Watchdog Says ‘I Told You So’ About New Carrier Costs
GAO tells Pentagon, Congress to get real about defense spending
The Government Accountability Office has slammed the U.S. Navy for badly managing its plans to buy new Gerald R. Ford-class aircraft carriers. Too late to do anything about delays and soaring costs, the top government watchdog hopes the boondoggle will at least be a teachable moment.
In 2009, Newport News Shipbuilding started construction of the first ship in the class, the USS Gerald R. Ford, also known as CVN-78. Scheduled to enter service in May 2016, the vessel may not arrive with key gear and is already $2 billion over budget.
“Budgets set early in the Ford-class program were not realistically achievable and included optimistic delivery dates to the fleet,” Paul Francis, GAO’s managing director of acquisition and sourcing management, bluntly told the Senate Armed Services Committee on Oct. 1. “The consequences of this tension have been realized today … with promised levels of capability potentially compromised.”
Having warned of exactly this outcome two years before the Virginia-based shipbuilder laid down CVN-78’s hull, Francis could not help but slip in an “I told you so” up front in the GAO’s full report titled “Poor Outcomes Are the Predictable Consequences of the Prevalent Acquisition Culture.”
“In July 2007, we reported on weaknesses in the Navy’s business case for the Ford-class aircraft carrier,” Francis noted to the assembled lawmakers. “Today, all of this has come to pass in the form of cost growth, testing delays and reduced capability – in other words, less for more.”
But at least according to the current requirements, Ford is already 92 percent complete. So, all the Pentagon can do is try to prevent these kind of messes with future members of the class and other big ticket items.
More than a decade ago, the Pentagon started considering replacements for the Navy’s venerable Nimitz-class carriers. In service since 1975, the sailing branch has progressively updated Nimitz and her sisters over the years.
Unfortunately, the basic design imposes significant limits on the scope of any changes. The Navy specifically wanted the Ford class to allow for more dramatic improvements.
Among other features, the new ships have an updated nuclear reactor, bigger flight decks, an electromagnetic catapult to launch aircraft, upgraded computer systems, more powerful radars and an advanced mechanism to help catch landing planes. In contrast, even the newest Nimitz-class vessels look particularly dated with their Cold War-era nuclear power plants, steam-powered catapults, spotty Internet connections and increasingly outdated electronics.
Unlike the previous modifications, these improvements centered in no small part on largely untested technologies that would take time to get working. In its first report on the project eight years ago, GAO had zeroed in on these potential issues.
The government watchdog highlighted seven unrealistic expectations the Navy had about the project. Most importantly, despite the fact that contractors were still developing many of the core systems, the sailing branch assumed that the overall shape and size of the carrier would remain essentially the same throughout construction.
With the hope that the final design would have a hull similar to the older carriers, the Navy assured the Pentagon the work could be done quickly and on the cheap compared to those ships. GAO and Newport News both disagreed.
“Specifically, we noted that the Navy’s cost estimate of $10.5 billion and two million fewer labor hours made the unprecedented assumption that the CVN 78 would take fewer labor hours than its more mature predecessor – the CVN 77 [USS George H.W. Bush],” Francis told senators. “The shipbuilder’s estimate – 22 percent higher in cost – was more in line with actual historical experience.”
The watchdog’s fears turned out to be well founded. Six years after publishing their initial criticisms, GAO released a second report stating that, as expected, new equipment such as the ship’s radar, and Electromagnetic Aircraft Launch System and the Advanced Arresting Gear landing system were all running into trouble.
When construction of Ford began, the Navy had not built a single one of the radar units it expected to fit on the ship. Engineers had never tested the components they had built outside of a laboratory.
The sailing branch had started prototyping the EMALS and AAG gear, but on land. GAO found that both of these state-of-the-art systems were experiencing relatively normal teething problems.
The shipbuilders had to incorporate design changes into the vessel they were already building. Unsurprisingly, the new carrier was over-budget by 22 percent – perfectly in line with Newport News’ original estimates.
In January, the Pentagon’s top weapon tester pointed out continuing problems with various important systems, especially the EMALS and AAG gear. Four months later, the Navy finally tested throwing a weighed sled with the new catapult off the still in-progress Ford.
