Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
March 27August 6, 2013
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 FY2013FY2014 budget estimates the ship’s
procurement cost at $12,323.2829.3 million (i.e., about $12.38 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 and FY2013. The Navy is requesting
$588.1 million in procurement funding
in FY2014, and $362 million in plans to request another $729.0 million in
procurement funding in FY2015 for the ship to cover $811
million in, to cover 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
ship received advance procurement funding
in FY2007-FY2012, and the Navy wantsplans to fully fund the ship in FY2013FY2018 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 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 FY2015FY2013-FY2018 using
congressionally authorized six-year incremental funding. The Navy’s proposed FY2014 budget
estimates CVN-79’s procurement cost at $11,338.4 million (i.e., about $11.3 billion) in then-year
dollars, and requests $944.9 million in procurement funding for the ship.
CVN-80 is scheduled to be procured in FY2018. The Navy’s proposed FY2013FY2014 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 FY2013FY2014 budget, the ship is to receive advance procurement funding
in FY2016-FY2017 and be fully funded in FY2018-FY2023 using congressionally authorized
six-year incremental funding.
Oversight issues for Congress for the CVN-78 program include the following:
•
the impact on Navy shipbuilding programs of the March 1, 2013, sequester on
FY2013 funding and unobligated prior-year funding;
•
the potential impact on Navy shipbuilding programs of a possible sequester later
this year or early next year on FY2014 funding and unobligated prior-year
funding;
•
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;
•
the potential for a two-ship block buy on CVN-79 and CVN-80; and
•
CVN-78 program issues that were raised in a December 2012 report from the
Department of Defense’s (DOD’s) Director of Operational Test and Evaluation
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: the potential
impact of an FY2013 year-long continuing resolution (CR) and a sequester on FY2013 funding
on the procurement of CVN-79; 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 procure CVN79 and CVN-80 together in a two-ship block buy; and CVN-78 program issues that were raised in
a December 2012 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............................................................................ 3
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 .............. 54
Program Procurement Funding ........................................................................................... 5
Increases in Estimated Unit Procurement Costs Since FY2008 Budget ............................. 6
Program Procurement Cost Cap .......................................................................................... 87
Issues for Congress .......................................................................................................................... 8
Potential Impact on CVN-79 of a Year-Long CR andImpact of March 1, 2013, Sequester inon FY2013 Funding ............................ 8
Cost Growth............................ 8
Potential Impact of Possible Late 2013/Early 2014 Sequester on FY2014 Funding................. 8
Cost Growth....................................................................................................... 9
November 2012 Press Report ......................................... 8
June 2013 Press Report ..................................................... 10
July 2012 CBO Report .................................................. 9
March 2013 Report to Congress (Released May 2013) .................................................... 10
March 2012 Navy Information Paper11
December 31, 2012, SAR (Released May 2013) .............................................................. 11
May 2013 Navy Testimony ................... 11
March 2012 Navy Letter to Senator McCain ........................................................................... 12
December 31, 2011, SAR (Released March 2012). 14
March 2013 GAO Report ........................................................... 17
March 2012 GAO Report ....................................... 16
November 2012 Press Report ................................................................. 19
January and February 2012 Press Reports ........................... 17
July 2012 CBO Report ............................................. 20
EMALS ......................................................... 18
March 2012 Navy Letter to Senator McCain .................................................................... 2319
CVN-78 Program Procurement Cost Caps .............................................................................. 24
Potential Two-Ship Block Buy on CVN-79 and CVN-80 ....................................................... 2425
Issues Raised in December 2012 DOT&E Report .................................................................. 30
Legislative Activity for FY2013FY2014 .................................................................................................... 34
FY2013FY2014 Funding Request ........................................................................................................ 34
FY2013FY2014 National Defense Authorization Act (H.R. 4310/P.L. 112-239) ................................ 34
House1960/S. 1197) ............................................ 35
House (Committee Report) ............................................................................................... 34
Senate .35
House (Floor Consideration) ............................................................................................. 38
Senate .................................. 35
Conference ........................................................................................................................ 36
Department of Defense, Military Construction and Veterans Affairs, and Full-Year
Continuing 38
FY2014 DOD Appropriations Act, 2013 (H.R. 933 of 113th Congress) ................................... 38
Version Passed by House on March 6, 2013 ..................................................................... 38
Version Passed by Senate and House on March 20 and 21, 2013 ..................................... 38
FY2013 DOD Appropriations Act (H.R. 5856 of 112th Congress) .......................................... 38
House (H.R. 2397/S. 1429) ......................................................... 42
House........................................................................................................................................................................................ 38 42
Senate ................................................................................................................................ 39
Conference ............................42
Figures
Figure 1. Navy Illustration of CVN-78 ............................................................................................ 393
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Figures
Figure 1. Navy Illustration of CVN-78 ............................................................................................ 3
Tables
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2018 .................................... 65
Table 2. Changes in Estimated Procurement Costs of CVNs 78, 79, and 80 ................................... 7
Appendixes
Appendix. March 2013 Report To Congress on Construction Plan for CVN-79 .......................... 43.................. 7
Contacts
Author Contact Information........................................................................................................... 3961
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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 10. 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. CVN-77 replaced Kitty Hawk (CV-63), which
was the Navy’s last remaining conventionally powered carrier.1
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
As mentioned above, the carrier force dropped from 11 ships to 10 ships when Enterprise (CVN65) 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 was originally
scheduled to
be delivered in September 2015, but its construction is nowhas been running behind schedule.
schedule, and the Navy in May 2013 announced that the ship’s delivery date has been postponed
to February 2016.2 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.
1
2
The Kitty Hawk was decommissioned on January 31, 2009.
Report to Congress on the Annual Long-Range Plan for Construction of Naval Vessels for FY2014, May 2013, p. 13.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
National Defense Authorization Act (H.R. 2647/P.L. 111-84 of October 28, 2009) authorized the
waiver, permitting the Navy to have 10
operational carriers between the inactivation 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
and the commissioning of CVN-78.
Funding and Procuring Aircraft Carriers
Some Key Terms
The Navy procures a ship (i.e., orders the ship) by awarding a full-ship construction contract to
the firm building the ship.
Part of a ship’s procurement cost might be provided through advance procurement (AP) funding.
AP funding is funding provided in one or more years prior to (i.e., in advance of) a ship’s year of
procurement. AP funding is used to pay for long-leadtime components that must be ordered ahead
of time to ensure that they will be ready in time for their scheduled installation into the ship. AP
funding is also used to pay for the design costs for a new class of ship. These design costs, known
more formally as detailed design/non-recurring engineering (DD/NRE) costs, are traditionally
incorporated into the procurement cost of the lead ship in a new class of ships.
Fully funding a ship means funding the entire procurement cost of the ship. If a ship has received
AP funding, then fully funding the ship means paying for the remaining portion of the ship’s
procurement cost.
The full funding policy is a Department of Defense (DOD) policy that normally requires items
acquired through the procurement title of the annual DOD appropriations act to be fully funded in
the year they are procured. In recent years, 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.23
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 could 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
five-year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in
FY2008-FY2011, the provision in practice applied to CVNs 79 and 80.
Section 121 of the FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112-239 of
January 2, 2013) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use sixyear incremental funding for CVNs 78, 79, and 80. (See “FY2013 National Defense
Authorization Act (H.R. 4310/P.L. 112-239)” in “Legislative Activity for FY2013”.) Since CVN78 was fully funded in FY2008-FY2011, the provision in practice applies to CVNs 79 and 80.
2
3
For more on full funding, incremental funding, and AP funding, see CRS Report RL31404, Defense Procurement:
Full Funding Policy—Background, Issues, and Options for Congress, by Ronald O'Rourke and Stephen Daggett, and
CRS Report RL32776, Navy Ship Procurement: Alternative Funding Approaches—Background and Options for
Congress, by Ronald O'Rourke.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Section 121 of the FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112-239 of
January 2, 2013) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use sixyear incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in FY2008FY2011, 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 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
various 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.34
Figure 1. Navy Illustration of CVN-78
Source: Navy image accessed at http://www.navy.mil/management/photodb/photos/060630-N-0000X-001.jpg on
April 20, 2011.
4
The CVN-78 class was earlier known as the CVN-21 class, which meant nuclear-powered aircraft carrier for the 21st
century.
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The Ford-class design uses the basic Nimitz-class hull form but incorporates several
improvements, including features permitting the ship to generate about 25% more aircraft sorties
per day, more electrical power for supporting ship systems, and features permitting the ship to be
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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operated by several hundred fewer sailors than a Nimitz-class ship, significantly reducing lifecycle operating and support (O&S) costs.
Navy plans call for procuring at least three Ford-class carriers—CVN-78, CVN-79, and CVN-80.
CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,45 was procured in FY2008. The
Navy’s proposed FY2013 budget estimates the ship’s procurement cost at $12,323.2829.3 million (i.e.,
about $12.38 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 $9.05
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 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 and FY2013. The Navy is requesting
$588.1 million in procurement funding in FY2014, and $362
million in plans to request another $729.0 million in
procurement funding in FY2015 for the ship to cover $811 million in, to cover cost growth on
the ship.
CVN-79
CVN-79, which was named for President John F. Kennedy on May 29, 2011,56 is scheduled to be
procured in FY2013. The ship received advance procurement funding in FY2007-FY2012, and
the Navy plans to fully fund the ship in FY2013-FY2018 using congressionally authorized sixyear incremental funding. The Navy’s proposed FY2014Navy’s proposed FY2013 budget estimates CVN-79’s procurement cost
cost at $11,411.0338.4 million (i.e., about $11.43 billion) in then-year dollars, and requests $608.2 944.9
million in
procurement funding for the ship. The ship received advance procurement funding in FY2007FY2012, and the Navy wants to fully fund the ship in FY2013-FY2018 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 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 procurement funding for the ship.
CVN-80
CVN-80, which was named Enterprise on December 1, 2012,7 is scheduled to be procured in
FY2018. The Navy’s proposed FY2014 budget estimates the ship’s procurement cost at $13,874.2
5
§1012 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17, 2006) expressed the sense of
the Congress that CVN-78 should be named for President Gerald R. Ford. On January 16, 2007, the Navy announced
that CVN-78 would be so named. CVN-78 and other carriers built to the same design will consequently be referred to
as Ford (CVN-78) class carriers. For more on Navy ship names, see CRS Report RS22478, Navy Ship Names:
Background for Congress, by Ronald O’Rourke.
56
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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CVN-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.
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
7
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
(continued...)
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million (i.e., about $13.9 billion) in then-year dollars. Under the Navy’s proposed FY2014
budget, the ship is to receive advance procurement funding in FY2016-FY2017 and be fully
funded in FY2018-FY2023 using congressionally authorized six-year incremental funding.
Program Procurement Funding
Table 1 shows procurement funding for CVNs 78, 79, and 80 through FY2018.
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
17121,712.5 (FF)
903.3 (AP)
0
2,615.8
FY12
0
554.8 (AP)
0
554.8
FY13 (requested)a
0
608.2 (FF)
0
608.2
FY14 (projected)
449.0a
666.1requested)
588.1b
944.9 (FF)
0
1,115.1533.0
FY15 (projected)
362.0a
2,999729.0b
1,834.1 (FF)
0
3,3612,563.1
FY16 (projected)
0
979.41,235.6 (FF)
682.8 (AP)
1,662.2918.4
FY17 (projected)
0
1,823.8496.0 (FF)
1,043.8 (AP)
2,867.6539.8
FY18 (projected)
0
1,006.5891.8 (FF)
2,378.91,062.6 (FF)
3,385.4
2,954.4
FY13
Source: FY2009-FY2013FY2014 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.The FY2013 column in the Navy’s FY2014 budget submission simply shows the figure that was requested
for FY2013, not the final appropriated figure for FY2013. The figures shown in the table do not reflect the
March 1, 2013, sequester on FY2013 funding and on FY2012 and prior-year funding that was unobligated on
March 1, 2013.
b.
Additional “cost to complete” funding to cover cost growth on CVN-78.
(...continued)
News Daily Press, December 2, 2012.) CVN-65 was the eighth Navy ship named Enterprise; CVN-80 is to be the
ninth.
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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..corrective action.
(Government Accountability Office, Defense Acquisitions[:] Navy Faces Challenges Constructing
the Aircraft Carrier Gerald R. Ford within Budget, GAO-07-866, August 2007, summary page. See
also Government Accountability Office, Defense Acquisitions[:] Realistic Business Cases Needed
to Execute Navy Shipbuilding Programs, Statement of Paul L. Francis, Director, Acquisition and
Sourcing Management Team, Testimony Before the Subcommittee on Seapower and Expeditionary
Forces, Committee on Armed Services, House of Representatives, July 24, 2007 (GAO-07-943T),
p. 15.)
