Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
March 26, 2014
Congressional Research Service
7-5700
www.crs.gov
RS20643
CRS Report for Congress
Pr
epared 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 (CVN-
78) class of nuclear-powered aircraft carriers (CVNs).
CVN-78 was procured in FY2008. The Navy’s proposed FY2015 budget estimates the ship’s
procurement cost at $12,887.2 million (i.e., about $12.9 billion) in then-year dollars. The ship
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 FY2013. To help cover cost growth
on the ship, the ship received an additional $588.1 million in procurement funding in FY2014,
and the Navy is requesting another $663.0 million in procurement funding for FY2015.
CVN-79 was 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 six-year incremental funding. The Navy’s proposed FY2015 budget estimates CVN-
79’s procurement cost at $11,498.0 million (i.e., about $11.5 billion) in then-year dollars, and
requests $1,300 million in procurement funding for the ship.
CVN-80 is scheduled to be procured in FY2018. The Navy’s proposed FY2015 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 FY2015 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:
• cost growth in the CVN-78 program;
• CVN-78 program issues that were raised in a January 2014 report from the
Department of Defense’s (DOD’s) Director of Operational Test and Evaluation
(DOT&E); and
• the potential for a two-ship block buy on CVN-79 and CVN-80.
An additional issue relating to aircraft carriers that has been raised by the Navy’s proposed
FY2015 budget concerns funding for the mid-life nuclear refueling overhaul of the aircraft carrier
George Washington (CVN-73).
Congressional Research Service
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 ............................................................................................................................... 5
CVN-80 ............................................................................................................................... 5
Program Procurement Funding ........................................................................................... 5
Increases in Estimated Unit Procurement Costs Since FY2008 Budget ............................. 6
Program Procurement Cost Cap .......................................................................................... 8
Issues for Congress .......................................................................................................................... 8
Cost Growth............................................................................................................................... 8
Overview ............................................................................................................................. 8
October 2013 CBO Report .................................................................................................. 9
September 2013 GAO Report ........................................................................................... 10
June 2013 Press Report ..................................................................................................... 14
March 2013 Navy Report to Congress (Released May 2013) ........................................... 15
December 31, 2012, DOD SAR (Released May 2013) ..................................................... 16
May 2013 Navy Testimony ............................................................................................... 18
March 2013 GAO Report .................................................................................................. 20
November 2012 Press Report ............................................................................................ 22
March 2012 Navy Letter to Senator McCain .................................................................... 23
Issues Raised in January 2014 DOT&E Report ...................................................................... 28
Potential Two-Ship Block Buy on CVN-79 and CVN-80 ....................................................... 32
Legislative Activity for FY2015 .................................................................................................... 37
FY2015 Funding Request ........................................................................................................ 37
Figures
Figure 1. Navy Illustration of CVN-78 ............................................................................................ 4
Tables
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2019 .................................... 6
Table 2. Changes in Estimated Procurement Costs of CVNs 78, 79, and 80 ................................... 7
Congressional Research Service
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Appendixes
Appendix A. March 2013 Navy Report to Congress on Construction Plan for CVN-79 .............. 38
Appendix B. Refueling Complex Overhaul (RCOH) for George Washington (CVN-73) ............ 56
Contacts
Author Contact Information........................................................................................................... 58
Congressional Research Service
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.
An additional issue relating to aircraft carriers that has been raised by the Navy’s proposed
FY2015 budget concerns funding for the mid-life nuclear refueling overhaul of the aircraft carrier
George Washington (CVN-73). This issue is discussed in Appendix B.
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 December 2012, 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 (CVN-
65) 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 was originally
scheduled to be delivered in September 2015, but its construction has been running behind
schedule, and the Navy in May 2013 announced that the ship’s delivery date had been postponed
1 The Kitty Hawk was decommissioned on January 31, 2009.
Congressional Research Service
1
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
to February 2016.2 The Navy’s FY2015 budget submission shows a delivery date of March 2016.
Anticipating the gap between the inactivation of CVN-65 and the commissioning of CVN-78, the
Navy asked Congress for a temporary waiver of 10 U.S.C. 5062(b) to accommodate the period
between the two events. Section 1023 of the FY2010 National Defense Authorization Act (H.R.
2647/P.L. 111-84 of October 28, 2009) authorized the waiver, permitting the Navy to have 10
operational carriers between the inactivation of CVN-65 and the commissioning of CVN-78.
Funding and Procuring Aircraft Carriers
Some Key Terms
The Navy procures a ship (i.e., orders the ship) by awarding a full-ship construction contract to
the firm building the ship.
Part of a ship’s procurement cost might be provided through advance procurement (AP) funding.
AP funding is funding provided in one or more years prior to (i.e., in advance of) a ship’s year of
procurement. AP funding is used to pay for long-leadtime components that must be ordered ahead
of time to ensure that they will be ready in time for their scheduled installation into the ship. AP
funding is also used to pay for the design costs for a new class of ship. These design costs, known
more formally as detailed design/non-recurring engineering (DD/NRE) costs, are traditionally
incorporated into the procurement cost of the lead ship in a new class of ships.
Fully funding a ship means funding the entire procurement cost of the ship. If a ship has received
AP funding, then fully funding the ship means paying for the remaining portion of the ship’s
procurement cost.
The full funding policy is a Department of Defense (DOD) policy that normally requires items
acquired through the procurement title of the annual DOD appropriations act to be fully funded in
the year they are procured. In recent years, Congress has authorized DOD to use incremental
funding for procuring certain Navy ships, most notably aircraft carriers. Under incremental
funding, some of the funding needed to fully fund a ship is provided in one or more years after
the year in which the ship is procured.3
Incremental Funding Authority for Aircraft Carriers
Section 121 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L.
109-364 of October 17, 2006) granted the Navy the authority to use four-year incremental
funding for CVNs 78, 79, and 80. Under this authority, the Navy could fully fund each of these
ships over a four-year period that includes the ship’s year of procurement and three subsequent
years.
2 Report to Congress on the Annual Long-Range Plan for Construction of Naval Vessels for FY2014, May 2013, p. 13.
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.
Congressional Research Service
2
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 six-
year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in FY2008-
FY2011, the provision in practice applies to CVNs 79 and 80.
Aircraft Carrier Construction Industrial Base
All U.S. aircraft carriers procured since FY1958 have been built by Newport News Shipbuilding
(NNS), of Newport News, VA, a shipyard that is part of Huntington Ingalls Industries (HII). 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
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.4
4 The CVN-78 class was earlier known as the CVN-21 class, which meant nuclear-powered aircraft carrier for the 21st
century.
Congressional Research Service
3
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.
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
operated by several hundred fewer sailors than a Nimitz-class ship, significantly reducing life-
cycle operating and support (O&S) costs.
Navy plans call for procuring at least three Ford-class carriers—CVN-78, CVN-79, and CVN-80.
CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,5 was procured in FY2008. The
Navy’s proposed FY2015 budget estimates the ship’s procurement cost at $12,887.2 million (i.e.,
about $12.9 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 $9.6
billion is for construction of the ship itself.
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.
Congressional Research Service
4
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 FY2013. To help cover cost
growth on the ship, the ship received an additional $588.1 million in procurement funding in
FY2014, and the Navy is requesting another $663.0 million in procurement funding for FY2015.
CVN-79
CVN-79, which was named for President John F. Kennedy on May 29, 2011,6 was 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 six-year
incremental funding. The Navy’s proposed FY2015 budget estimates CVN-79’s procurement cost
at $11,498.0 million (i.e., about $11.5 billion) in then-year dollars, and requests $1,300 million in
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
million (i.e., about $13.9 billion) in then-year dollars. Under the Navy’s proposed FY2015
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.
