Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
June 29December 10, 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. 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. 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
Statutory Requirement to Maintain Not Less Than 11 Carriers ................................................ 1
Origin of Requirement ........................................................................................................ 1
Waiver for Period Between CVN-65 and CVN-78 ............................................................. 1
Funding and Procuring Aircraft Carriers ................................................................................... 2
Some Key Terms ................................................................................................................. 2
Incremental Funding Authority for Aircraft Carriers .......................................................... 2
Aircraft Carrier Construction Industrial Base............................................................................ 32
Gerald R. Ford (CVN-78) Class Program ................................................................................. 3
CVN-78 ............................................................................................................................... 4
CVN-79 ............................................................................................................................... 4
CVN-80 ............................................................................................................................... 5
Effect of Lengthened Construction Periods on Meeting 11-Carrier Requirement .............. 5
Program Procurement Funding ........................................................................................... 5
Increases in Estimated Unit Procurement Costs Since FY2008 Budget ............................. 6
Program Procurement Cost Cap .......................................................................................... 8
Issues for Congress .......................................................................................................................... 8
Cost Growth............................................................................................................................... 8
March 2012 Navy Information PaperNovember 2012 Press Report .............................................................................................. 9
July 2012 CBO Report ........................... 9
March 2012 Navy Letter to Senator McCain .................................................................... 10
December 31, 2011, SAR (Released March 2012) ....... 10
March 2012 Navy Information Paper........................................................... 15
March 2012 GAO Report..................... 11
March 2012 Navy Letter to Senator McCain ............................................................................. 17
June 2011 CBO Report 12
December 31, 2011, SAR (Released March 2012) ........................................................... 17
March 2012 GAO Report .................................................... 18
Press Reports.............................................. 18
January and February 2012 Press Reports ........................................................................ 1920
EMALS ............................................................................................................................. 2122
CVN-78 Program Procurement Cost Caps .............................................................................. 2223
Six-Year Incremental Funding Authority ................................................................................ 2324
Potential Two-Ship Block Buy on CVN-79 and CVN-80 ....................................................... 2324
Issues Raised in December 2011 DOT&E Report................................................................... 2829
Shock Test................................................................................................................................ 32
Legislative Activity for FY2013 .................................................................................................... 3133
FY2013 Funding Request ........................................................................................................ 3133
FY2013 National Defense Authorization Act (H.R. 4310/S. 3254) ........................................ 3133
House................................................................................................................................. 3133
Senate ................................................................................................................................ 3234
FY2013 DOD Appropriations Act (H.R. 5856) ....................................................................... 3335
House................................................................................................................................. 3335
Senate ................................................................................................................................ 36
Figures
Figure 1. Navy Illustration of CVN-78 ............................................................................................ 3
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Tables
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2018 .................................... 6
Table 2. Estimated Procurement Costs of CVNs 78, 79, and 80 ..................................................... 7
Contacts
Author Contact Information........................................................................................................... 3436
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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 current aircraft carrier force consists of 10 nuclear-powered Nimitz-class ships
(CVNs 68 through 77) that entered service between 1975 and 2009. Until recently, the Navy’s
aircraft carrier force included an 11th aircraft carrier—the one-of-a-kind nuclear-powered
Enterprise (CVN-65), which entered service in 1961. CVN-65 was inactivated on December 1,
2012, reducing the Navy’s carrier force from 11 ships to 10aircraft carrier force consists of 11 ships, all of them nuclear-powered—the one-of-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, George H. W. Bush (CVN-77), the final Nimitz-class ship, was procured in FY2001 and
commissioned into service on January 10, 2009.1 CVN-77 replaced Kitty Hawk (CV-63), which
was the Navy’s last remaining conventionally powered carrier.21
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
TheAs mentioned above, the carrier force will dropdropped from 11 ships to 10 ships when Enterprise (CVN-65) is
decommissioned in November 2012, and willCVN65) was inactivated on December 1, 2012. The carrier force is to 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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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
CVN-78 may turn out to be more than 33 months. Anticipating a gap of at least 33 months
between the decommissioning
be delivered in September 2015, but its construction is now running behind schedule.
Anticipating the gap between the inactivation 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
operational carriers between the decommissioninginactivation of CVN-65 and the commissioning of CVN-78.