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Table 2. Changes in Estimated Procurement Costs of CVNs 78, 79, and 80
(As shown in FY2008-FY2013FY2014 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
FY14 budget
12,829.3
FY08
11,338.4
FY13
13,874.2
FY18
% 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%
FY13 budget to
FY14 budget
+4.1%
- 0.6%
No change
FY08 budget to
FY13FY14 budget
+17.5%
+24.122.3%
+23.4%
+29.5%
Source: FY2008-FY2013FY2014 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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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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
Potential Impact on CVN-79 of a Year-Long CR and Sequester in
FY2013
Year-Long CR
Navy officials state that although there is much current focus on the potential impacts on the
military services of a sequestration of FY2013 DOD funding, the Navy is equally (if not more)
concerned about the potential impact on the Navy of an extension of the current continuing
resolution, or CR (H.J.Res. 117/P.L. 112-175 of September 28, 2012), through the end of
FY2013.
Among other things, if the current CR is extended through the end of FY2013 on the basis of
FY2012 funding levels, and without sufficient transfer authority and/or anomalies, then it appears
likely that the Navy would not be able to procure (i.e., award a full-ship construction contract for)
the aircraft carrier CVN-79 in FY2013, as proposed under the FY2013 budget (i.e., the FY2013
quantity for aircraft carriers could not be 1), because the Navy did not procure an aircraft carrier
in FY2012 (i.e., the FY2012 quantity for aircraft carriers was zero).11 In other words, procuring a
carrier in FY2013 would amount to a quantity increase compared FY2012, which an extended CR
as described above would not permit. (Year-to-year quantity increases are a considered a type of
“new start”—i.e., a new program initiative that differs from what took place the prior year—and
new starts are generally not permitted under CRs.)
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.
11
The previous aircraft carrier, CVN-78, was procured in FY2008.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
The Navy might consider the option of declaring FY2013 to be another year of advance
procurement (AP) activity for CVN-79 (i.e., another year for procuring long-lead time
components and for conducting “advance construction” activities on the ship at the shipyard),12
but it is not clear whether the Navy would be permitted to do this. If it were possible for the Navy
to do this, then the Navy might be able to award one or more short-term contracts for AP-like
activities in FY2013, and at least some work on CVN-79 might continue through the remainder of
FY2013, though perhaps not enough for the ship to fall behind its originally intended construction
schedule. If it were not possible for the Navy to do this, then even less work on CVN-79 might
take place through the remainder of FY2013. On March 7, 2013, DOD announced that the Navy
is modifying the total amount of a contract previously awarded to HII/NNS by about $65.0
million “in order to provide the ability to procure additional long lead material and advance
construction activities for CVN 79 if required. The current contract has been in place since
2009.”13
Sequestration
A sequester of FY2013 DOD funding could further complicate the Navy’s ability to complete
work planned for CVN-79 in FY2013. If the sequester were implemented under a CR (i.e., if
there were “a sequester inside a CR”), then these program-execution challenges would in general
be in addition to the those caused by the CR (see previous section).
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 17.5% since the submission of the
FY2008 budget, and 6.9% since the submission of the FY2012 budget.
Cost growth on CVN-78 has prompted the Navy to program $811 million in additional
procurement funding for the ship. As shown in Table 1, $449 million of this $811 million is to be
requested in FY2014, and the remaining $362 million is to be requested in FY2015.
A February 17, 2012, press report states that Senators Carl Levin and John McCain, the chairman
and ranking Member, respectively, of the Senate Armed Services Committee, have asked the
Government Accountability Office (GAO) to review the CVN-78 program in light of the
program’s cost growth.14
12
CVN-79 has received AP funding from FY2007 through FY2012, but was scheduled to shift to regular procurement
funding starting in FY2013. CVN-79 received $554.8 million AP funding in FY2012, and the Navy requested $608.2
million in regular procurement funding for FY2013. If the Navy is permitted to declare FY2013 to be another year of
AP funding for CVN-79, the ship might receive as much as $558.2 million (or 0.612% more than the FY2012 level, as
permitted under the current CR) in FY2013 for AP-like activities.
13
DOD contract award announcement No. 131-13, March 7, 2013, accessed online March 12, 2013, at
http://www.defense.gov/contracts/contract.aspx?contractid=4992.
14
Tony Capaccio, “Aircraft Carrier’s Rising Cost Prompts Lawmakers To Seek Audit,” Bloomberg Government
(bgov.com), February 17, 2012.
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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.
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Issues for Congress
Impact of March 1, 2013, Sequester on FY2013 Funding
One issue for Congress concerns the impact on the CVN-78 program of the March 1, 2013,
sequester on FY2013 funding and unobligated prior-year funding. DOD’s June 2013 report to
Congress on the March 1, 2013, sequester states that the sequester reduced FY2013 and prioryear procurement funding for the CVN-78 program by $74.5 million.9 A June 21, 2013, press
report states:
So far, sequestration has not hindered test and evaluation efforts on [CVN-78’s] new
technologies in the same way that some other programs have been affected, Rear Adm. Tom
Moore [the program executive officer for aircraft carriers] said June 17....
Because [CVN-78] had no funding for construction in FY-13 because that funding was in
previous budgets, the ship's construction wasn't hurt....
But [CVN-79] hasn't been so lucky....
"[CVN-]79's being funded over several years and so as long as the out-year money shows up,
it really becomes more of a cash-flow issue," Moore said. "We'll probably have to slow some
things down that we would have preferred to do in '13 but we'll have to catch up on and do
later."10
Potential Impact of Possible Late 2013/Early 2014 Sequester on
FY2014 Funding
Another potential issue for Congress concerns the potential impact on the CVN-78 program of a
possible sequester on FY2014 funding and unobligated prior-year funding that might occur in late
2013 or early 2014 under the terms of the Budget Control Act of 2011 (S. 365/P.L. 112-25 of
August 2, 2011).
Cost Growth
Another issue for Congress 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 22.3% since the submission of the FY2008 budget, and 4.1% since the
submission of the FY2013 budget. As shown in Table 1, cost growth on CVN-78 has prompted
the Navy to program $1,317.1 million in additional procurement funding for the ship in FY2014
and FY2015.
9
Department of Defense Report on the Joint Committee Sequestration for Fiscal Year 2013, June 2013, p. 36A (pdf
page 86 of 438).
10
Megan Eckstein, “Navy Sees Sequestration Hurting CVN-79 Construction, CVN-72 Refueling,” Inside the Navy,
June 24, 2013.
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Most of the cost growth on CVN-78 since the submission of the FY2013 budget was expected:
The Navy stated in March 2012 that future budget submissions would show an additional $417
million in cost growth on CVN-78 that was not captured in the FY2013 budget because this cost
growth emerged late in the process for preparing the FY2013 budget, and because the Navy
hoped that actions being taken to restrain cost growth in the CVN-78 program would reduce the
figure to something less than $417 million before the FY2014 budget was submitted to
Congress.11 The $417 million in anticipated cost growth equates to about 82% of the $506.1
million in cost growth that has occurred on CVN-78 since the FY2013 budget.
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.12
June 2013 Press Report
A June 27, 2013, press report stated:
The U.S. Navy should delay the award of a multibillion-dollar contract to Huntington Ingalls
Industries Inc.to build the second aircraft carrier in a new class as the first one faces failings
from its radar to the gear that launches planes, congressional investigators said.
“Technical, design and construction challenges” with the first carrier, the USS Gerald R.
Ford, have caused “significant cost increases and reduce the likelihood that a fully functional
ship will be delivered on time,” the Government Accountability Office said in a draft report
obtained by Bloomberg News....
Delays and “reliability deficiencies” with the flattop’s new dual-mission radar,
electromagnetic launch system and arresting gear for aircraft mean that the Ford “will likely
face operational limitations that extend past commissioning” in March 2016 and “into initial
deployments,” the agency said.
The GAO, the investigative arm of Congress, said that’s reason enough to delay the contract
that’s scheduled to be issued this year for the second ship, the USS John F. Kennedy....
“It will be important to avoid repeating mistakes” in the contract for the Kennedy, the GAO
said. “Staying within budget” will require the Navy to reduce “significant risk mainly by
completing land-based testing for critical technologies before negotiating a contract” with
Newport News, Virginia-based Huntington Ingalls.
Beci Brenton, a company spokeswoman, said in a telephone interview that “it would not be
appropriate to comment on a draft report.” Naval Sea Systems Command spokeswoman
Colleen O’Rourke13 said in a statement that “as the Navy is currently working with the GAO
on this report, it would be inappropriate to comment on any draft findings at this time. When
the report is finalized, it will include Navy comments.”
11
Source: Navy meeting with CRS and CBO on the CVN-78 program, March 6, 2012.
Tony Capaccio, “Aircraft Carrier’s Rising Cost Prompts Lawmakers To Seek Audit,” Bloomberg Government
(bgov.com), February 17, 2012.
13
Colleen O’Rourke is not related to Ronald O’Rourke.
12
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The Navy remains committed to the Ford-class carrier as a needed capability, said a Navy
official who declined to be identified before the GAO releases its final report. The Navy is
confident that the first vessel will be delivered on schedule and that lessons learned from
building it will be applied to reduce the cost of the second ship, the official said....
While the GAO said that the Navy and Huntington Ingalls are taking steps to control costs
for the Ford, most increases occur after a vessel is 60 percent complete and key systems are
installed and integrated. The Ford is now 56 percent complete.
Even the current $12.8 billion estimate is “optimistic because it assumes the shipbuilder will
maintain its current level of performance throughout the remainder of construction,” the
GAO said....
The Pentagon’s independent cost-estimating office, the Congressional Budget Office and a
Navy-commissioned panel project final costs as high as $14.2 billion, the GAO said....
“As it now stands, the Navy will not be positioned to deliver a fully capable ship at the
time,” the GAO said.
“Reliability shortfalls facing key Ford-class systems cloud the Navy’s ability to forecast
when, or if” the carrier will meet the aircraft sortie rates and reduced manning requirements
that distinguish it from the older Nimitz class, the GAO said. O’Rourke, the Naval Sea
Systems Command spokeswoman, wouldn’t comment on the specific value of the potential
detailed design and construction contract to Huntington Ingalls for the Kennedy that the
GAO said is due in September....
The largest share of the cost increase for the Ford, 38 percent, stemmed from technologies
delivered by the Navy, including the radar, launch system and arresting gear, according to
the GAO.
The electromagnetic launch system made by San Diego-based General Atomics has
increased to $742.6 million, up 134 percent since 2008, the GAO said. The cost of arresting
gear also made by the company increased 125 percent to $169 million.
Raytheon Co.’s dual-band radar has increased 140 percent to $484 million, according to data
cited by the GAO. Twenty-seven percent of the cost growth was pegged to shipbuilder
design issues and another 27 percent to construction, both attributed to Huntington Ingalls.
Huntington Ingalls is building the Ford under a $4.9 billion detailed design contract that
covers the shipbuilder’s portion of constructing the vessel. It doesn’t cover other costs, such
as the nuclear reactor to power the ship and other government-furnished equipment....
The GAO said its analysis indicates that Huntington Ingalls “was forecasting an overrun at
contract completion of over $913 million” that it said stemmed from “the shipbuilder not
accomplishing work as planned.”
Huntington’s Brenton said in an e-mail in May that, “as the first new design carrier
beginning construction in more than 40 years,” the Ford “is designed to provide increased
capability and reduced total ownership cost by about $4 billion compared to Nimitz-class
carriers.”
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“For this first-of-class ship, construction commenced in parallel with design completion
based on earlier decisions at Department of Defense,” she said. “Ongoing design during the
construction process caused delay and inefficiencies in procurement, manufacturing, and
assembly.”14
March 2013 Report to Congress (Released May 2013)
A March 2013 report to Congress on the Navy’s plan for building CVN-79 that was released to
the public on May 16, 2013, states in its executive summary:
As a result of the lessons learned on CVN 78, the approach to carrier construction has
undergone an extensive affordability review and the Navy and the shipbuilder have made
significant changes on CVN 79 that will significantly reduce the cost to build the ship. These
include four key construction areas:
--
CVN 79 construction will start with a complete design and a complete bill of material
--
CVN 79 construction will start with a firm set of stable requirements
-- CVN 79 construction will start with the development complete on a host of new
technologies inserted on CVN 78 ranging from the Electromagnetic Aircraft Launch System
(EMALS), the Dual Band Radar, and the reactor plant, to key valves in systems throughout
the ship
-- CVN 79 construction will start with an ‘optimal build’ plan that emphasizes the
completion of work and ship outfitting as early as possible in the construction process to
optimize cost and ultimately schedule performance.