6 See “Navy Names Next Aircraft Carrier USS John F. Kennedy,” Navy News Service, May 29, 2011, accessed online
on June 1, 2011 at http://www.navy.mil/search/display.asp?story_id=60686. See also Peter Frost, “U.S. Navy’s Next
Aircraft Carrier Will Be Named After The Late John F. Kennedy,” Newport News Daily Press, May 30, 2011. CVN-79
is the second ship to be named for President John F. Kennedy. The first, CV-67, was the last conventionally powered
carrier procured for the Navy. CV-67 was procured in FY1963, entered service in 1968, and was decommissioned in
2007.
7 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.
Congressional Research Service
5
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Table 1. Procurement Funding for CVNs 78, 79, and 80 Through FY2019
(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
1,712.5 (FF)
903.3 (AP)
0
2,615.8
FY12
0
554.8 (AP)
0
554.8
FY13 0
491.0
(FF)
0
491.0
FY14
588.1 (CC)
917.6 (FF)
0
1,505.7
FY15 (requested)
663.0 (CC) 1,300.0
(FF)
0
1,963.0
FY16 (projected)
124.0 (CC)
2,193.0 (FF)
683.2 (AP)
3,000.2
FY17 (projected)
0
1,245.6 (FF) 1,045.2
(AP)
2,290.8
FY18 (projected)
0
2,023.8 (FF)
825.5 (FF)
2,849.3
FY19 (projected)
0
0
1,864.5 (FF)
1,864.5
Source: Table prepared by CRS based on FY2009-FY2015 Navy budget submissions.
Notes: Figures may not add due to rounding. “AP” is advance procurement funding; “FF” is ful funding; “CC” is
cost to complete funding (i.e., funding to cover cost growth).
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
(continued...)
Congressional Research Service
6
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-FY2015 budgets, in millions of then-year dol ars)
Budget CVN-78
CVN-79
CVN-80
Estimated
Scheduled
Estimated
Scheduled
Estimated
Scheduled
procurement
fiscal year of
procurement
fiscal year of
procurement
fiscal year of
cost
procurement
cost
procurement
cost
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
FY10 budget
10,845.8
FY08
n/aa
FY13b
n/aa FY18b
FY11 budget
11,531.0
FY08
10,413.1
FY13
13,577.0
FY18
FY12 budget
11,531.0
FY08
10,253.0
FY13
13,494.9
FY18
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
FY15 budget
12,887.2
FY08
11,498.0
FY13
13,874.2
FY18
% change:
FY08 budget to
-0.3
Almost no
No change
FY09 budget
change
FY09 budget to
+3.7 n/a
n/a
FY10 budget
FY10 budget to
+6.3 n/a
n/a
FY11 budget
FY11 budget to
No change
- 1.5
- 0.1
FY12 budget
FY12 budget to
+6.9%
+11.3%
+2.8%
FY13 budget
FY13 budget to
+4.1%
- 0.6%
No
change
FY14 budget
FY14 budget to
+0.5%
+1.4%
No
change
FY15 budget
FY08 budget to
+22.9%
+25.1%
+29.5%
FY15 budget
Source: Table prepared by CRS based on FY2008-FY2015 Navy budget submissions.
a. n/a means not available; the FY2010 budget submission did not show estimated procurement costs for
CVNs 79 and 80.
b. The FY2010 budget submission did not show scheduled years of procurement for CVNs 79 and 80; the
dates shown here for the FY2010 budget submission are inferred from the shift to five-year intervals for
procuring carriers that was announced by Secretary of Defense Gates in his April 6, 2009, news conference
regarding recommendations for the FY2010 defense budget.
(...continued)
surveillance, the Navy will not be able to identify early signs of cost growth and take necessary
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.)
Congressional Research Service
7
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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).
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 Ford-
class 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.
Section 121 of the FY2014 National Defense Authorization Act (H.R. 3304/P.L. 113-66 of
December 26, 2013) amended the procurement cost cap for the CVN-78 program to provide a
revised cap of $12,887.0 million for CVN-78 and a revised cap of $11,498.0 million for each
follow-on ship in the program, plus adjustments for inflation and other factors (including an
additional factor not included in original cost cap).
Issues for Congress
Cost Growth
Overview
Cost growth has been a continuing oversight issue for Congress on the CVN-78 program. As
shown in Table 2, the estimated procurement costs of CVNs 78 and 79 have grown 22.9% and
25.1%, respectively, since the submission of the FY2008 budget. As also shown in the table,
CVNs 78, 79, and 80 experienced little or no cost growth from the FY2014 budget to the FY2015
budget. As shown in Table 1, cost growth on CVN-78 has prompted the Navy to program
$1,375.1 million in additional cost-to-complete procurement funding for the ship in FY2014-
FY2016.
Section 121 of the FY2014 National Defense Authorization Act (H.R. 3304/P.L. 113-66 of
December 26, 2013), in addition to amending the procurement cost cap for the CVN-78 program
(see previous section), requires the Navy to submit
on a quarterly basis a report setting forth the most current cost estimate for the aircraft carrier
designated as 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.
Section 121 also states that
The Secretary [of the Navy] shall ensure that each prime contract for the aircraft carrier
designated as CVN-79 includes an incentive fee structure that will, throughout the period of
performance of the contract, provide incentives for each contractor to meet the portion of the
cost of the ship, as limited by subsection (a)(2) and adjusted pursuant to subsection (b) [i.e.,
Congressional Research Service
8
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
the amended procurement cost cap for the program], for which the contractor is
responsible.’.
Navy officials have stated that they are working to control the cost of CVN-79 using a build
strategy for the ship that incorporates improvements over the build strategy that was used for
CVN-78. These improvements, Navy officials have said, include the following items, among
others:
• achieving a higher percentage of outfitting of ship modules before modules are
stacked together to form the ship;
• achieving “learning inside the ship,” which means producing similar-looking ship
modules in an assembly line-like series, so as to achieve improved production
learning curve benefits in the production of these modules; and
• more economical ordering of parts and materials including greater use of batch
ordering of parts and materials, as opposed to ordering parts and materials on an
individual basis as each is needed.
The following sections present discussions of the cost growth issue from the Department of
Defense (DOD), the Navy, the Congressional Budget Office (CBO), and the Government
Accountability Office (GAO).
October 2013 CBO Report
An October 2013 CBO report on the potential cost of the Navy’s FY2014 30-year shipbuilding
plan states:
The Navy currently projects that the cost of the lead ship of the CVN-78 class will be $12.8
billion in nominal dollars (which is just below the new Congressional cost cap of $12.9
billion.) Using the Navy’s inflation index for naval shipbuilding, CBO converted that figure
to $13.9 billion in 2013 dollars. That amount is 22 percent more than the President’s budget
requested in 2008 when the ship was authorized. The Navy’s estimate does not include $4.7
billion in research and development costs that apply to the entire class. In its 2014 budget
request, the Navy requested an extra $506 million in nominal dollars in 2014 and 2015 ($483
million in 2013 dollars) to cover additional cost growth and additional tooling and vendor
services; that amount is included in the Navy’s estimate.
CBO estimates that the cost of the lead ship of the CVN-78 class will be $13.5 billion in
nominal dollars and $14.5 billion in 2013 dollars. To generate that estimate, CBO used the
actual costs of the previous carrier—the CVN-77—and adjusted them for the higher costs of
government-furnished 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). Subsequent ships of the CVN-78 class will not require as much
funding for one-time items, although they will incur the same costs for government-
furnished equipment. Altogether, CBO estimates the average cost of the 6 carriers in the
2014 plan at $12.7 billion, compared with the Navy’s estimate of $12.5 billion....
The final cost of the CVN-78 could be higher or lower than CBO’s estimate. Possible
reasons for a higher cost include the following:
— The costs of many lead ships built in the past 20 years have increased more than 30
percent from the original budgeted estimate. CBO’s estimate of the cost of the CVN-78
incorporates an amount of growth that falls within the range of historical cost growth for lead
Congressional Research Service
9
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
ships. However, construction of the ship is only about 60 percent complete, and costs have
tended to rise more in the latter stages of ship construction, when systems are being installed
and integrated.
