Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
February 9April 4, 2012
Congressional Research Service
7-5700
www.crs.gov
RS20643
CRS Report for Congress
Prepared for Members and Committees of Congress
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Summary
CVN-78, CVN-79, and CVN-80 are the first three ships in the Navy’s new Gerald R. Ford (CVN78) class of nuclear-powered aircraft carriers (CVNs).
CVN-78 was procured in FY2008 and was funded with congressionally authorized four-year
incremental funding in FY2008-FY2011. The Navy’s proposed FY2012 budget estimated the
ship’s . The Navy’s proposed FY2013 budget estimates the ship’s
procurement cost at $11,531.012,323.2 million (i.e., about $11.512.3 billion) in then-year dollars.
CVN-79 is scheduled under the FY2012 budget submission to be procured in FY2013, and has
received advance procurement funding since FY2007. The Navy’s proposed FY2012 budget
estimated the ship’s procurement cost at $10,253.0 million (i.e., about $10.3 billion) in then-year
dollars.
CVN-80 is scheduled for procurement in FY2018, with advance procurement funding scheduled
to begin in FY2014. The Navy’s proposed FY2012 budget estimated the ship’s procurement cost
at $13,494.9 million (i.e., about $13.5 billion) in then-year dollars.
Oversight issues for Congress for the CVN-78 program include:
•
the possibility that the Department of Defense (DOD) will propose deferring
procurement of CVN-79 by two years, to FY2015;
•
the potential for cost growth on CVNs 78, 79, and 80; and
•
CVN-78 program issues that were raised in a December 2011 report from DOD’s
The ship
received advance procurement funding in FY2001-FY2007 and was fully funded in FY2008FY2011 using congressionally authorized four-year incremental funding. The Navy did not
request any procurement funding for the ship in FY2012, and is not requesting any procurement
funding for the ship in FY2013. The Navy plans to request $449 million in procurement funding
in FY2014 and $362 million in procurement funding in FY2015 for the ship to cover $811
million in cost growth on the ship.
CVN-79 is scheduled to be procured in FY2013. The Navy’s proposed FY2013 budget estimates
CVN-79’s procurement cost at $11,411.0 million (i.e., about $11.4 billion) in then-year dollars,
and requests $608.2 million in procurement funding for the ship. The ship received advance
procurement funding in FY2007-FY2012, and the Navy wants to fully fund the ship in FY2013FY2018 using six-year incremental funding. Current law authorizes the use of five-year
incremental funding for procuring CVN-79 and CVN-80; the Navy is requesting Congress to
amend current law to authorize the use of six-year incremental funding for procuring CVN-79
and CVN-80. The FY2013 budget proposes to lengthen the construction period for the ship by
two years, so that the ship is delivered in September 2022, rather than in September 2020, as
projected under the FY2012 budget. Although the ship is being procured in FY2013, the new
delivery date of September 2022 is what in the past might have been expected for a carrier
procured in FY2015.
CVN-80 is scheduled to be procured in FY2018. The Navy’s proposed FY2013 budget estimates
the ship’s procurement cost at $13,874.2 million (i.e., about $13.9 billion) in then-year dollars.
Under the Navy’s proposed FY2013 budget, the ship is to receive advance procurement funding
in FY2016-FY2017 and be fully funded in FY2018-FY2023 using six-year incremental funding.
The FY2013 budget proposes to lengthen the construction period for the ship by two years, so
that the ship is delivered in 2027, rather than in 2025, as projected under the FY2012 budget.
Although the ship is being procured in FY2018, the new delivery date of 2027 is what in the past
might have been expected for a carrier procured in FY2020.
The Navy states that lengthening the construction periods of CVNs 79 and 80 by two years will
not temporarily reduce the carrier force to less than 11 ships, but will instead eliminate some
instances of when the carrier force would have temporarily numbered 12 ships.
Oversight issues for Congress for the CVN-78 program include the following: cost growth in the
program; where the estimated procurement costs of CVNs 78, 79, and 80 now stand in relation to
the legislated procurement cost caps for the ships, and whether the cost caps should be amended;
whether to approve the Navy’s request for using six-year incremental funding to procure CVN-79
and CVN-80; whether to procure CVN-79 and CVN-80 together in a two-ship block buy; and
CVN-78 program issues that were raised in a December 2011 report from the Department of
Defense’s (DOD’s) Director of Operational Test and Evaluation (DOT&E).
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Contents
Introduction...................................................................................................................................... 1
Background...................................................................................................................................... 1
The Navy’s Aircraft Carrier Force............................................................................................. 1
Aircraft Carrier Construction Industrial Base......Statutory Requirement to Maintain Not Less Than 11 Carriers ................................................ 1
Origin of Requirement ...................... 1
Gerald R. Ford (CVN-78) Class Program .................................................................................. 1
CVN-78 ..............................................Waiver for Period Between CVN-65 and CVN-78 ................................................................................. 2
CVN-79 1
Funding and Procuring Aircraft Carriers ................................................................................... 2
Some Key Terms ............................................ 3
CVN-80 ..................................................................... 2
Incremental Funding Authority for Aircraft Carriers .......................................................... 3
Procurement Funding .......2
Aircraft Carrier Construction Industrial Base............................................................................. 3
Gerald R. Ford (CVN-78) Class Program ...................... 3
Past Changes in Estimated Unit Procurement Costs ........................................................... 4
Procurement Cost Cap3
CVN-78 ......................................................................................................... 6
Issues for Congress ...................... 4
CVN-79 .................................................................................................... 6
Possibility That DOD Will Propose Deferring CVN-79 to FY2015 ......................................... 7
Potential for Cost Growth 4
CVN-80 .......................................................................................................... 9
General ..................................... 5
Effect of Lengthened Construction Periods on Meeting 11-Carrier Requirement .............. 5
Program Procurement Funding ........................................................................................... 9
EMALS ......5
Increases in Estimated Unit Procurement Costs Since FY2009 Budget ............................. 6
Program Procurement Cost Cap.......................................................................................... 16
CVN-78 Program Issues in December 2011 DOT&E Report .7
Issues for Congress ................................................ 20
Legislative Activity for FY2012 ........................................................................... 8
Cost Growth......................... 23
FY2012 Funding Request........................................................................................................ 23
FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81) . 8
March 2012 Navy Information Paper................................. 23
House (Committee Report) ............................................................. 9
March 2012 Navy Letter to Senator McCain .................................. 23
House (Floor Consideration).................................. 10
December 31, 2011, SAR (Released March 2012) ........................................................... 24
Senate (S. 1867) ..............15
March 2012 GAO Report.................................................................................................. 24
Senate (S. 1253) 17
June 2011 CBO Report...................................................................................................... 18
Press Reports.................... 25
Conference ........................................................................................................... 19
EMALS .......................... 25
FY2012 Military Construction and Veterans Affairs and Related Agencies
Appropriations Act (H.R. 2055/P.L. 112-74)........................................................................ 25
Conference .......................................... 21
CVN-78 Program Procurement Cost Caps.............................................................................. 25
FY2012 DOD Appropriations Act (H.R. 2219)22
Six-Year Incremental Funding Authority ......................................................................... 26
House.............. 23
Potential Two-Ship Block Buy on CVN-79 and CVN-80....................................................... 23
Issues Raised in December 2011 DOT&E Report................................................................... 26
Senate ............................27
Legislative Activity for FY2013 .................................................................................................... 26
Conference ................30
FY2013 Funding Request........................................................................................................ 2630
Figures
Figure 1. Navy Illustration of CVN-78............................................................................................ 23
Tables
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2016.................................... 46
Table 2. Estimated Procurement Costs of CVNs 78, 79, and 80 ..................................................... 5
Table A-1. Cost Impact of Shifting to Five-year Intervals............................................................. 31
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Table C-1. Aircraft Carrier Force Levels, FY2011-FY2045.......................................................... 36
Appendixes
Appendix A. Earlier Oversight Issue: Shift to Five-Year Intervals—A More Fiscally
Sustainable Path?........................................................................................................................ 27
Appendix B. Text of Navy Report on Effects of Shifting to Five-Year Intervals .......................... 32
Appendix C. Force-Level Implications of Shifting to Six- or Seven-Year Procurement
Intervals ...................................................................................................................................... 367
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Contacts
Author Contact Information........................................................................................................... 3730
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Introduction
This report provides background information and potential oversight issues for Congress on the
Gerald R. Ford (CVN-78) class aircraft carrier program. Congress’s decisions on the CVN-78
program could substantially affect Navy capabilities and funding requirements and the
shipbuilding industrial base.
Background
The Navy’s Aircraft Carrier Force
The Navy’s aircraft carrier force consists of 11 ships, all of them nuclear-powered ships—the one-of-a-kind
akind Enterprise (CVN-65), which entered service in 1961, and 10 Nimitz-class ships (CVNs 68
through 77) that entered service between 1975 and 2009. The most recently commissioned
carrier, the George H. W. Bush (CVN-77), the final Nimitz-class ship, was procured in FY2001
and and
commissioned into service on January 10, 2009.1 CVN-77 replaced the Kitty Hawk (CV-63),
which was the Navy’s last remaining conventionally powered carrier.2
Aircraft Carrier Construction Industrial Base
All U.S. aircraft carriers procured since FY1958 have been built by Newport News Shipbuilding
(NNS), of Newport News, VA, a shipyard that is part of Huntington Ingalls Industries (HII). HII
was previously owned by Northrop Grumman, during which time it was known as Northrop
Grumman Shipbuilding (NGSB). NNS is the only U.S. shipyard that can build large-deck,
nuclear-powered aircraft carriers. The aircraft carrier construction industrial base also includes
hundreds of subcontractors and suppliers in dozens of states.
Gerald R. Ford (CVN-78) Class Program
The Gerald R. Ford (CVN-78) class carrier design (Figure 1) is the successor to the Nimitz-class
carrier design.3 The Ford-class design uses the basic Nimitz-class hull form but incorporates
several improvements, including features permitting the ship to generate substantially more
aircraft sorties per day, more electrical power for supporting ship systems, and features permitting
1
Congress approved $4,053.7 million in FY2001 procurement funding to complete CVN-77’s then-estimated total
procurement cost of $4,974.9 million. §122 of the FY1998 defense authorization act (H.R. 1119/P.L. 105-85 of
November 18, 1997) limited the ship’s procurement cost to $4.6 billion, plus adjustments for inflation and other
factors. The Navy testified in 2006 that with these permitted adjustments, the cost cap stood at $5.357 billion. The
Navy also testified that CVN-77’s estimated construction cost had increased to $6.057 billion, or $700 million above
the adjusted cost cap. Consequently, the Navy in 2006 requested that Congress increase the cost cap to $6.057 billion.
Congress approved this request: §123 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17,
2006), increased the cost cap for CVN-77 to $6.057 billion.
2
The Kitty Hawk was decommissioned on January 31, 2009.
3
The CVN-78 class was earlier known as the CVN-21 class, which meant nuclear-powered aircraft carrier for the 21st
century.
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the ship to be operated by several hundred fewer sailors than a Nimitz-class ship, significantly
reducing life-cycle operating and support (O&S) costs.
Navy plans call for procuring at least three Ford-class carriers—CVN-78, CVN-79, and CVN-80.
Figure 1. Navy Illustration of CVN-78
Source: Navy image accessed at http://www.navy.mil/management/photodb/photos/060630-N-0000X-001.jpg on
April 20, 2011.
CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,4 was procured in FY2008 and
was funded with congressionally authorized four-year incremental funding in FY2008-FY2011.5
The Navy’s proposed FY2012 budget estimated the ship’s procurement cost at $11,531.0 million
(i.e., about $11.5 billion) in then-year dollars. Of this total, about $2.9 billion is for detailed
design and non-recurring engineering (DD/NRE) costs for the CVN-78 program, and about $8.6
billion is for construction cost of CVN-78 itself. (It is a traditional Navy budgeting practice to
attach the DD/NRE costs for a new class of ships to the procurement cost of the lead ship in the
class.)
4
§1012 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17, 2006) expressed the sense of
the Congress that CVN-78 should be named for President Gerald R. Ford. On January 16, 2007, the Navy announced
that CVN-78 would be so named. CVN-78 and other carriers built to the same design will consequently be referred to
as Ford (CVN-78) class carriers. For further discussion of Navy ship names, see CRS Report RS22478, Navy Ship
Names: Background for Congress, by Ronald O’Rourke.
5
§121 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L. 109-364 of October 17, 2006)
granted the Navy the authority to use four-year incremental funding for CVN-78, CVN-79, and CVN-80.
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CVN-78 is scheduled to enter service as the replacement for Enterprise (CVN-65). The Navy
projects that there will be a 33-month period between the scheduled decommissioning of
Enterprise in November 2012 and the scheduled commissioning of CVN-78 in September 2015.
During this 33-month period, the Navy’s carrier force is to temporarily decline from 11 ships to
10 ships. Since 10 U.S.C. 5062(b) requires the Navy to maintain a force of not less than 11
operational carriers, the Navy asked Congress for a temporary waiver of 10 U.S.C. 5062(b) to
accommodate the 33-month period between the scheduled decommissioning of Enterprise and
the scheduled commissioning of CVN-78. Section 1023 of the FY2010 National Defense
Authorization Act (H.R. 2647/P.L. 111-84 of October 28, 2009) authorized the waiver and
required the Secretary of Defense to submit a report on the operational risk of temporarily
reducing the size of the carrier force.
CVN-79
CVN-79, which was named for President John F. Kennedy on May 29, 2011,6 is scheduled under
the FY2012 budget submission to be procured in FY2013,7 and has received advance
procurement (AP) funding since FY2007. The Navy’s proposed FY2012 budget estimated the
ship’s procurement cost at $10,253.0 million (i.e., about $10.3 billion) in then-year dollars.
CVN-80
CVN-80 is scheduled for procurement in FY2018,8 with advance procurement funding scheduled
to begin in FY2014. The Navy’s proposed FY2012 budget estimated the ship’s procurement cost
at $13,494.9 million (i.e., about $13.5 billion) in then-year dollars.
Procurement Funding
Table 1 shows procurement funding for CVNs 78, 79, and 80 through FY2016 as presented in the
FY2012 budget submission and prior-year budget submissions.9 Each ship was or is being
procured with several years of advance procurement (AP) funding, followed by four-year
6
See “Navy Names Next Aircraft Carrier USS John F. Kennedy,” Navy News Service, May 29, 2011, accessed online
on June 1, 2011 at http://www.navy.mil/search/display.asp?story_id=60686. See also Peter Frost, “U.S. Navy’s Next
Aircraft Carrier Will Be Named After The Late John F. Kennedy,” Newport News Daily Press, May 30, 2011. CVN-79
is the second ship to be named for President John F. Kennedy. The first, CV-67, was the last conventionally powered
carrier procured for the Navy. CV-67 was procured in FY1963, entered service in 1968, and was decommissioned in
2007.
7
On April 6, 2009, Secretary of Defense Robert Gates announced a number of recommendations he was making to the
President for the FY2010 defense budget submission. One of these was to shift procurement of carriers to five-year
intervals. This recommendation, which was included in the FY2010 defense budget submission, deferred the scheduled
procurement of CVN-79 from FY2012 to FY2013. Gates stated in his April 9, 2009, address that shifting carrier
procurement to five-year intervals would put carrier procurement on “a more fiscally sustainable path.”7 For further
discussion, see Appendix A and Appendix B.
8
Secretary of Defense Gates’s April 2009 recommendation to shift carrier procurement to five-year intervals (see
footnote 7) deferred the procurement of CVN-80 from FY2016 to FY2018.
9
The FY2011 Department of Defense and Full-Year Continuing Appropriations Act (H.R. 1473/P.L. 112-10 of April
15, 2011), which was enacted after the submission of the proposed FY2012 budget, reduced the Navy’s request for
FY2011 procurement funding for CVN-78 by $9.3 million, and fully funded the Navy’s request for FY2011 advance
procurement funding for CVN-79.
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incremental procurement funding of the remainder of the ship’s cost.10 The funding profile for
CVN-78, for example, includes AP funding in FY2001-FY2007, followed by four years of
incremental procurement funding in FY2008-FY2011.
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2016
(Millions of then-year dollars, rounded to nearest tenth)
FY
CVN-78
CVN-79
CVN-80
Total
FY01
21.7 (AP)
0
0
21.7
FY02
135.3 (AP)
0
0
135.3
FY03
395.5 (AP)
0
0
395.5
FY04
1,162.9 (AP)
0
0
1,162.9
FY05
623.1 (AP)
0
0
623.1
FY06
618.9 (AP)
0
0
618.9
FY07
735.8 (AP)
52.8 (AP)
0
788.6
FY08
2,685.0
123.5 (AP)
0
2,808.6
FY09
2,684.6
1,210.6 (AP)
0
3,895.1
737.0
482.9 (AP)
0
1,219.9
FY11 (requested)a
FY10
1,731.3
908.3 (AP)
0
2,639.6
FY12 (requested)
0
554.8 (AP)
0
554.8
FY13 (projected)
0
1,942.4
0
1,942.4
FY14 (projected)
0
1,920.3
228.1 (AP)
2,148.4
FY15 (projected)
0
2,030.9
1,514.9 (AP)
3,545.8
FY16 (projected)
0
1,026.5
1,476.5 (AP)
2,503.0
Source: FY2009-FY2012 Navy budget submissions.
Notes: Figures may not add due to rounding. “AP” is advance procurement funding.
a.
The FY2011 Department of Defense and Full-Year Continuing Appropriations Act (H.R. 1473/P.L. 112-10 of
April 15, 2011), which was enacted after the submission of the proposed FY2012 budget, reduced the
Navy’s request for FY2011 procurement funding for CVN-78 by $9.3 million, and fully funded the Navy’s
request for FY2011 advance procurement funding for CVN-79.
Past Changes in Estimated Unit Procurement Costs
As shown in Table 2, the estimated procurement costs of CVNs 78, 79, and 80 in the FY2012
budget submission were 10.3%, 11.5%, and 25.9% higher, respectively, in then-year dollars than
those in the FY2009 budget submission.11 Table 2 also shows that the estimated procurement
10
As noted in footnote 5, §121 of FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L. 109-364
of October 17, 2006) granted the Navy the authority to use four-year incremental funding for CVN-78, CVN-79, and
CVN-80. §121 of the FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81 of December 31, 2012)
amended this authority to permit five-year incremental funding for these ships.
11 which
was the Navy’s last remaining conventionally powered carrier.2
Statutory Requirement to Maintain Not Less Than 11 Carriers
Origin of Requirement
10 U.S.C. 5062(b) requires the Navy to maintain a force of not less than 11 operational aircraft
carriers. The requirement for the Navy to maintain not less than a certain number of operational
aircraft carriers was established by Section 126 of the FY2006 National Defense Authorization
Act (H.R. 1815/P.L. 109-163 of January 6, 2006), which set the number at 12 carriers. The
requirement was changed from 12 carriers to 11 carriers by Section 1011(a) of the FY2007 John
Warner National Defense Authorization Act (H.R. 5122/P.L. 109-364 of October 17, 2006).
Waiver for Period Between CVN-65 and CVN-78
The carrier force will drop from 11 ships to 10 ships when Enterprise (CVN-65) is
decommissioned in November 2012, and will return to 11 ships when its replacement, Gerald R.
Ford (CVN-78), is commissioned into service. CVN-78 is scheduled to be delivered in September
2015, 33 months after CVN-65 is decommissioned, but CVN-78’s construction is now running a
few months late, so the gap between the decommissioning of CVN-68 and the commissioning of
1
Congress approved $4,053.7 million in FY2001 procurement funding to complete CVN-77’s then-estimated total
procurement cost of $4,974.9 million. §122 of the FY1998 defense authorization act (H.R. 1119/P.L. 105-85 of
November 18, 1997) limited the ship’s procurement cost to $4.6 billion, plus adjustments for inflation and other
factors. The Navy testified in 2006 that with these permitted adjustments, the cost cap stood at $5.357 billion. The
Navy also testified that CVN-77’s estimated construction cost had increased to $6.057 billion, or $700 million above
the adjusted cost cap. Consequently, the Navy in 2006 requested that Congress increase the cost cap to $6.057 billion.
Congress approved this request: §123 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17,
2006), increased the cost cap for CVN-77 to $6.057 billion.
2
The Kitty Hawk was decommissioned on January 31, 2009.
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CVN-78 may turn out to be more than 33 months. Anticipating a gap of at least 33 months
between the decommissioning of CVN-65 and the commissioning of CVN-78, the Navy asked
Congress for a temporary waiver of 10 U.S.C. 5062(b) to accommodate the period between the
two events. Section 1023 of the FY2010 National Defense Authorization Act (H.R. 2647/P.L.
111-84 of October 28, 2009) authorized the waiver, permitting the Navy to have 10 operational
carriers between the decommissioning of CVN-65 and the commissioning of CVN-78.
Funding and Procuring Aircraft Carriers
Some Key Terms
The Navy procures a ship (i.e., orders the ship) by awarding a full-ship construction contract to
the firm building the ship.
Part of a ship’s procurement cost might be provided through advance procurement (AP) funding.