1
The Kitty Hawk was decommissioned on January 31, 2009.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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, 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.32
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 cancould 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
3five-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
2
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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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.43
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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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.
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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CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,54 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, 2011,65 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
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.
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 more on Navy ship names, see CRS Report RS22478, Navy Ship Names:
Background for Congress, by Ronald O’Rourke.
65
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-80CVN-80
CVN-80, which was named Enterprise on December 1, 2012,6 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
6
The Navy made the announcement of CVN-80’s name on the same day that it deactivated the 51-year-old aircraft
carrier CVN-65, also named Enterprise. (“Enterprise, Navy’s First Nuclear-Powered Aircraft Carrier, Inactivated,”
Navy News Service, December 1, 2012; Hugh Lessig, “Navy Retires One Enterprise, Will Welcome Another,” Newport
News Daily Press, December 2, 2012.) CVN-65 was the eighth Navy ship named Enterprise; CVN-80 is to be the
ninth.
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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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2018
(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; “FF” is full funding.
a.
Additional “cost to complete” funding to cover cost growth on CVN-78.
Increases in Estimated Unit Procurement Costs Since FY2008 Budget
Table 2 shows changes in the estimated procurement costs of CVNs 78, 79, and 80 since the
FY2008 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,
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 necessary
(continued...)
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Table 2. Estimated Procurement Costs of CVNs 78, 79, and 80
(As shown in FY2008-FY2013 budgets, in millions of then-year dollars)
Budget
CVN-78
CVN-79
CVN-80
Estimated
procurement
cost
Scheduled
fiscal year of
procurement
Estimated
procurement
cost
Scheduled
fiscal year of
procurement
Estimated
procurement
cost
Scheduled
fiscal year of
procurement
FY08 budget
10,488.9
FY08
9,192.0
FY12
10,716.8
FY16
FY09 budget
10,457.9
FY08
9,191.6
FY12
10,716.8
FY16
FY13b
n/aa
FY18b
FY13
13,577.0
FY18
FY10 budget
10,845.8
FY08
n/aa
FY11 budget
11,531.0
FY08
10,413.1
FY12 budget
11,531.0
FY08
10,253.0
FY13
13,494.9
FY18
FY13 budget
12,323.2
FY08
11,411.0
FY13c
13,874.2
FY18c
% change:
FY08 budget to
FY09 budget
-0.3
Almost no
change
No 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
FY12 budget to
FY13 budget
+6.9%
+11.3%
+2.8%
FY08 budget to
FY13 budget
+17.5%
+24.1%
+29.5%
Source: FY2008-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.
c.
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).
(...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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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
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.9 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.10
Issues for Congress
Oversight issues for Congress for the CVN-78 program include
•
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 17.75% since the submission of the
FY2009FY2008 budget, and 6.9% since the submission of the FY2012 budget.
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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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
Government Accountability Office (GAO) to review the CVN-78 program in light of the
program’s cost growth.11
November 2012 Press Report
A November 29, 2012, press report stated:
Huntington Ingalls Industries Inc. will miss its 2012 target for reducing costs on the USS
Gerald R. Ford, the aircraft carrier that will be the most expensive U.S. warship.
The shipbuilder will fall short of getting 86 cents of planned work accomplished for every
dollar spent, in part because of late component deliveries from subcontractors, according to
the Navy admiral responsible for carrier development and construction....
“They have continued to improve in the right direction, but they did not make it to 86”
percent, Rear Admiral Thomas Moore, the Navy’s program executive officer for aircraft
carriers, said in a phone interview. The Navy hopes the company will eventually get $1 of
value from every $1 spent, he said....
“There are many challenges” in building a prototype that’s also the first production vessel of
a three-ship class, Beci Brenton, a spokeswoman for the Newport News, Virginia-based
company, said in an e-mailed statement.
The company “has developed and implemented a host of improvement actions” this year, she
said. “We have continued to advance the shipbuilding industry in tooling, material controls
and craft performance through the use of innovation in technology, process changes and
teaming.”...
Huntington Ingalls’ cost efficiency goals have been “challenging but attainable, and they met
them and did well in 2011,” Moore said. “They did not meet all those goals in 2012, and we
will sit down and figure out where we are going with them in 2013.”
Reaching the 86 percent mark would have helped reduce what’s now an estimated $884
million overrun on the design and construction contract. The Navy’s share is $690 million.