— The Navy has stated that there is a 50 percent probability that the cost of the CVN-78
will exceed its estimate. Specifically, in its most recent Selected Acquisition Report, the
Navy stated that it has budgeted an amount for the CVN-78 that covers up to the 50th
percentile of possible cost outcomes. By comparison, in a written response to CBO and the
Congressional Research Service last year, the Navy stated that it had budgeted an amount
“greater than [the] 50th percentile” (though without specifying how much greater).
— The Navy has stated that the test program for the carrier could reveal one or more major,
possibly expensive, problems.
Possible reasons for a lower cost than CBO’s estimate include the following:
— The Navy and the builder of the CVN-78 recognize that cost growth for lead ships is a
significant concern, and they are actively managing the CVN-78 program to restrain costs.
— All of the materials for the CVN-78 have been purchased, and much of the equipment
for the vessel is being purchased under fixed-price contracts—which essentially eliminates
the risk of further cost growth for about half of the projected cost of the carrier.
— A successful test program that revealed only minor problems would likely limit
additional costs to less than $100 million.
The next carrier following the CVN-78 will be the CVN-79, the John F. Kennedy. Funding
for that ship began in 2007, the Congress officially authorized its construction in 2013, and
appropriations for it are expected to be complete by 2018. The Navy estimates that the ship
will cost $10.2 billion in 2013 dollars, or $11.3 billion in nominal dollars. In its new Selected
Acquisition Report on the CVN-79, the Navy describes its cost estimate as an “aggressive
but achievable target.” In contrast, CBO estimates that the cost of the ship will be $11.3
billion in 2013 dollars, or about 10 percent more than the Navy’s estimate, and $12.0 billion
in nominal dollars.9
September 2013 GAO Report
A September 2013 GAO report on the CVN-78 program stated the following regarding the
potential for further cost growth on CVN-78:
While construction of CVN 78 is more than halfway complete, the Navy and shipbuilder
must still overcome significant technology development, design, and construction challenges
in order to deliver a fully functional ship to the fleet at the currently budgeted cost of $12.8
billion and the February 2016 delivery date. However, several critical technologies—
provided to the shipbuilder by the Navy—have encountered developmental delays and,
subsequently, have not yet reached a level of maturity that will enable them to be effectively
incorporated onto the ship. These delays are most evident in the land-based test programs for
these technologies, which are lagging significantly behind schedule. At the same time, the
ship’s design stability—a key factor in controlling future cost growth—is contingent on
9 Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2014 Shipbuilding Plan, October 2013, pp. 20-
21.
Congressional Research Service
10
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
critical technologies maturing in the configurations currently anticipated. In addition,
construction inefficiencies at the shipyard have delayed—and threaten additional delays to—
ship launch and delivery. These combined challenges and uncertainties suggest that more
cost growth could occur for CVN 78....
Prior to the CVN 78 detail design contract award, the Navy had only built, tested, and
integrated prototype components of the volume search radar in controlled laboratory
environments. As we previously reported, these tests revealed deficiencies related to key
components of the radar. Under the Navy’s 2008 program schedule, the volume search radar
was to be developed and tested as part of the Zumwalt-class destroyer program and was
expected to approach maturity following land-based testing in fiscal year 2009. The radar
would then participate in combat system integration testing with the other major component
of the dual band radar, the multifunction radar, and eventually demonstrate maturity as part
of Zumwalt-class destroyer at-sea testing in fiscal year 2014. In 2010, however, to reduce
Zumwalt-class construction costs, the Navy removed the volume search radar from the
destroyer program and suspended remaining land-based testing, leaving key Ford-class
testing requirements unaddressed. The Navy subsequently transferred remaining
development work to the Ford class program and planned to resume land-based testing in
fiscal year 2012 using an actual production unit of the radar—but contracting delays pushed
the start of this testing out to fiscal year 2013. As a result of this delay, and the Navy’s desire
not to slow down the current radar installation schedule for CVN 78, remaining land-based
testing will be completed in fiscal year 2014, 4.5 years later than originally planned, using a
less capable developmental radar array than the actual production configuration that will be
installed on CVN 78. The Navy has also scheduled shipboard testing beginning in fiscal year
2016 to complete additional volume search radar testing not executed on land. This testing
schedule increases the risk that discovery of problems with the system will trigger costly
design changes and rework aboard the ship....
Unlike the other critical technologies discussed above, [the EMALS] system was
approaching maturity prior to the CVN 78 detail design contract award because the Navy had
built and tested competitive prototypes of the system as part of the contractor selection
process for EMALS development in 2004. Under the Navy’s 2008 program schedule, land-
based testing for the system was scheduled to occur between fiscal years 2008 and 2011.
However, technical issues affecting the EMALS power interface and conversion systems,
among other deficiencies, have slowed progress. The Navy’s 2012 development schedule
calls for land-based testing to continue into fiscal year 2014, which, upon completion, the
Navy expects will mature the EMALS technology. In the meantime, however, significant
numbers of EMALS components have already been produced, delivered to the shipbuilder,
and installed on CVN 78—even though the functional requirements, performance, and
suitability of the system remain unproven....
The CVN 78 shipbuilder completed its 3D product model in November 2009—over a year
after the construction contract was awarded. At contract award, 76 percent of the model was
complete and the shipbuilder had already begun construction of at least 25 percent of its
structural units under the previous construction preparation contract. While the model is now
considered functionally complete, maintaining design stability depends on the critical
technologies discussed above fitting within the space, weight, cooling, and power
reservations allotted them. To date, evolving information about the attributes of these
technologies has produced a weight/stability configuration for CVN 78 that leaves little
margin to incorporate additional weight growth high up in the ship without making
corresponding weight trade-offs elsewhere or compromising the future growth potential of
the ship. Shipbuilder representatives have recently expressed concern about this possibility,
particularly regarding additional design changes to critical technologies still in
development—including the volume search radar, advanced arresting gear, and EMALS
technologies. According to shipbuilder representatives, additional weight growth to the
Congressional Research Service
11
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
advanced arresting gear was of particular concern and could trigger a need for future
structural and space modifications around the installed system. Further, until the advanced
weapons elevators, joint precision approach and landing system, and evolved sea sparrow
missile weapons link each demonstrate maturity, the likelihood of additional design changes
to CVN 78 persists....
The Navy has taken steps to limit cost growth for EMALS and the advanced arresting gear,
which are being developed and produced under contracts separate from the CVN 78 detail
design and construction contract. Most notably, in 2010, the Navy negotiated firm fixed-
price contracts for production of these systems for CVN 78. According to the Navy, these
contracts have helped cap cost growth for these systems and have incentivized more timely
deliveries to the shipyard. While EMALS is farther along in development than both the dual
band radar and advanced arresting gear systems, all have experienced significant cost
growth, and costs are likely to increase, given the remaining work needed to fully develop,
test, and integrate the systems on CVN 78. This potential for additional cost growth is also
apparent based on the Navy’s experience with the most recent Nimitz-class carrier, CVN 77.
That ship experienced cost growth during its system integration, even though that effort
employed mostly nondevelopmental systems.
Aside from the risk of cost growth stemming from the integration of critical technology
systems into the ship, the shipbuilder’s cost and schedule performance under the detail
design and construction contract suggests additional overruns are looming. Our review of the
contractor’s earned value management data for the program indicates that shipbuilder cost
pressures remain high and additional costs are likely, especially as key developmental items
are integrated onto the ship. We reviewed 18 months of earned value management data for
the CVN 78 ship program during the period of July 2011 through December 2012. During
this time, the shipbuilder increased its estimate of the number of labor hours required to
construct CVN 78 from 44.4 million to 47.3 million. Consequently, the shipbuilder’s
budgeted cost grew substantially, from $4,758 million to $5,266 million (an increase of $508
million). Our analysis shows that, as of December 2012, the contractor was forecasting an
overrun at contract completion of over $913 million. This cost growth is attributable to the
shipbuilder not accomplishing work as planned. The Navy has largely, but not fully, funded
this cost growth within CVN 78’s $12.8 billion procurement budget.