AP funding is funding provided in one or more years prior to (i.e., in advance of) a ship’s year of
procurement. AP funding is used to pay for long-leadtime components that must be ordered ahead
of time to ensure that they will be ready in time for their scheduled installation into the ship. AP
funding is also used to pay for the design costs for a new class of ship. These design costs, known
more formally as detailed design/non-recurring engineering (DD/NRE) costs, are traditionally
incorporated into the procurement cost of the lead ship in a new class of ships.
Fully funding a ship means funding the entire procurement cost of the ship. If a ship has received
AP funding, then fully funding the ship means paying for the remaining portion of the ship’s
procurement cost.
The full funding policy is a Department of Defense (DOD) policy that normally requires items
acquired through the procurement title of the annual DOD appropriations act to be fully funded in
the year they are procured. In recent years, the Congress has authorized DOD to use incremental
funding for procuring certain Navy ships, most notably aircraft carriers. Under incremental
funding, some of the funding needed to fully fund a ship is provided in one or more years after
the year in which the ship is procured.3
Incremental Funding Authority for Aircraft Carriers
Section 121 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L.
109-364 of October 17, 2006) granted the Navy the authority to use four-year incremental
funding for CVNs 78, 79, and 80. Under this authority, the Navy can fully fund each of these
ships over a four-year period that includes the ship’s year of procurement and three subsequent
years.
Section 124 of the FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81 of
December 31, 2011) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use
3
For more on full funding, incremental funding, and AP funding, see CRS Report RL31404, Defense Procurement:
Full Funding Policy—Background, Issues, and Options for Congress, by Ronald O'Rourke and Stephen Daggett, and
CRS Report RL32776, Navy Ship Procurement: Alternative Funding Approaches—Background and Options for
Congress, by Ronald O'Rourke.
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five-year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in
FY2008-FY2011, the provision in practice applies to CVNs 79 and 80.
Aircraft Carrier Construction Industrial Base
All U.S. aircraft carriers procured since FY1958 have been built by Newport News Shipbuilding
(NNS), of Newport News, VA, a shipyard that is part of Huntington Ingalls Industries (HII). HII
was previously owned by Northrop Grumman, during which time it was known as Northrop
Grumman Shipbuilding (NGSB). NNS is the only U.S. shipyard that can build large-deck,
nuclear-powered aircraft carriers. The aircraft carrier construction industrial base also includes
hundreds of subcontractors and suppliers in dozens of states.
Gerald R. Ford (CVN-78) Class Program
The Gerald R. Ford (CVN-78) class carrier design (Figure 1) is the successor to the Nimitz-class
carrier design.4
Figure 1. Navy Illustration of CVN-78
Source: Navy image accessed at http://www.navy.mil/management/photodb/photos/060630-N-0000X-001.jpg on
April 20, 2011.
4
The CVN-78 class was earlier known as the CVN-21 class, which meant nuclear-powered aircraft carrier for the 21st
century.
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The Ford-class design uses the basic Nimitz-class hull form but incorporates several
improvements, including features permitting the ship to generate substantially more aircraft
sorties per day, more electrical power for supporting ship systems, and features permitting the
ship to be operated by several hundred fewer sailors than a Nimitz-class ship, significantly
reducing life-cycle operating and support (O&S) costs.
Navy plans call for procuring at least three Ford-class carriers—CVN-78, CVN-79, and CVN-80.
CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,5 was procured in FY2008. The
Navy’s proposed FY2013 budget estimates the ship’s procurement cost at $12,323.2 million (i.e.,
about $12.3 billion) in then-year dollars. Of the ship’s total procurement cost, about $3.3 billion is
for detailed design/non-recurring engineering (DD/NRE) costs for the class, and about $9.0
billion is for construction of the ship itself.
CVN-78 received advance procurement funding in FY2001-FY2007 and was fully funded in
FY2008-FY2011 using four-year incremental funding. The Navy did not request any procurement
funding for the ship in FY2012, and is not requesting any procurement funding for the ship in
FY2013. The Navy plans to request $449 million in procurement funding in FY2014 and $362
million in procurement funding in FY2015 for the ship to cover $811 million in cost growth on
the ship.
CVN-79
CVN-79, which was named for President John F. Kennedy on May 29, 2011,6 is scheduled to be
procured in FY2013. The Navy’s proposed FY2013 budget estimates CVN-79’s procurement cost
at $11,411.0 million (i.e., about $11.4 billion) in then-year dollars, and requests $608.2 million in
procurement funding for the ship.
The ship received advance procurement funding in FY2007-FY2012, and the Navy wants to fully
fund the ship in FY2013-FY2018 using six-year incremental funding. As discussed earlier (see
“Incremental Funding Authority for Aircraft Carriers”), current law authorizes the use of fiveyear incremental funding for procuring CVN-79 and CVN-80; the Navy is requesting Congress to
amend current law to authorize the use of six-year incremental funding for procuring CVN-79
and CVN-80.
5
§1012 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17, 2006) expressed the sense of
the Congress that CVN-78 should be named for President Gerald R. Ford. On January 16, 2007, the Navy announced
that CVN-78 would be so named. CVN-78 and other carriers built to the same design will consequently be referred to
as Ford (CVN-78) class carriers. For more on Navy ship names, see CRS Report RS22478, Navy Ship Names:
Background for Congress, by Ronald O’Rourke.
6
See “Navy Names Next Aircraft Carrier USS John F. Kennedy,” Navy News Service, May 29, 2011, accessed online
on June 1, 2011 at http://www.navy.mil/search/display.asp?story_id=60686. See also Peter Frost, “U.S. Navy’s Next
Aircraft Carrier Will Be Named After The Late John F. Kennedy,” Newport News Daily Press, May 30, 2011. CVN-79
is the second ship to be named for President John F. Kennedy. The first, CV-67, was the last conventionally powered
carrier procured for the Navy. CV-67 was procured in FY1963, entered service in 1968, and was decommissioned in
2007.
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The FY2013 budget proposes to lengthen the construction period for the ship by two years, so
that the ship is delivered in September 2022, rather than in September 2020, as projected under
the FY2012 budget. Although the ship is being procured in FY2013, the new delivery date of
September 2022 is what in the past might have been expected for a carrier procured in FY2015.
CVN-80
CVN-80 is scheduled to be procured in FY2018. The Navy’s proposed FY2013 budget estimates
the ship’s procurement cost at $13,874.2 million (i.e., about $13.9 billion) in then-year dollars.
Under the Navy’s proposed FY2013 budget, the ship is to receive advance procurement funding
in FY2016-FY2017 and be fully funded in FY2018-FY2023 using six-year incremental funding.
The FY2013 budget proposes to lengthen the construction period for the ship by two years, so
that the ship is delivered in 2027, rather than in 2025, as projected under the FY2012 budget.
Although the ship is being procured in FY2018, the new delivery date of 2027 is what in the past
might have been expected for a carrier procured in FY2020.
Effect of Lengthened Construction Periods on Meeting 11-Carrier Requirement
The Navy states that lengthening the construction periods of CVNs 79 and 80 by two years will
not temporarily reduce the carrier force to less than 11 ships, but will instead eliminate some
instances of when the carrier force would have temporarily numbered 12 ships.7
Program Procurement Funding
Table 1 shows procurement funding for CVNs 78, 79, and 80 through FY2018.
7
Source: Email from Navy Office of Legislative Affairs to CRS dated February 27, 2012. See also Christopher P.
Cavas, “U.S. Navy Tries To Rein In Carrier Costs,” DefenseNews.com, February 21, 2012.
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Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2016
(Millions of then-year dollars, rounded to nearest tenth)
FY
CVN-78
CVN-79
CVN-80
Total
FY01
21.7 (AP)
0
0
21.7
FY02
135.3 (AP)
0
0
135.3
FY03
395.5 (AP)
0
0
395.5
FY04
1,162.9 (AP)
0
0
1,162.9
FY05
623.1 (AP)
0
0
623.1
FY06
618.9 (AP)
0
0
618.9
FY07
735.8 (AP)
52.8 (AP)
0
788.6
FY08
2,685.0 (FF)
123.5 (AP)
0
2,808.6
FY09
2,684.6 (FF)
1,210.6 (AP)
0
3,895.1
FY10
737.0 (FF)
482.9 (AP)
0
1,219.9
FY11
1712.5 (FF)
903.3 (AP)
0
2,615.8
FY12
0
554.8 (AP)
0
554.8
FY13 (requested)
0
608.2 (FF)
0
608.2
FY14 (projected)
449.0a
666.1 (FF)
0
1,115.1
FY15 (projected)
362.0a
2,999.1 (FF)
0
3,361.1
FY16 (projected)
0
979.4 (FF)
682.8 (AP)
1,662.2
FY17 (projected)
0
1,823.8 (FF)
1,043.8 (AP)
2,867.6
FY18 (projected)
0
1,006.5 (FF)
2,378.9 (FF)
3,385.4
Source: FY2009-FY2013 Navy budget submissions.
Notes: Figures may not add due to rounding. “AP” is advance procurement funding; “FP” is full funding.
a.
Additional “cost to complete” funding to cover cost growth on the ships.
Increases in Estimated Unit Procurement Costs Since FY2009 Budget
Table 2 shows changes in the estimated procurement costs of CVNs 78, 79, and 80 since the
FY2009 budget submission.8
8
CBO in 2008 and the Government Accountability Office (GAO) in 2007 questioned the accuracy of the Navy’s cost
estimate for CVN-78. CBO reported in June 2008 that it estimated that CVN-78 would cost $11.2 billion in constant
FY2009 dollars, or about $900 million more than the Navy’s estimate of $10.3 billion in constant FY2009 dollars, and
that if “CVN-78 experienced cost growth similar to that of other lead ships that the Navy has purchased in the past 10
years, costs could be much higher still.” CBO also reported that, although the Navy publicly expressed confidence in its
cost estimate for CVN-78, the Navy had assigned a confidence level of less than 50% to its estimate, meaning that the
Navy believed there was more than a 50% chance that the estimate would be exceeded. (Congressional Budget Office,
(continued...)
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costs of CVNs 79 and 80 in the FY2012 budget are 1.5% and 0.1% lower, respectively, than those
in the FY2011 budget.
Table 2. Estimated Procurement Costs of CVNs 78, 79, and 80
(As shown in FY2009-FY2012Resource Implications of the Navy’s Fiscal Year 2009 Shipbuilding Plan, June 9, 2008, p. 20.) GAO reported in August
2007 that:
Costs for CVN 78 will likely exceed the budget for several reasons. First, the Navy’s cost estimate,
which underpins the budget, is optimistic. For example, the Navy assumes that CVN 78 will be
built with fewer labor hours than were needed for the previous two carriers. Second, the Navy’s
target cost for ship construction may not be achievable. The shipbuilder’s initial cost estimate for
construction was 22 percent higher than the Navy’s cost target, which was based on the budget.
Although the Navy and the shipbuilder are working on ways to reduce costs, the actual costs to
build the ship will likely increase above the Navy’s target. Third, the Navy’s ability to manage
issues that affect cost suffers from insufficient cost surveillance. Without effective cost
surveillance, the Navy will not be able to identify early signs of cost growth and take necessary
(continued...)
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Table 2. Estimated Procurement Costs of CVNs 78, 79, and 80
(As shown in FY2009-FY2013 budgets, in millions of then-year dollars)
Budget
CVN-78
Estimated
procurement
cost
CVN-79
Scheduled
fiscal year of
procurement
Estimated
procurement
cost
CVN-80
Scheduled
fiscal year of
procurement
Estimated
procurement
cost
Scheduled
fiscal year of
procurement
FY09 budget
10,457.9
FY08
9,191.6
FY12
10,716.8
FY16
FY10 budget
10,845.8
FY08
n/aa
FY13b
n/aa
FY18b
FY11 budget
11,531.0
FY08
10,413.1
FY13
13,577.0
FY18
FY12 budget
11,531.0
FY08
10,253.0
FY13
13,494.9
FY18
11,411.0
FY13c
13,874.2
FY18c
FY13 budget
12,323.2
FY08
% change:
FY09 budget to
FY10 budget
+3.7
n/a
n/a
FY10 budget to
FY11 budget
+6.3
n/a
n/a
FY11 budget to
FY12 budget
No change
- 1.5
- 0.1
FY09FY12 budget to
FY12FY13 budget
+10.3
+11.5
+25.9
Source: FY2009-FY20126.9%
+11.3%
+2.8%
FY09 budget to
FY13 budget
+17.7%
+24.1%
+29.5%
Source: FY2009-FY2013 Navy budget submissions.
a.
n/a means not available; the FY2010 budget submission did not show estimated procurement costs for
CVNs 79 and 80.
b.
The FY2010 budget submission did not show scheduled years of procurement for CVNs 79 and 80; the
dates shown here for the FY2010 budget submission are inferred from the shift to five-year intervals for
procuring carriers that was announced by Secretary of Defense Gates in his April 6, 2009, news conference
regarding recommendations for the FY2010 defense budget.
(...continued)
Resource Implications of the Navy’s Fiscal Year 2009 Shipbuilding Plan, June 9, 2008, p. 20.) GAO reported in August
2007 that:
Costs for CVN 78 will likely exceed the budget for several reasons. First, the Navy’s cost estimate,
which underpins the budget, is optimistic. For example, the Navy assumes that CVN 78 will be
built with fewer labor hours than were needed for the previous two carriers. Second, the Navy’s
target cost for ship construction may not be achievable. The shipbuilder’s initial cost estimate for
construction was 22 percent higher than the Navy’s cost target, which was based on the budget.
Although the Navy and the shipbuilder are working on ways to reduce costs, the actual costs to
build the ship will likely increase above the Navy’s target. Third, the Navy’s ability to manage
issues that affect cost suffers from insufficient cost surveillance. Without effective cost
surveillance, the Navy will not be able to identify early signs of cost growth and take necessaryc.
Although the FY2013 budget did not change the scheduled years of procurement for CVN-79 and CVN-80
compared to what they were under the FY2012 budget, it lengthened the construction period for each ship
by two years (i.e., each ship is scheduled to be delivered two years later than under the FY2012 budget).
Program Procurement Cost Cap
Section 122 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L.
109-364 of October 17, 2006) established a procurement cost cap for CVN-78 of $10.5 billion,
plus adjustments for inflation and other factors, and a procurement cost cap for subsequent Fordclass carriers of $8.1 billion each, plus adjustments for inflation and other factors. The conference
(...continued)
corrective action.
(Government Accountability Office, Defense Acquisitions[:] Navy Faces Challenges Constructing
the Aircraft Carrier Gerald R. Ford within Budget, GAO-07-866, August 2007, summary page. See
also Government Accountability Office, Defense Acquisitions[:] Realistic Business Cases Needed
to Execute Navy Shipbuilding Programs, Statement of Paul L. Francis, Director, Acquisition and
Sourcing Management Team, Testimony Before the Subcommittee on Seapower and Expeditionary
Forces, Committee on Armed Services, House of Representatives, July 24, 2007 (GAO-07-943T),
p. 15.)
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
The increases in the estimated procurement costs of CVNs 78, 79, and 80 since the FY2009
budget submission have at least four potential causes:
•
one additional year of inflation being incorporated into the cost of CVN-79 as a
result of its scheduled procurement being deferred from FY2012 to FY2013, and
two years of additional inflation being incorporated into the cost of CVN-80 as a
result of its scheduled procurement being deferred from FY2016 to FY2018;
•
increases in projected annual rates of inflation;
•
higher estimates of real (i.e., inflation-adjusted) material costs, real labor rates, or
labor hours (given a certain position on the production learning curve) for
building CVN-78 class carriers; and
•
increased costs due to loss of learning and reduced spreading of fixed overhead
costs resulting from shifting to five-year intervals for procuring carriers.
Procurement Cost Cap
Section 122 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L.
109-364 of October 17, 2006) established a procurement cost cap for CVN-78 of $10.5 billion,
plus adjustments for inflation and other factors, and a procurement cost cap for subsequent Fordclass carriers of $8.1 billion each, plus adjustments for inflation and other factors. The conference
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
report (H.Rept. 109-702 of September 29, 2006) on P.L. 109-364 discusses Section 122 on pages
551-552.
The Navy on February 19, 2010, notified the congressional defense committees that, after making
permitted adjustments in the cost cap for inflation and other factors, the estimated cost of CVN78 was $224 million below the cost cap for that ship.129 The Navy on April 19, 2010, informed
CRS and the Congressional Budget Office (CBO) that, after making permitted adjustments in the
cost cap for inflation and other factors, the estimated costs of CVN-79 and CVN-80 at that time
each were
several hundred million dollars below the cost cap for those ships.1310
Issues for Congress
Oversight issues for Congress for the CVN-78 program include:
•
the possibility that DOD will propose deferring procurement of CVN-79 by two
years, to FY2015;
•
the potential for cost growth on CVNs 78, 79, and 80; and
•
CVN-78 program issues that were raised in a December 2011 report from DOD’s
Director of Operational Test and Evaluation (DOT&E).
12
Source: Letter dated February 19, 2010, from Secretary of the Navy Ray Mabus to the chairmen of the House and
Senate Armed Services committees and the Defense subcommittees of the House and Senate Appropriations
Committees. Copy of letter provided by the Navy to CRS and the Congressional Budget Office (CBO) on April 19,
2010.
13
Source: April 19, 2010, Navy briefing on the CVN-78 program to CRS and CBO.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Possibility That DOD Will Propose Deferring CVN-79 to FY2015
One oversight issue for Congress concerns the possibility that DOD will propose deferring
procurement of CVN-79. On July 11, 2011, it was reported that the Navy, as a potential measure
for reducing near-term funding requirements, was considering the option of deferring the
scheduled procurement of CVN-79 by two years, to FY2015.14 Deferring procurement of CVN79 by two years, to FY2015, might
•
substantially reduce FY2013 and FY2014 funding requirements for CVN-79;
•
increase the total procurement cost of CVN-79, potentially by hundreds of
millions of dollars;15
•
increase the procurement costs of Virginia-class attack submarines being built at
NNS over the next few years;16
•
increase costs at NNS over the next few years for mid-life nuclear refueling
overhauls of Nimitz-class aircraft carriers (called refueling complex overhauls, or
RCOHs);17 and
•
have implications for the aircraft carrier industrial base and future aircraft carrier
force levels.
A November 21, 2011, press report states:
The Navy needs to stay on the five-year buy rate for aircraft carriers to keep a strong
industrial base and an efficient transition from building one carrier to the next, the president
of Newport News Shipbuilding said last week.
Widening the gap between procuring the carriers could cause costs to rise and diminish the
strength of the workers and their skill set as they may be forced to seek jobs elsewhere, Matt
Mulherin, who runs the shipyard owned by Huntington Ingalls Industries [HII], told reporters
on conference call.
“If the time elapses and it’s going to be long enough they are not going to wait around,”
Mulherin said. Ideally, it would be best to transition works from the completed carrier to
beginning work on a new one, he said.18
14
Christopher P. Cavas, “U.S. May Delay Next Carrier,” Defense News, July 11, 2011: 1. Other options reportedly
under consideration included deferring procurement of CVN-79 by one year, to FY2014, or not procuring CVN-79.
(Michael Fabey, “Budget Concerns Put Carriers In Crosshairs Again,” Aerospace Daily & Defense Report, July 14,
2011: 1-2.)
15
CVN-79’s procurement cost could increase due to (1) additional inflation being incorporated into the ship’s cost, (2)
reduced spreading of fixed overhead costs at NNS due a reduced volume of work at the shipyard, and (3) reduced
production learning curve benefits (i.e., loss of learning) at NNS in moving from CVN-78 to CVN-79 due to the
increased time interval between CVN-78 and CVN-79. Increases due to the second and third of these factors would
increase the ship’s real (i.e., inflation-adjusted) procurement cost. Cost increases could also occur due to the impact of
the deferral on subcontractors and suppliers.
16
The procurement cost of Virginia-class attack submarines could increase as a result of reduced spreading of fixed
overhead costs at NNS due a reduced volume of work at the shipyard.
17
Costs for RCOHs could increase as a result of reduced spreading of fixed overhead costs at NNS due a reduced
volume of work at the shipyard.
18
Mike McCarthy, “Navy Needs To Maintain 5-Year Carrier Bay [sic: Buy] Rate, NNS Says,” Defense Daily,
November 21, 2011: 6. Material in brackets as in original.
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An August 9, 2011, press report states:
Delaying the purchase of an aircraft carrier could have sweeping consequences at the
Newport News shipyard, the nation’s lone builder of the $10 billion-plus nuclear-powered
flattops, its top executive told the Daily Press.
Matthew J. Mulherin, president of Newport News Shipbuilding, warned that pushing back
the construction contracts of future carriers would raise the overall costs associated with
building the giant ships and affect the yard’s construction and engineering workforce.
Further, he said, delaying the purchase of a carrier would force the Newport News shipyard
to alter its long-term financial plans and cause a ripple effect throughout its far-reaching base
of suppliers, which manufacture steel, valves, pipes, nuts, bolts and thousands of other
components that go into building the 1,092-foot vessels.
A delay, Mulherin said, “affects everything.”