In addition to these fundamentals, the Navy and the shipbuilder are tackling cost through a
series of other changes that when taken over the entire carrier will have a significant impact
on construction costs. The Navy has also imposed cost targets and is aggressively pursuing
cost reduction initiatives in its government furnished systems. A detailed accounting of these
actions is included in this report.
The actions discussed in this report are expected to reduce the material cost of CVN 79 by
10-20% in real terms from CVN 78, to reduce the number of man-hours required to build the
CVN 79 by 15-25% from CVN 78, and to reduce the cost of government furnished systems
by 5-10% in real terms from CVN 78.15
For the full text of the navy’s report, see Appendix.
December 31, 2012, SAR (Released May 2013)
The December 31, 2012, Selected Acquisition Report (SAR) for the CVN-78 program, which was
released in May 2013, states:
14
Tony Capaccio, “Navy Should Delay Next Carrier Amid Troubles, GAO Says,” Bloomberg.com, June 27, 2013.
Aircraft Carrier Construction, John F Kennedy (CVN 79), Report to Congress, March 2013, p. 3. An annotation on
the report’s cover page indicates that the report was authorized for public release on May 16, 2013. The report was
posted at InsideDefense.com (subscription required) on June 21, 2013. See also Megan Eckstein, “Navy Plan To
Congress Outlines New Strategies To Save On CVN-79,” Inside the Navy, June 24, 2013.
15
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The CVN 78 is experiencing cost growth due to “first of class” material availability (i.e.,
valves, actuators), construction labor inefficiencies, and challenges associated with
concurrent development and integration of new Government Furnished Equipment (GFE)
and Contractor Furnished Equipment (CFE) systems during lead ship design and
construction. For material costs, the variance reflects challenges associated with a shrinking
supplier base, procurement of developmental contractor furnished components, and vendor
qualification on CVN 78 unique items. Labor inefficiencies are the result of “first of class”
challenges. The effect of new and thinner steels on structural erection was greater than
expected, slowing production and requiring more hours than planned for straightening,
temporary structure and rigging. HII-NNS also experienced “first of class” learning
associated with the new CVN 78 Class modular build strategy, including movement, blast
and coat, and assembly area footprint difficulties for larger, reconfigured CVN 78 structural
units. Delays in the delivery of new developmental components as well as engineering
products required to develop construction work package also inhibited labor performance.
During 2012, HII-NNS continued its design and production efforts on CVN 78. Quarterly
Progress Reviews were held to manage and assess the status of design and production on
CVN 78. As of February 17, 2013, the construction effort was 67.3% complete based on
contract dollars. The landing of the island occurred on January 26, 2013. The shipbuilder has
proposed a revised Estimate at Completion (EAC) increasing Direct Labor from 43.9 to 47.3
million man hours that incorporates their assessment of performance trends and associated
recovery efforts for both construction and support areas. The Navy is evaluating this
proposed increase with emphasis on mitigating key cost and schedule drivers. The Navy
continues to work with the Participating Acquisition Resource Managers (PARMs) to
identify and remove barriers to improve cost and schedule performance for the new
developmental GFE systems. HII-NNS has rescheduled the CVN 78 launch from July 2013
to November 2013. Although shipbuilder actions to resolve “first of class” issues have
retired some technical and schedule risk, HII-NNS has been unable to retire all schedule risk,
resulting in a four month delay to the launch of CVN 78, with associated impact to delivery.
The Navy agrees with the delay to launch. Delivery is expected to be delayed until
approximately 2nd Quarter FY 2016.
The Navy is submitting reports to the four defense committees addressing cost performance
of the CVN 78 detail design and construction in response to Senator John McCain’s letter of
August 11, 2011. At the direction of the Assistant Secretary of the Navy for Research,
Development and Acquisition (ASN(RD&A)), an independent team conducted an end-to-end
assessment of CVN 78 cost variance that included opportunities to prevent further increases.
Recommendations from the report, briefed to ASN(RD&A) on December 21, 2011, are
being implemented. Recommendations from the CVN 78 end to end reviews have been
consolidated into 38 actionable items that are been tracked to completion. As of March 18,
2013, 17 recommendations have been implemented with 21 recommendations in progress.
All recommendations are expected to be implemented by September 2014. The review team
reconvened in 2012 and concluded the program offices action plan adequately addresses
their recommendations.
The high level of design maturity and material certification for the CVN 79 provides a stable
technical baseline for material procurement cost and schedule performance, which supports
the development and execution of an improved and reliable build plan. The Construction
Preparation (CP) Contract for CVN 79 advance procurement research, design, and
engineering was awarded on January 15, 2009. An extension to CP efforts through FY 2013
was awarded in March 2013.
To enable full ship-set material buys for cost reduction benefits and to ensure material
availability, two material procurement contract modifications were awarded to HII-NNS
during FY 2012. A third material procurement award was executed in March 2013. CVN 79
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affordability is being driven through several areas. The CVN 79 is a design roll-over from
CVN 78, with changes for improved producibility, reduced cost, and limited fact-of-life
obsolescence issues. Lessons learned during the construction of CVN 78 are resulting in
changes to the CVN 79 build plan to improve production efficiency. In addition, production
improvements are being achieved through implementation of several initiatives aimed at
driving work to be executed at the most efficient time (typically in the shop or on the platen
rather than in the dry-dock or after launch), as well as driving learning curve performance
into subsets of the ship construction (creation of “families of units” and work cells). In the
aggregate, the plan for CVN 79 construction will substantially drive down costs.
The CVN 79 DD&C Request for Proposal (RFP) was provided to HII-NNS on October 2,
2012. The CVN 79 DD&C contract is planned for award in September 2013. Unlike the
CVN 78 DD&C which is a Cost Plus Incentive Fee (CPIF) contract, the Navy plans to
negotiate a Fixed Price Incentive (FPI) contract with a simplified structure for CVN 79.16
The SAR also states:
The CVN 79 is budgeted at an aggressive but achievable target.
The Navy and shipbuilder have made fundamental change in the manner in which the CVN
79 will be built to incorporate lessons learned from CVN 78 and eliminate the key
contributors to cost performance challenges realized in the construction of CVN 78. The
approach to carrier construction has undergone an extensive affordability review, the results
of which are reflected in the CVN 79 budget. Further improvements are planned for CVN 80
but have not yet been incorporated into the CVN 80 cost estimates. The Navy is committed
to driving down aircraft carrier construction costs, and fully expects future estimates for
CVN 80 to reflect a continued downward trend. 17
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 SAR states
that the value of the contract has grown from an initial price of $4,910.5 million to a current price
of $5,885.6 million, and that NNS and the Navy estimate that the price will grow further, to
$6,665.6 (NNS’s estimate) or $6,638.7 million (the Navy’s estimate) by the time the contract is
completed (i.e., estimated price at completion).18 In discussing these figures, the SAR states:
The unfavorable net change in the cost variance is due to material cost growth (86%), labor
inefficiencies (25%), Overhead improvement (-3%), and Facilities Capital Cost of Money
(FCCM) improvement (-8%). 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
increased use of temporary structures and rigging). Additionally, increased supervision has
been required to manage the above challenges and a developing workforce.
The favorable net change in the schedule variance is due to improvement in material
availability and the overall decrease in design hold ups, which have resulted in a significant
increase in workable work packages available to the assembly trades. This increase in
16
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, pp. 5-6.
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 30.
18
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 56.
17
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available work, coupled with the significant increase in manning and improved performance
of the assembly trades, has resulted in an overall improvement in schedule performance.19
May 2013 Navy Testimony
In its prepared statement for a May 8, 2013, hearing on Navy shipbuilding programs before the
Seapower subcommittee of the Senate Armed Services Committee, the Navy stated that
In 2011, the Navy identified spiraling cost growth [on CVN-78] associated with first of class
non-recurring design, contractor and government furnished equipment, and ship production
issues on the lead ship. The Navy completed an end-to-end review of CVN 78 construction
in December 2011 and, with the shipbuilder, implemented a series of corrective actions to
stem, and to the extent possible, reverse these trends. While cost performance has stabilized,
incurred cost growth is irreversible....
As a result of lessons learned on CVN 78, the approach to carrier construction has undergone
an extensive affordability review; and the Navy and the shipbuilder have made significant
changes on CVN 79 that will reduce the cost to build the ship. CVN 79 construction will
start with a complete design, firm requirements, and material economically procured and on
hand in support of production need. The ship’s build schedule also provides for increased
completion levels at each stage of construction with resulting improved production
efficiencies....
Inarguably, this new class of aircraft carrier brings forward tremendous capability and lifecycle cost advantages compared to the NIMITZ-class it will replace. However, the design,
development and construction efforts required to overcome the technical challenges inherent
to these advanced capabilities have significantly impacted cost performance on the lead ship.
The Navy continues implementing actions from the 2012 detailed review of the FORD-Class
build plan to control cost and improve performance across lead and follow ship contracts.
This effort, taken in conjunction with a series of corrective actions with the shipbuilder on
the lead ship, will not recover costs to original targets for GERALD R. FORD [CVN-78], but
should improve performance on the lead ship while fully benefitting CVN 79 and following
ships of the class.20
In the discussion portion of the hearing, Sean Stackley, the Assistant Secretary of the Navy for
Research, Development and Acquisition (i.e., the Navy’s acquisition executive), testified that
First, the cost growth on the CVN-78 is unacceptable. The cost growth dates back in time to
the very basic concepts that went into take in the Nimitz-class and doing a total redesign of
the Nimitz class to get to a level of capability and to reduce operating and support cost for
the future carrier. Far too much risk was carried into the design of the first of the Ford-class.
Cost growth stems to the design was moving at the time production started. The vendor base
that was responsible for delivering new components and material to support the ship
production was (inaudible) with new developments in the vendor base and production plan
19
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 56.
Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Allen G. Myers, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Vice Admiral Kevin M. McCoy, Commander, Naval Sea Systems Command, Before the Subcommittee
on Seapower of the Senate Armed Services Committee on Department of the Navy Shipbuilding Programs, May 8,
2013, p. 8.
20
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do not account for the material ordering difficulties, the material delivery difficulties and
some of the challenges associated with building a whole new design compared to the
Nimitz....
Sir, for CVN-79, we have—we have held up the expenditures on CVN-79 as we go through
the details of—one, ensuring that the design of the 78 is complete and repeated for the 79s
[sic] that we start with a clean design.
Two, we're going through the material procurement. We brought a third party into
assessment material-buying practices at Newport News to bring down the cost of material.
And we're metering out the dollars for buying material until it hits the objectives that we're
setting for CVN-79 through rewriting the build plan on CVN-79.
If you take a look at how the 78 is being constructed, far too much work is being
accomplished late in the build cycle. So we are rewriting the build plan for CVN-79, do more
work in the shops where it’s more efficient, more work in the buildings where it’s more
efficient, less work in the dry dock, less work on the water. And then we're going after the
rates—the labor rates and the investments needed by the shipbuilder to achieve these
efficiencies.21
Later in the hearing, Stackley testified that
the history in shipbuilding is since you don't have a prototype for a new ship, the first of
class referred to as the lead ship is your prototype. And so you carry a lot of risk into the
construction of that first of class.
Also, given the nature that there’s a lengthy design development and build span associated
with ships, so there is a certain amount of overlap or concurrency that occurs between the
development of new systems that need to be delivered with the first ship, the incorporation of
the design of those new systems and the actual construction. And so to the extent that there is
change in a new ship class then the risk goes up accordingly.
In the case of the CVN-78, the degree of change compared to the Nimitz was fairly
extraordinary all for good reasons, good intentions, increased capability, increased
survivability, significant reduction in operating and support costs. So there was a
determination that will take on this risk in order to get those benefits, and the case of the
CVN-78, those risks are driving a lot of the cost growth on the lead ship.
When you think about the follow ships, now you've got a stable design, now your vendor
base has got a production line going to support the production. Now you've got a build plan
and a workforce that has climbed up on the learning curve to drive cost down. So you can
look at—you can look at virtually every shipbuilding program and you'll see a significant
drop-off in cost from that first of class to the follow ships.
And then you look for a stable learning curve to take over in the longer term production of a
ship class.
Carriers are unique for a number of reasons, one of which we don't have an annual
procurement of carriers. They're spread out over a five and, in fact, in the case of 78 as much
as seven-year period. So in order to achieve that learning, there are additional challenges
associated with achieving that learning. And so we're going at it very deliberately on the
21
Transcript of hearing.