“Reliability for the catapult and arresting gear systems have not been reported on in over a year,” the Director of Operational Test and Evaluation wrote in its annual summary of the program. “Before the Navy stopped tracking/reporting on catapult and arresting gear performance, both systems were performing well below their projected target to achieve required reliability.”
Then there was the matter of shock testing CVN 78. The Navy routinely uses explosives to shake new ships to make sure they’re ready for dangerous, combat situations.
Despite initial plans for a so-called Full Ship Shock Trial, “the Navy unilaterally reneged on the approved strategy on June 18, 2012,” according to the Pentagon’s year overview. In August, Frank Kendall — the under secretary of defense for acquisition, technology and logistics — sent a memo to Navy secretary Ray Mabus ordering him go ahead with the tests, according to a report from Bloomberg.
Beyond delays resulting from issues with the ship and its equipment, the Navy kept revising the number of sailors it will take to run the ship based on various design changes. “As manning requirements have been further developed, analysis indicates the present design has insufficient berthing for some ranks requiring re-designation/redesign of some spaces as a possible solution,” the Pentagon evaluators discovered.
The Pentagon figured the sailing branch will run into problems getting the Ford ready for its version of the troublesome F-35 stealth fighter. All told, GAO isn’t sure the Navy can meet its goal of having the ship fully operational less than five years from now.
“The timeframes for post-delivery testing, i.e. the period when the ship would demonstrate many of its capabilities, are being compressed by ongoing system delays,” Francis said. “This tight test schedule could result in deploying without fully tested systems if the Navy maintains the ship’s ready-to-deploy date in 2020.”
Perhaps even more problematic, the Navy’s failure to be realistic about the carriers from the start means the costs are likely to keep growing beyond the more reasonable estimates at the beginning from GAO or Newport News. Regardless of the final price tag, “the Navy’s approach … results in a more expensive, yet less complete and capable ship at delivery than initially planned,” Francis declared.
However, the wrangling over CVN 78’s cost is basically over. But Francis told senators he was worried about the same problems playing out with the second ship in the class, the John F. Kennedy – a.k.a. CVN 79.
As with the Ford, GAO accused the Navy of being overly optimistic about the up-front costs and fudging the numbers by planning to install key gear after getting the ship. If the sailing branch proceeded as planned, Francis explained the service would be accepting yet another carrier with the same flaws as the first one.
“I think what we’ve seen with the CVN 78 and the CVN 79 was optimism verging on delusion about what each carrier was going to cost,” Mandy Smithberger, director of the Straus Military Reform Project at the Center for Defense Information, told War Is Boring after reviewing the watchdog’s report. “The Navy and the Pentagon knew that the true cost was politically untenable.”
Beyond that, both the Pentagon and lawmakers have refused to keep to their own budget caps with the new carriers. Congress has put caps in place to try and control the price point. The Navy had previously convinced lawmakers to loosen those rules as the Ford became more expensive.
Now, the Kennedy is already at its Congressional mandated $11.5 billion cap. Under existing plans, however, both the Pentagon’s own Cost Assessment and Program Evaluation office and the Congressional Budget Office expect the ship’s final cost to go up.
According to Francis, the debacle has been the result of complacency on all sides and culture that promotes throwing money at problems. “In the commercial marketplace, investment in a new product represents an expense,” the managing director noted. But for the military, “new products represent a revenue, in the form of a budget line.”
In turn, the services offer overly optimistic assessments of their own projects to secure pieces of that increasingly shrinking budget. The Navy is already looking for money for CVN 80, despite clearly not having a real sense of how much the new carriers actually cost.
“The environment of Navy shipbuilding is unique as it is characterized by a symbiotic relationship between buyer [Navy] and builder,” Francis added. “Under such a scenario, the government has a limited ability to negotiate favorable contract terms in light of construction challenges and virtually no ability to walk away from the investment once it is underway.”
In his concluding remarks, Francis said that the only way to avoid bigger problems in the future is to have a serious conversation about how the Pentagon asks for and how Congress doles out money for large defense programs.
“I think it’s easy for the Pentagon and Congress to dismiss GAO’s warnings and predictions at the beginning,” Smithberger lamented. “It’s only when the chickens come home to roost that they start to pay attention.”
The most important point seems to be that everyone involved in the process needs to get real about their spending habits from the start.