“It’s something you really have to think through, and the Navy knows this—there are a lot of
ramifications,” he said during a brief interview at an art exhibit opening last week. “We’ve
said and the Navy has said that a five-year build cycle is optimal for building carriers. That’s
why that remains the plan of record today.”...
“We’re certainly paying attention to the situation,” Mulherin said. “You can't overreact, but
you have to provide constant input and offer insight into the consequences.”
Even if the Navy opts to push out a carrier like the Kennedy, the impact to Newport News
“all depends on how they do it,” he said, noting that previous carrier orders have been
delayed due to budgetary constraints.
Should the major construction contract be bumped to fiscal 2014 or 2015, the Navy could
soften the impact by funneling money to Newport News through smaller, advance funding
contracts in the interim that help pay for engineering, pre-fabrication and procurement of
parts and materials, Mulherin said.
“That’s pretty much what happened with the (George H.W.) Bush,” he said, referring to the
last ship of the Nimitz class, which was originally scheduled to be purchased in 2000 but was
pushed back to 2001. The yard got a series of smaller contracts in the run-up to construction
that helped smooth the workload in Newport News.19
An August 12, 2011, press report states that Mike Petters, HII’s president and chief executive
officer,
addressed the looming uncertainty over the Navy’s future budgets, which includes
consideration of delaying the purchase of the John F. Kennedy aircraft carrier by up to two
years and altering its long-term carrier construction plan.
Each time a multibillion-dollar carrier comes up for budget approval, the program tends “to
come under a lot of scrutiny … and the Kennedy is no different,” he said.
19
Peter Frost, “Mulherin: Aircraft Carrier Delay Would Have ‘A Lot Of Ramifications’ For Newport News Shipyard,”
Newport News Daily Press, August 9, 2011.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Petters warned that such a delay would have a wide-ranging impact on the Navy, the 20,000worker Newport News shipyard and its stable of suppliers.
“Extending the carrier-build cycle to six or seven years not only increases the overall cost of
the ship but would also have a severe and far-reaching impact nationwide,” he said, noting
that the shipyard buys up to $3 billion of materials from suppliers across the country.20
Deferring procurement of CVN-79 by one or two years might be done as part of a larger decision
to shift procurement of carriers from five-year intervals (the current plan) to six- or seven-year
intervals. Table C-1 in Appendix C shows projected aircraft carrier force levels for FY2011FY2045 that would result from procuring carriers at five-, six-, or seven-year intervals, beginning
with CVN-79.
Potential for Cost Growth
Another issue for Congress for the CVN-78 program concerns potential for cost growth on CVNs
78, 79, and 80. One possible source of cost growth in CVN-78 are new technologies that are
being developed for the ship, particularly the electromagnetic aircraft launch system (EMALS)—
an electromagnetic (as opposed to the traditional steam-powered) aircraft catapult. Problems in
developing EMALS or other technologies could delay the ship’s completion and increase its
development and/or procurement cost.
General
Press Reports
A January 13, 2012, press report states:
[Navy acquisition chief Sean] Stackley acknowledged that building a new class of aircraft
carrier was complex, and that task was made harder by the Navy’s decision to transition to a
new carrier in one ship, rather than over the course of three, as initially planned.
He said the Navy was working closely with Huntington Ingalls to drive cost out of the
Gerald R. Ford (CVN-78) aircraft carrier under construction at the Newport News shipyards,
but was trying to “hammer home” the need for additional efforts.
He said the company had a good management team in place, but needed to make further
changes to lower the cost of the carrier.
He said the Navy had added funds to the fiscal 2013 budget and five-year spending plan to
cover expected cost increases on the CVN 78 carrier. He gave no details, since the budget
will not be formally released until February, but said the Navy had not budgeted for the
worst case, estimate by some to be a cost overrun of $1 billion cost on the $12 billion
program....
20
Peter Frost, “Huntington Ingalls Posts Second-Quarter Profit Of $40 Million, Warms Of Potential Carrier Delay,”
Newport News Daily Press, August 12, 2011.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Huntington Ingalls last week responded to reports that the carrier would likely be $884
million over budget by saying it was continuing to see improvements in its performance on
the aircraft carrier.
[Huntington Ingalls Chief Executive Mike] Petters said both the company and the Navy
knew at the outset that building a first-in-class ship as complex as an aircraft carrier involved
risk, and they had agreed on a formula for sharing that risk.
If industry had to shoulder the risk of new development programs completely on its own, he
said, the cost of new warships and other weapons would skyrocket because defense
companies would raise prices to cover the added risk.
“There’s an argument to be made that the method that we're using to build the Ford is saving
the taxpayers hundreds of millions of dollars,” he said, adding that company executives were
“very aggressive in going out and continue to try to save money.”21
A December 22, 2011, press report stated:
The U.S. Navy has estimated a worst-case cost overrun of as much as $1.1 billion for the
aircraft carrier USS Gerald R. Ford, the service’s most expensive warship.
The carrier is being built by Huntington Ingalls Industries Inc. under a cost-plus, incentivefee contract in which the Navy pays for most of the overruns. Even so, the service’s efforts to
control expenses may put the company’s $579.2 million profit at risk, according to the Navy.
A review of the carrier’s rising costs began in August after the Navy’s program manager
indicated that the “most likely” overrun had risen to $884.7 million, or about 17 percent over
the current contract’s target price of $5.16 billion. That’s up from a $650 million overrun
estimated in April, according to internal Navy figures made available to Bloomberg News.
The worst-case assessment would be about 21 percent over the target.
“Regular reviews of the cost performance indicated cost increases were occurring,” said
Navy spokeswoman Captain Cate Mueller in a statement.
Some rising costs are tied to construction inefficiencies, the Navy said. Navy Assistant
Secretary for Acquisition Sean Stackley directed the review “to determine specific causes
and what recovery actions could be put in place,” Mueller said.
Even as the Navy conducts its internal review, it is trying to assure U.S. lawmakers and
Pentagon officials that costs of major vessel programs are being controlled. The Pentagon is
evaluating strategy, retirement health benefits, weapons programs and military service
budgets to find as much as $488 billion in reductions through 2021. The service has already
offered to delay construction of the second Ford-class vessel, the CVN-79 John F. Kennedy,
by two years.
Stackley’s assessment is focusing on “every aspect of the ship’s construction including the
risks” of delays and cost growth to both contractor- and government-furnished equipment,
Mueller said. Among the largest government-furnished equipment is the carrier’s nuclear
reactor.
21
Andrea Shalal-Esa, “Navy Wants More Cost-Cutting From Huntington Ingalls,” Newport News Daily Press, January
13, 2012. See also Christopher J. Castelli, “Stackley: Navy Did Not Fund Worst-Case Estimate For CVN-78 Overrun,”
Inside the Navy, January 23, 2012.
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The review includes officials from Stackley’s office, as well as the Naval Sea Systems
Command, the chief of naval operations, and the Navy’s supervisor of shipbuilding, Mueller
said.
Late delivery of Huntington-furnished material has been a key factor in late assembly and
inefficient construction, the Navy said. Still, the carrier remains on schedule for its planned
September 2015 delivery, the service said.
Huntington Ingalls’s goal is to reduce the program’s costs, Chief Executive Officer Michael
Petters said in an interview.
“If there was something else I thought we needed to do, we’d be doing it,” Petters said. “If
there is something else somebody else thinks we ought to be doing, we’ll listen and, if it
makes sense, we’ll do it.”
Mueller said some of Huntington’s cost-control efforts are producing “favorable results.” For
example, the Newport News, Virginia-based shipbuilder has established specific labor-cost
targets for its key manufacturing and construction jobs. Mueller did not say whether these
moves have reduced costs yet.
The Navy also has agreed to consider changes to specifications and modify them “where
appropriate to lower cost and schedule risk,” Mueller said.
Huntington has designated a senior vice president and ship construction superintendent with
daily oversight responsibility.
The Navy plans to report a new contract completion cost in its next annual report to
Congress. The document would be submitted to lawmakers next year.
Mueller declined to discuss the current overrun estimates. The Navy earlier disclosed that the
carrier faced the $650 million overrun to complete the contract—$562 million of which the
Navy would absorb; the remaining $88 million by Huntington....
Any discussion of cost growth should reflect the Gerald Ford’s status as a first-of-a-kind ship
under development, Petters said.
“A lead ship comes with a whole lot of churn—things that don’t go the way it should,” he
said. “It’s like building a prototype.”
Petters said the company “put a lot of thought” into the construction when it designed the
carrier. “As a result, this ship is coming together pretty well, but it’s a lead ship and it’s a big
ship so we’ll probably be having this kind of discussion for the next four years,” he said.22
An August 8, 2011, press report stated:
The U.S. Navy’s newest aircraft carrier, the most expensive warship ever, is overrunning its
contract target price by 11 percent “due to contractor performance,” according to Navy
figures and documents.
22
Tony Capaccio, “Huntington’s Gerald Ford Carrier May Have $1.1 Billion Overrun,” Bloomberg Government
(bgov.com), December 22, 2011.
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The USS Gerald R. Ford is being built under a cost-plus incentive fee contract by Newport
News, Virginia-based Huntington Ingalls Industries Inc. That means the Navy pays for cost
overruns, typical for the first vessel in a class.
The company is projected to exceed the current contract’s $5.161 billion target price by $562
million because of “construction inefficiencies,” the Naval Sea Systems Command said
without elaboration....
The company’s $579.2 million fee, its profit under the contract, may be at risk as the Navy
takes steps to contain the overrun.
“The final cost will determine the amount of fee earned by Huntington Ingalls” and the Navy
will pay less than the $579.2 million if “the contractor will not achieve the target cost,” the
command said in a statement to Bloomberg News....
The Gerald R. Ford overrun projection is based on company data as of April 24, which
indicates the September 2008 design and construction contract is about 39 percent
complete.....
Huntington Ingalls spokesman Jerri Dickseski said in an e-mail that the company’s Newport
News Shipbuilding division has seen “month-over-month cost improvements since late
2010.”
The company has put in place at least five major improvements to stem cost growth,
Dickseski said.
They include use of 3-D computer modeling technology; increased use of automated
welding; leveraging the buying power of all Huntington Ingalls to obtain bulk quantities of
commodities at lower costs, and better coordination of the division’s engineering,
manufacturing and construction teams.
The company also is improving its infrastructure to enhance productivity, she said....
The Navy said it is working with Huntington Ingalls “to drive construction costs down and
reduce material expenditures.” The company has assigned a full-time vice president for
construction and a construction director to “improve accountability and focus management
attention” on reducing costs, the Navy said.
Dickseski said Huntington Ingalls shares in any cost growth in terms of “impact to our fee.”
As part of a $504 million modification to Huntington’s contract, the Navy on July 29
tightened the linkage between the company’s fee and cost control, the company and Navy
sea command said.
“This provides more incentive for the contractor to complete the design within the contract
negotiated cost,” the command said.23
An August 12, 2011, press report states that Mike Petters, HII’s president and chief executive
officer,
23
Tony Capaccio, “Huntington’s USS Gerald Ford Carrier Contract Has 11% Overrun,” Bloomberg News, August 9,
2011.
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defended the company’s performance on the Ford, saying it “remains committed to our
financial targets on that program.”
“The performance on the ship right now is pretty solid,” Petters said. “(W)e’re very
confident with the financial performance on that program.”24
Another August 12, 2011, press report states:
Huntington Ingalls Industries’ (HII) Newport News Shipbuilding unit should meet its overall
cost-and-schedule targets for the U.S. Navy’s next-generation aircraft carrier CVN-78 Gerald
R. Ford despite recently acknowledged potential overruns on the ship’s current design-andconstruction contract, HII CEO Michael Petters says.
“We remain committed to the financial targets,” Petters told Wall Street investment analysts
during the company’s Aug. 11 conference call to detail second-quarter financial results. “The
targets on this ship have not changed.”…
Potential cost-growth concerns have been a worry for the Ford-class carrier, CRS notes in its
report. But what analysts need to remember, according to Petters, is that the Ford is a leadclass ship. “Lead ships are always challenging,” he says.
Ford construction is further challenged by “aggressive” shipbuilding targets negotiated by
the Navy and Newport News, Petters says.
One of the reasons Newport News and the Navy negotiated a cost-plus contract was to help
the company manage the cost performance with the risk involved in building such an
advanced lead ship, Petters says.
“This lead ship is better than any one I’ve worked with,” he says, adding that Newport News
is constantly working to bring down costs.
The next Ford-class carrier—the CVN-79 John F. Kennedy—will likely be a fixed-price
contract.
“That’s a 2013 ship,” Petters says, and assuming the Navy stays on course for its carrier
construction plan, Navsea and Newport News should start negotiating the contract at the end
of 2012 or beginning of 2013.
That negotiation will not be about price, Petters says; it instead will be about “how to
allocate risk.”
The more the Navy and Newport News share the risk of building these ships on schedule and
within budget, the lower the price of the carrier will be, he says.
“If we bear the risk,” he says, “that will drive the price up.”25
24
Peter Frost, “Huntington Ingalls Posts Second-Quarter Profit Of $40 Million, Warms Of Potential Carrier Delay,”
Newport News Daily Press, August 12, 2011. Ellipsis and parentheses as in original.
25
Michael Fabey, “HII CEO Downplays Potential Ford Carrier Overruns,” Aerospace Daily & Defense Report, August
12, 2011: 3.
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June 2011 CBO Report
A June 2011 CBO report on the potential cost of the Navy’s FY2011 30-year shipbuilding plan
states (with costs expressed on constant FY2011 dollars):
The Navy’s projected cost of the lead ship of the CVN-78 class grew by 10 percent between
the President’s 2008 and 2012 budget requests. The Navy’s budget now projects the lead
ship’s cost to be about $12.0 billion (about what CBO estimated in its analysis of the Navy’s
2009 plan). However, further increases appear likely. According to the Selected Acquisition
Report for the CVN-78 program, the program manager is currently estimating an additional
$600 million in cost overruns above the budgeted amount. In addition, the lead ship of the
CVN-78 class is only about 23 percent complete, and cost growth in shipbuilding programs
typically occurs when a ship is more than half finished—particularly in the later stages of
construction, when all of a ship’s systems must be installed and integrated. Therefore, greater
cost growth in the lead ship appears likely, which would signal higher costs for subsequent
ships in the class as well.
To estimate the cost of the lead ship of the CVN-78 class, CBO used the actual costs of the
previous carrier—the CVN-77—and then adjusted them for higher costs for governmentfurnished equipment and for more than $3 billion in costs for nonrecurring engineering and
detail design (the plans, drawings, and other one-time items associated with the first ship of a
new class). As a result, CBO estimates that the lead CVN-78 will cost about $12.9 billion
once it is completed. Subsequent ships of the class will not require as much funding for onetime items, although they will incur the higher costs for government-furnished equipment.
Altogether, CBO estimates the average cost of the six carriers in the [FY]2012 [30-year
shipbuilding] plan at $12.1 billion, whereas the Navy estimates their average cost at $10.3
billion (see Table 3). CBO’s estimate for all carriers under the 2012 plan is lower than the
estimate for the 2011 plan primarily because... the projected gap between inflation in the
economy overall and long-run shipbuilding inflation has narrowed.
There are several reasons to believe that the final cost of the CVN-78 could be even higher
than CBO’s estimate. First, most lead ships built in the past 20 years have experienced cost
growth of more than 40 percent. (CBO’s estimate for the lead CVN-78 accounts for some but
not all of that historical cost growth.) Second, Navy officials have told CBO that they have
budgeted to the 40th percentile of possible cost outcomes. That is, there is a 60 percent
probability that the final cost of the CVN-78 will exceed the service’s estimate and only a 40
percent probability that the final cost will be less than that estimate. Third, a number of
critical technologies that are supposed to be incorporated into the ship, such as a new
electromagnetic catapult system for launching aircraft, remain under development.
Difficulties in completing their development could arise and increase costs, which would
also affect the costs for subsequent ships of the class.26
December 31, 2010, SAR (Released April 2011)
Regarding a contract that NNS has with the Navy for detailed design and construction work on
CVN-78—a contract that accounts for a portion of the ship’s total cost—the December 31, 2010,
Selected Acquisition Report (SAR) for the CVN-78 program, which was released in mid-April
2011, states: “The [CVN-78] Program Manager’s (PM) Estimate At Completion (EAC) [for the
contract] increased from $5,295.5M to $5,723.5M reflecting unfavorable contractor material and
labor performance.” This statement would appear to suggest a potential for $428 million in cost
26
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2012 Shipbuilding Plan, June 2011, pp. 13-14.
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growth on CVN-78. The December 31, 2010, SAR for the program also states that the contract
has a current target price of $5,161.3 million. Compared to this figure, the EAC figure of
$5,723.5 million would appear to suggest a potential for $562.2 million in cost growth, which
would equate to about 10.9% cost growth. At a May 3, 2011, briefing on the CVN-78 program for
CRS and CBO, officials from the CVN-78 program office stated that the EAC figure in the SAR
reflected information available at the time the SAR was being compiled, and that the Navy is
working to reduce the EAC figure.
March 2011 GAO Report
The Government Accountability office (GAO) reported the following in March 2011 regarding
the status of the CVN-78 program, including the potential for cost growth:
Technology Maturity
Seven of the CVN 21 program’s 13 current critical technologies have not been demonstrated
in a realistic, at-sea environment. Of these technologies, EMALS, the advanced arresting
gear, and dual band radar present the greatest risk to the ship’s cost and schedule. Program
officials stated that EMALS development has been one of the primary drivers of CVN 78
cost increases. Problems have occurred in EMALS testing which could result in more design
changes later in the program. Testing uncovered a crack in the motor, which has already
resulted in several design changes; and in January 2010, a motor controller software error
caused damage to the EMALS hardware. Both fixes have successfully been retested. The
program completed the first four
F/A-18E launches in December 2010. The advanced arresting gear is nearing maturity and
has completed extended reliability testing. However, delays in land-based testing with
simulated and live aircraft could lead to late delivery. The Navy finalized a fixed-price
production contract for EMALS and the advanced arresting gear in June 2010. Although the
Navy continues to pay design and testing costs, any EMALS changes identified during
development will be incorporated into the production units at no cost to the government. The
dual band radar, which includes the volume search and multifunction radars, is being
developed by the DDG 1000 destroyer program and is also nearing maturity. However, as a
part of a program restructuring, the DDG 1000 eliminated the volume search radar from the
program. According to Navy officials, radar development has not been affected, but CVN 78
will now be the first ship to operate with this radar. Radar equipment will be delivered for
installation and testing beginning September 2011 for the multifunction radar and in January
2012 for the volume search radar.
Design Maturity
In September 2008, CVN 78 began production with only 76 percent of its three-dimensional
product model complete. The three-dimensional product model was completed by November
2009, but the contractor is currently making design changes to prevent electrical cable
routing from interfering with other design features. As EMALS and other systems complete
testing, additional design changes may be necessary.
Production Maturity
The Navy awarded the CVN 78 construction contract in September 2008. Construction of
approximately 65 percent of the ship’s structural units is complete. These units account for
about 19 percent of the ship’s total production hours. As of July 2010, construction of the
hull in dry dock was behind schedule because of late material deliveries from suppliers.
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Other Program Issues
In 2010, the CVN 21 program shifted from a 4- to 5-year build cycle, which could increase
program costs. According to program officials, the shipbuilder projects that this change will
increase costs by 9 to 15 percent due to the loss of learning and effect on the supplier base,
among other inefficiencies. The Navy disagrees with this assessment and reported to
Congress that the shift will have minimal negative consequences. The dual band radar also
presents cost risks for the program. Program officials are considering buying the radar for
both CVN 79 and CVN 80 at the same time, in order to reduce the risks associated with the
production line being idle for up to 5 years. However, this strategy could lead to increased
costs if changes identified during at-sea testing on CVN 78 need to be incorporated into the
already-procured systems for the two follow-on ships.
Program Office Comments
In commenting on a draft of this assessment, the Navy generally concurred with this
assessment. Officials stated the program is addressing the technology and construction
challenges for a successful September 2015 delivery, and that CVN 79 is on track to award a
construction contract by the first quarter fiscal year 2013. The Navy stated that while the
change from a 4- to 5-year build cycle will increase the unit cost of the CVN 78 class carrier,
it facilitates a reduced average yearly funding requirement over a longer period of time. The
Navy also provided technical comments, which were incorporated as appropriate.27
EMALS
October 2011 Press Report
An October 10, 2011, press report states:
After ironing out software glitches that stopped the next generation of U.S. aircraft carrier
catapults from launching planes for five months, the people developing the electromagnetic
aircraft launch system (EMALS) are working on making the system more reliable….
The goal is to cut the average re-pair time to less than one hour, a vast improvement
compared with the 12 hours it takes to fix the average breakdown on existing steam
catapults….
EMALS has just two major moving parts and will break down less frequently than steam
catapults, said Capt. James Donnelly, EMALS program manager….
The EMALS team has moved on to improving reliability after fixing a glitch with the 29
“blocks” that line the catapult track. The blocks turn on and off in a finely timed succession,
building a wave of energy that pushes the aircraft down the flight deck. But after launching
an F/A-18E Super Hornet in mid-December [2010], developers discovered bugs in the
software that controls when the blocks fire.