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CVN-79 through the build plan with the shipbuilder to hit the line that we've got to have—
the cost reductions that we've got to have on the follow ships of the class.22
March 2013 GAO Report
A March 2013 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
According to the Navy, 6 of CVN 78’s 13 critical technologies are mature, and the remaining
7 are approaching maturity. Delays developing and producing the dual band radar (DBR) and
advanced arresting gear (AAG) have driven inefficient, out of sequence construction work
and caused the Navy to defer some key tests until after installation. The Navy’s decision to
remove DBR’s volume search radar (VSR) component from the DDG 1000 destroyer shifted
responsibility for maturing DBR to CVN 78, and the resulting restart of testing has been
slow. Further, because a fully configured, production unit VSR is unavailable, the Navy is
using a less robust, lower powered prototype to complete testing. At present, the first test of
a fully configured, integrated DBR will be aboard CVN 78 after ship delivery—a strategy
that introduces risks. Malfunctions in the water twisters, components used to absorb energy
created when arresting aircraft, have slowed the development of AAG. To support
construction, the Navy plans to produce and install AAG aboard CVN 78 prior to completing
system development, which may risk retrofits late in construction. The electromagnetic
aircraft launch system (EMALS) has successfully launched a wide range of aircraft during
land based testing using a single launcher and four motor generators. The shipboard system
will employ a more complex configuration of four launchers and 12 generators sharing a
power interface. Both EMALS and AAG face reliability challenges, and neither system is
expected to attain minimum required reliability until more than 10 years after CVN 78
delivery.
Design Maturity
CVN 78 completed its 3D product model in November 2009—over a year after the
construction contract award. At contract award, 76 percent of the model was complete and
the shipbuilder had already begun construction of at least 25 percent of structural units under
a previous construction preparation contract. While the model is now considered functionally
complete, maintaining design stability depends on technologies fitting within the space,
weight, cooling, and power reservations allotted them. Shipboard testing may reveal a need
for design changes. In addition, as construction progresses, the shipbuilder is discovering
“first-of-class” type design changes, which it will use to update the model prior to CVN 79
construction.
Production Maturity
According to program officials, CVN 78 is approximately 51 percent complete. Procurement
costs for the lead ship have grown by over 17 percent since authorization of construction in
fiscal year 2008, largely due to problems encountered in construction. Specifically, the new
steel plating used for ship decks excessively warped and flexed during construction, which
contributed to lower than desired levels of preoutfitting. In addition, the shipbuilder has
experienced a shortage of the new valves critical for installing and testing different piping
22
Transcript of hearing.
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systems within the ship, and lagging government-furnished equipment deliveries have
required deviation from the planned build sequence.
Other Program Issues
As requested, we reviewed whether individual subcontracting reports from the prime
contractor for the program were accepted on eSRS [Electronic Subcontracting Reporting
System]. The government uses subcontracting reports on eSRS as one method of monitoring
small business participation. As of December 2012, eSRS indicated that none of the
associated subcontracting reports for CVN 78’s two contracts have been accepted.
Program Office Comments
In commenting on a draft of this assessment, the program office stated that the shipbuilder is
applying lessons learned from CVN 78 construction to improve production strategies and
reduce labor hours needed to construct follow-on ships (CVN 79 and CVN 80). Further, the
program office does not expect to repeat CVN 78’s “first of class” design and production
challenges on CVN 79 and CVN 80. Program officials also stated that using a
nonproduction-representative VSR prototype for DBR land-based testing has mitigated much
of the impact of the DDG 1000 descope of VSR and will be beneficial in exhibiting dual
band functionality prior to ship delivery. In addition, program officials stated that the 12
current critical technologies in the program have met their system maturity goals, noting that
an oversight team led by the Office of the Secretary of Defense disbanded in 2012 once each
of these technologies was determined to be approaching maturity or mature. The program
office also provided technical comments, which were incorporated where deemed
appropriate.23
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
23
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-13294SP, March 2013, p. 70. See also Michael Welles Shapiro, “Valve Shortage Drives Up Cost Of Shipyard’s Ford
Carrier,” Newport News Daily Press, March 30, 2013.
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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.
“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.1524
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
15
Tony Capaccio, “Huntington Ingalls Aircraft Carrier To Miss Cost-Reduction Goal,” Bloomberg Government
(bgov.com), November 29, 2012.
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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
24
Tony Capaccio, “Huntington Ingalls Aircraft Carrier To Miss Cost-Reduction Goal,” Bloomberg Government
(bgov.com), November 29, 2012.
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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.16
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,17 and $273 million is for
“construction performance variance,” meaning cost growth at the shipyard. The information paper
further states that
16
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2013 Shipbuilding Plan, July 2012, p. 16.
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.
17
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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.18
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.19
The Navy states that, of the $1,158 million in cost growth on CVN-79 in the FY2013 budget
compared to the FY2012 budget, $401 million is due to added inflation incorporated into the
ship’s cost as a consequence of the ship’s scheduled delivery date being shifted from September
2020 to September 2022.20 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
2022.21 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-78.25
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
18
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
Source: Navy meeting with CRS and CBO on the CVN-78 program, March 6, 2012.
20
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
21
Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19, 2012.
19
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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
25
Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2013 Shipbuilding Plan, July 2012, p. 16.
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focuses equally upon tackling these issues while applying the many lessons learned in the
course of CVN 78 procurement.
As always, if I may be of further assistance, please let me know.
Sincerely, [signed] Ray Mabus
Attachment: As stated
Copy to: The Honorable Carl Levin, Chairman
[Attachment]
Improving Cost Performance on CVN 78
CVN 78 is nearing 40 percent completion. Cost growth to-date is attributable to increases in
design, contractor furnished material, government furnished material (notably, the
Electromagnetic Aircraft Launching System (EMALS), Advanced Arresting Gear (AAG),
and the Dual Band Radar (DBR)), and production labor performance. To achieve the best
case outcome, the program must execute with zero additional cost growth in design and
material procurement, and must improve production performance. The Navy and the
shipbuilder have implemented a series of actions and initiatives in the management and
oversight of CVN 78 that cross the full span of contracting, design, material procurement,
government furnished equipment, production planning, production, management and
oversight.
CVN 78 is being procured within a framework of cost-plus contracts. Within this framework,
however, the recent series of action taken by the Navy to improve contract effectiveness are
achieving the desired effect of incentivizing improved cost performance and reducing
government exposure to further cost growth.
•
CVN 78 design has been converted from a ‘level of effort, fixed fee’ contract to a
completion contract with a firm target and incentive fee. Shipbuilder cost performance
has been on-target or better since this contract was changed.
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•
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,
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but they also point to inadequate accountability for carrier material procurement, primarily
during the ship’s advance procurement period (2002-2008).
These effects cannot be reversed on CVN 78, but it is essential to improve upon material
delivery to the shipyard to mitigate the significant impact of material delays on production
performance. Equally important, the systemic material procurement deficiencies must be
corrected for CVN 79. To this end, the Navy and shipbuilder have taken the following
actions.
•
The Navy has employed outside supply chain management experts to develop optimal
material procurement strategies. The Navy and the shipbuilder are reviewing remaining
material requirements to employ these best practices (structuring procurements to
achieve quantity discounts, dual-sourcing to improve schedule performance and
leverage competitive opportunities, etc.).
•
The shipbuilder has assigned engineering and material sourcing personnel to each of
their key vendors to expedite component qualifications and delivery to the shipyard.
•
The shipbuilder is inventorying all excess material procured on CVN 78 for transfer to
CVN 79 (cost reduction to CVN 78), as applicable.
•
The Program Executive Officer (Carriers) is conducting quarterly flag-level government
furnished equipment summits to drive cost reduction opportunities and ensure on-time
delivery of required equipment and design information to the shipbuilder.
The most important finding regarding CVN 78 remaining cost is that the CVN 78 build plan,
consistent with the NIMITZ class, focuses foremost on completion of structural and critical
path work to support launching the ship on-schedule. This emphasis on structure comes at
the expense of completing ship systems, outfitting, and furnishing early in the build process
and results in costly, labor-intensive system completion activity during later; more costly
stages of production. Achieving the program’s cost improvement targets will require that
CVN 78 increase its level of completion at launch, from current estimate of 60 percent to no
less than 65 percent. To achieve this goal and drive greater focus on system completion:
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•
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.
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•
The shipbuilder has assigned a new Vice President in charge of CVN 78, a new Vice
President in charge of material management and purchasing, and a number of new
general shop foreman to strengthen CVN 78 performance.
•
The Navy has assigned a second tour Flag Officer with considerable carrier operations,
construction, and program management experience as the new Program-Executive
Officer (PEO).
•
The PEO and shipyard president conduct bi-weekly launch readiness reviews focusing
on cost performance, critical path issues and accomplishment of the target for launch
completion.
•
The Assistant Secretary of the Navy (Research, Development, and Acquisition)
conducts a monthly review of program progress and performance with the PEO and
shipbuilder, bringing to bear the full weight of the Department, as needed, to ensure that
all that can be done to improve on cost performance is being done.
Early production performance improvements can be traced directly to these actions,
however, significant further improvement is required. To this end, the Navy is conducting a
line-by-line review of all ‘cost to-go’ on CVN 78 to identify further opportunity to reduce
cost and to mitigate risk.
Improving Cost Performance on CVN 79
CVN 79 Advance Procurement commenced in 2007 with early construction activities
following in 2011. Authorization for CVN 79 procurement is requested in Fiscal Year 2013
President’s Budget request with the first year of incremental funding. Two years have been
added to the CVN 79 production schedule in this budget request, afforded by the fact that
CVN 79 will replace CVN 68 when she inactivates. To improve affordability for CVN 79,
the Navy plans to leverage this added time by introducing a fundamental change to the
carrier procurement approach and a corresponding shift to the carrier build plan, while
incorporating CVN 78 lessons learned.
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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
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vendor base capacity and schedule for receipt supports the optimal build plan being
developed for production.
In total, the high level of design maturity and material certification provides a stable
technical baseline for material procurement cost and schedule performance, which are
critical to developing and executing an improved, reliable build plan.
In order to significantly improve production labor performance, based on timely receipt of
design and material, the Navy and shipbuilder are reviewing and implementing changes to
the CVN 79 build plan and affected facilities. The guiding principles are:
•
maximize planned work in the shops and early stages of construction;
•
revise sequence of structural unit construction to maximize learning curve performance
through ‘families of units’ and work cells;
•
incorporate design changes to improve FORD Class producibility;
•
increase the size of erection units to eliminate disruptive unit breaks and improve unit
alignment and fairness;
•
increase outfitting levels for assembled units prior to erection in the dry-dock;
•
increase overall ship completion levels at each key event.
The shipbuilder is working on detailed plans for facility improvements that will improve
productivity, and the Navy will consider incentives for capital improvements that would
provide targeted return on investment, such as:
•
increasing the amount of temporary and permanent covered work areas;
•
adding ramps and service towers for improved access to work sites and the dry-dock;
•
increasing lift capacity to enable construction of larger, more fully outfitted super-lifts:
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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;
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
•
zero delinquent engineering and planning products;
•
resolution of engineering problems in < 8 [i.e., less than 8] hours.
In parallel with efforts to improve shipbuilder costs, the PEO is establishing equally
aggressive targets to reduce the cost of government furnished equipment for CVN 79;
working equipment item by equipment item with an objective to reduce overall GFE costs by
~$500 million. Likewise, the Naval Sea Systems Command is committed to continuing its
ongoing effort to identify specification changes that could significantly reduce cost without
compromising safety and technical rigor.
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.22
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).23 In discussing these
figures, the SAR states:
Cost And Schedule Variance Explanations
22
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.
23
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
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The unfavorable net change in the cost variance is due to material cost growth (66%), labor
inefficiencies (28%) and increases in non-recurring engineering (6%). The material variances
are due to market forces, unanticipated impacts of a “first of class” specification on
contractor furnished material costs (e.g. valves, electrical components, steel and other
commodities), and refined understanding of material requirements as the ship design
matured. Labor inefficiencies are the result of “first of class” challenges including
producibility issues (e.g. thin plate steel, weld distortion, and the increase use of temporary
structure and rigging) and the availability of new developmental components (e.g. valves,
actuators). Additionally, increased supervision has been required to manage the above
challenges and a developing workforce.
The unfavorable net change in the schedule variance is due to to inefficiencies associated the
material availability and “first of class” producibility issues described above, and delays in
the release of engineering products required to develop construction work packages.
Contract Comments
The difference between the initial contract price target and the current contract price target is
due to the award of a new contract structure for Non-Recurring Engineering (NRE) and
adjudicated change orders, procurement of special tooling and test equipment, and NRE
associated with design and integration of developmental systems. The Program Manger’s
(PM) Estimated Price at Completion of $6,595.6M less the current contract Target Price of
$5,899.5M is $696.1M. This price variance at completion of $696.1M includes $6.4M of
authorized work that has not been adjudicated resulting in government liability of $689.7M.