Huntington’s share is $194 million, which would be forfeited if the overrun isn’t reduced.
Moore said Huntington Ingalls’ failure to hit its efficiency goal this year won’t increase the
cost estimate for the next carrier in the class, the USS John F. Kennedy.
11
Tony Capaccio, “Aircraft Carrier’s Rising Cost Prompts Lawmakers To Seek Audit,” Bloomberg Government
(bgov.com), February 17, 2012.
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“My expectation is that we are starting with a clean sheet of paper,” he said. “I fully expect”
the second carrier’s costs “to be significantly below where we end up on,” the Ford, he
said.12
July 2012 CBO Report
A July 2012 CBO report on the potential cost of the Navy’s FY2012 30-year shipbuilding plan
states (with costs expressed in constant FY2012 dollars):
The Navy’s projected cost of the lead ship of the CVN-78 class grew by 18 percent between
the President’s budget requests for 2008 and 2013. The Navy’s budget now projects the lead
ship’s cost to be $13.1 billion (about what CBO estimated in its analysis of the Navy’s 2011
plan), but further increases are likely. According to information provided by the Navy, in
fiscal year 2014 the service will request an extra $497 million ($564 million in 2014 dollars)
to cover additional cost growth and additional tooling and vendor services. Including that
money in the Navy’s estimate boosts the expected cost of the lead ship to $13.6 billion. (That
amount does not include $4.7 billion in research and development costs that apply to the
entire class.)
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). CBO estimates that completing the lead CVN-78 will cost $14.2 billion.
Subsequent ships of that class will not require as much funding for one-time items, although
they will incur the higher costs for government-furnished equipment. Altogether, CBO
estimates the average cost of the 6 carriers in the 2013 plan at $13.0 billion, compared with
the Navy’s estimate of $10.9 billion....
The final cost of the CVN-78 could be even higher than CBO’s estimate, for several reasons.
First, many lead ships built in the past 20 years have experienced cost growth of more than
30 percent. CBO’s estimate for the lead ship already falls within the range of cost growth in
lead ships, but construction is only about 40 percent complete. Historically, more cost
growth has occurred in the latter stages of ship construction, when systems are being
installed and integrated. Second, with the increase in the Navy’s estimate, the Navy, in a
written response to CBO and the Congressional Research Service, stated that the service has
budgeted the CVN-78 to a “greater than 50th” percentile of possible cost outcomes. Because
the Navy has not reported a precise probability, the service’s view of the probability that the
final cost will exceed its estimate is unclear. 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 and will require integration as the ship nears
the final stages of construction. Difficulties in completing that integration could arise and
increase costs, and those increases would also probably affect the costs for subsequent ships
of the class. However, the Navy and the shipbuilder recognize those issues and are actively
managing the CVN-78 program to reduce costs and prevent further growth. If they succeed,
then the cost of the lead ship could be less than CBO’s estimate.13
12
Tony Capaccio, “Huntington Ingalls Aircraft Carrier To Miss Cost-Reduction Goal,” Bloomberg Government
(bgov.com), November 29, 2012.
13
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2013 Shipbuilding Plan, July 2012, p. 16.
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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,1214 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.1315
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.1416
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
11
Tony Capaccio, “Aircraft Carrier’s Rising Cost Prompts Lawmakers To Seek Audit,” Bloomberg Government
(bgov.com), February 17, 2012.
122020 to September 2022.17 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
2022.18 The remaining $582 million in cost growth would appear to be the result of a more
refined estimate of the cost to build CVN-79 reflecting, among other things, experience to date in
building CVN-78.
14
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.
1315
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
1416
Source: Navy meeting with CRS and CBO on the CVN-78 program, March 6, 2012.
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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
refined estimate of the cost to build CVN-79 reflecting, among other things, experience to date in
building CVN-78.
17
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
18
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
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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.
15
16
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
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Sincerely, [signed] Ray Mabus
Attachment: As stated
Copy to: The Honorable Carl Levin, Chairman
[Attachment]
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
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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
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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.).
•
The shipbuilder has assigned engineering and material sourcing personnel to each of
their key vendors to expedite component qualifications and delivery to the shipyard.
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•
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.
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•
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
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.
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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.
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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;
•
incorporate design changes to improve FORD Class producibility;
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•
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.
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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.
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.1719
19
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
(continued...)