“It was a minor correction,” said Susan Wojtowicz, program manager for General Atomics,
the contractor developing EMALS. “It wasn’t herky-jerky, it was different” from a steam
catapult.
27
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-11233SP, March 2011, p. 55.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
That software problem seems to be over. After catapulting aboard an E-2D Advanced
Hawkeye from EMALS on Sept. 27, Lt. Cmdr. Brian Tollefson gave the best review an
aviator could give a new catapult: It was a typical flight.
“We have around 300 cat shots apiece. It felt just like the rest of them,” he said, after landing
her with two naval flight officers onboard….
So far, EMALS has completed 32,000 launch cycles. EMALS has launched during hot and
cold conditions, and while being exposed to salt, acid and firefighting foam. There have been
1,212 dead load shots and 96 aircraft launches, including the recent Advanced Hawkeye
flight. EMALS is 80 percent through the system development stage. About 135 different
components have been delivered to Newport News Shipbuild-ing, Va., where Ford is being
built.
The EMALS team has also tested the system for electromagnetic interference and found it
does not harm the aircraft, carrier, communication systems or any weapons.28
June 2011 Press Report
A June 27, 2011, press report states:
Flight tests of the U.S. Navy’s new electromagnetic aircraft launch system (EMALS)
resumed in late May after a five-month hiatus, and two more aircraft types have now passed
their initial launch tests.
The program’s maiden launches were accomplished in mid-December when an F/A-18E
Super Hornet strike fighter from Air Test and Evaluation Squadron 23 (VX-23) made four
takeoffs from the Navy’s catapult test center at Lakehurst, N.J. But the tests revealed the
need to fine-tune the software that controls the system’s motors and better control the
miniscule timing gaps between when the motors are energized and turned off.
“The linear motors fire sequentially as you go down the catapult track,” said Capt. James
Donnelly, the Navy’s program man-ager for EMALS. “Only three are energized at a time.
They turn on, turn off. As each one energizes, a force is exerted on the aircraft, and the
timing needed to be fine-tuned.” Flight tests with the F/A-18E resumed May 25, and “the
launches validated the software changes,” Donnelly said.
The Super Hornet made 14 launches using the revamped software, followed by 12 launches
on June 1 and 2 with a T-45C Goshawk training jet from VX-23.
A C-2A Carrier Onboard Delivery aircraft from VX-20 made a further series of 12 launches
on June 8 and 9.
The Super Hornet will return in July to Lakehurst for another series of launches using a
variety of stores, or weapons, mount-ed under the wings and on the aircraft. Later in the
summer, an E-2D Advanced Hawkeye airborne command-and-control aircraft will begin
launch tests, Donnelly said.
28
Joshua Stewart, “EMALS Developers Fix Glitch, Tout Launcher’s Reliability,” Defense News, October 10, 2011: 54.
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The multiple launches are used to test a variety of weights on the aircraft, he said, and to
validate the EMALS system and improve reliability. The aircraft are also tested at various
launch speeds.
Reliability of the EMALS system is “improving,” Donnelly said.
“We have more and more launches without any [warning] lights that come on, anything we
annotate in launch logs,” he said during a June 23 interview.
“A lot of corrections” were made during the early stages of the program’s flight testing,
Donnelly said.
“We’re doing much less of that. We had very few issues in the May and June launches.”...
Despite the five-month pause in the test schedule, production and delivery of EMALS
components is proceeding for the Gerald R. Ford, under construction at Huntington Ingalls
Industries’ Newport News, Va., shipyard. “No impact to the ship [construction] schedule,”
Donnelly said. “We’re meeting our required in-yard dates. We started deliveries in May, and
we’re delivering a lot of equipment this month, including most of the motor generators—the
components that many folks were most concerned about schedule-wise.” Asked about the
program’s budget performance, Donnelly noted that production elements are being procured
under a fixed-price contract—“no ups and extras there,” he said—but he declined to provide
test budget figures.
“We’re constantly looking at the testing budget, so that’s under discussion,” he said. “The
bottom line is, we’ll continue testing,” he said. “Our focus is to ensure the catapult is as
reliable as possible as when we deliver and the ship gets underway with sailors aboard.”29
April 2011 News Report
An April 18, 2011, news report stated that the EMALS program office
has completed work on six [EMALS] generators scheduled to be delivered to the shipyard
soon, but it will likely have to make changes after they are installed on the aircraft carrier
since integration testing is ongoing, according to officials from Huntington Ingalls
Industries.
HII representatives told reporters at a Navy League conference here on April 12 that so far
EMALS is on track to be installed on the Gerald Ford (CVN-78) which the company is
building on schedule at Newport News, VA. They also said they are confident that the
generators will not need extensive changes because the Navy has already put them through
component testing.30
29
Christopher P. Cavas, “U.S. Navy Resumes EMALS Tests,” Defense News, June 27, 2011: 19. Material in brackets
as in original.
30
Cid Standifer, “EMALS Set To Deliver 6 Generators To HII; May Require Changes Later,” Inside the Navy, April
18, 2011.
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March 9, 2011, Hearing
At a March 9, 2011, hearing on Navy shipbuilding issues before the Seapower and Projection
Forces subcommittee of the House Armed Services Committee, the following exchange occurred
between Representative Akin, the chairman of the subcommittee, and Sean Stackley, the Assistant
Secretary of the Navy for Research, Development, and Acquisition (i.e., the Navy’s acquisition
executive):
REPRESENTATIVE AKIN:
… one of the things we’ve been paying attention to is the EMALS systems on new carrier
and that has to be built into the hull and everything, and I gather the timeline on that is pretty
tight. How is that going and do you see any problems with that or not?
STACKLEY:
Yes, sir. We have—we have been managing EMALS to the smallest detail. We are very
concerned about two years ago that the program was not on track. We placed basically—we
have replaced the management team as well as ensure that the program is properly funded
both to complete its development and also to support in-yard- need-dates for the CVN-78.
Today—today, we are at a point in system development that we have turned over to the
shipyard which referred to as the green book which takes all the testing that’s been
conducted up at Lakehurst where we have a full-scale model in the ground that we’ve used to
launch aircraft. So we’ve developed the test requirements, turned over that green book to
Newport News on schedule so that they can continue to build the CVN-78 to support the test
program.
On the production side, we are carefully watching each of the components that need to be
delivered to Newport News. We have two in particular. Two motor generator sets out of 12
that have very limited float on in-yard-need-date, but we don’t see difficulties right now in
terms of meeting that and all the other components have float on the order of four to six
months.
So, tight, yes, closing manage [sic: closely managed], yes. I think the risk is acceptable
absolutely. We have to yet to complete the STD testing that we, as I described, we launched
aircraft off the Lakehurst system in December. They really do stress it and to drive learning
early on and coming out of that. In fact, we have uncovered some dynamics associated
between the system and the aircraft’s performance that we’ve taken a pause to work on more
on the software side of correcting that issue so that we can ...
AKIN:
Software in order to change the amount of force relative to distance that the system develops
or ... ?
STACKLEY:
No, Sir. The – what’s beautiful about the EMALS is it’s very scalable in terms of you dial in
the load that you’re putting on it and what you want for speed when at the end of the runway
and the EMALS will do the rest. What we discovered in moving away from a dead load to an
F-18 is: EMALS is a long – it’s a number of linear motors that are in series and then a hand
off from linear motor to linear motor as the aircraft is accelerating. There’s a slight gap. And
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that can be tuned in terms of the way you ramp up the load and where you drop it off to
minimize that gap so it’s not perceptible to the pilot.
So it’s an example what were not able to pick up in dead load testing which put a pilot on
aircraft and that’s a report I received back until we docked in to that to figure out what the
best way to mitigate that so that it’s not a problem.
So the test program—bottom line is the test program is frankly in good shape. It is a fairly
exhaustive test program. We did take a pause because we did not while we were working on
these changes or corrections coming out of the live aircraft testing. We did not want to have
a standing army on the test side that was performing inefficiently, so we took a pause; we’re
coming back with corrections and picking back up the system functional demonstration this
month.31
CVN-78 Program Issues in December 2011 DOT&E Report
Another issue for Congress concerns CVN-78 program issues that were raised in a December
from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual report for
FY2011. The report stated, in its section on the CVN-78 program, that
Assessment
The Navy began CVN 78 construction in 2008 and plans to deliver the ship in September
2015. Current progress supports this plan; however the EMALS, AAG [Advanced Arresting
gear], DBR [Dual Band Radar], and Integrated Warfare Systems remain pacing items for
successful delivery of the ship.
The CVN 78 program (similar to the CVN 68 class program) continues to work through
challenges with F-35 JSF aircraft/ship integration. These challenges have the Naval Sea
Systems Command’s and Naval Air Systems Command’s significant attention and priority.
The Navy has not completed its analysis of the test data to determine whether design changes
are required for the jet blast deflectors and/or flight deck. Problems remain outstanding
regarding JSF data flow aboard ship via the Autonomic Logistics Information System; JSF
engine replacement logistics; lithium-ion battery stowage and operations; and low observable
material maintenance procedures.
EMALS developmental testing continues within timelines required to meet shipyard
Required in Yard Dates (RIYD) for various EMALS components. Developmental test
progress continues, although continued discovery of deficiencies (necessitating a re-design of
the launch armature and rough acceleration characteristics on initial Aircraft Compatibility
Testing aircraft launches) indicates a still maturing system. DOT&E holds moderate concern
regarding the performance risk generated by the inability to test the full, four catapult
electrical distribution system prior to initial trials aboard ship. This is mitigated somewhat by
the conduct of system electrical fault testing during FY12, which will replicate some level of
the electrical distribution fault tree.
AAG testing was halted following the discovery of metal scoring of the CSA [Cable Shock
Absorber] during initial dead-load testing requiring component redesign and software
modifications. Testing should resume in December 2011 and still supports RIYD for AAG
components barring significant additional redesign.
31
Source: Transcript of hearing.
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The Navy will re-start DBR testing at Wallops Island in FY12. Based on these tests, if
additional DBR testing is required, there will likely be cost growth in software development
and required testing and a slip in completion of the post-delivery testing and trials of the
DBR. Numerous integrated warfare system items are of concern, including:
•
Historically the ship self-defense combat systems on aircraft carriers have had
reliability, weapon, and radar system integration shortcomings. While the Navy has
made efforts, it has not yet developed a detailed plan to address these concerns on CVN
78.
•
Navy development of a new anti-ship ballistic missile target and obtainment of a
capability to launch multiple simultaneous supersonic sea-skimming targets lags behind
CVN 78 testing need dates. Both are required to fully assess the effectiveness of the ship
self-defense systems.
•
CVN 78 will use DBR continuously and simultaneously for both air traffic control and
to support other warfare areas including ship self-defense, whereas separate legacy
systems perform these missions individually. Merging these previously separate
missions into a single system requires significant testing and integration. Portions of this
testing are currently scheduled shipboard, instead of making more complete use of the
land-based Wallops Island facility; this complicates the test-fix-test timeline. RIYD
[required in-yard date] for these systems continues to drive the development schedule;
however, to date, development and testing remains on track.
The PSMD [Preliminary Ship’s Manning Document] was partially validated during Naval
Aviation Enterprise Manning War-game II in September 2011. In order to reduce Total
Ownership Costs (TOC) the ship’s overall manning (not including embarked air wing and
staffs) was reduced by 663 billets from current aircraft carrier requirements. In light of these
forced manning reductions, the Navy specifically designed CVN 78 to operate at 100 percent
manning on a continual basis, a level which the current manning construct and personnel
policies of the Navy do not support. The war-game validated the CVN 78 manning
requirements for operating during normal peacetime conditions; however during surge
operations or at less than 85 percent NEC fit/fill requirements there is risk as to whether the
ship can operate effectively. In order to ensure the ship’s operational effectiveness the Navy
will have to develop a manning construct which supports the 100 percent NEC fit/fill
manning requirement for CVN 78.
The current state of the Virtual Carrier model does not fully provide for an accurate
accounting of SGR [Sortie Generation Rate] due to a lack of fidelity regarding manning and
equipment/aircraft availability. Spiral development of the Virtual Carrier model is continuing
in order to ensure that the required fidelity will be available to support SGR testing during
IOT&E [Initial Operational Test & Evaluation].
DOT&E has requested the Navy adequately fund and complete the actions necessary to
conduct the TSST [Total Ship Survivability Trial] and the FSST [Full-Ship Shock Trial] on
the CVN 78. This includes updating the Damage Scenario Based Engineering Analyses
(DSBEA) from prior Vulnerability Assessment Reports (VARs) and enough new DSBEAs,
including machinery spaces, to conduct an adequately scoped TSST. DOT&E expects this
will require five or six TSST drills.
Because of the two-month delay required to perform the FSST, the Navy proposes delaying
the shock trial by 5-7 years in order to complete it on CVN 79 (instead of CVN 78). The
two-month delay is not sufficient reason to postpone the shock trial for so long, as it could
reveal valuable lessons, including previously unknown vulnerabilities.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
The current TEMP [Test and Evaluation Master Plan] and proposed revisions do not
adequately address whole-platform level developmental testing. The strategy leverages the
testing being conducted by contracted organizations on their associated systems and subsystems but does not stipulate any additional integrated platform-level CVN 78 class specific
developmental tests. Lack of platform-level developmental testing significantly raises the
likelihood of platform-level discovery during operational test.
Recommendations
Status of Previous Recommendations. All FY10 recommendations remain valid and are
updated below. The Navy should:
1. Adequately test and address integration challenges with JSF; specifically logistics (storage
of spare parts and engines, transport of support equipment and spares to/from the carrier),
changes (if any) required to JBD’s [Jet Blast Deflectors], changes (due to heat and or noise)
to flight deck procedures, and Autonomic Logistics Information System integration.
2. Finalize plans that address CVN 78 integrated warfare system engineering and ship’s selfdefense system discrepancies.
3. Develop and procure an anti-ship ballistic missile target that adequately emulates the selfdefense portions of the threat trajectory, and pursue test range upgrades to allow up to four
supersonic sea-skimming targets to be launched simultaneously.
4. Continue aggressive EMALS and AAG risk-reduction efforts to maximize opportunity for
successful system design and test completion in time to meet RIYD for ship-board
installation of components.
5. Continue development of a realistic model for determining the sortie generation rate, while
utilizing realistic assumptions regarding equipment availability, manning, and weather
conditions. Obtain acknowledgement and concurrence from Navy leadership on scheduling,
funding, and execution plan for conducting a live SGR test event.
FY11 Recommendations.
1. Develop and codify a formal manning construct through the Navy’s Bureau of Personnel
to ensure adequate depth and breadth of required personnel to ensure that the 100 percent
NEC [Navy Enlisted Classification] fit/fill manning requirements of CVN 78 are met.
2. Conduct platform-level developmental testing to preclude discovery of operational
effectiveness deficiencies during IOT&E.
3. Plan and budget for an adequate Full-Ship Shock Trial and Total Ship Survivability Trial
on CVN 78.32
32
Department of Defense, Director, Operational Test & Evaluation, FY2011 Annual Report, December 2011, pp. 116117.
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Legislative Activity for FY2012
FY2012 Funding Request
As shown in Table 1, the Navy’s proposed FY2012 budget requested $554.8 million in advance
procurement (AP) funding for CVN-79.
FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81)
House (Committee Report)
The House Armed Services Committee, in its report (H.Rept. 112-78 of May 17, 2011) on H.R.
1540, recommends approving the Navy’s FY2012 request for advance procurement (AP) funding
for CVN-79 (page 345). Page 33 of the report states:
CVN-78 is the lead ship of the Ford-class of aircraft carriers. The committee was critical
when the Navy changed construction starts of these carriers from 4-year to 5-year centers.
The committee encourages the Secretary of the Navy to keep these aircraft carriers on 5-year
centers at the most, with fiscal year 2013 being the first year of detail design and
construction funding for CVN-79. The committee believes one key to success in this
program will be to minimize changes from ship to ship in the class. (page 33)
Section 221 of H.R. 1540 as reported by the committee states:
SEC. 221. DESIGNATION OF ELECTROMAGNETIC AIRCRAFT LAUNCH SYSTEM
DEVELOPMENT AND PROCUREMENT PROGRAM AS MAJOR SUBPROGRAM.
Not later than 30 days after the date of the enactment of this Act, the Secretary of Defense
shall designate the electromagnetic aircraft launch development and procurement program as
a major subprogram of the CVN-78 Ford-class aircraft carrier major defense acquisition
program, in accordance with section 2430a of title 10, United States Code.
Regarding Section 221, the committee’s report states:
This section would direct the Secretary of Defense to designate the Electromagnetic Aircraft
Launch System (EMALS) as a major subprogram of the CVN-78 Ford-class aircraft carrier
major defense acquisition program within 30 days after the date of enactment of this Act. A
major subprogram is defined in section 2430a of title 10, United States Code.
The committee is aware that EMALS is progressing through its land-based testing. However,
earlier problems in development have reduced almost all schedule margin in order to make
the date the equipment must be in the shipyard for installation in the first ship of the class.
The committee acknowledges elevating EMALS to a major subprogram will provide the
proper oversight to this critical system as it continues its development and production. (Page
93)
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House (Floor Consideration)
On May 25, 2011, as part of its consideration of H.R. 1540, the House agreed by voice vote to
H.Amdt. 301, the text of which is as follows:
SEC. 127. FORD-CLASS AIRCRAFT CARRIER PROCUREMENT.
(a) In General.—Subject to the availability of appropriations for such purpose, the Secretary
of the Navy may enter into multiyear contracts for the start of major construction of the
Ford-class aircraft carriers designated CVN 79 and CVN 80 and for the construction of
major components, modules, or other structures related to such carriers.
(b) Requirements.—In carrying out this section, the Secretary of the Navy may—
(1) enter into contracts under subsection (a) in a manner that the Secretary determines will
result in the lowest cost to the United States given the variability of shipyard industrial
capacity and other factors; and
(2) enter into contracts with the prime contractor chosen for major fabrication and
construction of the vessels or directly with other contractors to supply materiel and
equipments for the construction of the vessels in such a manner as to reduce cost to the
United States of such materiel and equipments by purchasing in economic order quantities.
(c) Condition for Out-Year Contract Payments.—A contract entered into under subsection
(a) shall provide that any obligation of the United States to make a payment under the
contract for a fiscal year after fiscal year 2012 is subject to the availability of appropriations
for that purpose for such later fiscal year.
(d) Other Authority.—Section 121(a) of the John Warner National Defense Authorization
Act for Fiscal Year 2007 (P.L. 109-364; 120 Stat. 2104) is amended by striking “three fiscal
years” and inserting “four fiscal years”.
Regarding subsection (d) above, as mentioned earlier (see footnote 5), Section 121 of the FY2007
John Warner National Defense Authorization Act (H.R. 5122/P.L. 109-364 of October 17, 2006)
granted the Navy the authority to use four-year incremental funding for CVN-78, CVN-79, and
CVN-80. Subsection (d) above would change that authority to permit the use of five-year
incremental funding. Since DOD currently plans to procure CVN-79 in FY2013 and CVN-80 in
FY2018, procuring the two ships in those years using five-year incremental funding would result
in a continuous stream of carrier procurement funding from FY2013 through FY2022.
Senate (S. 1867)
S. 1867, an original measure reported by Senator Levin on November 15, 2011, without written
report, in effect supersedes S. 1253 (see below). S. 1867 recommends approving the Navy’s
FY2012 request for advance procurement (AP) funding for CVN-79. (See §4101 of the bill as
reported by Senator Levin. In the printed version of the bill as reported by the committee, the
relevant table within this section appears on page 611.)
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Senate (S. 1253)
S. 1253 has been, in effect, superseded by S. 1867 (see above). S. 1253 as reported by the Senate
Armed Services Committee (S.Rept. 112-26 of June 22, 2011) recommends approving the Navy’s
FY2012 request for advance procurement (AP) funding for CVN-79. (See §4101 of the bill as
reported by the committee. In the printed version of the bill as reported by the committee, the
relevant table within this section appears on page 606.)
Conference
The conference report (H.Rept. 112-329 of December 12, 2011) on H.R. 1540/P.L. 112-81 of
December 31, 2011, recommends approving the Navy’s FY2012 request for advance procurement
(AP) funding for CVN-79 (page 811).
As mentioned earlier (see footnote 5), Section 121 of the FY2007 John Warner National Defense
Authorization Act (H.R. 5122/P.L. 109-364 of October 17, 2006) granted the Navy the authority
to use four-year incremental funding for CVN-78, CVN-79, and CVN-80. Section 124 of the
conference report would change that authority to permit the use of five-year incremental funding.
Since DOD currently plans to procure CVN-79 in FY2013 and CVN-80 in FY2018, procuring the
two ships in those years using five-year incremental funding would result in a continuous stream
of carrier procurement funding from FY2013 through FY2022. Section 124 of the conference
report states:
SEC. 124. EXTENSION OF FORD-CLASS AIRCRAFT CARRIER CONSTRUCTION
AUTHORITY.
Section 121(a) of the John Warner National Defense Authorization Act for Fiscal Year 2007
(P.L. 109-364; 120 Stat. 2104) is amended by striking `three fiscal years’ and inserting `four
fiscal years’.