The PM’s Estimated Price At Completion increased from $5,723.5M (December 31, 2010
SAR) to $6,595.6M consisting of $738.2M due to contract actions, $127.5M of construction
inefficiencies, and $6.4M of authorized work that has not been adjudicated. The Government
Liability has increased from $562.2M (December 31, 2010 SAR) to $689.7M, reflecting the
$127.5M of construction inefficiencies. The PM’s Variance at Completion (VAC) increased
from $650M (December 31, 2010 SAR) to $884.7M. The government liability of the
$884.7M VAC is $689.7M based on the contract shareline ratios which reduces the
contractors target fee as cost growth increases.24
The SAR states the following it is executive summary:
The CVN 78 Detail Design and Construction (DD&C) contract was awarded on September
10, 2008. The shipbuilder reports negative cumulative cost and schedule variances [i.e., cost
growth and schedule delay] on DD&C efforts. Cost growth on the DD&C contract is due to
material and labor factors. The material variances are due to market forces, unanticipated
impacts of a “first of class” specification on contractor furnished material costs (e.g. valves,
electrical components, steel and other commodities), and refined understanding of material
requirements as the ship design matured. Labor inefficiencies are the result of “first of class”
challenges including producibility issues (e.g. thin plate steel, weld distortion, and the
increase use of temporary structure and rigging) and the availability of new developmental
components (e.g. valves, actuators). Additionally, increased supervision has been required to
manage the above challenges and a developing workforce. The schedule variance is due to
inefficiencies associated the material availability and “first of class” producibility issues
described above, and delays in the release of engineering products required to develop
construction work packages. As of December 31, 2011, the construction effort for the CVN
78 is 33.9% complete.
24
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 32.
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The Navy is aggressively working with the shipbuilder to drive improvements to material
and construction performance. These efforts to control cost are producing favorable results.
Significant changes include designation of a Senior Vice President and a Total Ship
Construction Superintendent for oversight of CVN 78 construction and changes in material
management. The shipbuilder has established specific labor cost targets for key
manufacturing and construction areas and implemented cost control initiatives to meet these
goals. Specific initiatives include more effective coordination between engineering and
production trades, extending Earned Value Management (EVM) targets throughout all levels
of leadership, improving work control processes, the use of bulk material ordering where
possible, and methods to more quickly resolve waterfront issues. In addition, the Navy has
partnered with the shipbuilder to consider changes to specifications and modify them where
appropriate to lower cost and schedule risk. On July 29, 2011, the Program awarded a new
contract structure for non-recurring engineering (NRE) by transitioning from a Cost Plus
Fixed Fee (CPFF) Level of Effort (LOE) to a Cost Plus Incentive Fee (CPIF) to complete the
remaining NRE work.
Senator John McCain’s letter of August 11, 2011 to Secretary of the Navy, Raymond Mabus,
addressed cost performance of the detail design and construction of the CVN 78. As a result,
the Navy is submitting monthly reports to the four defense committees. In the Secretary of
the Navy’s response letter dated August 29, 2011, the Secretary directed the Assistant
Secretary of the Navy (ASN) Research Development and Acquisition (RDA) to conduct a
detailed review of the CVN 78 program build plan to improve end-to-end aircraft carrier
design, material procurement, production planning, build and test. The Navy completed the
assessment December 2011. The Navy is implementing recommendations from this report to
both improve CVN 78 contract performance, and to drive further improvements in the
upcoming CVN 79 DD&C contract.25
March 2012 GAO Report
A March 2012 GAO report assessing major DOD weapon acquisition programs stated the
following regarding the status of the CVN-78 program, including the potential for cost growth:
Technology Maturity
Seven of the CVN 78 program’s 13 current critical technologies have not been tested in a
realistic, at-sea environment, including two technologies—EMALS and the dual-band
radar—which continue to pose risks. According to program officials, EMALS has
successfully launched F/A-18E, T-45C, C-2A, and E-2D aircraft during testing; however, the
system has not demonstrated the required level of reliability because of the slow correction
of problems discovered earlier in testing. In addition, according to officials, EMALS motor
generators have only been tested in a group of 4, rather than the group of 12 that will make
up the system. A test of the complete system will not take place until it is aboard the ship.
The dual-band radar also will not complete testing until after it is aboard the ship, which
presents a risk if the system does not work as intended. The radar is required for ship
installation starting in March 2013, but the program does not expect to complete testing the
multifunction radar component until early 2013 or begin testing the volume-search radar
component until May 2013. Some radar subsystems will not be tested until aboard the CVN
78. In addition, less dual-band radar testing has been done than anticipated because the Navy
eliminated the volume-search component of the radar from the DDG 1000 Destroyer
program, which the CVN 78 had planned to leverage. CVN 78 will now be the first ship to
operate with this radar, but as of August 2011, the Navy had not yet planned for carrier25
Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2011, p. 5.
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specific testing. Program officials also noted that the Evolved Sea Sparrow Missile will be
demonstrated in a relevant environment by March 2012, at which point all critical
technologies will have been demonstrated in a relevant environment.
Design Maturity
The CVN 78 program completed its three-dimensional product model in November 2009—
over a year after the award of the construction contract. At the time of the September 2008
contract award, only 76 percent of the ship’s three-dimensional product model was complete
and the shipbuilder had already begun construction of at least 25 percent of the ship’s
structural units under its previous construction preparation contract. Program officials noted
that while there had been concerns about the ability of the ship’s jet blast deflectors to work
effectively with the carrier variant of the Joint Strike Fighter, these concerns have been
addressed and will not require major design changes. Additional design changes are still
possible as EMALS and other systems continue testing.
Production Maturity
Procurement costs for CVN 78 have grown by about 10 percent over the past 3 years. A key
driver is an increase in construction costs. According to the program, 83 percent of the ship’s
structural units are complete, constituting almost 27 percent of the expected labor hours.
However, the program estimates that the labor hours to complete the ship will be 4 million
more than the 40 million hours originally budgeted. The program believes the cost and laborhour increases are largely due to the immaturity of the ship’s technologies and design when
the construction contract was awarded. Program officials also cited problems such as late
material deliveries, an unexpected need for more structural support to achieve a thinner deck
structure, and material deficiencies on developmental components such as valves. According
to the program, the growth in construction costs may require requests for additional funding
or a reduction of the ship’s capabilities.
Program Office Comments
In commenting on a draft of this assessment, the program noted that dual-band radar testing,
while impacted by DDG 1000 decisions on volume-search radar, is fully funded and will
complete land-based tests and begin shipboard testing prior to delivery.26
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.”...
26
Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-12400SP, March 2012, p. 66.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
“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. 17.27 “I do not propose to make
that time up, because right now the most important thing we’ve got going on with the 78 is
controlling cost.
“I expect the delivery will delay by at least that much,” Stackley added. “But we’re
managing that pretty tightly right now.”
As for the Kennedy [CVN-79], Stackley emphasized that “we’re being very deliberate about
capturing lessons learned from the lead ship [CVN-78]. We do not want a build plan that
repeats the build plan on the CVN 78.
“That means that all the things that precede the start of construction associated with design,
plans, material procurement, they all have to be exactly in line. And the degree of
completion, outfitting, etc., associated with the construction of the build units, we’re working
that plan now so that CVN 79, frankly, is built to a higher degree of completion and
readiness each step of the way, than CVN 78.”
Stackley acknowledged that what he called the “optimal build plan” for the Kennedy
“translates to a potentially two-year delay for the delivery.” [compared to CVN-79’s delivery
under the FY2012 budget]
Work and Stackley said development of the new Electromagnetic Aircraft Launch System
(EMALS) is not a factor in the Ford’s current cost growth.
“We continue to test and it continues to go well” despite “a couple of test wrinkles,”
Stackley said of EMALS. “But we don’t have a scenario where the system is not meeting the
testing requirement.” Production at General Atomics of the system’s components to be fitted
in the ship also is “on schedule.”
But changes to the dual-band radar (DBR) program developed by Raytheon have led to a
portion of the cost increases.
“That’s a fallout of the previous decision to not install the volume search radar on DDG
1000,” Stackley explained, referring to a decision in 2010 to eliminate half the radar from the
[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.”...
27
In warship construction, launching a ship does not mean that the ship’s construction has been completed; it means
that the ship’s construction has reached a stage where the ship can be put into the water for the final stage of its
construction.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.28
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.29
A January 13, 2012, press report states:
[Navy acquisition chief Sean] Stackley acknowledged that building a new class of aircraft
carrier was complex, and that task was made harder by the Navy’s decision to transition to a
new carrier in one ship, rather than over the course of three, as initially planned.
He said the Navy was working closely with Huntington Ingalls to drive cost out of the
Gerald R. Ford (CVN-78) aircraft carrier under construction at the Newport News shipyards,
but was trying to “hammer home” the need for additional efforts.
He said the company had a good management team in place, but needed to make further
changes to lower the cost of the carrier.
He said the Navy had added funds to the fiscal 2013 budget and five-year spending plan to
cover expected cost increases on the CVN 78 carrier. He gave no details, since the budget
will not be formally released until February, but said the Navy had not budgeted for the
worst case, estimate by some to be a cost overrun of $1 billion cost on the $12 billion
program....
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.
28
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.
29
Christopher J. Castelli, “New Fixes Target management Problems In Aircraft Carrier Program,” Inside the Navy,
February 20, 2012.
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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.”30
EMALS
One possible source of cost growth in CVN-78 are new technologies that are being developed for
the ship, particularly the electromagnetic aircraft launch system (EMALS)—an electromagnetic
(as opposed to the traditional steam-powered) aircraft catapult. Problems in developing EMALS
or other technologies could delay the ship’s completion and increase its development and/or
procurement cost. Section 221 of the FY2012 National Defense Authorization Act (H.R.
1540/P.L. 112-81 of December 31, 2012) requires the Secretary of Defense to designate the
EMALS program as a major subprogram of the CVN-78 program, in accordance with 10 U.S.C.
2430a. An October 10, 2011, press report states:
After ironing out software glitches that stopped the next generation of U.S. aircraft carrier
catapults from launching planes for five months, the people developing the electromagnetic
aircraft launch system (EMALS) are working on making the system more reliable….
The goal is to cut the average re-pair time to less than one hour, a vast improvement
compared with the 12 hours it takes to fix the average breakdown on existing steam
catapults….
EMALS has just two major moving parts and will break down less frequently than steam
catapults, said Capt. James Donnelly, EMALS program manager….
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….
30
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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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.31
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
26
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. The
Navy in 2012 stated that in 2013 it would request an increase in the cost cap for CVN-78, but not
for CVN-79.27 In its prepared statement for a May 8, 2013, hearing on Navy shipbuilding
programs before the Seapower subcommittee of the Senate Armed Services Committee, the Navy
stated that
the Fiscal Year 2014 President’s Budget includes funding for the cost growth [on CVN-78]
identified in 2011 and requests that the cost cap [for the ship] be correspondingly increased
to $12.887 billion.... The associated cost cap for CVN 79 is also being updated with this
budget request [i.e., the cost cap figure for CVN-79 is being adjusted upward under clauses
in the cap that permit such adjustments for certain factors] to account for economic inflation
26
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.
27
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 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.32
(Undated Navy information paper on CVN-78 program provided to CRS and CBO on March 19,
2012.)
Secretary of the Navy Ray Mabus, when asked by Senator John McCain at a March 15, 2012,
hearing before the Senate
Armed Services Committee whether the Navy will ask for legislative
relief on the CVN-78 cost cap, replied: “Senator,
not this year, but I'm certain we will be asking
next year.” In response to a follow-up question from Senator McCain on
aircraft carrier program
costs, Secretary Mabus stated in part:
The one thing that we are absolutely committed to and the one thing that we will not go
forward 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-79.33
(Transcript of hearing.)
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and non-recurring engineering for incorporation of lead ship lessons learned and design
changes to improve affordability.28
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
31
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.
33
Source: Transcript of hearing.
32
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(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.3429
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.3530 When the FY1988 block buy
was proposed, the Navy estimated that the block buy would reduce the combined cost of CVN-74
and CVN-75 by a considerably larger percentage. GAO stated that the savings would be
considerably less than the Navy estimated, but agreed that a two-ship acquisition strategy is less
expensive than a single-ship acquisition strategy, and that some savings would occur in a twoship strategy for CVN-74 and CVN-75.36
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.)37 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
34
31
28
Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Allen G. Myers, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Vice Admiral Kevin M. McCoy, Commander, Naval Sea Systems Command, Before the Subcommittee
on Seapower of the Senate Armed Services Committee on Department of the Navy Shipbuilding Programs, May 8,
2013, p. 8.
29
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.
3530
See General Accounting Office, Request to Fully Fund Two Nuclear Aircraft Carriers in Fiscal Year 1983,
MASAD-82-87 (B-206847), March 26, 1982, 10 pp. The figure of 5.6% was derived by dividing $450 million in noninflation cost avoidance shown on page 5 by the combined estimated cost of the two ships (absent a block buy) of
$8,024 million shown on page 4.