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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).1820 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
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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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
$884.7M VAC is $689.7M based on the contract shareline ratios which reduces the
contractors target fee as cost growth increases.1921
The SAR states the following it is executive summary:
(...continued)
is dated March 26, 2012.
20
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
21
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
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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
19
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
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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.2022
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
22
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 5.
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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
20
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 5.
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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.
Program Office Comments
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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
21
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-12400SP, March 2012, p. 66.
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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
23
January and February 2012 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. 17.2324 “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
22
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2012 Shipbuilding Plan, June 2011, pp. 13-14.
testing requirement.” Production at General Atomics of the system’s components to be fitted
in the ship also is “on schedule.”
23
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-12400SP, March 2012, p. 66.
24
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.
23
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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
[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.2425
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.2526
A January 13, 2012, press report states:
24
[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.
25
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.
2526
Christopher J. Castelli, “New Fixes Target management Problems In Aircraft Carrier Program,” Inside the Navy,
February 20, 2012.
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[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....
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.”2627
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….
26
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….
27
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 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.
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.2728
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.2829
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
27
28relief 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:
28
29
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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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
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-79.2930
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.3031
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.3132 When the FY1988 block buy
29was 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
30
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.
3132
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 non(continued...)
30
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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
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.
31
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considerably less than the Navy estimated, but agreed that a two-ship acquisition strategy is less
expensive than a single-ship acquisition strategy, and that some savings would occur in a twoship strategy for CVN-74 and CVN-75.3233
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.)3334 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.
(...continued)
inflation 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.
32
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.
33
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.
3334
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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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.
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.
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
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we can either avoid a gap in a production line or avoid unnecessary cost growth on that
follow ship.3435
Later in the hearing, the following exchange occurred:
REPRESENTATIVE RICK LARSEN:
35
Source: transcript of hearing.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.3536
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:
34
35
Source: transcript of hearing.
Source: Transcript of hearing.
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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
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
36
Source: Transcript of hearing.
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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.3637
At the March 19, 2012, briefing for CRS and CBO on the CVN-78 program, CRS asked the Navy
to examine the option of a block buy on CVN-79 and CVN-80, 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. The Navy’s response, dated April 22, 2012, was sent to CRS on May 10, 2012 (i.e., just
after the House Armed Services Committee completed its markup of H.R. 4310, the FY2013
National Defense Authorization Act). The response stated:
There are several options for procuring aircraft carriers that differ from the current practice;
two ship buys and block buys. Navy experience with aircraft carrier two ship buys includes
procurement of the CVN 72 and CVN 73 (awarded in FY83), and the CVN 74 and CVN 75
(awarded in FY88). The actual cost returns for these procurements support significant
savings compared to other NIMITZ Class single ship buys. This conclusion is based on a
comparison of the NIMITZ Class two ship buys (CVN72, 73, 74 & 75) with single ship buys
(CVN71 and CVN76). The total ship man-hour comparison shows a 9% reduction. The total
ship material comparison in constant dollars shows an 8% reduction. The NIMITZ- Class
two ship buys took advantage of a single year of full funding for the combined procurement,
and less than three years between the deliveries of each ship. Having both ships fully funded
in one year enabled the Navy and shipbuilder to take advantage of two ship-set Economic
Order Quantity (EOQ) market savings for material items, and also allowed the shipbuilder to
optimize production trades management. The short time between deliveries also resulted in
design stability, minimized potential obsolescence, and greater opportunities for learning.
Given hard budget constraints in FY13 and FY14, CVN 79 and CVN 80 cannot benefit from
a multiyear construct, similar to those requested in PB13 for VIRGINIA Class Submarine
and ARLIEGH BURKE Class Destroyers. By the end of FY14, 75% of CVN 79 material
will be under contract with suppliers, leaving limited opportunities to implement material
savings with multiyear incremental funding. 75% of CVN 80 material would also be
incapable of achieving savings, as the material purchases would be placed after CVN 79.
CVN 80/81 would present the first opportunity to potentially consider this strategy.37
36
37
Source: Transcript of hearing.
Navy information paper dated April 25, 2012, sent to CRS on May 10, 2012.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress38
The Navy’s response states, “Having both ships fully funded in one year enabled the Navy and
shipbuilder to take advantage of two ship-set Economic Order Quantity (EOQ) market savings for
material items.... ” It can be noted that ships funded in separate years can also take advantage of
EOQ savings, provided that the authorizing legislation permits the use of EOQ, and that the
FY1988 block buy of CVN-74 and CVN-75 was originally proposed by the Navy as a block buy
in which CVN-74 would be procured in FY1990 and CVN-75 in FY1993.