Further, the Navy’s current budget estimate of $12.8 billion for completing CVN 78 is
optimistic because it assumes the shipbuilder will maintain its current level of performance
throughout the remainder of construction. This assumption is inconsistent with historical
Navy shipbuilding experiences for recent lead ships, which have suffered from performance
degradation late in construction. Our previous work has shown that the full extent of cost
growth does not usually manifest itself until after the ship is more than 60 percent complete,
when key systems are being installed and integrated. In April 2013, the ship was 56 percent
complete. The Director of DOD’s Cost Assessment and Program Evaluation office and the
Congressional Budget Office—as well as Navy cost analysts and a Navy-commissioned
expert panel—have also projected higher than budgeted procurement costs for CVN 78, with
cost estimates ranging from $13.0 to $14.2 billion.10
The report stated the following regarding the potential for further cost growth on CVN-79:
The Navy and shipbuilder are implementing changes to the build strategy for CVN 79 aimed
at reducing that ship’s costs before the construction contract is awarded, currently planned
10 Government Accountability Office, Ford-Class Carriers[:] Lead Ship Testing and Reliability Shortfalls Will Limit
Initial Fleet Capabilities, GAO-13-396, September 2013, pp. 11, 16-17, 18, 20-21, 27-28.
Congressional Research Service
12
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
for September 2013. These changes include increased time allotted to construct the ship and
in-yard construction process improvements. Remaining technical and design risks with CVN
78, however, could interfere with the Navy’s ability to achieve its desired cost savings for
CVN 79. These uncertainties also affect the Navy and contractor’s ability to assess the likely
CVN 79 costs ahead of contract award and, when coupled with the existing sole source
environment for aircraft carrier construction, compromise the government’s negotiating
position for CVN 79.
The Navy and its shipbuilder have learned valuable lessons from CVN 78 construction that
have the potential to improve cost outcomes for the construction of the first follow-on ship,
CVN 79. The shipbuilder plans to employ a new build strategy for CVN 79 that (1) allots
more time to fund and construct the ship compared to CVN 78 and (2) implements process
improvements aimed at completing more work earlier in the build process—steps that the
Navy anticipates will achieve construction efficiency improvements as compared to CVN 78.
However, remaining technical and design risks in the program could undermine the Navy’s
ability to realize cost savings on CVN 79....
The Navy’s decision to fund CVN 79 construction over 6 years was coupled with a decision
to increase the build time for the ship as compared to CVN 78. According to the Navy, it will
use the additional time to improve CVN 79’s construction sequence and implement cost
reduction initiatives. Further, Ford class shipbuilders report that the increased time afforded
to CVN 79 construction provides additional opportunities to apply lessons learned from lead
ship construction. The Navy expects the combined savings from these actions to more than
offset the increased costs associated with extending the funding of the ship by 2 years. Figure
9 compares CVN 78 and CVN 79 construction schedules....
As part of CVN 79 construction, the shipbuilder plans to implement process improvements
aimed at reducing the labor hours—and cost—required to construct the ship, as compared to
CVN 78....
The core of the shipbuilder’s strategy for CVN 79 is moving more planned work—including
complex ship assemblies—earlier in the build process so that it can be completed in shipyard
workshops. Generally, the earlier work can be sequenced in the build process, the more
efficiently it can be completed....
Although the Navy and shipbuilder expect CVN 79’s design to be virtually the same as that
of the lead ship—another step toward improving follow-on ship outcomes—remaining
developmental and design risks in the program could undermine the actual realization of cost
savings. As discussed above, these risks are exemplified by key ship systems not progressing
through their land-based test programs at the pace the Navy anticipated—delays largely
attributable to persisting technical deficiencies. Navy and shipbuilder efforts to resolve these
deficiencies on CVN 78—concurrent with follow-on ship construction—are likely to lead to
redesign and potentially costly out of sequence work or rework for CVN 79. If these
discoveries and fixes disrupt CVN 79 construction and offset planned improvements, they
could jeopardize the Navy’s ability to complete the ship within planned cost and schedule
estimates.
The Navy’s cost estimate for CVN 79 detail design and construction is closely linked to
CVN 78 outcomes and reflects an expectation that the shipbuilder will deliver the lead ship
within current labor hour estimates. One key component of the CVN 79 cost estimate is a
Navy assumption that 15 percent fewer labor hours will be required to construct the follow-
on ship as compared to the lead ship. This estimate is also underpinned by expectations that
the shipbuilder’s current level of performance will persist between now and lead ship
delivery. Further, the Navy’s budget for CVN 79 is predicated on even higher performance
gains than those forecast in the cost estimate—notably, 20 percent fewer labor hours in
Congressional Research Service
13
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
construction as compared to CVN 78. Yet, as we previously detailed, the Navy’s
understanding of the costs required to construct and deliver CVN 78 remains incomplete.
These knowledge gaps add risk and uncertainty to CVN 79 cost and budget estimates.11
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’Rourke12 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.”
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....
11 Government Accountability Office, Ford-Class Carriers[:] Lead Ship Testing and Reliability Shortfalls Will Limit
Initial Fleet Capabilities, GAO-13-396, September 2013, pp. 41-42, 43, 44-45.
12 Colleen O’Rourke is not related to Ronald O’Rourke.
Congressional Research Service
14
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.”
“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.”13
March 2013 Navy 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
13 Tony Capaccio, “Navy Should Delay Next Carrier Amid Troubles, GAO Says,” Bloomberg.com, June 27, 2013.
Congressional Research Service
15
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 78.14
For the full text of the navy’s report, see Appendix A.
December 31, 2012, DOD SAR (Released May 2013)
The December 31, 2012, DOD Selected Acquisition Report (SAR) for the CVN-78 program,
which was released in May 2013, states:
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
14 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.
Congressional Research Service
16
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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
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
Congressional Research Service
17
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 79.15
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.16
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).17 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
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.18
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
15 Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, pp. 5-6.
16 Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 30.
17 Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 56.
18 Department of Defense, Selected Acquisition Report (SAR), CVN 78 Class, December 31, 2012, p. 56.
Congressional Research Service
18
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 life-
cycle 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.19
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
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.
19 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.
Congressional Research Service
19
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.20
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
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.21
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:
20 Transcript of hearing.
21 Transcript of hearing.
Congressional Research Service
20
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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
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.
Congressional Research Service
21
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.22
November 2012 Press Report
A November 29, 2012, press report stated:
Huntington Ingalls Industries Inc. will miss its 2012 target for reducing costs on the USS
Gerald R. Ford, the aircraft carrier that will be the most expensive U.S. warship.
The shipbuilder will fall short of getting 86 cents of planned work accomplished for every
dollar spent, in part because of late component deliveries from subcontractors, according to
the Navy admiral responsible for carrier development and construction....
“They have continued to improve in the right direction, but they did not make it to 86”
percent, Rear Admiral Thomas Moore, the Navy’s program executive officer for aircraft
carriers, said in a phone interview. The Navy hopes the company will eventually get $1 of
value from every $1 spent, he said....
“There are many challenges” in building a prototype that’s also the first production vessel of
a three-ship class, Beci Brenton, a spokeswoman for the Newport News, Virginia-based
company, said in an e-mailed statement.
The company “has developed and implemented a host of improvement actions” this year, she
said. “We have continued to advance the shipbuilding industry in tooling, material controls
and craft performance through the use of innovation in technology, process changes and
teaming.”...
Huntington Ingalls’ cost efficiency goals have been “challenging but attainable, and they met
them and did well in 2011,” Moore said. “They did not meet all those goals in 2012, and we
will sit down and figure out where we are going with them in 2013.”