3631
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.
37
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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(continued...)
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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.)32 A block buy on CVN-79 and CVN-80 could leave intact the FY2013 procurement
date for CVN-79 and the FY2018 procurement date for CVN-80. This would permit the funding
for the two ships to be spread out over the same fiscal years as currently planned, although the
amounts of funding in individual years would likely change.
It is too late to implement a complete block buy on CVN-79 and CVN-80, because some of CVN79, particularly its propulsion plant, has already been purchased. Consequently, the option would
be to implement a partial block buy that would include the remaining part of CVN-79 and all of
CVN-80.
To illustrate the notional scale of the savings that might result from using a block buy strategy on
CVN-79 and CVN-80, it can be noted that if such a block buy were to achieve one-third as much
percentage cost reduction as the FY1983 block buy—that is, if it were to reduce the combined
procurement cost of CVN 79 and 80 by about 1.9%—that would equate to a savings of roughly
$470 million on the currently estimated combined procurement cost of CVN-79 and CVN-80.
More refined estimates might be higher or lower than this notional figure of $470 million.
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
(...continued)
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.
32
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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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
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that for some components that are carrier-unique, that vendor base is—is just struggling to
hold on between the five-year gaps.
So we have to take a hard look at where does it make sense after we’ve gotten to what I’m
calling an optimal build plan for CVN-79 and then be able to come back and—and say, OK,
here—on CVN-79 here are some opportunities that if we could, in fact, reach out to CVN-80
we can either avoid a gap in a production line or avoid unnecessary cost growth on that
follow ship.3833
Later in the hearing, the following exchange occurred:
REPRESENTATIVE RICK LARSEN:
Finally, we had some discussion about this question with regard to CVNs and trying to find a
way to squeeze some costs out, and one of the ideas was to do some—do block buy of
certain components of—of—of CVN components. And have you considered that, and what’s
your thought on that on block buy on components from [CVN-]79 to [CVN-]80, or whatever,
[CVN-]79, [CVN-]79 to [CVN-]80, and so on?
ASSISTANT SECRETARY OF THE NAVY SEAN STACKLEY:
Yes, sir. At this point in time the Navy and the shipbuilder are sitting side by side putting
together a build plan for CVN-79. We’re 40 percent complete construction of the [CVN-]78;
we’ve got a lot that we’ve got to, I’ll say, do different on the [CVN-]79 and follow from the
lead ship. It’s a very different ship class [compared to the Nimitz class].
So we’re taking a hard look at the build plan [for CVN-78]. We need to get that locked
down. And associated with that is the complete bill of materials for the Ford class.
33
Source: transcript of hearing.
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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:
38
Source: transcript of hearing.
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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.3934
Later in the hearing, Matthew Mulherin, president of NNS and corporate vice president of HII,
stated the following when asked by Representative Robert Wittman about the possibility of a twoship block buy on CVN-79 and CVN-80:
Yes, sir. You know, historically you go back, you were exactly right, if you look at the
contracts that bought the CVN- 72 and [CVN-]73 there was huge savings that flowed to the
second ship, both in the ability to go buy materials, a block buy and get—get discounts there,
but also that you did the engineering up front the first time for both hulls so the second ship
you really just had the answer, problem, paper [sic] and some of those kind of things the—
the kind of the normal course of business to support the waterfront.
So I wouldn’t see any different. I think if we were able to do it both for material, for—for the
engineering to be able to go pump out drawings that had two-ship applicability—plus, I think
it brings the—the—the CVN—if we were to do a two-ship buy for [CVN-]79 and [CVN-]80
it would ensure CVN-80 was a copy of CVN-79, no change into the contract or very
minimal, you’re not having a—on the material side you get economic order savings, you
don’t have to deal with obsolescence.
So absolutely. I think there’s huge opportunity to go do that. You know, you talk to the—the
vendor base. They would love to see it. It gives them the ability to go look at—at what
investments they need, what work is out in front of them, and go invest in—in training and
tools to—to be able to go support that.4035
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
34
35
Source: Transcript of hearing.
Source: Transcript of hearing.
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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.
39
40
Source: Transcript of hearing.
Source: Transcript of hearing.
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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.4136
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.
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]13421337
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
36
37
Navy information paper dated April 25, 2012, sent to CRS on May 10, 2012.
This is a reference to the President’s budget for FY2013—that is, the Administration’s requested budget for FY2013.
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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.”4338
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.
41
Navy information paper dated April 25, 2012, sent to CRS on May 10, 2012.
This is a reference to the president’s budget for FY2013—that is, the administration’s requested budget for FY2013.
43
Navy information paper dated May 22, 2012, sent to CRS on May 25, 2012.
42
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Issues Raised in December 2012 DOT&E Report
Another issue for Congress concerns CVN-78 program issues that were raised in a December
2012 report from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual
report for FY2012. The report stated, in its section on the CVN-78 program, that
Assessment
Test Planning
• 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 continues in
order to ensure that the required fidelity will be available to support the SGR assessment
during IOT&E [initial operational test and evaluation].
• The current TEMP [test and evaluation master plan] does not adequately address whole
platform-level developmental testing. The Program Office has begun to address the problem
and has refined the Post Delivery Test and Trials schedule. The details are unclear on the
extent of any additional integrated platform-level CVN-78 developmental tests. Lack of
platform-level developmental testing significantly raises the likelihood of the discovery of
platform-level problems during IOT&E.
• The Navy plans to deliver CVN-78 in September 2015.39 Current progress supports this
plan;
however, the EMALS [electromagnetic aircraft launch system] , AAG [advanced arresting
arresting gear], DBR [dual band radar], and Integrated Warfare Systems remain pacing items for
for successful delivery of the ship.
EMALS [electromagnetic aircraft launch 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 concern is partially mitigated by the current phase of test using a simulated shared
electrical storage and shared power conversion at the EMALS system functional design test
site in Joint Base McGuire-Dix-Lakehurst, New Jersey.
38
Navy information paper dated May 22, 2012, sent to CRS on May 25, 2012.
As noted earlier, the Navy announced in May 2013 that the ship’s delivery date has been postponed to February
2016.
39
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AAG [advanced arresting gear]
• Significant redesign of multiple components has slowed development of AAG
development. The program will begin performance testing in FY13.
JSF [Joint Strike Fighter]
• JBD testing identified no deficiencies for catapult launch operations of JSF at military rated
thrust. The tests did, however, determine that additional JBD [jet blast deflector] side panel
cooling (SPC) and other adjustments are required for operations at combat rated thrust, i.e.,
with afterburner. The existing JBD panels will need to be replaced with new panels with SPC
to be fully JSF-compatible. JBD panels with SPC are form, fit, and function replacements
and will be installed after CVN-78 delivers.
—JSF data flow aboard ship via the Autonomic Logistics Information System (ALIS) is
critical to proper F-35 maintenance. Currently, the ALIS system has provided all required
parametric information to interface properly with CANES [Consolidated Afloat Networks
and Enterprise Services], but CANES is not fully developed yet, as the contract was awarded
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in August 2012. ALIS is expected to undergo Application Integration Process testing in
FY13 to ensure proper interface with CANES. DOT&E will be able to better assess the
impact on JSF operations aboard CVN-78 after the test. Currently, data are planned to be
exchanged manually until ALIS and CANES properly interface.
—In 2007, the Program Office identified discrepancies with the integration of the JSF’s
F135 engine onto aircraft carriers. The weight of the F135 power module, approximately
10,000 pounds, exceeds the limit of current underway replenishment (UNREP) systems.
Although CVN-78 will include a heavy UNREP system that will allow transfer of 12,000
pounds, supply ships must include the new system for power module transfer to occur. The
Navy’s plan to install heavy UNREP systems on resupply ships has slipped eight years.
• Navy Fleet Force’s JSF “day-in-the-life” analysis identified a significant number of
aircraft-ship interface deficiencies that must be accomplished by the Navy in post-delivery
ship modification. They include the following:
—JSF battle damage assessment and non-traditional Intelligence, Surveillance, and
Reconnaissance information captured on the Portable Memory Device or cockpit video
recorder cannot be shared real-time with the Distributed Common Ground System-Navy
(DCGS-N). This prevents assessment by shipboard intelligence analysts for inclusion in
mission reports.
—Ships are unable to receive and display Link 16 imagery; this problem is not unique to
JSF. The Combatant Commanders have stated a need to display imagery to intelligence
analysts and operations command and control nodes to enhance engagement decisions.
—Limited shipboard capabilities exist with expeditionary Link 16. The Navy is considering
a program of record to distribute imagery to analysts and maritime operations command and
control nodes (e.g., carriers and amphibious ships). This would be a temporary workaround
for the DCGS-N post-flight data gap.
—The JSF Prognostic Health Maintenance (PHM) downlink design for ships is not mature.
The uncertainty in the technical characteristics of the final design means that there are
potential challenges to integrating PHM into current shipboard communications suites and
networks. These challenges include unidentified Information Assurance considerations and
unidentified waveform hosting and interfacing.
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—The JSF wheel supplier’s recent rim inspection requirement may force a significant
increase in shipboard tire and wheel storage requirements. The JSF Program Office is
currently working to determine the effect of this deficiency and the need for inspection by
the wheel supplier.
DBR
• Previous testing of Navy combat systems similar to CVN-78’s revealed numerous
integration problems that degrade the performance of the combat system. The previous
results emphasize the necessity of maintaining a DBR / CVN-78 combat system asset at
Wallops Island. The Navy is considering long-term plans (i.e., beyond FY15) for testing
DBR at Wallops Island, Virginia, but it is not clear if a Multi-Functional Radar and funding
will be available. Such plans are critical to delivering a fully capable combat system and
ensuring lifecycle support after CVN-78 delivery in 2015.
LFT&E [live fire test and evaluation]
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• While the Navy has made substantial effort in component and surrogate testing, this work
does not obviate the need to conduct the FSST [full-ship shock trial] to gain the critical
empirical data that past testing has repeatedly demonstrated are required to rigorously
evaluate the ship’s ability to withstand shock and survive in combat. Shock Trials conducted
on both the Nimitz class aircraft carrier and the San Antonio class Amphibious Transport
Dock demonstrated the need for and substantial value of conducting the FSST. Postponing
the FSST until CVN-79 would cause a five- to seven-year delay in obtaining the data critical
to evaluating the survivability of the CVN-78 and would preclude timely modification of
subsequent ships of this class to assure their survivability.
• The Navy proposes delaying the shock trial by five to seven years because of the
approximately four- to six-month delay required to perform the FSST. The delay is not a
sufficient reason to postpone the shock trial, since the shock trial could reveal valuable
lessons, including previously unknown vulnerabilities.
• DOT&E has requested the Navy adequately fund and complete the actions necessary to
conduct the TSST on the CVN-78. This includes updating the Damage Scenario Based
Engineering Analyses (DSBEA) from prior Vulnerability Assessment Reports and enough
new DSBEAs, including machinery spaces, to conduct an adequately scoped TSST [total
ship survivability trial]. DOT&E expects this will require five or six TSST drills. While
progress has been made toward reaching consensus on the scope of the TSST, there is still
work to be done, mainly to include the machinery spaces, and the budget has not been
adjusted to adequately support the TSST.
Recommendations
• Status of Previous Recommendations. The Navy addressed one of eight previous
recommendations but the following seven remain valid:
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 required to JBDs, changes (due to heat and or noise) to flight deck procedures, and
ALIS integration.
2. Finalize plans that address CVN-78 integrated warfare system engineering and ship’s selfdefense system discrepancies prior to the start of IOT&E.
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3. Continue aggressive EMALS and AAG risk-reduction efforts to maximize opportunity for
successful system design and test completion in time to meet required in-yard dates for
shipboard installation of components.
4. Continue development of a realistic model for determining CVN-78’s SGR, while
utilizing realistic assumptions regarding equipment availability, manning, and weather
conditions for use in the IOT&E.
5. Provide scheduling, funding, and execution plans to DOT&E for the live SGR test event
during the IOT&E.
6. Continue to work with the Navy’s Bureau of Personnel to ensure adequate depth and
breadth of required personnel to ensure that the 100 percent Navy Enlisted Classification fit /
fill manning requirements of CVN-78 are met.
7. Conduct system-of-systems developmental testing to preclude discovery of deficiencies
during IOT&E.
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• FY12 Recommendations. None. 4440
Regarding the full ship shock test (FSST) discussed, above, 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.
40
Department of Defense, Director, Operational Test & Evaluation, FY2012 Annual Report, released January 2013, pp.
144-146.
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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.
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.”
44
Department of Defense, Director, Operational Test & Evaluation, FY2012 Annual Report, released January 2013, pp.