37
38
Source: Transcript of hearing.
Navy information paper dated April 25, 2012, sent to CRS on May 10, 2012.
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The Navy’s response states, “Given hard budget constraints in FY[20]13 and FY[20]14, CVN 79
and CVN 80 cannot benefit from a multiyear construct, similar to those requested in PB[20]13381339
for VIRGINIA Class Submarine and ARLIEGH BURKE Class Destroyers.” It can be noted that a
block buy on CVN-79 and CVN-80 would not necessarily be a multiyear procurement (MYP)
contract, like those requested for the Virginia-class submarine program and the Arleigh Burke
(DDG-51) destroyer programs. It can also be noted that Congress may decide to work within
budget constraints for FY2013 and FY2014 that might differ from those on which is DOD basing
its planning.
The Navy’s response states, “By the end of FY14, 75% of CVN 79 material will be under
contract with suppliers, leaving limited opportunities to implement material savings with
multiyear incremental funding. 75% of CVN 80 material would also be incapable of achieving
savings, as the material purchases would be placed after CVN 79.” CRS on May 10, 2012, asked
the Navy what percent of the material for CVN-79 would be under contract by the end of
FY2012. The Navy’s response, dated May 22, 2012, was sent to CRS on May 25, 2012 (i.e., the
same day that the House Appropriations Committee reported H.R. 5856, the FY2013 DOD
Appropriations Act). The response stated, “Approximately 47% of CVN 79 direct material will be
under contract by the end of FY[20]12.”3940
The Navy’s response states that “CVN 80/81 would present the first opportunity to potentially
consider this [block buy] strategy.” This statement appears to refer to a strategy of a complete
block buy involving 100% of the material for both carriers. Based on the Navy’s response dated
May 22, 2012, a partial block buy on CVN-79 and CVN-80 involving as much as 53% of the
material on CVN-79 might be possible, if the block buy were authorized and implemented as part
of the FY2013 defense budget.
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.
38
39
This is a reference to the president’s budget for FY2013—that is, the administration’s requested budget for FY2013.
Navy information paper dated May 22, 2012, sent to CRS on May 25, 2012.
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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.
39
40
This is a reference to the president’s budget for FY2013—that is, the administration’s requested budget for FY2013.
Navy information paper dated May 22, 2012, sent to CRS on May 25, 2012.
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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.
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
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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
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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.
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
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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.
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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 78.4041
Shock Test
Another issue for Congress concerns the shock test for the CVN-78 class. (A shock test is an
underwater explosion set off near a ship to test a new ship design’s ability to absorb a shock from
such a blast.) An August 9, 2012, press report states:
The Navy is inappropriately delaying or scaling back $70 million in needed combat testing
of the USS Gerald R. Ford [CVN-78], an aircraft carrier that may cost $14.2 billion, in the
name of cutting costs, according to the Pentagon’s top weapons tester.
A test that would “rigorously evaluate the ship’s ability to withstand shock and survive in
combat” would be postponed until a second carrier in the new Ford class [CVN-79] is built
and may not be completed for seven years, Michael Gilmore, the Defense Department’s
director of operational test and evaluation, told Navy Secretary Ray Mabus in a July 12
memo obtained by Bloomberg News....
“I recognize the need to expend resources wisely for all purposes, including testing, in the
existing constrained fiscal environment,” Gilmore said in the memo. “I consider these test
costs well-justified, particularly when considered in the context of the $27.8 billion cost to
design and build the first three of these new carriers, clearly one of the most expensive
combat systems the department has ever acquired.”...
The dispute centers on the Navy’s decision to change the agreed-upon test plan for the first
carrier in the class without Gilmore’s approval. The Navy wants to shift “full ship shock
trial” evaluations to the John F. Kennedy, the second carrier, in the move Gilmore says
would delay conducting the tests and gathering needed data for five to seven years.
The tests, estimated to cost about $60 million, are designed to evaluate a ship’s ability to
perform its mission after absorbing repeated shock waves from underwater explosions using
live ammunition detonated at a distance.
