caps Congress has mandated for each ship.”
On Feb. 7, 2017, James MacStravic, the Under Secretary of Defense for Acquisition, Technology and Logistics, responded to the GAO’s recommendations, indicating that the Navy will provide life-cycle cost estimates for each individual ship, but only beginning with the third ship, USS Enterprise.
But, he said, the Navy would not be able to follow GAO’s recommended timeline in completing this life-cycle cost estimate before asking Congress for the funding to begin construction. As for reporting on the program, the DoD disagreed that a SAR for each individual ship was necessary to provide helpful information about the costs of each ship. Instead, MacStravic said, it could result in “unnecessary duplication.”
As the Project On Government Oversight and the Straus Military Reform Project previously reported, serious concerns remain about the basic design of Ford-class carrier. Several of the ship’s major systems have yet to be fully designed and tested. The possibility remains that testing might reveal that a major ship system, like the catapult, may have to be redesigned or even replaced.
Congress must have all the available information, including independent cost estimates, to make informed decisions before more money is sunk into this program.