144-146.
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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.4541
Legislative Activity for FY2013
FY2013FY2014
FY2014 Funding Request
As shown in Table 1, the Navy’s proposed FY2013FY2014 budget requests $608.2 million in
procurement funding for CVN-79.
FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112-239)
House
Section 122 of the FY2013 National Defense Authorization Act (H.R. 4310 of the 112th
Congress) 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:
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’.
45
Tony Capaccio, “Navy Delays Combat Tests Needed For Carrier, Weapons Tester Says,” Bloomberg Government
(bgov.com), August 9, 2012.
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(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:
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 the FY23013 National Defense Authorization Act (S. 3254 of the 112th Congress)
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.
(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.
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(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.
(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).
Conference
Section 121 of the conference report (H.Rept. 112-705 of December 18, 2012) on H.R. 4310/P.L.
112-239 of January 2, 2013, approves the Navy’s request for using six-year incremental funding
to procure CVN-79 and CVN-80. The text of Section 121 is as follows:
SEC. 121. EXTENSION OF FORD CLASS AIRCRAFT CARRIER CONSTRUCTION
AUTHORITY.
Section 121(a) of the John Warner National Defense Authorization Act for Fiscal Year 2007
(Public Law 109–364; 120 Stat. 2104), as amended by section 124 of the National Defense
Authorization Act for Fiscal Year 2012 (Public Law 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
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procurement, together with the five succeeding years, provides a total of six years of incremental
funding.)
Section 124 of the conference report states:
SEC. 124. LIMITATION ON AVAILABILITY OF AMOUNTS FOR SECOND FORD
CLASS AIRCRAFT CARRIER.
(a) LIMITATION.—Of the funds authorized to be appropriated or otherwise made available
for fiscal year 2013 for shipbuilding and conversion for the second Ford class aircraft carrier,
not more than 50 percent 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 with respect to the Ford class aircraft carriers to—
(1) maximize planned work in shops and early stages of construction;
(2) sequence construction of structural units to maximize the effects of lessons learned;
(3) incorporate design changes to improve producibility for the Ford class aircraft carriers;
(4) increase the size of erection units to eliminate disruptive unit breaks and improve unit
alignment and fairness;
(5) increase outfitting levels for assembled units before erection in the dry dock;
(6) increase overall ship completion levels at each key construction event;
(7) improve facilities in a manner that will lead to improved productivity; and
(8) 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 superlifts.
The conference report recommends reducing by $2.9 million the Navy’s request for $608.2
million in procurement funding for CVN-79, with the reduction being for “SEWIP [surface
electronic warfare improvement program] block 2 growth.” (See pdf page 473 of 629 of the Joint
Explanatory Statement for the conference report.)
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Department of Defense, Military Construction and Veterans
Affairs, and Full-Year Continuing Appropriations Act, 2013 (H.R.
933 of 113th Congress)
Version Passed by House on March 6, 2013
H.R. 933 of the 113th Congress as passed by the House on March 6, 2013, includes the FY2013
DOD appropriations act as Division A. The bill reduces by $42.824 million the request for
procurement funding for the CVN-78 class aircraft carrier program, with the reduction consisting
of reductions ranging from $1 million to $8 million for 11 separate pieces of equipment
associated with the program.46
Version Passed by Senate and House on March 20 and 21, 2013
H.R. 933 of the 113th Congress as passed by the Senate on March 20, 2013, and the House on
March 21, 2013, includes the FY2013 DOD appropriations act as Division C. The explanatory
statement for Division C of H.R. 933 as passed by the Senate on March 20, 2013, and the House
on March 21, 2013, is the essentially the same as the explanatory statement for Division A of
H.R. 933 as passed by the House on March 6, 2013 (see above).47
FY2013 DOD Appropriations Act (H.R. 5856 of 112th Congress)
House
The House Appropriations Committee, in its report (H.Rept. 112-493 of May 25, 2012) on H.R.
5856 of the 112th Congress, 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 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)
46
Explanatory statement for H.R. 933, pdf page 150 of 394.
The explanatory statement for Division C of H.R. 933 as passed by the Senate on March 20, 2013, consists of the
pages from the Congressional Record of March 6, 2013, containing the explanatory statement of Division A H.R. 933
as passed by the House on march 6, 2013 (Congressional Record, daily edition, March 6, 2013, pages H1029-H1256,
plus 3 additional pages from the Congressional Record, numbered 1 through 3, presenting a table showing the new
budget authority by account provided by the bill).
47
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Senate
The Senate Appropriations Committee, in its report (S.Rept. 112-196 of August 2, 2012) on H.R.
5856 of the 112th Congress, 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)
Conference
For further action on the FY2013 DOD appropriations act, see H.R. 933 of the 113th Congress
above.
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
Congressional Research Service
39588.1 million in
procurement funding to cover cost growth on CVN-78, and $944.9 million in procurement
funding for CVN-79.
41
Tony Capaccio, “Navy Delays Combat Tests Needed For Carrier, Weapons Tester Says,” Bloomberg Government
(bgov.com), August 9, 2012.
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FY2014 National Defense Authorization Act (H.R. 1960/S. 1197)
House (Committee Report)
The House Armed Services Committee, in its report (H.Rept. 113-102 of June 7, 2013) on H.R.
1960, recommends approving the Navy’s requests for $588.1 million in procurement funding to
cover cost growth on CVN-78 and $944.9 million in procurement funding for CVN-79 (page
387).42
Section 122 of H.R. 1960 as reported states:
SEC. 122. COST LIMITATION FOR CVN-78 AIRCRAFT CARRIERS.
(a) In General- Section 122 of the John Warner National Defense Authorization Act for
Fiscal Year 2007 (P.L. 109-364; 120 Stat. 2104) is amended to read as follows:
`SEC. 122. ADHERENCE TO NAVY COST ESTIMATES FOR CVN-78 CLASS OF
AIRCRAFT CARRIERS.
`(a) Limitation`(1) LEAD SHIP- The total amount obligated from funds appropriated or otherwise made
available for Shipbuilding and Conversion, Navy, or for any other procurement account, for
the aircraft carrier designated as CVN-78 may not exceed $12,887,000,000 (as adjusted
pursuant to subsection (b)).
`(2) FOLLOW-ON SHIPS- The total amount obligated from funds appropriated or otherwise
made available for Shipbuilding and Conversion, Navy, or for any other procurement
account, for the construction of any ship that is constructed in the CVN-78 class of aircraft
carriers after the lead ship of that class may not exceed $11,411,000,000 (as adjusted
pursuant to subsection (b)).
`(b) Adjustment of Limitation Amount- The Secretary of the Navy may adjust the amount set
forth in subsection (a) for any ship constructed in the CVN-78 class of aircraft carriers by the
following:
`(1) The amounts of increases or decreases in costs attributable to economic inflation after
September 30, 2013.
`(2) The amounts of increases or decreases in costs attributable to compliance with changes
in Federal, State, or local laws.
`(3) The amounts of outfitting costs and post-delivery costs incurred for that ship.
`(4) The amounts of increases or decreases in costs of that ship that are attributable to
insertion of new technology into that ship, as compared to the technology baseline as it was
defined in the approved acquisition program baseline estimate of December 2005.
42
The request for $588.1 million in procurement funding to cover cost growth on CVN-78 is included in the $625.8
million requested in line item 020, Completion of PY [prior-year] Shipbuilding Programs.
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`(5) The amounts of increases or decreases to nonrecurring design and engineering cost
attributable to achieving compliance with the cost limitation.
`(6) The amounts of increases or decreases to cost required to correct deficiencies that may
affect the safety of the ship and personnel or otherwise preclude the ship from safe
operations and crew certification.
`(7) With respect to the aircraft carrier designated as CVN-78, the amounts of increases or
decreases in costs of that ship that are attributable to the shipboard test program.
`(c) Limitation on Technology Insertion Cost Adjustment- The Secretary of the Navy may
use the authority under paragraph (4) of subsection (b) to adjust the amount set forth in
subsection (a) for a ship referred to in that subsection with respect to insertion of new
technology into that ship only if-`(1) the Secretary determines, and certifies to the congressional defense committees, that
insertion of the new technology would lower the life-cycle cost of the ship; or
`(2) the Secretary determines, and certifies to the congressional defense committees, that
insertion of the new technology is required to meet an emerging threat and the Secretary of
Defense certifies to those committees that such threat poses grave harm to national security.
`(d) Notice`(1) REQUIREMENT- The Secretary of the Navy shall submit to the congressional defense
committees each year, at the same time that the budget is submitted under section 1105(a) of
title 31, United States Code, for the next fiscal year, written notice of-`(A) any change in the amount set forth in subsection (a) during the preceding fiscal year that
the Secretary has determined to be associated with a cost referred to in subsection (b); and
`(B) the most accurate estimate possible of the Secretary with respect to the total cost
compared to the amount set forth in subsection (a), as adjusted by subsection (b), and the
steps the Secretary is taking to reduce the costs below such amount.
`(2) EFFECTIVE DATE- The requirement in paragraph (1) shall become effective with the
budget request for the year of procurement of the first ship referred to in subsection (a).'.
(b) Conforming Amendment- The table of contents at the beginning of such Act is amended
by striking the item relating to section 122 and inserting the following:
`Sec. 122. Adherence to Navy cost estimates for CVN-78 class of aircraft carriers.'.
Regarding Section 122, H.Rept. 113-102 states:
Section 122—Cost Limitation for CVN–78 Aircraft Carriers
This section would amend the statutory cost cap for the aircraft carrier designated as CVN–
78 that was imposed by subsection (a)(1) of section 122 of the John Warner National
Defense Authorization Act for Fiscal Year 2007 (Public Law 109–364). The cost cap for
CVN–78 is currently $11.755 billion, having been adjusted by the Secretary of the Navy in
2010 using the authority granted by subsection (b) of section 122 of Public Law 109–364.
This section would raise the cost cap to the Program Manager’s most likely Estimate at
Completion, as reported in the 2011 Selected Acquisition Report, to $12.9 billion. This
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section would also update the cost cap associated with CVN–79 and later Ford-class aircraft
carriers.
The committee notes the receipt of a report to Congress required by section 124 of the
National Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239) that
provides cost-saving details that the Navy intends to incorporate into the acquisition strategy
to provide better cost stability in CVN–78 and eventual incorporation into CVN–79
procurement process.
The committee remains concerned about the continued escalation in costs associated with
Gerald R. Ford-class aircraft carrier and the negative consequences associated with this
continued escalation on the entirety of the ship construction accounts. This escalation, when
taken in the context of the 30-year shipbuilding plan that includes significant costs associated
with the Ohio-class ballistic missile submarine replacement, is unsustainable. (Page 40)
Section 1233 of H.R. 1960 as reported states:
SEC. 1233. SENSE OF CONGRESS ON THE DEFENSE OF THE ARABIAN GULF.
(a) Findings- Congress finds the following:
(1) In response to U.S. Central Command requirements, the United States Navy has
maintained, on average, more than one aircraft carrier in the Arabian Gulf for more than five
years.
(2) In February 2013, the senior leadership of the Department of Defense elected to reduce
the number of aircraft carriers deployed to the Arabian Gulf in light of budget constraints and
limitation of the overall carrier force structure to support the two aircraft carrier requirement.
(3) In reference to the decision to indefinitely delay the deployment of the USS Harry
Truman, CVN 75, and the USS Gettysburg, its cruiser escort, Chairman of the Joint Chiefs,
General Martin Dempsey stated, `We're trying to stretch our readiness out by keeping this
particular carrier in homeport in our global response force, so if something happens
elsewhere in the world, we can respond to it. Had we deployed it and `consumed' that
readiness, we could have created a situation where downstream we wouldn't have a carrier
present in certain parts of the world at all.'.
(4) Highlighting the risks of having only one aircraft carrier in the region and relying on
land-based aircraft, General Dempsey stated, `When you have carrier-based aircraft, you
have complete autonomy and control over when you use them. When you use land-based
aircraft, you often have to have host-nation permission to use them.'.
(5) Addressing the perception of the United States commitment to the region, General James
Mattis, Commander of U.S. Central Command, testified in March 2013, `Perhaps the
greatest risk to U.S. interests in the region is a perceived lack of an enduring U.S.
commitment to collective interests and the security of our regional partners.'. He went on to
testify that, `The drawdown of our forces can be misinterpreted as a lack of attention, a lack
of commitment to the region.'.