Reaching the 86 percent mark would have helped reduce what’s now an estimated $884
million overrun on the design and construction contract. The Navy’s share is $690 million.
Huntington’s share is $194 million, which would be forfeited if the overrun isn’t reduced.
22 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-13-
294SP, 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.
Congressional Research Service
22
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.23
March 2012 Navy Letter to Senator McCain
Secretary of the Navy Ray Mabus, in a letter with attachment sent in late March 2012 to Senator
John McCain on controlling cost growth in the CVN-78, stated:
Dear Senator McCain:
Thank you for your letter of March 21, 2012, regarding the first-of-class aircraft carrier,
GERALD R. FORD (CVN 78). Few major programs carry greater importance or greater
impact on national security, and no other major program comprises greater scale and
complexity than the Navy’s nuclear aircraft carrier program. Accordingly, successful
execution of this program carries the highest priority within the Department of the Navy.
I have shared in the past my concern when I took office and learned the full magnitude of
new technologies and design change being brought to the FORD. Requirements drawn up
more than a decade prior for this capital ship drove development of a new reactor plant,
propulsion system, electric plant and power distribution system, first of kind electromagnetic
aircraft launching system, advanced arresting gear, integrated warfare system including a
new radar and communications suite, air conditioning plant, weapons elevators, topside
design, survivability improvements, and all new interior arrangements. CVN 78 is a near-
total 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 cost-
plus contracts. The outlined approach for ensuring CVN 79 and follow ship affordability
focuses equally upon tackling these issues while applying the many lessons learned in the
course of CVN 78 procurement.
As always, if I may be of further assistance, please let me know.
23 Tony Capaccio, “Huntington Ingalls Aircraft Carrier To Miss Cost-Reduction Goal,” Bloomberg Government
(bgov.com), November 29, 2012.
Congressional Research Service
23
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.
• CVN 78 construction fee has been retracted, consistent with contract performance.
However, the shipbuilder is incentivized by the contract shareline to improve upon
current performance to meet agreed-to cost goals.
• Contract design changes are under strict control; authorized only for safety, damage
control, mission-degrading deficiencies, or similar. Adjudicated changes have been
contained to less than 1 percent of contract target price.
• The Navy converted the EMALS and AAG production contract to a firm, fixed price
contract, capping cost growth to that system and imposing negative incentives for late
delivery.
• Naval Sea Systems Command is performing a review of carrier specifications with the
shipbuilder, removing or improving upon overly burdensome or unneeded specifications
that impose unnecessary cost on the program.
The single largest impact to cost performance to-date has been contractor and government
material cost overruns. These issues trace to lead ship complexity and CVN 78 concurrency,
but they also point to inadequate accountability for carrier material procurement, primarily
during the ship’s advance procurement period (2002-2008).
These effects cannot be reversed on CVN 78, but it is essential to improve upon material
delivery to the shipyard to mitigate the significant impact of material delays on production
performance. Equally important, the systemic material procurement deficiencies must be
Congressional Research Service
24
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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:
• the Navy fostered a collaborative build process review by the shipbuilder with other Tier
1 private shipyards in order to benchmark its performance arid identify fundamental
changes that would yield marked improvement;
• the shipbuilder has established specific launch metrics by system (foundations,
machinery, piping, power panels, vent duct, lighting, etc.) and increased staffing for
waterfront engineering and material expediters to support meeting these metrics;
• the shipbuilder has linked all of these processes within a detailed integrated master
schedule, providing greater visibility to current performance and greater ability to
control future cost and schedule performance across the shipbuilding disciplines;
• the Navy and shipbuilder are conducting Unit Readiness Reviews of CVN 78 erection
units to ensure that the outfitted condition of each hull unit being lifted into the dry-dock
contains the proper level of outfitting.
These initiatives, which summarize a more detailed list of actions being implemented and
tracked as result of the end-to-end review, are accompanied by important management
changes.
• The shipbuilder has assigned a new Vice President in charge of CVN 78, a new Vice
President in charge of material management and purchasing, and a number of new
general shop foreman to strengthen CVN 78 performance.
Congressional Research Service
25
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
• 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.
The two principal ‘documents’ which the Navy and shipbuilder must ensure are correct and
complete at the outset of CVN 79 procurement are the design and the build plan.
Design is governed by rules in place that no changes will be considered for the follow ship
except changes necessary to correct design deficiencies on the lead ship, fact of life changes
to correct obsolescence issues, or changes that will result in reduced cost for the follow ship.
Exceptions to these rules must be approved by the JROC, or designee. Accordingly, the
Navy is requesting procurement authority for CVN 79 with the Design Product Model
complete and construction drawings approximately 95 percent complete (compared to
approximately 30 percent complete at time of lead ship authorization).
As well, first article testing and certification will be complete for virtually all major new
equipments introduced in the FORD Class. At this point in time, the shipbuilder has
developed a complete bill of material for CVN 79. The Navy is working with the shipbuilder
to ensure that the contractor’s material estimates are in-line with Navy ‘should cost’
estimates; eliminating non-recurring costs embedded in lead ship material, validating
quantities, validating escalation indices, incorporating lead ship lessons learned. The Navy
has increased its oversight of contractor furnished material procurement, ensuring that
material procurement is competed (where competition is available); that it is fixed priced;
that commodities are bundled to leverage economic order quantity opportunities; and that the
vendor base capacity and schedule for receipt supports the optimal build plan being
developed for production.
Congressional Research Service
26
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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:
An incremental improvement to carrier construction cost will fall short of the improvement
necessary to ensure affordability for CVN 79 and follow ships. Accordingly, the shipbuilder
has established aggressive targets for CVN 79 to drive the game-changing improvements
needed for carrier construction. These targets include:
• 75 percent Complete at Launch (15 percent> [i.e., 15 percent greater than] FORD);
• 85-90 percent of cable pulled prior to Launch (25-30 percent> FORD);
• 30 percent increase in front-end shop work (piping details, foundations, etc);
• All structural unit hot work complete prior to blast and paint;
• 25 percent increase to work package throughput;
• 100 percent of material available for all work packages in accordance with the
integrated master schedule;
• zero delinquent engineering and planning products;
• resolution of engineering problems in < 8 [i.e., less than 8] hours.
Congressional Research Service
27
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.24
Issues Raised in January 2014 DOT&E Report
Another issue for Congress concerns CVN-78 program issues that were raised in a January 2014
report from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual
report for FY2013. The report stated the following in its section on the CVN-78 program:
Assessment
Test Planning
• The current state of the VCVN [Virtual CVN] 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 VCVN 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].
• A new TEMP [Test and Evaluation Master Plan] is under development to address problems
with the currently-approved TEMP. The current TEMP does not adequately address
platform-level developmental testing. The Program Office has begun to refine the Post
Delivery Test and Trials schedule, but that schedule still lacks sufficient details to ensure
reasonable developmental testing. 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 February 2016. The ship’s post-shipyard shakedown
availability will follow delivery in 2016. During the post-shipyard shakedown availability
installations of some systems will be completed. The first at-sea operational test and
evaluation of CVN-78 will begin in July 2017.
Reliability
• CVN-78 includes several systems that are new to aircraft carriers; four of these systems
stand out as being critical to flight operations: EMALS [Electromagnetic Aircraft Launch
System], AAG [Advanced Arresting Gear], DBR [Dual Band Radar], and the Advanced
Weapons Elevators (AWEs). Overall, the uncertain reliability of these four systems is the
most significant risk to the CVN-78 IOT&E. All four of these systems will be tested for the
first time in their shipboard configurations aboard CVN-78. Reliability estimates derived
from test data are available for EMALS and AAG and are discussed below. For DBR and
24 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.
Congressional Research Service
28
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
AWE, estimates based on test data are not available and only engineering reliability
estimates are available.