Gilmore rescinded approval of the test plan on July 12 and that decision remains in place, he
said in an e-mail through his spokeswoman Cheryl Irwin. Gilmore also said he has informed
Defense Secretary Leon Panetta’s staff of his concerns.
Gilmore said in the e-mail that the delay “is not appropriate” because the tests “provide
information key to assuring a ship’s survivability in combat.”
Captain Cate Mueller, a Navy spokeswoman, said in an e-mailed statement that “the Navy
and test office are committed to providing the most capable and survivable carrier.” The
service’s differences with Gilmore “are in the technical aspects and phasing of the shock
trials,” she said.
41
Department of Defense, Director, Operational Test & Evaluation, FY2011 Annual Report, December 2011, pp. 116117.
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Conducting the full shock test “is a high-cost event with schedule impact,” she said. The
Navy also has been under pressure due to environmental impact concerns “to identify
alternative means to validate ship shock design,” Mueller said.
The Ford carrier’s hull form “has been subject to extensive survivability modeling and
simulation, robust equipment and system component testing,” she said, and the Navy’s
decision to delay the full shock testing “is fully consistent with past practices for new ship
classes.”
Gilmore wrote Mabus that postponing the full shock tests until they can be performed on the
Kennedy “would preclude timely modification of subsequent ships of this class to ensure
survivability.”
Conducting the tests on the first ship as originally planned would cause about a two-month
delay in fielding the carrier, according to Gilmore.
“The data to be gained and risk mitigated are, in my view, clearly valuable enough to justify
this delay,” Gilmore wrote Mabus.
Gilmore wrote Mabus that he also disagreed with a second Navy decision that would “limit
the scope” of “total ship survivability trials” on the first carrier. These tests, at an estimated
cost of $10 million, are designed to demonstrate the ability of the ship and crew to control
damage resulting from simulated anti-ship weapons and continue fighting.
“I cannot accept elimination of key and essential survivability analyses,” including proposals
to eliminate analysis of the carrier’s machinery spaces, “simply to satisfy budget reductions,”
Gilmore said.42
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.
FY2013 National Defense Authorization Act (H.R. 4310/S. 3254)
House
Section 122 of H.R. 4310 as reported by the House Armed Services Committee (H.Rept. 112-479
of May 11, 2012) approves the Navy’s request for using six-year incremental funding to procure
CVN-79 and CVN-80. The text of Section 122 is as follows:
42
Tony Capaccio, “Navy Delays Combat Tests Needed For Carrier, Weapons Tester Says,” Bloomberg Government
(bgov.com), August 9, 2012.
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SEC. 122. 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), as amended by section 124 of the National Defense
Authorization Act for Fiscal Year 2012 (P.L. 112-81; 125 Stat. 1320), is amended by striking
`four fiscal years’ and inserting `five fiscal years’.
(In the above provision, the reference to “five fiscal years” means the number of years, in
addition to the year of procurement, in which incremental funding can be used. The year of
procurement, together with the five succeeding years, provides a total of six years of incremental
funding.)
H.Rept. 112-479 recommends approval of the Navy’s request for $608.2 million in procurement
funding for CVN-79 (page 375). The report also states:
40
Department of Defense, Director, Operational Test & Evaluation, FY2011 Annual Report, December 2011, pp. 116117.
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CVN-78 is the lead ship of the Ford class aircraft carrier. It incorporates improved
performance and cost saving technologies, decreases the crew size by 1,200 personnel, and
saves the Navy over $5.0 billion in total ownership costs for each ship. The Navy intends to
start construction of the first three ships of the Ford class on a 5-year basis. The committee
encourages the Navy to maintain this schedule with fiscal year 2013 as the first year of
incremental funding for CVN-79. Elsewhere in this Act, the committee includes a provision
[Sec. 122] that would authorize an extension from the current 5-year period to 6 years for the
incremental funding of CVN-79 and CVN-80. (Page 34)
Senate
Section 122 of S. 3254 as reported by the Senate Armed Services Committee (S.Rept. 112-173 of
June 4, 2012) approves the Navy’s request for using six-year incremental funding to procure
CVN-79 and CVN-80. The text of Section 122 is as follows:
SEC. 122. FORD CLASS AIRCRAFT CARRIERS.