Section 221 of the conference report states:
SEC. 221. DESIGNATION OF ELECTROMAGNETIC AIRCRAFT LAUNCH SYSTEM
DEVELOPMENT AND PROCUREMENT PROGRAM AS MAJOR SUBPROGRAM.
Not later than 30 days after the date of the enactment of this Act, the Secretary of Defense
shall designate the electromagnetic aircraft launch development and procurement program as
a major subprogram of the CVN-78 Ford-class aircraft carrier major defense acquisition
program, in accordance with section 2430a of title 10, United States Code. The Secretary
may cease such designation after the date on which the electromagnetic aircraft launch
system is certified as operationally effective and suitable by the Director of Operational Test
and Evaluation.
FY2012 Military Construction and Veterans Affairs and Related
Agencies Appropriations Act (H.R. 2055/P.L. 112-74)
Conference
In final action, H.R. 2055 became a “megabus” appropriations vehicle incorporating nine
appropriations bills, including the FY2012 DOD appropriations bill, which was incorporated as
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Division A. The conference report (H.Rept. 112-331 of December 15, 2011) on H.R. 2055/P.L.
112-74 of December 23, 2011, approves the Navy’s FY2012 request for advance procurement
(AP) funding for CVN-79 (page 628).
FY2012 DOD Appropriations Act (H.R. 2219)
House
The House Appropriations Committee, in its report (H.Rept. 112-110 of June 16, 2011) on H.R.
2219, recommends approving the Navy’s FY2012 request for advance procurement (AP) funding
for CVN-79 (page 153).
Senate
The Senate Appropriations Committee, in its report (S.Rept. 112-77 of September 15, 2011) on
H.R. 2219, recommends approving the Navy’s FY2012 request for advance procurement (AP)
funding for CVN-79 (page 120).
Conference
For the conference report on the FY2012 DOD appropriations bill, see the above discussion of
H.R. 2055.
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Appendix A. Earlier Oversight Issue: Shift to FiveYear Intervals—A More Fiscally Sustainable Path?
On April 6, 2009, Secretary of Defense Robert Gates announced a number of recommendations
he was making to the President for the FY2010 defense budget submission. One of these was to
shift procurement of carriers to five-year intervals. This recommendation, which was included in
the FY2010 defense budget submission, deferred the scheduled procurement of CVN-79 from
FY2012 to FY2013, and the scheduled procurement of CVN-80 from FY2016 to FY2018.
Gates stated in his April 9, 2009, address that shifting carrier procurement to five-year intervals
would put carrier procurement on “a more fiscally sustainable path.”33 This was interpreted as
meaning that shifting to five-year intervals (compared to a combination of four- and five-year
intervals in previous Navy 30-year shipbuilding plans) would reduce the average amount of
funding required each year for procuring carriers.
As a simplified notional example, if carriers are assumed to cost $10 billion each, then shifting
from a four-year interval to a five-year interval would reduce the average amount of carrier
procurement funding needed each year from $2.5 billion to $2.0 billion, a reduction of $500
million per year.
This simplified notional example, however, assumes that shifting from four- to five-year intervals
does not by itself cause an increase in the real (i.e., inflation-adjusted) procurement cost of the
carriers. Increasing the procurement interval could by itself cause an increase in the real
procurement cost of the carriers by reducing learning-curve benefits (i.e., causing a loss of
learning) from one carrier to the next, and by reducing the spreading of fixed overhead costs at
the Newport News shipyard and at supplier firms. A real increase in carrier procurement costs due
to such effects would offset at least some of the reduction in the average amount of carrier
procurement funding needed each year that would result from shifting to five-year intervals.
Shifting to five-year intervals for procuring carriers could also increase the costs of other Navy
ship programs. NGSB’s Newport News shipyard performs mid-life nuclear refueling complex
overhauls (RCOHs) on Nimitz-class carriers, and jointly builds Virginia-class nuclear-powered
attack submarines along with another shipyard (General Dynamics’ Electric Boat Division). In
addition, vendors that make nuclear-propulsion components for carriers make analogous
components for nuclear-powered submarines. A reduced spreading of fixed costs at NGSB’s
Newport News yard and at nuclear-propulsion component vendors due to the shift to five-year
intervals for carrier procurement might thus also increase costs for Nimitz-class RCOHs and
Virginia-class submarines. Increases in costs for these programs would further offset the
reduction in the average amount of carrier procurement funding needed each year that would
result from shifting to five-year intervals for carrier procurement.
Potential key oversight questions for Congress included the following:
33
Source: Statement of Secretary of Defense Robert Gates, at April 6, 2009, news conference on his recommendations
for the FY2010 defense budget.
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•
How much of the increase since the FY2009 budget submission in the estimated
procurement costs of CVNs 78, 79, and 80 (see Table 2) is due to the shift to
five-year intervals for procuring carriers?
•
How do potential increases in the costs of CVN-78 class aircraft carriers, Nimitzclass RCOHs, and Virginia-class submarines caused by the shift to five-year
intervals for procuring carriers affect the calculation of the net change in average
annual funding requirements that results from shifting carrier procurement to
five-year intervals?
May 2009 Northrop Grumman Shipbuilding Statement
A May 2009 Northrop Grumman Shipbuilding statement on the cost impact of shifting to fiveyear intervals for procuring carriers states:
One element of the announcement by the Secretary of Defense last week was to shift from
four (4) years to five (5) years between construction start for each new Ford Class carrier.
Past Northrop Grumman Shipbuilding experience with carrier new construction has shown
that the optimum time between carrier construction is less than 4 years. This allows the most
efficient flow of the work force from one ship to the next, and facilitates a learning curve for
carriers. Moving to five (5) year intervals between starts will require the shipyard to suboptimize manning level sequencing and result in added trade training, loss of learning, and
added startup costs.
Increasing the time between carrier construction can have a large impact on the supplier
base, driving cost increases of 5-10 percent, or higher in some cases, above normal
escalation. Material costs of suppliers who provide similar components to other Navy
programs currently under contract will also experience cost growth. Some equipment
suppliers can be expected to exit the market as a result of the additional year with the
expense of component requalification being realized.
Finally, the decrease in production labor volume on an annual basis, created by the increase
in the time interval between carrier construction starts will increase the cost to other
programs in the yard. This applies to work already under contract, namely Virginia class
submarines (VCS) Block 2 and Block 3, and CVN 78 predominately; and for future work not
yet under contract, namely Carrier RCOH’s, CVN79 and follow-on Ford class carrier
construction, and later Blocks of VCS. The impact to work already under contract is
expected to be in the range of $100M of cost growth. We also expect cost increases for
future contracts yet to be priced. Conservative projections of the shipbuilder cost impact to
CVN 79 and CVN80 for the one year delay will be on the order of a 9-15 percent cost
increase.34
34
Northrop Grumman Shipbuilding statement dated May 1, 2009, entitled “NGSB Statement Regarding Extending the
Time Interval between New Build Starts For the Ford Class of Aircraft Carriers,” provided to CRS by Northrop
Grumman.
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March 2010 GAO Report
A March 2010 GAO report stated that if carrier procurement were shifted to five-year intervals,
“the fabrication start date for CVN 80 will be delayed by 2 years, which will increase the amount
of shipyard overhead costs paid under the CVN 79 contract.”35
March 2010 Navy Report Required by Section 126
Section 126 of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28,
2009) required the Secretary of the Navy to submit a report to the congressional defense
committees on the effects of using a five-year interval for the construction of Ford-class aircraft
carriers. The conference report (H.Rept. 111-288 of October 7, 2009) on H.R. 2647/P.L. 111-84
stated the following regarding Section 126:
The conferees note that a 5-year interval for aircraft carrier construction, as proposed by the
Secretary of Defense, may be the appropriate course of action for the Department of the
Navy. However, the conferees are concerned that this decision may not have been made
following a rigorous cost-benefit analysis. Therefore, the conferees expect that the Secretary
of the Navy will take no further action to preclude the ability of the Secretary to award a
construction contract for CVN–79 in fiscal year 2012 or the aircraft carrier designated CVN–
80 in fiscal year 2016, consistent with the Annual Long-Range Plan for Construction of
Naval Vessels for Fiscal Year 2009, until he completes the required assessment and fully
informs the congressional defense committees of any such a decision. (Page 680)
The Navy submitted the report on March 4, 2010.36 The report states, among other things, that
•
“It is reasonable to assume that some vendor base inefficiencies, in addition to
inflation may occur by increasing CVN build intervals to five years.”
•
“While a five-year interval between carrier construction starts will result in
potential inefficiencies and gaps for specific carrier construction trade skills, the
Navy plans to closely manage the transition to 5-year centers to minimize the
impact of this change on training of individuals required to support ship
construction.”
•
“The Navy estimated that a four-year build interval would maximize the
opportunity to achieve labor efficiencies due to learning. A five-year build
interval reduces this opportunity; however, the overall impact for loss of learning
associated with a shift to five-year centers is manageable through Advance
Procurement and Advance Construction.”
•
“The Navy assessed the NIMITZ Class cost returns for shipbuilder labor and
material and GFE to determine the correlation between these cost elements and
the number of years between carrier awards. The Navy estimates that impact to
Basic Construction is around 1.0% for CVN 79 and CVN 80.”
35
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-10388SP, March 2010, p. 54.
36
This is the date of the cover letters to the congressional recipients. The report itself has a cover date of February
2010.
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•
“The change to five-year build intervals results in an overhead decrease in direct
labor workload for aircraft carrier construction, thereby causing the overhead
rates to increase proportionately. The Navy estimates the construction portion
increase is less than 1% each for CVN 78, CVN 79 and CVN 80.”
•
“The impact of changing the interval between carrier awards to the VIRGINIA
Class submarine current Block II and Block III contracts is estimated to be $3050 million per hull.”37
The report does not provide an overall dollar calculation of how much of the increase since the
FY2009 budget submission in the estimated procurement costs of CVNs 78, 79, and 80 is due to
the shift to five-year intervals for procuring carriers. Virginia-class submarines are scheduled to
be procured at a rate of two ships per year starting FY2011. If the cost increase of $30 million to
$50 million for each Virginia-class boat cited in the Navy’s report holds for Virginia-class boats
procured in FY2011 and subsequent years, then the shift to five-year intervals for procuring
carriers would increase Virginia-class procurement costs by $60 million to $100 million per year.
For the text of the Navy’s report, see Appendix B.
June 30, 2010, Selected Acquisition Report (SAR)
DOD’s June 30, 2010, Selected Acquisition Report (SAR) for the CVN-78 program states that the
estimated increase in Ford-class procurement costs resulting from shifting to five-year intervals
for procuring carriers is $1,798.0 million in then-year dollars, consisting of $521.0 million for
CVN-79 and $1,277.0 million for CVN-80.38 The June 30, 2010, SAR states that these two
figures are a “clarification” of figures presented in the December 31, 2009, SAR. The December
31, 2009, SAR estimated the increase at $4,131.2 million in then-year dollars, consisting of
$1,131.4 million for CVN-79 and $2,999.8 million CVN-80, but also stated that these figures
were “overstated, and will be corrected in the June 2010 SAR.”39 The difference between the June
30, 2010, SAR, and the December 31, 2009, SAR regarding the estimated increase in
procurement costs resulting from shifting to five-year intervals for procuring carriers (i.e.,
$4,131.2 million minus $1,798.0 million) is $2,333.2 million. The June 30, 2010, SAR reattributes a net total of $2,333.2 million in estimated cost increases to factors other than shifting
to five-year intervals for procuring carriers, and reports total estimated procurement costs for
CVN-79 and CVN-80 that are the same as those reported in the December 31, 2009, SAR.
Neither the June 30, 2010, SAR nor the December 31, 2009, SAR shows an estimated increase in
the procurement cost for CVN-78 resulting from shifting to five-year intervals for procuring
carriers. The figures in the June 30, 2010, SAR are consistent with the Navy-provided figures
presented in Table A-1.
Navy Data Provided to CRS and CBO on June 24, 2010
On April 19, 2010, following a Navy briefing to CRS and CBO on the CVN-78 program, CRS
asked the Navy to provide the procurement costs of CVNs 78, 79, and 80 in constant FY2011
37
Department of the Navy, Report to Congress on Effects of Five-year Build Intervals for Force Class Aircraft
Carriers, February 2010, 5 pp. Copy provided to CRS by Navy Office of legislative Affairs on April 8, 2010.
38
Department of Defense, Selected Acquisition Report (SAR), CVN-78, As of June 30, 2010, p. 26.
39
Department of Defense, Selected Acquisition Report (SAR), CVN-78, As of December 31, 2009, pp. 4 and 25.
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dollars as in the proposed FY2011 budget, and what these costs would have been in the proposed
FY2011 budget if there had been no shift to five-year intervals for carrier procurement (i.e., if
CVN-79 were procured in FY2012 and CVN-80 were procured in FY2016). The Navy provided
the figures (in both then-year and constant FY2011 dollars) to CRS and CBO on June 24, 2010.
Table A-1 shows the figures.
Table A-1. Cost Impact of Shifting to Five-year Intervals
(Millions of dollars, rounded to nearest tenth)
CVN-78
CVN-79
CVN-80
Cost in FY2011 budget
11,531.0
10,413.1
13,577.0
What the figure would have been in FY2011 budget if
there had been no shift to five-year intervals
11,531.0
9,892.1
12,300.0
Difference (dollars)
0
521.0
1,277.0
Difference (%)
0
5.3%
10.4%
Cost in FY2011 budget
11,875.9
9,742.3
11,628.5
What the figure would have been in FY2011 budget if
there had been no shift to five-year intervals
11,875.9
9,396.7
10,872.2
Difference (dollars)
0
345.6
756.3
Difference (%)
0
3.7%
7.0%
Then-year dollars
Constant FY2011 dollars
Source: Briefing slide entitled “CVN 78 Class CBO/CRS Data Request,” dated June 24, 2010, and provided as
an attachment to a Navy information paper dated May 19, 2010. The May 19, 2010, information paper and the
June 24, 2010, attachment were provided to CRS and CBO on June 24, 2010.
Notes: In the scenario assuming there had been no shift to five-year intervals for carrier procurement, CVN-79
would be procured in FY2012 and CVN-80 would be procured in FY2016. The Navy converted then-year dollars
to constant FY2011 dollars using a January 2010 SCN (i.e., shipbuilding budget) deflator. FY2011 budget figures
for CVN-80 reflect a CVN-78 program estimate pending official approval from the Naval Sea Systems Command
(NAVSEA).
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Appendix B. Text of Navy Report on Effects of
Shifting to Five-Year Intervals
The following is the text of the Navy’s report on the effects of shifting to five-year intervals for
procuring carriers.40
I . REPORT REQUIREMENTS
Section 126 of the National Defense Authorization Act for Fiscal Year 2010, P.L. 111-84,
(hereinafter “Section 126”) requires that a report be submitted to Congress no later than
February 1, 2010 assessing the effects of using a five-year interval for the construction of
Gerald R. Ford Class aircraft carriers. The assessment shall include impacts with respect to
four specified areas resulting from this change in acquisition strategy. This report fulfills the
Navy’s reporting obligation pursuant to Section 126. The language of this section is as
follows:
“Not later than February 1, 2010, the Secretary of the Navy shall submit to the congressional
defense committees a report on the effects of using a five-year interval for the construction of
FORD Class aircraft carriers. The report shall include, at a minimum, an assessment of the
effects of such five-year interval on the following:
(1) With respect to the supplier base(A) the viability of the base, including suppliers exiting the market or other potential
reductions in competition; and
(B) cost increases to the Ford Class aircraft carrier program.
(2) Training of individuals in trades related to ship construction.
(3) Loss of expertise associated with ship construction.
(4) The costs of—
(A) any additional technical support or production planning associated with the start of
construction;
(B) material and labor;
(C) overhead; and
(D) other ship construction programs, including the costs of existing and future contracts.”
II. ASSESSMENT DISCUSSION
On April 6, 2009, Secretary of Defense announced within a Defense Budget
Recommendation Statement that the Navy’s CVN 21 aircraft carrier program (Ford Class)
40
Department of the Navy, Report to Congress on Effects of Five-year Build Intervals for Force Class Aircraft
Carriers, February 2010, 5 pp. The cover letters sent with the report are dated March 4, 2010. Copy of report provided
to CRS by Navy Office of legislative Affairs on April 8, 2010.
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would shift from a four-year to a five-year build cycle, thereby placing the program on a
more fiscally sustainable path. This will result in 10 aircraft carriers after 2040. The five-year
build cycle allows for a balance between carrier build-rate and inventory, and a more
effective use of overall Shipbuilding and Conversion, Navy funding between carrier
programs and other ship, submarine, support, and amphibious ship recapitalization plans.
1.
IMPACT TO SUPPLIER BASE
It has been the Navy’s experience that longstanding aircraft carrier suppliers have generally
responded to ship construction schedule shifts and extended workload gaps without
widespread disruption or loss of continuity for critical products from most vendors. For
example, the interval between procurement of CVN 77 and CVN 78 was originally planned
to be five years, but grew to seven years. There was no significant impact on the
shipbuilder’s procurement of components to support ship construction.
In addition, for a 2009 Navy-funded RAND Corporation study, RAND sought comments
from 46 major suppliers regarding the impact of moving the CVN 79 award date to Fiscal
Year 2013. The suppliers chosen were those deemed critical to aircraft carrier construction
by the shipbuilder. The majority of the 18 major suppliers who responded indicated that less
than 20% of their total annual revenues were from aircraft carrier construction, and nearly all
responding vendors indicated they provide services to other Navy ship platforms including
submarines, surface combatants, and aircraft carrier Refueling and Complex Overhauls
(RCOH). It is reasonable to assume that some vendor base inefficiencies, in addition to
inflation may occur by increasing CVN build intervals to five years. Efforts by the Navy to
drive cross-platform commonality of parts and proactively manage obsolescence also
mitigate the risk of economic dependence. As a result, economic dependence on Ford Class
aircraft carrier order frequency for the majority of the vendor industrial base is projected to
be low. The Navy plans to continue to closely manage this industrial base to minimize
impacts and costs.
2-3. IMPACT TO TRAINING AND EXPERTISE
The construction start of the Ford Class coincides with an overall ramp-up in shipyard
production efforts in the Fiscal Year 2010-Fiscal Year 2013 timeframe due to an increase to
two per year VIRGINIA Class submarines, more consistent carrier build frequencies,
sustained NIMITZ Class RCOH program, and the start of CVN 65 inactivation. While a fiveyear interval between carrier construction starts will result in potential inefficiencies and
gaps for specific carrier construction trade skills, the Navy plans to closely manage the
transition to 5- year centers to minimize the impact of this change on training of individuals
required to support ship construction.
The Navy estimated that a four-year build interval would maximize the opportunity to
achieve labor efficiencies due to learning. A five-year build interval reduces this opportunity;
however, the overall impact for loss of learning associated with a shift to five-year centers is
manageable through Advance Procurement and Advance Construction.
4.
COST IMPACTS
There are three primary sources of cost impact associated with increasing the intervals
between carrier construction starts - inflation, inefficiencies, and overhead impacts. The
effects of these are addressed in paragraphs 4A, 4B, and 4C for CVN 79 and CVN 80. For
other work at the shipyard, the collective impacts of the three sources are provided in
paragraph 4D.
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A. Cost of any Additional Technical Support or Production Planning Associated with the
Start of Construction
Since CVN 79 advance planning and procurement commenced prior to the five-year build
interval decision, CVN 79 technical support and production planning will be adjusted for the
five-year interval. The Construction Preparation contract will be extended by one year to
meet the construction award shift from Fiscal Year 2012 to Fiscal Year 2013. With the
exception of costs associated with an additional year of planning amounting to about 1%,
there should be no other fiscal implications with this extension.
B. Cost of Material and Labor
A five-year build interval imposes one additional year of inflation on the CVN 79 and two
additional years on CVN 80. The Navy estimates a 3% impact on the Basic Construction
Cost and Government Furnished Equipment (GFE) for CVN 79 and an 8% impact to CVN
80. This inflation impact will be addressed in the budget request for these two ships.
The Navy assessed the NIMITZ Class cost returns for shipbuilder labor and material and
GFE to determine the correlation between these cost elements and the number of years
between carrier awards. The Navy estimates that impact to Basic Construction is around
1.0% for CVN 79 and CVN 80.
C. Cost of Overhead
Overhead rates (percentage of direct labor) at the shipbuilder and major suppliers are directly
correlated to the projected direct labor workload. The change to five-year build intervals
results in an overall decrease in direct labor workload for aircraft carrier construction,
thereby causing the overhead rates to increase proportionally. The Navy estimates the
construction portion increase is less than 1% each for CVN 78, CVN 79 and CVN 80. The
Navy will be working with the shipbuilder on managing overhead in the shipyard.
D. Costs of Other Ship Construction Programs, Including the Costs of Existing and Future
Contracts
The impact of changing the interval between carrier awards to the VIRGINIA Class
submarine current Block II and Block III contracts is estimated to be $30-50 million per hull.
The increase in costs is associated with workload reallocatjon in the shipbuilding industrial
base.