(b) Sense of Congress- It is the sense of Congress that-(1) maintaining only one aircraft carrier battle group in the Arabian Gulf constrains United
States' options and could put at risk the ability to have diversified platforms from which to
defend the Arabian Gulf and, if necessary, to conduct military operations to prevent Iran
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from threatening the United States, United States allies, or Iran's neighbors with nuclear
weapons;
(2) it is in the interests of the United States to maintain both land-based and sea-based
capabilities in the region to project force;
(3) land-based locations in the region could restrict United States military options and
critically impact the operational capability if required to conduct a defense of the Arabian
Gulf because the United States has not finalized bilateral security agreements with key Gulf
Cooperation Council countries;
(4) as a result of these and other critical limitations associated with maintaining one aircraft
carrier battle group in the Arabian Gulf, United States military commanders have expressed
concerns about the operational constraints, the increasing uncertainty among United States
allies, and the emboldening of potential adversaries such as Iran;
(5) regarding the ability of the United States Navy to maintain a two aircraft carrier presence
in the Arabian Gulf, the Chief of Naval Operations, Admiral Jonathan Greenert, stated, `We
need 11 carriers to do the job. That's been pretty clearly written, and that's underwritten in
our defense strategic guidance.'.
(6) the United States should construct and sufficiently sustain a fleet of at least eleven
aircraft carriers and associated battle force ships in order to meet current and future
requirements and to support at least a two aircraft carrier battle group presence in the
Arabian Gulf, in addition to meeting other operational requirements; and
(7) the United States should finalize bilateral agreements with key Gulf Cooperation Council
countries that support the Defense of the Arabian Gulf requirements, at the earliest possible
date.
House (Floor Consideration)
On June 13, 2013, as part of its consideration of H.R. 1960, the House rejected, 106-318,
H.Amdt. 142, which would have amended 10 U.S.C. 5062(b) to reduce from 11 to 10 the
minimum number of operational aircraft carriers required to be maintained by the Navy. (As a
conforming action, H.Amdt. 142 would also have repealed Section 1023 of the FY2010 National
Defense Authorization Act [H.R. 2647/P.L. 111-84 of October 28, 2009], the provision that
permits the Navy to maintain a force of 10 rather than 11 operational carriers during the period
between the inactivation of CVN-65 and the commissioning of CVN-78.)
Senate
The Senate Armed Services Committee, in its report (S.Rept. 113-44 of June 20, 2013) on S.
1197, recommends approving the Navy’s requests for $588.1 million in procurement funding to
cover cost growth on CVN-78 and $944.9 million in procurement funding for CVN-79 (pages
295-296).43
Section 122 of the bill as reported states:
43
The request for $588.1 million in procurement funding to cover cost growth on CVN-78 is included in the $625.8
million requested in line item 020, Completion of PY [prior-year] Shipbuilding Programs.
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SEC. 122. CVN-78 CLASS AIRCRAFT CARRIER PROGRAM.
(a) Cost Limitation Baseline for Lead Ship- Subsection (a)(1) of section 122 of the John
Warner National Defense Authorization Act for Fiscal Year 2007 (P.L. 109-364; 120 Stat.
2104) is amended by striking `$10,500,000,000' and inserting `$12,887,000,000'.
(b) Additional Factor for Adjustment of Limitation Amount- Subsection (b) of such section
is amended by adding at the end the following new paragraph:
`(7) The amounts of increases or decreases in costs of that ship that are attributable to the
shipboard test program.'.
(c) Hull Number- Such section is further amended in subsections (a)(1), (a)(2), and (b), by
striking `CVN-21' and inserting `CVN-78'.
(d) Requirements for CVN-79- Such section is further amended by adding at the end the
following new subsection:
`(e) Requirements for CVN-79`(1) QUARTERLY COST ESTIMATE- The Secretary of the Navy shall submit to the
congressional defense committees on a quarterly basis a report setting forth the most current
cost estimate for CVN-79 (as estimated by the program manager). Each cost estimate shall
include the current percentage of completion of the program, the total costs incurred, and an
estimate of costs at completion for ship construction, government-furnished equipment, and
engineering and support costs.
`(2) LIMITATION- If any report under paragraph (1) includes a cost estimate for CVN-79 in
excess of the amount specified in subsection (a)(2), the Secretary may not make any payment
of fees under any cost-type or incentive fee contract associated with CVN-79 until the
program manager determines that the cost estimate for CVN-79 no longer exceeds the
amount specified in subsection (a)(2).'.
(e) Conforming Amendment- The heading of such section is amended to read as follows:
`SEC. 122. ADHERENCE TO NAVY COST ESTIMATES FOR CVN-78 CLASS OF
AIRCRAFT CARRIERS.'.
Regarding Section 122, S.Rept. 113-44 states:
CVN–78 class aircraft carrier program (sec. 122)
The committee recommends a provision that would amend section 122 of the John Warner
National Defense Authorization Act for Fiscal Year 2007 (Public Law 109–364) by: (1) in
subsection (a)(1), striking ‘‘$10,500,000,000’’ and inserting ‘‘$12,887,000,000;’’ (2) in
subsection (b), adding a new factor for adjustment allowing increases or decreases in the cost
of the ship that are attributable to the shipboard test program; and (3) changing the heading
of the subsection to reflect that the name of the program has changed from CVN–21 to
CVN–78.
The provision would require a quarterly report providing the CVN–79 program manager’s
cost estimate for CVN–79. The provision would require the Navy to halt payment of fee on
any cost-type or incentive fee contract associated with CVN–79 until such time that the
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variance between the total program cost estimate and the mandated cost cap has been
corrected.
The changes in the CVN–78 cost cap are related to three major areas:
(1) reflecting allowable changes in the original cost cap due to economic inflation, changes
in federal, state, or local laws, changes in nonrecurring design and engineering costs
attributable to achieving compliance with the cost limitation, and changes to correct
deficiencies that may affect the safety of the ship and personnel;
(2) cost increases from the shipyard, resulting from increases in labor costs, material costs,
and design costs, offset by a reduction in shipyard’s fee; and
(3) cost increases in government-furnished equipment.
The cost increases in the latter two categories are changes outside the original, allowable
changes in the cost cap, and are troublesome. The Navy had envisioned the CVN–78 and
CVN–79 (then called “CVNX–1” and “CVNX–2”) as evolutionary ships that would
implement new technologies gradually as they matured. However, the Department of
Defense determined that planned incremental improvements for CVNX–1 did not justify the
significant investments nor match the pace of technology, given the length of time needed to
build the carrier. Instead, the CVNX–1 and CVNX–2 designs were combined into a single,
transformational ship design, called ‘‘CVN–21,’’ with the intent to skip a generation of
technology, while meeting operational timelines for delivery.
This has resulted in cost increases in the shipyard, and costs increases in the new
technologies developed and designed to be installed as government-furnished equipment.
The shipyard has not been as efficient as it could be, but combining these two ships and
maintaining the original construction schedule for operational reasons has resulted in reduced
productivity and inefficiencies in the shipyard’s effort. All told, this has resulted in roughly
40 percent of the reason to raise the cost cap.
There have also been cost increases in the equipment beyond the control of the shipyard.
These include the “transformational” technologies of the electromagnetic aircraft launch
system (EMALS), the dual-band radar (DBR), and advanced arresting gear (AAG). While
each of these technologies represents an improvement in capability and promise substantial
reductions in life cycle costs, collectively, these technologies resulted in roughly one third of
the increase to the total construction costs of CVN–78.
As a result of the scrutiny of the CVN–78 program, the Navy believes that they and the
shipyard can deliver the CVN–79 within the cost cap for the program recently adjusted by
the Secretary of the Navy. This derives from a number of factors, including:
(1) CVN–79 construction will start with a complete design and a complete bill of material;
(2) CVN–79 construction will start with a firm set of stable requirements;
(3) CVN–79 construction will start with the development complete on a host of new
technologies inserted on CVN 78 ranging from the EMALS and DBR, to key valves in
systems throughout the ship; and
(4) CVN–79 construction will start with a revised construction plan that emphasizes the
completion of work and ship outfitting as early as possible in the construction process to
optimize cost and ultimately schedule performance.
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The Administration and Congress chose to ignore the lessons repeatedly and painfully
learned in previous shipbuilding programs that resulted in delays and cost increases. A
decision to skip a generation of technology must be accompanied by an operational
assessment of the need date for the operational capability and a plan to ensure new
generations of technologies are developed, tested, and ready for installation at the optimum
time during the construction of the ship. Unfortunately, the decision on the construction
cycle for CVN–78 construction was driven more by the need to replace the USS Enterprise
at the end of her service life and the need to maintain workload and the industrial base of
suppliers for the sole U.S. builder of aircraft carriers. The committee is committed to
working with the Department of the Navy to ensure these lessons are not learned again in
future Navy vessel construction. (Pages 9-11)
S.Rept. 113-44 also states:
Comptroller General review of the Ford-class aircraft carrier program
The Navy is developing the Ford-class nuclear powered aircraft carrier (CVN–78) to serve as
the future centerpiece of the carrier strike group. Ford-class carriers will introduce several
advanced technologies that are intended to create operational efficiencies while enabling
higher sortie rates with reduced manpower compared to current carriers. As discussed
elsewhere in this report, however, these new technologies have led to cost and schedule
problems in constructing the first ship of the class.
The Government Accountability Office (GAO) has recently reported on significant
technology delays, construction inefficiencies, testing shortfalls, and cost and schedule
pressures currently facing CVN–78. The committee remains concerned that these issues
could delay and limit demonstration of eventual CVN–78 capabilities and potentially affect
cost, schedule, and performance outcomes for the next ship, CVN–79.
Section 124 of the National Defense Authorization Act for Fiscal Year 2013 (Public Law
112–239) required the Secretary of the Navy to report what program management and cost
control measures the Navy will employ in constructing the second Ford-class aircraft carrier.
The Secretary of the Navy’s report in response to that requirement identified a number of
changes in the way CVN–79 will be built that will help improve on the performance on
CVN–78.
In light of these concerns, the committee directs the GAO to undertake a follow-on review of
Ford-class carrier acquisition program. Specifically, the committee directs the Comptroller
General to review:
(1) program management and cost control measures the Navy plans to employ in
constructing the CVN–79 ship, as identified in its May 2013 report to Congress, in order to
determine the extent to which these may be effective in controlling costs. As part of this
analysis, the Comptroller General should evaluate the Navy’s plans for executing the detail
design and construction contract for CVN–79, and should pay particular attention to
components of the Navy’s plan intended to accommodate remaining schedule risk in the
CVN–78 building program;
(2) sufficiency of the Navy’s post-delivery test plans for CVN–78 in facilitating timely
demonstration of ship capabilities. As part of this analysis, the Comptroller General should
evaluate the extent to which land-based testing delays for critical ship technologies have
complicated the Navy’s planned post-delivery testing activities and schedule;
(3) Department of Defense (DOD) analysis underpinning the Navy’s current capability
estimates for CVN–78, progress made in meeting the ship’s capability requirements, and
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gaps that may exist between the likely performance of the ship and its major capability
requirements; and
(4) maturity and implementation of plans by the shipbuilder to manage the workforce during
concurrent construction of CVN–78 and CVN–79.
The committee further directs the Comptroller General to submit a report on his review to
the congressional defense committees by April 30, 2014. (Pages 21-22)
FY2014 DOD Appropriations Act (H.R. 2397/S. 1429)
House
The House Appropriations Committee, in its report (H.Rept. 113-113 of June 17, 2013) on H.R.
2397, recommends approving the Navy’s requests for $588.1 million in procurement funding to
cover cost growth on CVN-7844 and $944.9 million in procurement funding for CVN-79 (page
163).
Senate
The Senate Appropriations Committee, in its report (S.Rept. 113-85 of August 1, 2013) on S.
1429, recommends approving the Navy’s request for $588.1 million in procurement funding to
cover cost growth on CVN-7845 and reducing by $27.313 million the Navy request for $944.9
million in procurement funding for CVN-79, with $16.2 million of the reduction being for
“Restoring acquisition accountability: Reduction in change orders” and $11.113 million of the
reduction being for “Maintaining program affordability: SEWIP [Surface Electronic Warfare
Improvement Program] Block 3 excessive cost growth” (pages 100 and 101).
44
This request is included in the $625.8 million requested in line item 20, Completion of PY [prior-year] Shipbuilding
Programs.
45
This request is included in the $625.8 million requested in line item 20, Completion of PY [prior-year] Shipbuilding
Programs.
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Appendix. March 2013 Report To Congress on
Construction Plan for CVN-79
This appendix reprints a March 2013 report to Congress on the Navy’s construction plan for
CVN-79.46
46
Aircraft Carrier Construction, John F Kennedy (CVN 79), Report to Congress, March 2013, 17 pp. An annotation on
the report’s cover page indicates that the report was authorized for public release on May 16, 2013. The report was
posted at InsideDefense.com (subscription required) on June 21, 2013. See also Megan Eckstein, “Navy Plan To
Congress Outlines New Strategies To Save On CVN-79,” Inside the Navy, June 24, 2013.
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Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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