SGR
• It is unlikely that CVN-78 will achieve its SGR requirement. The target threshold is based
on unrealistic assumptions including fair weather and unlimited visibility, and that aircraft
emergencies, failures of shipboard equipment, ship maneuvers (e.g., to avoid land), and
manning shortfalls will not affect flight operations. DOT&E plans to assess CVN-78
performance during IOT&E by comparing to the demonstrated performance of the Nimitz
class carriers. A demonstrated SGR less than the requirement but equal to or greater than the
performance of the Nimitz class could potentially be acceptable.
• During the operational assessment, DOT&E conducted an analysis of past aircraft carrier
operations in major conflicts. The analysis concludes that the CVN-78 SGR requirement is
well above historical levels and that CVN-78 is unlikely to achieve that requirement. There
are concerns with the reliability of key systems that support sortie generation on CVN-78.
Poor reliability of these critical systems could cause a cascading series of delays during flight
operations that would affect CVN-78’s ability to generate sorties, make the ship more
vulnerable to attack, or create limitations during routine operations. DOT&E assesses the
poor or unknown reliability of these critical subsystems will be the most significant risk to
CVN-78’s successful completion of IOT&E. The analysis also considered the operational
implications of a shortfall and concluded that as long as CVN-78 is able to generate sorties
comparable to Nimitz class carriers, the operational implications of CVN-78 will be similar
to that of a Nimitz class carrier.25
Manning
• Current manning estimates have shortages of bunks for Chief Petty Officers (CPOs) and do
not provide the required 10 percent SLA. Per Office of the Chief of Naval Operations
Instruction 9640.1B, Shipboard Habitability Program, all new ships are required to have a
growth allowance of 10 percent of the ship’s company when the ship delivers. The SLA
provides empty bunks to allow for changes in the crew composition over CVN-78’s expected
50-year lifespan and provides berthing for visitors and Service members temporarily
assigned to the ship.
EMALS
• EMALS is one of the four systems critical to flight operations. While testing to date has
demonstrated that EMALS should be able to launch aircraft planned for CVN-78’s air wing,
the system’s reliability is uncertain. At the Lakehurst, New Jersey, test site, over 1,967
launches have been conducted and 201 chargeable failures have occurred. Based on available
data, the program estimates that EMALS has approximately 240 Mean Cycles Between
Critical Failure in the shipboard configuration, where a cycle represents the launch of one
aircraft. Based on expected reliability growth, the failure rate is presently five times higher
than should be expected.
25 The issue of the sortie generation rate was also discussed in Tony Capaccio, “Hagel Told New Carrier Unlikely to
Meet Aircraft Goals,” Bloomberg News, January 10, 2014.
Congressional Research Service
29
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
AAG
• AAG is another system critical to flight operations. Testing to date has demonstrated that
AAG should be able to recover aircraft planned for the CVN-78 air wing, but as with
EMALS, AAG’s reliability is uncertain. At the Lakehurst, New Jersey test site, 71
arrestments were conducted earlier this year and 9 chargeable failures occurred. The Program
Office estimates that AAG has approximately 20 Mean Cycles Between Operational Mission
Failure in the shipboard configuration, where a cycle represents the recovery of one aircraft.
Based on expected reliability growth, the failure rate is presently 248 times higher than
should be expected.
DBR
• Previous testing of Navy combat systems similar to CVN-78’s revealed numerous
integration problems that degrade the performance of the combat system. Many of these
problems are expected to exist on CVN-78. 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 resources 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 2016.
JPALS [Joint Precision Approach and Landing System]
• The Navy has proposed to the USD(AT&L) Milestone Decision Authority that the program
be restructured from its current, land- and sea-based, multiple-increment structure to a single
increment focusing on sea-based requirements primarily supporting JSF [Joint Strike Fighter;
aka F-35] and future Unmanned Carrier Launched Airborne Surveillance and Strike aircraft.
Under this proposed restructuring scheme, there will be no retrofitting of JPALS on legacy
aircraft and the Navy will need to maintain both the legacy approach and landing system and
JPALS onboard each aircraft-capable ship.
JSF
• The arresting hook system remains an integration risk as the JSF development schedule
leaves no time for discovering new problems. The redesigned tail hook has an increased
downward force as well as sharper design that may induce greater than anticipated wear on
the flight deck.
• JSF noise levels remain moderate to high risk in JSF integration and will require modifi ed
carrier flight deck procedures.
- Flight operations normally locate some flight deck personnel in areas where double hearing
protection would be insufficient during F-35 operations. To partially mitigate noise concerns,
the Navy will procure new hearing protection with active noise reduction for flight deck
personnel.
- Projected noise levels one level below the flight deck (03 level), which includes mission
planning spaces, will require at least single hearing protection that will make mission
planning difficult. The Navy is working to mitigate the effects of the increased noise levels
adjacent to the flight deck.
• Storage of the JSF engine is limited to the hangar bay, which will affect hangar bay
operations. The impact on the JSF logistics footprint is not yet known.
Congressional Research Service
30
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
• Lightning protection of JSF aircraft while on the flight deck will require the Navy to
modify nitrogen carts to increase their capacity. Nitrogen is used to fill fuel tank cavities
while aircraft are on the flight deck.
• JSF remains unable to share battle damage assessment and non-traditional Intelligence,
Surveillance, and Reconnaissance information captured on the aircraft portable memory
device or cockpit voice recorder in real-time. In addition, the CVN-78 remains unable to
receive and display imagery transmitted through Link 16 because of bandwidth limitations.
These capability gaps were identified in DOT&E’s FY12 Annual Report. The Combatant
Commanders have requested these capabilities to enhance decision-making.
LFT&E [Live Fire Test and Evaluation]
• 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.
• CVN-78 has many new critical systems that have not undergone shock trials on other
platforms. Unlike past tests on other new classes of ships with legacy systems, the
performance of CVN-78’s new critical systems under test is unknown.
• 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 benefit of having
test data to affect the design of future carriers in the class outweighs the delay in delivery of
CVN-78 to the fleet to conduct this test. The delay is not a sufficient reason to postpone the
shock trial.
Recommendations
• Status of Previous Recommendations. The Navy should continue to address the seven
remaining FY10 and FY11 recommendations.
1. Adequately test and address integration challenges with JSF; specifically:
- Logistics (unique concerns for storage and transportation)
- Changes required to JBDs [Jet Blast Deflectors]
- Changes to flight deck procedures due to heat and noise
- Autonomic Logistics Information System integration
2. Finalize plans that address CVN-78 Integrated Warfare System engineering and ship’s
self-defense system discrepancies prior to the start of IOT&E.
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.
Congressional Research Service
31
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 achieve adequate depth and
breadth of required personnel to sufficiently meet Navy Enlisted Classification fit/fill
manning requirements of CVN-78.
7. Conduct system-of-systems developmental testing to preclude discovery of deficiencies
during IOT&E.
• FY13 Recommendations. The Navy should:
1. Address the uncertain reliability of EMALS, AAG, DBR, and AWE. These systems are
critical to CVN-78 flight operations, and are the largest risk to the program.
2. Conduct fully integrated, robust, end-to-end testing of the proposed JPALS, to include
operations in neutral and potentially hostile electronic warfare environments.26
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 CVN-
73) together in a block buy in FY1983, and procured another two Nimitz-class aircraft carriers
(CVN-74 and CVN-75) together in a block buy in FY1988. The Navy proposed these block buys
in the FY1983 and FY1988 budget submissions.27
When the FY1983 block buy was proposed, the Navy estimated that the block buy would reduce
the combined cost of CVN-72 and CVN-73 by 5.6% in real terms.28 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
26 Department of Defense, Director, Operational Test & Evaluation, FY2013 Annual Report, released January 2014, pp.
157-159. See also Olga Belogolova, “Navy Pushes Back On DOT&E Reliability Concerns For Ford-Class Carrier,”
Inside the Navy, February 24, 2014.
27 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.