III. REPORT SUMMARY
This report, as required by Section 126 of P.L. 111-84, assesses the impacts resulting from
the shift of the acquisition schedule to five-year intervals for Ford Class aircraft carriers. A
review of available information indicates there will be a minimal impact on the supplier base
if closely managed. Since the shipyard has ample opportunity to plan for five-year intervals,
any impacts to worker training or trade skill inefficiencies, and workload planning is
assessed to be manageable.
The change from a four-year to a five-year build interval will result in a unit cost increase to
the Ford Class carriers that have funding requirements in the Future Years Defense Program.
The Navy is continuing to refine the estimated impacts and will adjust future budget
submissions. These increases are due primarily to inflation, inefficiencies, and overhead
adjustments that will be factored into the overall budget request for each ship. Despite the
inflation adjusted costs per ship, the change in build interval allows carrier annual funding
requirements to be spread over longer periods of time, maintains a steady state 11 carrier
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
force structure until after 2040, and facilitates a reduced average annual aircraft carrier
funding requirement.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Appendix C. Force-Level Implications of Shifting to
Six- or Seven-Year Procurement Intervals
Table C-1 shows projected aircraft carrier force levels for FY2011-FY2045 that would result
from procuring carriers at five-, six-, or seven-year intervals, beginning with CVN-79. The
current plan is to procure carriers at five-year intervals. The table shows, among other things,
that:
•
Compared to procuring carriers at five-year intervals, procuring carriers at six- or
seven-year intervals would not change projected carrier force levels until
FY2025.
•
Compared to procuring carriers at five-year intervals, and setting aside the twoyear period FY2013-FY2014, shifting to six-year intervals would accelerate by
10 years (from FY2042 to FY2032) the date when the projected carrier force first
drops to 10 ships, and shifting to seven-year intervals would accelerate by 14
years (from FY2042 to FY2028) the date when the projected carrier force first
drops to 10 ships.
•
Compared to procuring carriers at five-year intervals, which would not reduce the
projected carrier force to fewer than 10 ships through FY2045, procuring carriers
at six-year intervals would reduce the carrier force to 9 ships in FY2042-FY2044,
and procuring carriers at seven-year intervals would reduce the projected carrier
force to 9 ships in FY2040-FY2041 and FY2043-FY2045, and to 8 ships in
FY2042.
Table C-1. Aircraft Carrier Force Levels, FY2011-FY2045
Resulting From 5-, 6-, and 7-Year procurement intervals, beginning with CVN-79
5-year intervals
6-year intervals
7-year intervals
FY
Total
Relative
to 11ship goal
Total
Relative
to 11ship goal
Relative
to 5-year
intervals
11
11
—
11
—
—
11
—
—
—
12
11
—
11
—
—
11
—
—
—
13
10
-1
10
-1
—
10
-1
—
—
14
10
-1
10
-1
—
10
-1
—
—
15
11
—
11
—
—
11
—
—
—
16
11
—
11
—
—
11
—
—
—
17
11
—
11
—
—
11
—
—
—
18
11
—
11
—
—
11
—
—
—
19
11
—
11
—
—
11
—
—
—
20
12
+1
12
+1
—
12
+1
—
—
21
12
+1
12
+1
—
12
+1
—
—
22
12
+1
12
+1
—
12
+1
—
—
Congressional Research Service
Total
Relative
to 11ship goal
Relative
to 5-year
intervals
Relative
to 6-year
intervals
36
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
5-year intervals
6-year intervals
7-year intervals
FY
Total
Relative
to 11ship goal
Total
Relative
to 11ship goal
Relative
to 5-year
intervals
Total
Relative
to 11ship goal
Relative
to 5-year
intervals
Relative
to 6-year
intervals
23
11
—
11
—
—
11
—
—
—
24
11
—
11
—
—
11
—
—
—
25
12
+1
11
—
-1
11
—
-1
—
26
12
+1
11
—
-1
11
—
-1
—
27
12
+1
12
+1
—
11
—
-1
-1
28
11
—
11
—
—
10
-1
-1
-1
29
11
—
11
—
—
11
—
—
—
30
12
+1
11
—
-1
11
—
-1
—
31
12
+1
11
—
-1
11
—
-1
—
32
11
—
10
-1
-1
10
-1
-1
—
33
11
—
11
—
—
10
-1
-1
-1
34
11
—
11
—
—
10
-1
-1
-1
35
12
+1
11
—
-1
10
-1
-2
-1
36
11
—
10
-1
-1
10
-1
-1
—
36
11
—
10
-1
-1
10
-1
-1
—
38
11
—
10
-1
-1
10
-1
-1
—
39
11
—
11
—
—
10
-1
-1
-1
40
11
—
10
-1
-1
9
-2
-2
-1
41
11
—
10
-1
-1
9
-2
-2
-1
42
10
-1
9
-2
-1
8
-3
-2
-1
43
10
-1
9
-2
-1
9
-2
-1
—
44
10
-1
9
-2
-1
9
-2
-1
—
45
11
—
10
-1
-1
9
-2
-2
-1
Source: Table prepared by CRS using force-level projections prepared by Congressional Budget Office (CBO)
and provided by CBO to CRS on July 18, 2011.
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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•
cost growth in the CVN-78 program;
•
where the estimated procurement costs of CVNs 78, 79, and 80 now stand in
relation to the legislated procurement cost caps for the ships, and whether the
cost caps should be amended;
•
whether to approve the Navy’s request for using six-year incremental funding to
procure CVN-79 and CVN-80;
•
whether to procure CVN-79 and CVN-80 together in a two-ship block buy as a
potential means of reducing the combined procurement cost of the two ships; and
•
CVN-78 program issues that were raised in a December 2011 report from the
Department of Defense’s (DOD’s) Director of Operational Test and Evaluation
(DOT&E).
Cost Growth
One oversight issue for Congress for the CVN-78 program concerns the cost growth on CVNs 78,
79, and 80 shown in Table 2, and the potential for further cost growth on the ships. As can be
seen in the table, the estimated cost of CVN-78 has grown 17.7% since the submission of the
FY2009 budget, and 6.9% since the submission of the FY2012 budget.
Cost growth on CVN-78 has prompted the Navy to program $811 million in additional
procurement funding for the ship. As shown in Table 1, $449 million of this $811 million is to be
requested in FY2014, and the remaining $362 million is to be requested in FY2015.
A February 17, 2012, press report states that Senators Carl Levin and John McCain, the chairman
and ranking Member, respectively, of the Senate Armed Services Committee, have asked the
9
Source: Letter dated February 19, 2010, from Secretary of the Navy Ray Mabus to the chairmen of the House and
Senate Armed Services committees and the Defense subcommittees of the House and Senate Appropriations
Committees. Copy of letter provided by the Navy to CRS and the Congressional Budget Office (CBO) on April 19,
2010.
10
Source: April 19, 2010, Navy briefing on the CVN-78 program to CRS and CBO.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Government Accountability Office (GAO) to review the CVN-78 program in light of the
program’s cost growth.11
March 2012 Navy Information Paper
A Navy information paper provided to CRS and CBO on March 19, 2012, states that, of the $811
million in additional funding to be requested for CVN-78 in FY2014 and FY2015, $330 million
is for cost growth in non-recurring engineering (NRE) work (i.e., design work for the CVN-78
class), $208 million is for cost growth on the ship’s dual band radar,12 and $273 million is for
“construction performance variance,” meaning cost growth at the shipyard. The information paper
further states that
The Current PMs [program manager’s] Variance at Completion (VAC) is $884M. The
government’s liability of this VAC is $690M due to contract shareline reductions in fee. PB
13 [the President’s budget for FY2013—that is, the Navy’s proposed FY2013 budget] is
requesting $273M of the $690M, which represents that part of the VAC realized to date, of
the government’s liability leaving a balance of $417M to be funded in later years.13
What this statement means is that the cost growth on CVN-78 that is reported in the FY2013
budget, and the $811 million in additional procurement funding that is programmed in the
FY2013 budget submission for FY2014 and FY2015 as a result of that cost growth, do not
capture all the cost growth that the CVN-78 program manager now estimates will occur on the
CVN-78, and that the program manager as of March 2012 estimated that future budget
submissions will show an additional $417 million in cost growth.
The Navy states that this $417 million in additional cost growth was not captured in the FY2013
budget because it emerged late in the budget-preparation process, and because the Navy hopes
that actions being taken to restrain cost growth in the CVN-78 program will reduce the figure to
something less than $417 million before the FY2014 budget is submitted to Congress.14
The Navy states that, of the $1,158 million in cost growth on CVN-79 in the FY2013 budget
compared to the FY2012 budget, $401 million is due to added inflation incorporated into the
ship’s cost as a consequence of the ship’s scheduled delivery date being shifted from September
2020 to September 2022.15 The remaining $757 million in cost growth would be real (i.e.,
inflation-adjusted) cost growth. Of this $757 million, the Navy states that $175 million is due to
overhead and industrial-base impacts resulting from shifting the ship’s delivery date to September
2022.16 The remaining $582 million in cost growth would appear to be the result of a more
11
Tony Capaccio, “Aircraft Carrier’s Rising Cost Prompts Lawmakers To Seek Audit,” Bloomberg Government
(bgov.com), February 17, 2012.
12
The information paper further states that of the $208 million in cost growth on the dual band radar, $54 million is a
consequence of a decision to remove a part of the dual band radar on the Navy’s three Zumwalt (DDG-1000) class
destroyers, and the remaining $154 million is due to cost growth in CVN-78-unique installation, integration, and test
requirements for the dual band radar. For more on the decision to remove a part of the dual band radar on the DDG1000 destroyers, see CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and
Issues for Congress, by Ronald O'Rourke.
13
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
14
Source: Navy meeting with CRS and CBO on the CVN-78 program, March 6, 2012.
15
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
16
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
refined estimate of the cost to build CVN-79 reflecting, among other things, experience to date in
building CVN-78.
March 2012 Navy Letter to Senator McCain
Secretary of the Navy Ray Mabus, in a letter with attachment sent in late March 2012 to Senator
John McCain on controlling cost growth in the CVN-78, stated:
Dear Senator McCain:
Thank you for your letter of March 21, 2012, regarding the first-of-class aircraft carrier,
GERALD R. FORD (CVN 78). Few major programs carry greater importance or greater
impact on national security, and no other major program comprises greater scale and
complexity than the Navy’s nuclear aircraft carrier program. Accordingly, successful
execution of this program carries the highest priority within the Department of the Navy.
I have shared in the past my concern when I took office and learned the full magnitude of
new technologies and design change being brought to the FORD. Requirements drawn up
more than a decade prior for this capital ship drove development of a new reactor plant,
propulsion system, electric plant and power distribution system, first of kind electromagnetic
aircraft launching system, advanced arresting gear, integrated warfare system including a
new radar and communications suite, air conditioning plant, weapons elevators, topside
design, survivability improvements, and all new interior arrangements. CVN 78 is a neartotal redesign of the NIMITZ Class she replaces. Further, these major developments, which
were to be incrementally introduced in the program, were directed in 2002 to be integrated
into CVN 78 in a single step. Today we are confronting the cost impacts of these decisions
made more than a decade ago.
In my August 29, 2011 letter, I provided details regarding these cost impacts. At that time, I
reported the current estimate for the Navy’s share of the shipbuilder’s construction overrun,
$690 million, and described that I had directed an end-to-end review to identify the changes
necessary to improve cost for carrier design, material procurement, planning, build and test.
The attached white paper provides the findings of that review and the steps we are taking to
drive affordability into the remaining CVN 78 construction effort. Pending the results of
these efforts, the Navy has included the ‘fact of life’ portion of the stated overrun in the
Fiscal Year 2013 President’s Budget request. The review also highlighted the compounding
effects of applying traditional carrier build planning to a radically new design; the challenges
inherent to low-rate, sole-source carrier procurement; and the impact of external economic
factors accrued over 15 years of CVN 78 procurement—all within the framework of costplus contracts. The outlined approach for ensuring CVN 79 and follow ship affordability
focuses equally upon tackling these issues while applying the many lessons learned in the
course of CVN 78 procurement.
As always, if I may be of further assistance, please let me know.
Sincerely, [signed] Ray Mabus
Attachment: As stated
Copy to: The Honorable Carl Levin, Chairman
[Attachment]
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Improving Cost Performance on CVN 78
CVN 78 is nearing 40 percent completion. Cost growth to-date is attributable to increases in
design, contractor furnished material, government furnished material (notably, the
Electromagnetic Aircraft Launching System (EMALS), Advanced Arresting Gear (AAG),
and the Dual Band Radar (DBR)), and production labor performance. To achieve the best
case outcome, the program must execute with zero additional cost growth in design and
material procurement, and must improve production performance. The Navy and the
shipbuilder have implemented a series of actions and initiatives in the management and
oversight of CVN 78 that cross the full span of contracting, design, material procurement,
government furnished equipment, production planning, production, management and
oversight.
CVN 78 is being procured within a framework of cost-plus contracts. Within this framework,
however, the recent series of action taken by the Navy to improve contract effectiveness are
achieving the desired effect of incentivizing improved cost performance and reducing
government exposure to further cost growth.
•
CVN 78 design has been converted from a ‘level of effort, fixed fee’ contract to a
completion contract with a firm target and incentive fee. Shipbuilder cost performance
has been on-target or better since this contract was changed.
•
CVN 78 construction fee has been retracted, consistent with contract performance.
However, the shipbuilder is incentivized by the contract shareline to improve upon
current performance to meet agreed-to cost goals.
•
Contract design changes are under strict control; authorized only for safety, damage
control, mission-degrading deficiencies, or similar. Adjudicated changes have been
contained to less than 1 percent of contract target price.
•
The Navy converted the EMALS and AAG production contract to a firm, fixed price
contract, capping cost growth to that system and imposing negative incentives for late
delivery.
•
Naval Sea Systems Command is performing a review of carrier specifications with the
shipbuilder, removing or improving upon overly burdensome or unneeded specifications
that impose unnecessary cost on the program.
The single largest impact to cost performance to-date has been contractor and government
material cost overruns. These issues trace to lead ship complexity and CVN 78 concurrency,
but they also point to inadequate accountability for carrier material procurement, primarily
during the ship’s advance procurement period (2002-2008).
These effects cannot be reversed on CVN 78, but it is essential to improve upon material
delivery to the shipyard to mitigate the significant impact of material delays on production
performance. Equally important, the systemic material procurement deficiencies must be
corrected for CVN 79. To this end, the Navy and shipbuilder have taken the following
actions.
•
The Navy has employed outside supply chain management experts to develop optimal
material procurement strategies. The Navy and the shipbuilder are reviewing remaining
material requirements to employ these best practices (structuring procurements to
achieve quantity discounts, dual-sourcing to improve schedule performance and
leverage competitive opportunities, etc.).
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
•
The shipbuilder has assigned engineering and material sourcing personnel to each of
their key vendors to expedite component qualifications and delivery to the shipyard.
•
The shipbuilder is inventorying all excess material procured on CVN 78 for transfer to
CVN 79 (cost reduction to CVN 78), as applicable.
•
The Program Executive Officer (Carriers) is conducting quarterly flag-level government
furnished equipment summits to drive cost reduction opportunities and ensure on-time
delivery of required equipment and design information to the shipbuilder.
The most important finding regarding CVN 78 remaining cost is that the CVN 78 build plan,
consistent with the NIMITZ class, focuses foremost on completion of structural and critical
path work to support launching the ship on-schedule. This emphasis on structure comes at
the expense of completing ship systems, outfitting, and furnishing early in the build process
and results in costly, labor-intensive system completion activity during later; more costly
stages of production. Achieving the program’s cost improvement targets will require that
CVN 78 increase its level of completion at launch, from current estimate of 60 percent to no
less than 65 percent. To achieve this goal and drive greater focus on system completion:
•
the Navy fostered a collaborative build process review by the shipbuilder with other Tier
1 private shipyards in order to benchmark its performance arid identify fundamental
changes that would yield marked improvement;
•
the shipbuilder has established specific launch metrics by system (foundations,
machinery, piping, power panels, vent duct, lighting, etc.) and increased staffing for
waterfront engineering and material expediters to support meeting these metrics;
•
the shipbuilder has linked all of these processes within a detailed integrated master
schedule, providing greater visibility to current performance and greater ability to
control future cost and schedule performance across the shipbuilding disciplines;
•
the Navy and shipbuilder are conducting Unit Readiness Reviews of CVN 78 erection
units to ensure that the outfitted condition of each hull unit being lifted into the dry-dock
contains the proper level of outfitting.
These initiatives, which summarize a more detailed list of actions being implemented and
tracked as result of the end-to-end review, are accompanied by important management
changes.
•
The shipbuilder has assigned a new Vice President in charge of CVN 78, a new Vice
President in charge of material management and purchasing, and a number of new
general shop foreman to strengthen CVN 78 performance.
•
The Navy has assigned a second tour Flag Officer with considerable carrier operations,
construction, and program management experience as the new Program-Executive
Officer (PEO).
•
The PEO and shipyard president conduct bi-weekly launch readiness reviews focusing
on cost performance, critical path issues and accomplishment of the target for launch
completion.
•
The Assistant Secretary of the Navy (Research, Development, and Acquisition)
conducts a monthly review of program progress and performance with the PEO and
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
shipbuilder, bringing to bear the full weight of the Department, as needed, to ensure that
all that can be done to improve on cost performance is being done.
Early production performance improvements can be traced directly to these actions,
however, significant further improvement is required. To this end, the Navy is conducting a
line-by-line review of all ‘cost to-go’ on CVN 78 to identify further opportunity to reduce
cost and to mitigate risk.
Improving Cost Performance on CVN 79
CVN 79 Advance Procurement commenced in 2007 with early construction activities
following in 2011. Authorization for CVN 79 procurement is requested in Fiscal Year 2013
President’s Budget request with the first year of incremental funding. Two years have been
added to the CVN 79 production schedule in this budget request, afforded by the fact that
CVN 79 will replace CVN 68 when she inactivates. To improve affordability for CVN 79,
the Navy plans to leverage this added time by introducing a fundamental change to the
carrier procurement approach and a corresponding shift to the carrier build plan, while
incorporating CVN 78 lessons learned.
The two principal ‘documents’ which the Navy and shipbuilder must ensure are correct and
complete at the outset of CVN 79 procurement are the design and the build plan.
Design is governed by rules in place that no changes will be considered for the follow ship
except changes necessary to correct design deficiencies on the lead ship, fact of life changes
to correct obsolescence issues, or changes that will result in reduced cost for the follow ship.
Exceptions to these rules must be approved by the JROC, or designee. Accordingly, the
Navy is requesting procurement authority for CVN 79 with the Design Product Model
complete and construction drawings approximately 95 percent complete (compared to
approximately 30 percent complete at time of lead ship authorization).
As well, first article testing and certification will be complete for virtually all major new
equipments introduced in the FORD Class. At this point in time, the shipbuilder has
developed a complete bill of material for CVN 79. The Navy is working with the shipbuilder
to ensure that the contractor’s material estimates are in-line with Navy ‘should cost’
estimates; eliminating non-recurring costs embedded in lead ship material, validating
quantities, validating escalation indices, incorporating lead ship lessons learned. The Navy
has increased its oversight of contractor furnished material procurement, ensuring that
material procurement is competed (where competition is available); that it is fixed priced;
that commodities are bundled to leverage economic order quantity opportunities; and that the
vendor base capacity and schedule for receipt supports the optimal build plan being
developed for production.
In total, the high level of design maturity and material certification provides a stable
technical baseline for material procurement cost and schedule performance, which are
critical to developing and executing an improved, reliable build plan.
In order to significantly improve production labor performance, based on timely receipt of
design and material, the Navy and shipbuilder are reviewing and implementing changes to
the CVN 79 build plan and affected facilities. The guiding principles are:
•
maximize planned work in the shops and early stages of construction;
•
revise sequence of structural unit construction to maximize learning curve performance
through ‘families of units’ and work cells;
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
•
incorporate design changes to improve FORD Class producibility;
•
increase the size of erection units to eliminate disruptive unit breaks and improve unit
alignment and fairness;
•
increase outfitting levels for assembled units prior to erection in the dry-dock;
•
increase overall ship completion levels at each key event.
The shipbuilder is working on detailed plans for facility improvements that will improve
productivity, and the Navy will consider incentives for capital improvements that would
provide targeted return on investment, such as:
•
increasing the amount of temporary and permanent covered work areas;
•
adding ramps and service towers for improved access to work sites and the dry-dock;
•
increasing lift capacity to enable construction of larger, more fully outfitted super-lifts:
An incremental improvement to carrier construction cost will fall short of the improvement
necessary to ensure affordability for CVN 79 and follow ships. Accordingly, the shipbuilder
has established aggressive targets for CVN 79 to drive the game-changing improvements
needed for carrier construction. These targets include:
•
75 percent Complete at Launch (15 percent> [i.e., 15 percent greater than] FORD);
•
85-90 percent of cable pulled prior to Launch (25-30 percent> FORD);
•
30 percent increase in front-end shop work (piping details, foundations, etc);
•
All structural unit hot work complete prior to blast and paint;
•
25 percent increase to work package throughput;
•
100 percent of material available for all work packages in accordance with the
integrated master schedule;
•
zero delinquent engineering and planning products;
•
resolution of engineering problems in < 8 [i.e., less than 8] hours.