(a) Contract Authority for Construction of Aircraft Carriers Designated CVN-78, CVN-79,
and CVN-80- In the fiscal year immediately following the last fiscal year of the contract for
advance procurement for a CVN-21 class aircraft carrier designated CVN-78, CVN-79 or
CVN-80, the Secretary of the Navy may enter into a contract for the construction of such
aircraft carrier to be funded in the fiscal year of such contract for construction and the
succeeding four fiscal years, in the case of the vessel designated CVN-78, and the
succeeding five fiscal years, in the case of the vessels designated CVN-79 and CVN-80.
(b) 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 any subsequent fiscal year is subject to the availability of appropriations for that purpose
for such subsequent fiscal year.
(c) Repeal of Superseded Provision- Section 121 of the John Warner National Defense
Authorization Act for Fiscal Year 2007 (P.L. 109-364; 120 Stat. 2104) is repealed.
Section 123 of the bill as reported states:
SEC. 123. LIMITATION ON AVAILABILITY OF AMOUNTS FOR SECOND FORD
CLASS AIRCRAFT CARRIER.
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(a) Limitation- Of the amount authorized to be appropriated for fiscal year 2013 by section
101 and available for shipbuilding and conversion for the second Ford class aircraft carrier as
specified in the funding table in section 4101, not more than 50 percent of such amount may
be obligated or expended until the Secretary of the Navy submits to the congressional
defense committees a report setting forth a description of the program management and cost
control measures that will be employed in constructing the second Ford class aircraft carrier.
(b) Elements- The report described in subsection (a) shall include a plan to do the following
with respect to the Ford class aircraft carriers:
(1) To maximize planned work in shops and early stages of construction.
(2) To sequence construction of structural units to maximize the effects of lessons learned.
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(3) To incorporate design changes to improve producibility for the Ford class aircraft
carriers.
(4) To increase the size of erection units to eliminate disruptive unit breaks and improve unit
alignment and fairness.
(5) To increase outfitting levels for assembled units before erection in the dry-dock.
(6) To increase overall ship completion levels at each key construction event.
(7) To improve facilities in a manner that will lead to improved productivity.
(8) To ensure the shipbuilder initiates plans that will improve productivity through capital
improvements that would provide targeted return on investment, including—
(A) increasing the amount of temporary and permanent covered work areas;
(B) adding ramps and service towers for improved access to work sites and the dry-dock; and
(C) increasing lift capacity to enable construction of larger, more fully outfitted super-lifts.
In connection with Section 123, S.Rept. 112-173 states:
The committee also expects the Secretary of the Navy to re-certify the statutory cost cap for
the CVN–79 and that the Navy and the contractor will build this ship within the amount
permitted by law. (Page 12)
S.Rept. 112-173 recommends approval of the Navy’s request for $608.2 million in procurement
funding for CVN-79 (page 325).
FY2013 DOD Appropriations Act (H.R. 5856)
House
The House Appropriations Committee, in its report (H.Rept. 112-493 of May 25, 2012) on H.R.
5856, recommends reducing by $29.9 million the Navy’s request for $608.2 million in
procurement funding for CVN-79, with the reduction being for the following components of the
ship: electronics ship test and integration growth ($2.5 million); HM&E (hull, mechanical and
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
electrical) engineering services growth ($6.0 million); trucks/forklifts growth ($2.0 million); ship
self-defense system engineering growth ($2.0 million); SEWIP (Surface Electronic Warfare
Improvement Program) block 2 growth ($2.9 million); EMALS (electromagnetic aircraft launch
system) systems engineering growth ($3.0 million); EMALS technical engineering services
growth ($8.0 million); JPALS (Joint Precision Approach and Landing System) pricing ($1.0
million); AN/SQQ-34 tactical support center pricing ($1.0 million); Nulka decoy system pricing
($1.5 million). (Page 157)
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for CongressSenate
The Senate Appropriations Committee, in its report (S.Rept. 112-196 of August 2, 2012) on H.R.
5856, recommends reducing by $43.824 million the Navy’s request for $608.2 million in
procurement funding for CVN-79, with the reduction being for the following components of the
ship: “CVN-79—excessive cost growth” ($28.0 million); AN/UPX-29(V) IFF (identification
friend or foe)—revised cost estimate ($10.824 million); ESS, SEWIP (Surface Electronic Warfare
Improvement Program) Block 2—pricing adjustment ($5.0 million). (Page 125)
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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