28 See General Accounting Office, Request to Fully Fund Two Nuclear Aircraft Carriers in Fiscal Year 1983,
MASAD-82-87 (B-206847), March 26, 1982, 10 pp. The figure of 5.6% was derived by dividing $450 million in non-
inflation cost avoidance shown on page 5 by the combined estimated cost of the two ships (absent a block buy) of
$8,024 million shown on page 4.
Congressional Research Service
32
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
expensive than a single-ship acquisition strategy, and that some savings would occur in a two-
ship strategy for CVN-74 and CVN-75.29
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.)30 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 CVN-
79, 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.
29 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.
30 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.
Congressional Research Service
33
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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 CVN-
80, particularly in light of current uncertainty over future levels of defense spending, is a factor
that Congress may consider in assessing the option of doing a block buy. If budgetary
circumstances were to lead to a decision to end procurement of Ford-class carriers after CVN-79,
then much or all of the funding spent procuring materials for CVN-80 could go to waste.
At a March 29, 2012, hearing on Navy shipbuilding programs before the Seapower and Projection
Forces subcommittee of the House Armed Services Committee, Sean Stackley, the Assistant
Secretary of the Navy for Research, Development, and Acquisition (i.e., the Navy’s acquisition
executive), stated the following when asked by Representative Robert Wittman about the
possibility of a two-ship block buy on CVN-79 and CVN-80:
Yes, sir. Let me focus on affordability of the CVN-78 class. We are right now about 40
percent complete construction of the CVN-78 and we’re running into some very difficult
cost growth issues across the full span—design, material procurement, and production—
material procurement on both contractor and government side.
So our first focus right now is to stabilize the lead ship. Let’s get cost under control so we
can complete this ship as close to schedule at the lowest cost possible.
But in parallel, the Navy is working very closely with the shipbuilder to take a step back and
say, one, what are all the lessons we just learned on CVN-78? Two, CVN-78 is a very
different ship from the Nimitz [CVN-68]; we cannot expect to build the [CVN-]78 the way
we build the [CVN-]68 and—and get to an affordable ship construction plan. So we’re
pressing on the way the carrier is built—the build plan for the carrier—to arrive at a more
affordable CVN-79.
Now, in the process of doing that we’ll take a hard look at what opportunity there is across
[CVN-]79 and [CVN-]80, recognizing that we’re going to be limited, again, by [budget] top
line. But there are going to be some opportunities that jump out at us. We don’t want to have
to replan each carrier. We have a vendor base that is stretched out with the carrier build cycle
that for some components that are carrier-unique, that vendor base is—is just struggling to
hold on between the five-year gaps.
So we have to take a hard look at where does it make sense after we’ve gotten to what I’m
calling an optimal build plan for CVN-79 and then be able to come back and—and say, OK,
here—on CVN-79 here are some opportunities that if we could, in fact, reach out to CVN-80
we can either avoid a gap in a production line or avoid unnecessary cost growth on that
follow ship.31
Later in the hearing, the following exchange occurred:
REPRESENTATIVE RICK LARSEN:
31 Source: transcript of hearing.
Congressional Research Service
34
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Finally, we had some discussion about this question with regard to CVNs and trying to find a
way to squeeze some costs out, and one of the ideas was to do some—do block buy of
certain components of—of—of CVN components. And have you considered that, and what’s
your thought on that on block buy on components from [CVN-]79 to [CVN-]80, or whatever,
[CVN-]79, [CVN-]79 to [CVN-]80, and so on?
ASSISTANT SECRETARY OF THE NAVY SEAN STACKLEY:
Yes, sir. At this point in time the Navy and the shipbuilder are sitting side by side putting
together a build plan for CVN-79. We’re 40 percent complete construction of the [CVN-]78;
we’ve got a lot that we’ve got to, I’ll say, do different on the [CVN-]79 and follow from the
lead ship. It’s a very different ship class [compared to the Nimitz class].
So we’re taking a hard look at the build plan [for CVN-78]. We need to get that locked
down. And associated with that is the complete bill of materials for the Ford class.
At that point in time we'll be able to take a look at...
LARSEN:
On this, call it bill of materials, what does it make sense—what makes sense in terms of
looking long term, beyond the immediate ship?
STACKLEY:
Right.
LARSEN:
Are there areas of the industrial base that are stressed to the point that it does make sense to
look at coupling the CVN-79 and CVN-80 buy?
STACKLEY:
We’re not at that point yet. I described earlier that I think after we get through this build plan
review then we'll be able to come back in ‘14 [FY2014] and identify potential critical items
that warrant a block buy approach.32
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 two-
ship 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
32 Source: Transcript of hearing.
Congressional Research Service
35
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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.33
At the March 19, 2012, briefing for CRS and CBO on the CVN-78 program, CRS asked the Navy
to examine the option of a block buy on CVN-79 and CVN-80, and inform CRS and CBO of the
Navy’s estimate of how much it might reduce the combined procurement cost of CVN-79 and
CVN-80. The Navy’s response, dated April 22, 2012, was sent to CRS on May 10, 2012 (i.e., just
after the House Armed Services Committee completed its markup of H.R. 4310, the FY2013
National Defense Authorization Act). The response stated:
There are several options for procuring aircraft carriers that differ from the current practice;
two ship buys and block buys. Navy experience with aircraft carrier two ship buys includes
procurement of the CVN 72 and CVN 73 (awarded in FY83), and the CVN 74 and CVN 75
(awarded in FY88). The actual cost returns for these procurements support significant
savings compared to other NIMITZ Class single ship buys. This conclusion is based on a
comparison of the NIMITZ Class two ship buys (CVN72, 73, 74 & 75) with single ship buys
(CVN71 and CVN76). The total ship man-hour comparison shows a 9% reduction. The total
ship material comparison in constant dollars shows an 8% reduction. The NIMITZ- Class
two ship buys took advantage of a single year of full funding for the combined procurement,
and less than three years between the deliveries of each ship. Having both ships fully funded
in one year enabled the Navy and shipbuilder to take advantage of two ship-set Economic
Order Quantity (EOQ) market savings for material items, and also allowed the shipbuilder to
optimize production trades management. The short time between deliveries also resulted in
design stability, minimized potential obsolescence, and greater opportunities for learning.
Given hard budget constraints in FY13 and FY14, CVN 79 and CVN 80 cannot benefit from
a multiyear construct, similar to those requested in PB13 for VIRGINIA Class Submarine
and ARLIEGH BURKE Class Destroyers. By the end of FY14, 75% of CVN 79 material
will be under contract with suppliers, leaving limited opportunities to implement material
savings with multiyear incremental funding. 75% of CVN 80 material would also be
incapable of achieving savings, as the material purchases would be placed after CVN 79.
CVN 80/81 would present the first opportunity to potentially consider this strategy.34
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.
33 Source: Transcript of hearing.
34 Navy information paper dated April 25, 2012, sent to CRS on May 10, 2012.
Congressional Research Service
36
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
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]1335
for VIRGINIA Class Submarine and ARLIEGH BURKE Class Destroyers.” It can be noted that a
block buy on CVN-79 and CVN-80 would not necessarily be a multiyear procurement (MYP)
contract, like those requested for the Virginia-class submarine program and the Arleigh Burke
(DDG-51) destroyer programs. It can also be noted that Congress may decide to work within
budget constraints for FY2013 and FY2014 that might differ from those on which is DOD basing
its planning.
The Navy’s response states, “By the end of FY14, 75% of CVN 79 material will be under
contract with suppliers, leaving limited opportunities to implement material savings with
multiyear incremental funding. 75% of CVN 80 material would also be incapable of achieving
savings, as the material purchases would be placed after CVN 79.” CRS on May 10, 2012, asked
the Navy what percent of the material for CVN-79 would be under contract by the end of
FY2012. The Navy’s response, dated May 22, 2012, was sent to CRS on May 25, 2012 (i.e., the
same day that the House Appropriations Committee reported H.R. 5856, the FY2013 DOD
Appropriations Act). The response stated, “Approximately 47% of CVN 79 direct material will be
under contract by the end of FY[20]12.”36
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.