In parallel with efforts to improve shipbuilder costs, the PEO is establishing equally
aggressive targets to reduce the cost of government furnished equipment for CVN 79;
working equipment item by equipment item with an objective to reduce overall GFE costs by
~$500 million. Likewise, the Naval Sea Systems Command is committed to continuing its
ongoing effort to identify specification changes that could significantly reduce cost without
compromising safety and technical rigor.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
The output of these efforts comprises the optimal build plan for CVN 79 and follow, and will
be incorporated in the detail design and construction baseline for CVN 79. CVN 79 will be
procured using a fixed price incentive contract.17
December 31, 2011, SAR (Released March 2012)
Regarding a contract that NNS has with the Navy for detailed design and construction (DD&C)
work on CVN-78—a contract that accounts for a portion of the ship’s total cost—the December
31, 2011, Selected Acquisition Report (SAR) for the CVN-78 program, which was released in late
March 2012, states that the value of the contract has grown from an initial price of $4,910.5
million to a current price of $5,899.5 million, and that NNS and the Navy estimate that the price
will grow further, to $6,370.9 million (NNS’s estimate) or $6,595.6 million (the Navy’s estimate)
by the time the contract is completed (i.e., estimated price at completion).18 In discussing these
figures, the SAR states:
Cost And Schedule Variance Explanations
The unfavorable net change in the cost variance is due to material cost growth (66%), labor
inefficiencies (28%) and increases in non-recurring engineering (6%). The material variances
are due to market forces, unanticipated impacts of a “first of class” specification on
contractor furnished material costs (e.g. valves, electrical components, steel and other
commodities), and refined understanding of material requirements as the ship design
matured. Labor inefficiencies are the result of “first of class” challenges including
producibility issues (e.g. thin plate steel, weld distortion, and the increase use of temporary
structure and rigging) and the availability of new developmental components (e.g. valves,
actuators). Additionally, increased supervision has been required to manage the above
challenges and a developing workforce.
The unfavorable net change in the schedule variance is due to to inefficiencies associated the
material availability and “first of class” producibility issues described above, and delays in
the release of engineering products required to develop construction work packages.
Contract Comments
The difference between the initial contract price target and the current contract price target is
due to the award of a new contract structure for Non-Recurring Engineering (NRE) and
adjudicated change orders, procurement of special tooling and test equipment, and NRE
associated with design and integration of developmental systems. The Program Manger’s
(PM) Estimated Price at Completion of $6,595.6M less the current contract Target Price of
$5,899.5M is $696.1M. This price variance at completion of $696.1M includes $6.4M of
authorized work that has not been adjudicated resulting in government liability of $689.7M.
The PM’s Estimated Price At Completion increased from $5,723.5M (December 31, 2010
SAR) to $6,595.6M consisting of $738.2M due to contract actions, $127.5M of construction
inefficiencies, and $6.4M of authorized work that has not been adjudicated. The Government
Liability has increased from $562.2M (December 31, 2010 SAR) to $689.7M, reflecting the
$127.5M of construction inefficiencies. The PM’s Variance at Completion (VAC) increased
from $650M (December 31, 2010 SAR) to $884.7M. The government liability of the
17
Letter and attachment from Secretary of the Navy Ray Mabus to Senator John McCain, undated but posted at
InsideDefnse.com (subscription required) on March 27, 2012. InsideDefense.com’s description of the letter states that it
is dated March 26, 2012.
18
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
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$884.7M VAC is $689.7M based on the contract shareline ratios which reduces the
contractors target fee as cost growth increases.19
The SAR states the following it is executive summary:
The CVN 78 Detail Design and Construction (DD&C) contract was awarded on September
10, 2008. The shipbuilder reports negative cumulative cost and schedule variances [i.e., cost
growth and schedule delay] on DD&C efforts. Cost growth on the DD&C contract is due to
material and labor factors. The material variances are due to market forces, unanticipated
impacts of a “first of class” specification on contractor furnished material costs (e.g. valves,
electrical components, steel and other commodities), and refined understanding of material
requirements as the ship design matured. Labor inefficiencies are the result of “first of class”
challenges including producibility issues (e.g. thin plate steel, weld distortion, and the
increase use of temporary structure and rigging) and the availability of new developmental
components (e.g. valves, actuators). Additionally, increased supervision has been required to
manage the above challenges and a developing workforce. The schedule variance is due to
inefficiencies associated the material availability and “first of class” producibility issues
described above, and delays in the release of engineering products required to develop
construction work packages. As of December 31, 2011, the construction effort for the CVN
78 is 33.9% complete.
The Navy is aggressively working with the shipbuilder to drive improvements to material
and construction performance. These efforts to control cost are producing favorable results.
Significant changes include designation of a Senior Vice President and a Total Ship
Construction Superintendent for oversight of CVN 78 construction and changes in material
management. The shipbuilder has established specific labor cost targets for key
manufacturing and construction areas and implemented cost control initiatives to meet these
goals. Specific initiatives include more effective coordination between engineering and
production trades, extending Earned Value Management (EVM) targets throughout all levels
of leadership, improving work control processes, the use of bulk material ordering where
possible, and methods to more quickly resolve waterfront issues. In addition, the Navy has
partnered with the shipbuilder to consider changes to specifications and modify them where
appropriate to lower cost and schedule risk. On July 29, 2011, the Program awarded a new
contract structure for non-recurring engineering (NRE) by transitioning from a Cost Plus
Fixed Fee (CPFF) Level of Effort (LOE) to a Cost Plus Incentive Fee (CPIF) to complete the
remaining NRE work.
Senator John McCain’s letter of August 11, 2011 to Secretary of the Navy, Raymond Mabus,
addressed cost performance of the detail design and construction of the CVN 78. As a result,
the Navy is submitting monthly reports to the four defense committees. In the Secretary of
the Navy’s response letter dated August 29, 2011, the Secretary directed the Assistant
Secretary of the Navy (ASN) Research Development and Acquisition (RDA) to conduct a
detailed review of the CVN 78 program build plan to improve end-to-end aircraft carrier
design, material procurement, production planning, build and test. The Navy completed the
assessment December 2011. The Navy is implementing recommendations from this report to
both improve CVN 78 contract performance, and to drive further improvements in the
upcoming CVN 79 DD&C contract.20
19
20
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 5.
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March 2012 GAO Report
A March 2012 GAO report assessing major DOD weapon acquisition programs stated the
following regarding the status of the CVN-78 program, including the potential for cost growth:
Technology Maturity
Seven of the CVN 78 program’s 13 current critical technologies have not been tested in a
realistic, at-sea environment, including two technologies—EMALS and the dual-band
radar—which continue to pose risks. According to program officials, EMALS has
successfully launched F/A-18E, T-45C, C-2A, and E-2D aircraft during testing; however, the
system has not demonstrated the required level of reliability because of the slow correction
of problems discovered earlier in testing. In addition, according to officials, EMALS motor
generators have only been tested in a group of 4, rather than the group of 12 that will make
up the system. A test of the complete system will not take place until it is aboard the ship.
The dual-band radar also will not complete testing until after it is aboard the ship, which
presents a risk if the system does not work as intended. The radar is required for ship
installation starting in March 2013, but the program does not expect to complete testing the
multifunction radar component until early 2013 or begin testing the volume-search radar
component until May 2013. Some radar subsystems will not be tested until aboard the CVN
78. In addition, less dual-band radar testing has been done than anticipated because the Navy
eliminated the volume-search component of the radar from the DDG 1000 Destroyer
program, which the CVN 78 had planned to leverage. CVN 78 will now be the first ship to
operate with this radar, but as of August 2011, the Navy had not yet planned for carrierspecific testing. Program officials also noted that the Evolved Sea Sparrow Missile will be
demonstrated in a relevant environment by March 2012, at which point all critical
technologies will have been demonstrated in a relevant environment.
Design Maturity
The CVN 78 program completed its three-dimensional product model in November 2009—
over a year after the award of the construction contract. At the time of the September 2008
contract award, only 76 percent of the ship’s three-dimensional product model was complete
and the shipbuilder had already begun construction of at least 25 percent of the ship’s
structural units under its previous construction preparation contract. Program officials noted
that while there had been concerns about the ability of the ship’s jet blast deflectors to work
effectively with the carrier variant of the Joint Strike Fighter, these concerns have been
addressed and will not require major design changes. Additional design changes are still
possible as EMALS and other systems continue testing.
Production Maturity
Procurement costs for CVN 78 have grown by about 10 percent over the past 3 years. A key
driver is an increase in construction costs. According to the program, 83 percent of the ship’s
structural units are complete, constituting almost 27 percent of the expected labor hours.
However, the program estimates that the labor hours to complete the ship will be 4 million
more than the 40 million hours originally budgeted. The program believes the cost and laborhour increases are largely due to the immaturity of the ship’s technologies and design when
the construction contract was awarded. Program officials also cited problems such as late
material deliveries, an unexpected need for more structural support to achieve a thinner deck
structure, and material deficiencies on developmental components such as valves. According
to the program, the growth in construction costs may require requests for additional funding
or a reduction of the ship’s capabilities.
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Program Office Comments
In commenting on a draft of this assessment, the program noted that dual-band radar testing,
while impacted by DDG 1000 decisions on volume-search radar, is fully funded and will
complete land-based tests and begin shipboard testing prior to delivery.21
June 2011 CBO Report
A June 2011 CBO report on the potential cost of the Navy’s FY2011 30-year shipbuilding plan
states (with costs expressed in constant FY2011 dollars):
The Navy’s projected cost of the lead ship of the CVN-78 class grew by 10 percent between
the President’s 2008 and 2012 budget requests. The Navy’s budget now projects the lead
ship’s cost to be about $12.0 billion (about what CBO estimated in its analysis of the Navy’s
2009 plan). However, further increases appear likely. According to the Selected Acquisition
Report for the CVN-78 program, the program manager is currently estimating an additional
$600 million in cost overruns above the budgeted amount. In addition, the lead ship of the
CVN-78 class is only about 23 percent complete, and cost growth in shipbuilding programs
typically occurs when a ship is more than half finished—particularly in the later stages of
construction, when all of a ship’s systems must be installed and integrated. Therefore, greater
cost growth in the lead ship appears likely, which would signal higher costs for subsequent
ships in the class as well.
To estimate the cost of the lead ship of the CVN-78 class, CBO used the actual costs of the
previous carrier—the CVN-77—and then adjusted them for higher costs for governmentfurnished equipment and for more than $3 billion in costs for nonrecurring engineering and
detail design (the plans, drawings, and other one-time items associated with the first ship of a
new class). As a result, CBO estimates that the lead CVN-78 will cost about $12.9 billion
once it is completed. Subsequent ships of the class will not require as much funding for onetime items, although they will incur the higher costs for government-furnished equipment.
Altogether, CBO estimates the average cost of the six carriers in the [FY]2012 [30-year
shipbuilding] plan at $12.1 billion, whereas the Navy estimates their average cost at $10.3
billion (see Table 3). CBO’s estimate for all carriers under the 2012 plan is lower than the
estimate for the 2011 plan primarily because... the projected gap between inflation in the
economy overall and long-run shipbuilding inflation has narrowed.
There are several reasons to believe that the final cost of the CVN-78 could be even higher
than CBO’s estimate. First, most lead ships built in the past 20 years have experienced cost
growth of more than 40 percent. (CBO’s estimate for the lead CVN-78 accounts for some but
not all of that historical cost growth.) Second, Navy officials have told CBO that they have
budgeted to the 40th percentile of possible cost outcomes. That is, there is a 60 percent
probability that the final cost of the CVN-78 will exceed the service’s estimate and only a 40
percent probability that the final cost will be less than that estimate. Third, a number of
critical technologies that are supposed to be incorporated into the ship, such as a new
electromagnetic catapult system for launching aircraft, remain under development.
Difficulties in completing their development could arise and increase costs, which would
also affect the costs for subsequent ships of the class.22
21
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-12400SP, March 2012, p. 66.
22
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2012 Shipbuilding Plan, June 2011, pp. 13-14.
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Press Reports
A February 21, 2012, press report stated:
Two of the Navy’s top officials explained the reasons behind the increase [in CVN-78’s
procurement cost] in a Feb. 17 interview with Defense News.
“This was a very unique ship,” said Bob Work, undersecretary of the Navy. “The original
Navy plan was to spread the transition of technology over three ships [CVNs 78, 79, and 80],
and in the 2002-2003 time frame the office of [then-Defense Secretary Donald Rumsfeld]
directed the Navy to put most of the technology into a single ship [CVN-78], which made
our challenge very, very high.”...
“We’re about 17 weeks behind where we need to be to launch [CVN-78] in July of 2013,”
Sean Stackley, the Navy’s top acquisition official, said Feb. 17.23 “I do not propose to make
that time up, because right now the most important thing we’ve got going on with the 78 is
controlling cost.
“I expect the delivery will delay by at least that much,” Stackley added. “But we’re
managing that pretty tightly right now.”
As for the Kennedy [CVN-79], Stackley emphasized that “we’re being very deliberate about
capturing lessons learned from the lead ship [CVN-78]. We do not want a build plan that
repeats the build plan on the CVN 78.
“That means that all the things that precede the start of construction associated with design,
plans, material procurement, they all have to be exactly in line. And the degree of
completion, outfitting, etc., associated with the construction of the build units, we’re working
that plan now so that CVN 79, frankly, is built to a higher degree of completion and
readiness each step of the way, than CVN 78.”
Stackley acknowledged that what he called the “optimal build plan” for the Kennedy
“translates to a potentially two-year delay for the delivery.” [compared to CVN-79’s delivery
under the FY2012 budget]
Work and Stackley said development of the new Electromagnetic Aircraft Launch System
(EMALS) is not a factor in the Ford’s current cost growth.
“We continue to test and it continues to go well” despite “a couple of test wrinkles,”
Stackley said of EMALS. “But we don’t have a scenario where the system is not meeting the
testing requirement.” Production at General Atomics of the system’s components to be fitted
in the ship also is “on schedule.”
But changes to the dual-band radar (DBR) program developed by Raytheon have led to a
portion of the cost increases.
“That’s a fallout of the previous decision to not install the volume search radar on DDG
1000,” Stackley explained, referring to a decision in 2010 to eliminate half the radar from the
23
In warship construction, launching a ship does not mean that the ship’s construction has been completed; it means
that the ship’s construction has reached a stage where the ship can be put into the water for the final stage of its
construction.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
[Navy’s] three Zumwalt-class destroyers. “That shifted the testing and integration
requirements to the carrier, and that shows up as a bill on the carrier.”
The $811 million [in cost growth] is being added to the Navy’s 2014 and 2015 budget
requests. [Of the $811 million,] The DBR accounted for most of the $208 million in
government-furnished equipment; $330 million is for non-recurring engineering design—
essentially first-of-class design work; and $273 million is for construction overruns....
Stackley noted he is keeping the pressure on the shipbuilder to hold down further cost
growth on the carrier program.
“I’ve made it very clear to HII that the issues that are most dear to the Navy and shipbuilding
also happen to be the most dear to HII and shipbuilding,” Stackley said. “Cost growth on the
carrier has indirectly impacted those exact programs.”...
Delaying the Kennedy’s delivery to the fleet from 2020 to 2022 should not affect the Navy’s
carrier levels, Work said, because of an overlap period of a few years before the carrier
Nimitz—the ship the Kennedy will replace—is decommissioned. The Nimitz now is
scheduled for retirement in 2025, although the date can change.
“Going up to 12 carriers for a couple of years incurs cost on the operations and support side.
And on the construction side it pressurizes the construction schedule, and we want to be
careful it doesn’t create cost on the construction side,” Stackley said.24
A February 20, 2012, press report states that a
Dec. 22, 2011, “for official use only” report by the Naval Audit Service faults shipbuilder
Huntington Ingalls Industries and the Navy for failing to implement key “earned value
management” rules aimed at tracking the cost, schedule and performance of the CVN-78
aircraft carrier program....
... the report states that Newport News has broken half of the Pentagon’s 32 rules for
delivering weapons on time and on budget. The report also concludes that the Navy’s
supervisor of shipbuilding at Newport News did not provide formal oversight concerning the
implementation of the rules because the office lacked enough trained experts.25
A January 13, 2012, press report states:
[Navy acquisition chief Sean] Stackley acknowledged that building a new class of aircraft
carrier was complex, and that task was made harder by the Navy’s decision to transition to a
new carrier in one ship, rather than over the course of three, as initially planned.
He said the Navy was working closely with Huntington Ingalls to drive cost out of the
Gerald R. Ford (CVN-78) aircraft carrier under construction at the Newport News shipyards,
but was trying to “hammer home” the need for additional efforts.
24
Christopher P. Cavas, “U.S. Navy Tries To Rein In Carrier Costs,” DefenseNews.com, February 21, 2012. The
bracketed phase referring to then-Defense Secretary Donald Rumsfeld as in the original; other bracketed phrases added
by CRS.
25
Christopher J. Castelli, “New Fixes Target management Problems In Aircraft Carrier Program,” Inside the Navy,
February 20, 2012.
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He said the company had a good management team in place, but needed to make further
changes to lower the cost of the carrier.
He said the Navy had added funds to the fiscal 2013 budget and five-year spending plan to
cover expected cost increases on the CVN 78 carrier. He gave no details, since the budget
will not be formally released until February, but said the Navy had not budgeted for the
worst case, estimate by some to be a cost overrun of $1 billion cost on the $12 billion
program....
Huntington Ingalls last week responded to reports that the carrier would likely be $884
million over budget by saying it was continuing to see improvements in its performance on
the aircraft carrier.
[Huntington Ingalls Chief Executive Mike] Petters said both the company and the Navy
knew at the outset that building a first-in-class ship as complex as an aircraft carrier involved
risk, and they had agreed on a formula for sharing that risk.
If industry had to shoulder the risk of new development programs completely on its own, he
said, the cost of new warships and other weapons would skyrocket because defense
companies would raise prices to cover the added risk.
“There’s an argument to be made that the method that we're using to build the Ford is saving
the taxpayers hundreds of millions of dollars,” he said, adding that company executives were
“very aggressive in going out and continue to try to save money.”26
EMALS
One possible source of cost growth in CVN-78 are new technologies that are being developed for
the ship, particularly the electromagnetic aircraft launch system (EMALS)—an electromagnetic
(as opposed to the traditional steam-powered) aircraft catapult. Problems in developing EMALS
or other technologies could delay the ship’s completion and increase its development and/or
procurement cost. Section 221 of the FY2012 National Defense Authorization Act (H.R.
1540/P.L. 112-81 of December 31, 2012) requires the Secretary of Defense to designate the
EMALS program as a major subprogram of the CVN-78 program, in accordance with 10 U.S.C.
2430a. An October 10, 2011, press report states:
After ironing out software glitches that stopped the next generation of U.S. aircraft carrier
catapults from launching planes for five months, the people developing the electromagnetic
aircraft launch system (EMALS) are working on making the system more reliable….
The goal is to cut the average re-pair time to less than one hour, a vast improvement
compared with the 12 hours it takes to fix the average breakdown on existing steam
catapults….
EMALS has just two major moving parts and will break down less frequently than steam
catapults, said Capt. James Donnelly, EMALS program manager….
26
Andrea Shalal-Esa, “Navy Wants More Cost-Cutting From Huntington Ingalls,” Newport News Daily Press, January
13, 2012. See also Christopher J. Castelli, “Stackley: Navy Did Not Fund Worst-Case Estimate For CVN-78 Overrun,”
Inside the Navy, January 23, 2012.
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The EMALS team has moved on to improving reliability after fixing a glitch with the 29
“blocks” that line the catapult track. The blocks turn on and off in a finely timed succession,
building a wave of energy that pushes the aircraft down the flight deck. But after launching
an F/A-18E Super Hornet in mid-December [2010], developers discovered bugs in the
software that controls when the blocks fire.
“It was a minor correction,” said Susan Wojtowicz, program manager for General Atomics,
the contractor developing EMALS. “It wasn’t herky-jerky, it was different” from a steam
catapult.
That software problem seems to be over. After catapulting aboard an E-2D Advanced
Hawkeye from EMALS on Sept. 27, Lt. Cmdr. Brian Tollefson gave the best review an
aviator could give a new catapult: It was a typical flight.
“We have around 300 cat shots apiece. It felt just like the rest of them,” he said, after landing
her with two naval flight officers onboard….
So far, EMALS has completed 32,000 launch cycles. EMALS has launched during hot and
cold conditions, and while being exposed to salt, acid and firefighting foam. There have been
1,212 dead load shots and 96 aircraft launches, including the recent Advanced Hawkeye
flight. EMALS is 80 percent through the system development stage. About 135 different
components have been delivered to Newport News Shipbuild-ing, Va., where Ford is being
built.