Legislative Activity for FY2015
FY2015 Funding Request
As shown in Table 1, the Navy’s proposed FY2014 budget requested $663.3 million in
procurement funding to cover cost growth on CVN-78, and $1,300.0 million in procurement
funding for CVN-79.
35 This is a reference to the President’s budget for FY2013—that is, the Administration’s requested budget for FY2013.
36 Navy information paper dated May 22, 2012, sent to CRS on May 25, 2012.
Congressional Research Service
37
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Appendix A. March 2013 Navy Report to Congress
on Construction Plan for CVN-79
This appendix reprints a March 2013 Navy report to Congress on the Navy’s construction plan for
CVN-79.37
37 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.
Congressional Research Service
38
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
39
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
40
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
41
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
42
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
43
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
44
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
45
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
46
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
47
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
48
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
49
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
50
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
51
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
52
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
53
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
54
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Congressional Research Service
55
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
Appendix B. Refueling Complex Overhaul (RCOH)
for George Washington (CVN-73)
An additional issue relating to aircraft carriers that has been raised by the Navy’s proposed
FY2015 budget concerns funding for the mid-life nuclear refueling overhaul of the aircraft carrier
George Washington (CVN-73). This appendix presents background information and potential
oversight questions for Congress relating to this issue.
To operate for a full 50-year life, existing Nimitz (CVN-68) class nuclear-powered carriers are
given a mid-life nuclear refueling overhaul, called a refueling complex overhaul (RCOH), when
they are 20 to 25 years old, which is when their original nuclear fuel core has been exhausted.
The RCOH gives the ship a new nuclear fuel core sufficient to power the ship for the remainder
of its 50-year life. The RCOH also involves a significant amount of other overhaul, repair, and
modernization work on the ship. An RCOH requires about 44 months from contract award to
delivery. RCOHs are funded through the Navy’s shipbuilding account (the Shipbuilding and
Conversion, Navy [SCN] appropriation account).
RCOHs are done primarily at NNS and form a significant part of NNS’s business base, along
with construction of new nuclear-powered aircraft carriers and construction of new nuclear-
powered submarines. RCOHs in recent years have been scheduled in a more or less heel-to-toe
fashion at NNS—when one RCOH is done, the next one is scheduled to begin. RCOHs are done
in a particular dry dock at NNS, so a carrier undergoing an RCOH in that dry dock must have its
work finished and depart the dry dock before the following carrier can be moved into the dry
dock for its RCOH.
The next carrier scheduled for an RCOH is the George Washington (CVN-73). The total
estimated cost of the CVN-73 RCOH in the Navy’s FY2014 budget submission was $4,738.2
million (i.e., about $4.7 billion).
Until the FY2015 budget submission, the CVN-73 RCOH was scheduled for FY2016. The CVN-
73 RCOH received $12 million in advance procurement (AP) funding in FY2012, $69.9 million
in AP funding in FY2013, and $245.8 million in AP funding in FY2014. Under the Navy’s
FY2014 budget submission, another $491.1 million in AP funding was projected for FY2015, and
the balance of the RCOH’s estimated cost of $4,738.2 million was to be provided in FY2016 and
FY2017.
As part of its FY2015 budget submission, DOD removed funding for the CVN-73 RCOH from
the FY2015-FY2019 Future Years Defense Plan (FYDP) and is proposing to defer the question of
whether to proceed with the CVN-73 RCOH until next year, when Congress will consider the
FY2016 defense budget. DOD and Navy officials state that if Congress provides an indication
this year that it supports the defense spending levels in the FY2015-FY2019 FYDP, which are
higher than those called for in the Budget Control Act of 2011 as amended, then the FYDP would
be reformulated for FY2016 and subsequent years to include the roughly $7 billion that would be
needed over the FYDP to fund the CVN-73 RCOH and keep the ship and its associated carrier air
wing in service.
DOD and Navy officials state that if Congress does not provide an indication this year that it
supports the defense spending levels in the FYDP, CVN-73 would instead be inactivated (i.e.,
permanently retired from service), and its associated air wing would be disestablished. Other
Congressional Research Service
56
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
things held equal, inactivating CVN-73 would reduce the Navy’s carrier force to 10 ships for the
next 25 years or so (i.e., the period of time that CVN-73 would have remained in service if it had
received an RCOH).
The Navy’s proposed FY2015 budget includes about $46 million in funding in the Operation and
Maintenance, Navy (OMN) appropriation account to defuel CVN-73. Defueling the ship (i.e.,
removing the original nuclear fuel core) is an initial step to be performed on the ship at NNS,
regardless of whether the ship is to undergo an RCOH or be inactivated.
Navy officials state that deferring until next year the decision on whether to proceed with the
CVN-73 RCOH would mean that the RCOH, if were to occur, would be delayed some number of
months from the schedule shown in the Navy’s FY2014 budget submission, and consequently
would likely become an FY2017 action rather than an FY2016 action. Navy officials state that if
the delay in the start of the RCOH were not more than a certain number of months, it would not
cause a cascading delay in the schedule for the following RCOH (to be done on CVN-74),
because there is currently some slack time on the back end of the CVN-73 RCOH period to
absorb some delay in the CVN-73 RCOH without affecting the schedule for the CVN-74 RCOH.
The proposal to defer a decision on the CVN-73 RCOH until next year, and to not include
funding for the CVN-73 RCOH in the proposed FY2015 budget or the FY2015-FY2019 FYDP, is
an issue for Congress in its review of DOD’s proposed FY2015 budget. Potential oversight
questions for Congress include the following:
• As discussed in the “Background” section of this report, 10 USC 5062(b) states
that “the naval combat forces of the Navy shall include not less than 11
operational aircraft carriers.” The requirement as stated in this statute is not
contingent on the DOD budget being at a certain level in coming years. Is DOD’s
proposal to treat the issue of whether to proceed with the CVN-73 RCOH (and
consequently whether there are to be 10 or 11 carriers for the next 25 years or so)
as a question to be decided next year, depending on indications of congressional
support for a certain DOD budget level in coming years, consistent with 10 USC
5062(b)?
• What would be the operational impact for the Navy of reducing the carrier force
to 10 ships for the next 25 years or so (and also eliminating its associated carrier
air wing)? What impact would it have on the Navy’s ability to fulfill its missions?
• If the FDYP were reformulated to include the $7 billion needed to keep CVN-73
and its associated air wing, what other defense programs would have their
funding reduced, and what would be the impact of these reductions on DOD’s
ability to fulfill its missions?
• If CVN-73 were inactivated, what portion, if any, of the prior-year funding that
has been appropriated for the CVN-73 RCOH would go to waste?
• What would be the cost to inactivate CVN-73?
• What would be the impact on NNS and the other parts of the aircraft carrier
industrial base if CVN-73 were inactivated rather than given an RCOH? What
Congressional Research Service
57
Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress
impact, if any, would this have on the cost of other work performed at NNS
during these years, and on the eventual cost of the CVN-74 RCOH?38
Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
38 For press reports discussing the industrial-base aspects of the issue, see Lara Seligman, “Shipbuilder: Navy’s
Timeline For CVN-73 ‘Not In Accordance With Our Plan,’” Inside the Navy, March 24, 2014; Olga Belogolova, “PEO
Carriers: A Cut From 11 To 10 Carriers Would Impact Industrial Base,” Inside the Navy, February 24, 2014; Michael
Fabey, “Foregoing Carrier RCOH Won’t Disrupt Future Work, HII CEO Says,” Aerospace Daily & Defense Report,
March 25, 2014: 4; Rick Giannini and Darrell Grow, “Why Aircraft Carrier Workers Deserve a Better Plan from the
Pentagon,” Defense One (www.defenseone.com), March 23, 2014.
Congressional Research Service
58