The EMALS team has also tested the system for electromagnetic interference and found it
does not harm the aircraft, carrier, communication systems or any weapons.27
CVN-78 Program Procurement Cost Caps
Another issue for Congress is where the estimated procurement costs of CVNs 78, 79, and 80
now stand in relation to the legislated procurement cost caps for the ships (see “Program
Procurement Cost Cap” in “Background”), and whether the cost caps should be amended. A Navy
information paper provided to CRS and CBO on March 19, 2012, states that
Beginning in fiscal year 2014, the estimated cost to complete GERALD R. FORD (CVN 78)
will exceed the cap for causes requiring legislative relief. Accordingly, the Navy intends to
submit a legislative proposal for a CVN 78 cost cap increase beginning in Fiscal Year 2014.
For follow ships of the CVN78 Class, the cost cap is still under evaluation.28
Secretary of the Navy Ray Mabus, when asked by Senator John McCain at a March 15, 2012,
hearing before the Senate Armed Services Committee whether the Navy will ask for legislative
relief on the CVN-78 cost cap, replied: “Senator, not this year, but I'm certain we will be asking
next year.” In response to a follow-up question from Senator McCain on aircraft carrier program
costs, Secretary Mabus stated in part:
The one thing that we are absolutely committed to and the one thing that we will not go
forward with [on] CVN-79 is that we will take the lessons learned here. We will have a firm
27
28
Joshua Stewart, “EMALS Developers Fix Glitch, Tout Launcher’s Reliability,” Defense News, October 10, 2011: 54.
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
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price and we will not come back to the Senate to ask for—or Congress to ask for raising the
cost cap on the follow-on ship, the John F. Kennedy CVN-79.29
Six-Year Incremental Funding Authority
Another issue for Congress is whether to approve the Navy’s request for using six-year
incremental funding to procure CVN-79 and CVN-80.
Supporters could argue that using six-year incremental funding authority would further mitigate
the potentially disruptive budget spikes that can occur when attempting to fully fund an aircraft
carrier over a shorter time period, and that providing six-year incremental funding authority
would represent only a marginal extension of the five-year incremental funding authority for
CVNs 79 and 80 granted by Congress last year.
Skeptics—particularly those who prefer that carriers be procured no less frequently than one ship
every five years—could argue that the five-year incremental funding authority granted last year
by Congress will adequately mitigate budget spikes associated with procuring aircraft carriers,
and that given the current parallel between the plan to procure a carrier every five years (aka,
procuring carriers on five-year centers) and five-year incremental funding authority, approving
six-year incremental funding authority could be cited by the executive branch at some point in the
future as an authority that facilitates shifting carrier procurement to six-year centers.
Potential Two-Ship Block Buy on CVN-79 and CVN-80
Another issue for Congress concerns the potential for procuring CVN-79 and CVN-80 together in
a two-ship block buy. The Navy currently plans to procure CVN-79 and CVN-80 separately, as
one-ship procurements. Procuring the two ships together in a block buy could reduce their
combined procurement cost.
Procuring two aircraft carriers together in a two-ship block buy has been done on two previous
occasions. The Navy procured two Nimitz (CVN-68) class aircraft carriers (CVN-72 and CVN73) together in a block buy in FY1983, and procured another two Nimitz-class aircraft carriers
(CVN-74 and CVN-75) together in a block buy in FY1988. The Navy proposed these block buys
in the FY1983 and FY1988 budget submissions.30
When the FY1983 block buy was proposed, the Navy estimated that the block buy would reduce
the combined cost CVN-72 and CVN-73 by 5.6% in real terms.31 When the FY1988 block buy
was proposed, the Navy estimated that the block buy would reduce the combined cost of CVN-74
and CVN-75 by a considerably larger percentage. GAO stated that the savings would be
considerably less than the Navy estimated, but agreed that a two-ship acquisition strategy is less
29
Source: Transcript of hearing.
It can also be noted that the Air Force is procuring two Advanced EHF (AEHF) satellites under a two-satellite block
buy that the Air Force proposed and Congress approved in FY2012.
31
See General Accounting Office, Request to Fully Fund Two Nuclear Aircraft Carriers in Fiscal Year 1983,
MASAD-82-87 (B-206847), March 26, 1982, 10 pp. The figure of 5.6 was derived by dividing $450 million in noninflation cost avoidance shown on page 5 by the combined estimated cost of the two ships (absent a block buy) of
$8,024 million shown on page 4.
30
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expensive than a single-ship acquisition strategy, and that some savings would occur in a twoship strategy for CVN-74 and CVN-75.32
The FY1983 and FY1988 block buys each involved procuring two aircraft carriers in a single
year. Procuring two carriers in the same year, however, is not mandatory for a two-ship aircraft
carrier block buy. The Navy, for example, proposed the block buy for CVN-74 and CVN-75 in
the FY1988 budget submission as something that would involve procuring CVN-74 in FY1990
and CVN-75 in FY1993. (Congress, in acting on the FY1988 budget, decided to not only approve
the two-ship block buy, but also accelerate the procurement of both CVN-74 and CVN-75 to
FY1988.33) A block buy on CVN-79 and CVN-80 could leave intact the FY2013 procurement
date for CVN-79 and the FY2018 procurement date for CVN-80. This would permit the funding
for the two ships to be spread out over the same fiscal years as currently planned, although the
amounts of funding in individual years would likely change.
It is too late to implement a complete block buy on CVN-79 and CVN-80, because some of CVN79, particularly its propulsion plant, has already been purchased. Consequently, the option would
be to implement a partial block buy that would include the remaining part of CVN-79 and all of
CVN-80.
To illustrate the notional scale of the savings that might result from using a block buy strategy on
CVN-79 and CVN-80, it can be noted that if such a block buy were to achieve one-third as much
percentage cost reduction as the FY1983 block buy—that is, if it were to reduce the combined
procurement cost of CVN 79 and 80 by about 1.9%—that would equate to a savings of roughly
$470 million on the currently estimated combined procurement cost of CVN-79 and CVN-80.
More refined estimates might be higher or lower than this notional figure of $470 million.
32
See General Accounting Office, Procurement Strategy For Acquiring Two Nuclear Aircraft Carriers, Statement of
Frank Conahan, Assistant Comptroller General, National Security and International Affairs Division, Before the
Conventional Forces and Alliance Defense Subcommittee and Projection Forces and Regional Defense Subcommittee
of the Senate Armed Services Committee, April 7, 1987, T-NSIAD-87-28, 5 pp. The testimony states on page 2 that “A
single ship acquisition strategy is more expensive because materials are bought separately for each ship rather than
being combined into economic order quantity buys under a multi-ship procurement.” The report discounted the Navy’s
estimated savings of $1,100 million based on this effect on the grounds that if CVN-74 and CVN-75 were not procured
in the proposed two-ship block buy, with CVN-74 procured in FY1990 and CVN-75 procured FY1993, it was likely
that CVN-74 and CVN-75 would subsequently be procured in a two-ship block buy, with CVN-74 procured in FY1994
and CVN-75 procured in FY1996. For the discussion here, however, the comparison is between the Navy’s current plan
to procure CVN-79 and CVN-80 separately and the potential alternative of procuring them together in a block buy.
The GAO report commented on an additional $700 million in savings that the Navy estimated would be derived from
improving production continuity between CVN-73, CVN-74, and CVN-75 by stating on page 3 that “It is logical to
assume that savings are possible through production continuity but the precise magnitude of such savings is difficult to
calculate because of the many variables that affect the outcome.” It is not clear how significant savings from production
continuity might be in a two-ship block buy for CVN-79 and CVN-80 if the procurement dates for the two ships
(FY2013 and FY2018, respectively) are not changed.
The GAO report noted that the Navy estimated $500 million in additional savings from avoided configuration changes
on CVN-74 and CVN-75 if the ships were procured in FY1990 and FY1993 rather than FY1994 and FY1996. It is not
clear how significant the savings from avoided configuration changes might be for a two-ship block buy for CVN-79
and CVN-80.
See also CRS Issue Brief IB87043, Aircraft Carriers (Weapons Facts), 13 pp., updated February 10, 1988 and archived
March 24, 1988, by Ronald O’Rourke. The report includes a discussion of the above GAO report. The report is out of
print and available directly from the author.
33
See CRS Issue Brief IB87043, Aircraft Carriers (Weapons Facts), 13 pp., updated February 10, 1988 and archived
March 24, 1988, by Ronald O’Rourke. The report is out of print and available directly from the author.
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At a March 19, 2012, briefing for CRS and CBO on the CVN-78 program, CRS asked the Navy
whether it was considering the possibility of a block buy on CVN-79 and CVN-80. The Navy
stated that it had looked into a narrower option of doing joint purchases of some materials for the
two ships. CRS asked the Navy to examine the broader option of a block buy along the lines
described above, and inform CRS and CBO of the Navy’s estimate of how much it might reduce
the combined procurement cost of CVN-79 and CVN-80. As of April 4, 2012, the Navy had not
replied to this request.
Implementing a block buy on CVN-79 and CVN-80 would require committing to the
procurement of CVN-80. Whether Congress would want to commit to the procurement of CVN80, particularly in light of current uncertainty over future levels of defense spending, is a factor
that Congress may consider in assessing the option of doing a block buy. If budgetary
circumstances were to lead to a decision to end procurement of Ford-class carriers after CVN-79,
then much or all of the funding spent procuring materials for CVN-80 could go to waste.
At a March 29, 2012, hearing on Navy shipbuilding programs before the Seapower and Projection
Forces subcommittee of the House Armed Services Committee, Sean Stackley, the Assistant
Secretary of the Navy for Research, Development, and Acquisition (i.e., the Navy’s acquisition
executive), stated the following when asked by Representative Robert Wittman about the
possibility of a two-ship block buy on CVN-79 and CVN-80:
Yes, sir. Let me focus on affordability of the CVN-78 class. We are right now about 40
percent complete construction of the CVN-78 and we’re running into some very difficult
cost growth issues across the full span—design, material procurement, and production—
material procurement on both contractor and government side.
So our first focus right now is to stabilize the lead ship. Let’s get cost under control so we
can complete this ship as close to schedule at the lowest cost possible.
But in parallel, the Navy is working very closely with the shipbuilder to take a step back and
say, one, what are all the lessons we just learned on CVN-78? Two, CVN-78 is a very
different ship from the Nimitz [CVN-68]; we cannot expect to build the [CVN-]78 the way
we build the [CVN-]68 and—and get to an affordable ship construction plan. So we’re
pressing on the way the carrier is built—the build plan for the carrier—to arrive at a more
affordable CVN-79.
Now, in the process of doing that we’ll take a hard look at what opportunity there is across
[CVN-]79 and [CVN-]80, recognizing that we’re going to be limited, again, by [budget] top
line. But there are going to be some opportunities that jump out at us. We don’t want to have
to replan each carrier. We have a vendor base that is stretched out with the carrier build cycle
that for some components that are carrier-unique, that vendor base is—is just struggling to
hold on between the five-year gaps.
So we have to take a hard look at where does it make sense after we’ve gotten to what I’m
calling an optimal build plan for CVN-79 and then be able to come back and—and say, OK,
here—on CVN-79 here are some opportunities that if we could, in fact, reach out to CVN-80
we can either avoid a gap in a production line or avoid unnecessary cost growth on that
follow ship.34
34
Source: transcript of hearing.
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Later in the hearing, the following exchange occurred:
REPRESENTATIVE RICK LARSEN:
Finally, we had some discussion about this question with regard to CVNs and trying to find a
way to squeeze some costs out, and one of the ideas was to do some—do block buy of
certain components of—of—of CVN components. And have you considered that, and what’s
your thought on that on block buy on components from [CVN-]79 to [CVN-]80, or whatever,
[CVN-]79, [CVN-]79 to [CVN-]80, and so on?
ASSISTANT SECRETARY OF THE NAVY SEAN STACKLEY:
Yes, sir. At this point in time the Navy and the shipbuilder are sitting side by side putting
together a build plan for CVN-79. We’re 40 percent complete construction of the [CVN-]78;
we’ve got a lot that we’ve got to, I’ll say, do different on the [CVN-]79 and follow from the
lead ship. It’s a very different ship class [compared to the Nimitz class].
So we’re taking a hard look at the build plan [for CVN-78]. We need to get that locked
down. And associated with that is the complete bill of materials for the Ford class.
At that point in time we'll be able to take a look at...
LARSEN:
On this, call it bill of materials, what does it make sense—what makes sense in terms of
looking long term, beyond the immediate ship?
STACKLEY:
Right.
LARSEN:
Are there areas of the industrial base that are stressed to the point that it does make sense to
look at coupling the CVN-79 and CVN-80 buy?
STACKLEY:
We’re not at that point yet. I described earlier that I think after we get through this build plan
review then we'll be able to come back in ‘14 [FY2014] and identify potential critical items
that warrant a block buy approach.35
Later in the hearing, Matthew Mulherin, President of NNS and Corporate Vice President of HII,
stated the following when asked by Representative Robert Wittman about the possibility of a twoship block buy on CVN-79 and CVN-80:
Yes, sir. You know, historically you go back, you were exactly right, if you look at the
contracts that bought the CVN- 72 and [CVN-]73 there was huge savings that flowed to the
second ship, both in the ability to go buy materials, a block buy and get—get discounts there,
but also that you did the engineering up front the first time for both hulls so the second ship
35
Source: Transcript of hearing.
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you really just had the answer, problem, paper [sic] and some of those kind of things the—
the kind of the normal course of business to support the waterfront.
So I wouldn’t see any different. I think if we were able to do it both for material, for—for the
engineering to be able to go pump out drawings that had two-ship applicability—plus, I think
it brings the—the—the CVN—if we were to do a two-ship buy for [CVN-]79 and [CVN-]80
it would ensure CVN-80 was a copy of CVN-79, no change into the contract or very
minimal, you’re not having a—on the material side you get economic order savings, you
don’t have to deal with obsolescence.
So absolutely. I think there’s huge opportunity to go do that. You know, you talk to the—the
vendor base. They would love to see it. It gives them the ability to go look at—at what
investments they need, what work is out in front of them, and go invest in—in training and
tools to—to be able to go support that.36
Issues Raised in December 2011 DOT&E Report
Another issue for Congress concerns CVN-78 program issues that were raised in a December
2011 report from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual
report for FY2011. The report stated, in its section on the CVN-78 program, that
Assessment
The Navy began CVN 78 construction in 2008 and plans to deliver the ship in September
2015. Current progress supports this plan; however the EMALS, AAG [Advanced Arresting
gear], DBR [Dual Band Radar], and Integrated Warfare Systems remain pacing items for
successful delivery of the ship.
The CVN 78 program (similar to the CVN 68 class program) continues to work through
challenges with F-35 JSF aircraft/ship integration. These challenges have the Naval Sea
Systems Command’s and Naval Air Systems Command’s significant attention and priority.
The Navy has not completed its analysis of the test data to determine whether design changes
are required for the jet blast deflectors and/or flight deck. Problems remain outstanding
regarding JSF data flow aboard ship via the Autonomic Logistics Information System; JSF
engine replacement logistics; lithium-ion battery stowage and operations; and low observable
material maintenance procedures.
EMALS developmental testing continues within timelines required to meet shipyard
Required in Yard Dates (RIYD) for various EMALS components. Developmental test
progress continues, although continued discovery of deficiencies (necessitating a re-design of
the launch armature and rough acceleration characteristics on initial Aircraft Compatibility
Testing aircraft launches) indicates a still maturing system. DOT&E holds moderate concern
regarding the performance risk generated by the inability to test the full, four catapult
electrical distribution system prior to initial trials aboard ship. This is mitigated somewhat by
the conduct of system electrical fault testing during FY12, which will replicate some level of
the electrical distribution fault tree.
AAG testing was halted following the discovery of metal scoring of the CSA [Cable Shock
Absorber] during initial dead-load testing requiring component redesign and software
36
Source: Transcript of hearing.
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modifications. Testing should resume in December 2011 and still supports RIYD for AAG
components barring significant additional redesign.
The Navy will re-start DBR testing at Wallops Island in FY12. Based on these tests, if
additional DBR testing is required, there will likely be cost growth in software development
and required testing and a slip in completion of the post-delivery testing and trials of the
DBR. Numerous integrated warfare system items are of concern, including:
•
Historically the ship self-defense combat systems on aircraft carriers have had
reliability, weapon, and radar system integration shortcomings. While the Navy has
made efforts, it has not yet developed a detailed plan to address these concerns on CVN
78.
•
Navy development of a new anti-ship ballistic missile target and obtainment of a
capability to launch multiple simultaneous supersonic sea-skimming targets lags behind
CVN 78 testing need dates. Both are required to fully assess the effectiveness of the ship
self-defense systems.
•
CVN 78 will use DBR continuously and simultaneously for both air traffic control and
to support other warfare areas including ship self-defense, whereas separate legacy
systems perform these missions individually. Merging these previously separate
missions into a single system requires significant testing and integration. Portions of this
testing are currently scheduled shipboard, instead of making more complete use of the
land-based Wallops Island facility; this complicates the test-fix-test timeline. RIYD
[required in-yard date] for these systems continues to drive the development schedule;
however, to date, development and testing remains on track.
The PSMD [Preliminary Ship’s Manning Document] was partially validated during Naval
Aviation Enterprise Manning War-game II in September 2011. In order to reduce Total
Ownership Costs (TOC) the ship’s overall manning (not including embarked air wing and
staffs) was reduced by 663 billets from current aircraft carrier requirements. In light of these
forced manning reductions, the Navy specifically designed CVN 78 to operate at 100 percent
manning on a continual basis, a level which the current manning construct and personnel
policies of the Navy do not support. The war-game validated the CVN 78 manning
requirements for operating during normal peacetime conditions; however during surge
operations or at less than 85 percent NEC fit/fill requirements there is risk as to whether the
ship can operate effectively. In order to ensure the ship’s operational effectiveness the Navy
will have to develop a manning construct which supports the 100 percent NEC fit/fill
manning requirement for CVN 78.
The current state of the Virtual Carrier model does not fully provide for an accurate
accounting of SGR [Sortie Generation Rate] due to a lack of fidelity regarding manning and
equipment/aircraft availability. Spiral development of the Virtual Carrier model is continuing
in order to ensure that the required fidelity will be available to support SGR testing during
IOT&E [Initial Operational Test & Evaluation].
DOT&E has requested the Navy adequately fund and complete the actions necessary to
conduct the TSST [Total Ship Survivability Trial] and the FSST [Full-Ship Shock Trial] on
the CVN 78. This includes updating the Damage Scenario Based Engineering Analyses
(DSBEA) from prior Vulnerability Assessment Reports (VARs) and enough new DSBEAs,
including machinery spaces, to conduct an adequately scoped TSST. DOT&E expects this
will require five or six TSST drills.
Because of the two-month delay required to perform the FSST, the Navy proposes delaying
the shock trial by 5-7 years in order to complete it on CVN 79 (instead of CVN 78). The
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two-month delay is not sufficient reason to postpone the shock trial for so long, as it could
reveal valuable lessons, including previously unknown vulnerabilities.
The current TEMP [Test and Evaluation Master Plan] and proposed revisions do not
adequately address whole-platform level developmental testing. The strategy leverages the
testing being conducted by contracted organizations on their associated systems and subsystems but does not stipulate any additional integrated platform-level CVN 78 class specific
developmental tests. Lack of platform-level developmental testing significantly raises the
likelihood of platform-level discovery during operational test.
Recommendations
Status of Previous Recommendations. All FY10 recommendations remain valid and are
updated below. The Navy should:
1. Adequately test and address integration challenges with JSF; specifically logistics (storage
of spare parts and engines, transport of support equipment and spares to/from the carrier),
changes (if any) required to JBD’s [Jet Blast Deflectors], changes (due to heat and or noise)
to flight deck procedures, and Autonomic Logistics Information System integration.
2. Finalize plans that address CVN 78 integrated warfare system engineering and ship’s selfdefense system discrepancies.
3. Develop and procure an anti-ship ballistic missile target that adequately emulates the selfdefense portions of the threat trajectory, and pursue test range upgrades to allow up to four
supersonic sea-skimming targets to be launched simultaneously.
4. Continue aggressive EMALS and AAG risk-reduction efforts to maximize opportunity for
successful system design and test completion in time to meet RIYD for ship-board
installation of components.
5. Continue development of a realistic model for determining the sortie generation rate, while
utilizing realistic assumptions regarding equipment availability, manning, and weather
conditions. Obtain acknowledgement and concurrence from Navy leadership on scheduling,
funding, and execution plan for conducting a live SGR test event.
FY11 Recommendations.
1. Develop and codify a formal manning construct through the Navy’s Bureau of Personnel
to ensure adequate depth and breadth of required personnel to ensure that the 100 percent
NEC [Navy Enlisted Classification] fit/fill manning requirements of CVN 78 are met.
2. Conduct platform-level developmental testing to preclude discovery of operational
effectiveness deficiencies during IOT&E.
3. Plan and budget for an adequate Full-Ship Shock Trial and Total Ship Survivability Trial
on CVN 78.37
37
Department of Defense, Director, Operational Test & Evaluation, FY2011 Annual Report, December 2011, pp. 116117.
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Legislative Activity for FY2013
FY2013 Funding Request
As shown in Table 1, the Navy’s proposed FY2013 budget requests $608.2 million in
procurement funding for CVN-79.
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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