Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs
May 27, 2016
Congressional Research Service
7-5700
www.crs.gov
RS20643


Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress

Summary
CVN-78, CVN-79, CVN-80, and CVN-81 are the first four ships in the Navy’s new Gerald R.
Ford (CVN-78) class of nuclear-powered aircraft carriers (CVNs). CVN-78 was fully funded in
prior fiscal years. The Navy’s proposed FY2016 budget requests procurement for CVN-79 and
advance procurement (AP) funding for CVN-80.
CVN-78 was procured in FY2008. The Navy’s proposed FY2017 budget estimates the ship’s
procurement cost at $12,887.0 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. To help cover cost
growth on the ship, the ship received an additional $1,374.9 million in FY2014-FY2016 in
FY2015 in so-called cost-to-complete procurement funding. The Navy’s proposed FY2017
budget does not request any additional funding for the ship. The ship is scheduled for delivery to
the Navy in late August or early September 2016.
CVN-79 was procured in FY2013. The Navy’s proposed FY2017 budget estimates the ship’s
procurement cost at $11,398.0 million (i.e., about $11.4 billion) in then-year dollars. 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 FY2017 budget requests $1,291.8 million in procurement funding for the ship.
The ship is scheduled for delivery to the Navy in June 2022.
CVN-80 is scheduled to be procured in FY2018. The Navy’s proposed FY2017 budget estimates
the ship’s procurement cost at $12,900.0 million (i.e., $12.9 billion) in then-year dollars. The
Navy wants to use AP funding for the ship in FY2016 and FY2017, and then fully fund the ship
in FY2018-FY2023 using congressionally authorized six-year incremental funding. The Navy’s
proposed FY2017 budget requests $1,370.8 million in AP funding for the ship.
CVN-81 is scheduled to be procured in FY2023. Under current plans, the Navy would use AP
funding for the ship in FY2021 and FY2022, and then fully fund the ship in FY2023-FY2028
using congressionally authorized six-year incremental funding. The Navy’s FY2017 budget
submission programs the initial increment of AP funding for the ship in FY2021.
Oversight issues for Congress for the CVN-78 program (and other carrier-related issues) include
the following:
 whether to approve, reject, or modify the Navy’s FY2017 procurement and
advance procurement (AP) funding requests for the CVN-78 program;
 whether to provide advance procurement (AP) funding in FY2017 for the
purchase of materials for CVN-81, so as to enable a combined purchase of
materials for CVN-80 and CVN-81 (the Navy’s proposed FY2017 budget does
not request any AP funding for the procurement of materials for CVN-81);
 whether to approve, reject, or modify the Navy’s proposal in its FY2017 budget
submission to deactivate one of the Navy’s carrier air wings;
 cost growth in the CVN-78 program, Navy efforts to stem that growth, and Navy
efforts to manage costs so as to stay within the program’s cost caps;
 CVN-78 program issues that were raised in a January 2016 report from the
Department of Defense’s (DOD’s) Director of Operational Test and Evaluation
(DOT&E); and
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress

 whether the Navy should shift at some point from procuring large-deck, nuclear-
powered carriers like the CVN-78 class to procuring smaller aircraft carriers.
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress

Contents
Introduction ..................................................................................................................................... 1
Background ..................................................................................................................................... 1
Strategic and Budgetary Context............................................................................................... 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
Legislative Provision Regarding Number of Carrier Air Wings ............................................... 2
Funding and Procuring Aircraft Carriers ................................................................................... 2
Some Key Terms ................................................................................................................. 2
Incremental Funding Authority for Aircraft Carriers .......................................................... 3
Aircraft Carrier Construction Industrial Base ........................................................................... 3
Gerald R. Ford (CVN-78) Class Program ................................................................................. 3
CVN-78 ............................................................................................................................... 3
CVN-79 ............................................................................................................................... 4
CVN-80 ............................................................................................................................... 5
CVN-81 ............................................................................................................................... 5
Program Procurement Funding ........................................................................................... 5
Changes in Estimated Unit Procurement Costs Since FY2008 Budget .............................. 6
Program Procurement Cost Cap .......................................................................................... 7
Issues for Congress .......................................................................................................................... 9
FY2017 Funding Request ......................................................................................................... 9
Potential for Combined Material Purchase for CVNs 80 and 81 .............................................. 9
Proposal to Deactivate Carrier Air Wing .................................................................................. 11
Cost Growth and Managing Costs Within Program Cost Caps ............................................... 14
Issues Raised in January 2016 DOT&E Report ...................................................................... 18
Navy Study on Smaller Aircraft Carriers ................................................................................ 22
Legislative Activity for FY2017 .................................................................................................... 24
Summary of Congressional Action on FY2016 Funding Request .......................................... 24
FY2017 National Defense Authorization Act (H.R. 4909/S. 2943) ........................................ 25
House (Committee Report) ............................................................................................... 25
House (Floor Consideration) ............................................................................................. 27
Senate ................................................................................................................................ 27
FY2017 DOD Appropriations Act (H.R. 5293/S. 3000) ......................................................... 33
House ................................................................................................................................ 33
Senate ................................................................................................................................ 33

Figures
Figure 1. Navy Illustration of CVN-78 ........................................................................................... 4

Tables
Table 1. Procurement Funding for CVNs 78, 79, 80, and 81 Through FY2021 ............................ 6
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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress

Table 2. Changes in Estimated Procurement Costs of CVNs 78, 79, 80, and 81 ............................ 7
Table 3. Estimated Net Savings of Deactivating Carrier Air Wing ............................................... 12
Table 4. Congressional Action on FY2017 Funding Request........................................................ 24

Appendixes
Appendix A. Cost Growth and Managing Costs Within Program Cost Caps ............................... 34
Appendix B. March 2013 Navy Report to Congress on Construction Plan for CVN-79 .............. 57

Contacts
Author Contact Information .......................................................................................................... 75

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Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress

Introduction
This report provides background information and potential oversight issues for Congress on the
Gerald R. Ford (CVN-78) class aircraft carrier program. The Navy’s proposed FY2017 budget
requests a total of $2,662.6 million in procurement and advance procurement (AP) funding for
CVN-79 and CVN-80, the second and third ships in the program. Congress’s decisions on the
CVN-78 program could substantially affect Navy capabilities and funding requirements and the
shipbuilding industrial base.
Background
Strategic and Budgetary Context
For an overview of the strategic and budgetary context in which the CVN-78 class program and
other Navy shipbuilding programs may be considered, see CRS Report RL32665, Navy Force
Structure and Shipbuilding Plans: Background and Issues for Congress
, by Ronald O'Rourke.
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 The Gerald R. Ford (CVN-78),
the lead ship in the CVN-78 class, is scheduled to be delivered to the Navy in late August or early
September 2016. It will likely be commissioned some months after that, returning the Navy’s
carrier force to a total of 11 ships.
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

1 The Kitty Hawk was decommissioned on January 31, 2009.
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replacement, Gerald R. Ford (CVN-78), is commissioned into service. 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.
Legislative Provision Regarding Number of Carrier Air Wings
In addition to the above-discussed statutory requirement for maintaining not less than 11
operational aircraft carriers, there is a legislative provision regarding the number of carrier air
wings. Section 1093 of the FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81
of December 31, 2011) states:
SEC. 1093. NUMBER OF NAVY CARRIER AIR WINGS AND CARRIER AIR WING
HEADQUARTERS.
The Secretary of the Navy shall ensure that the Navy maintains--
(1) a minimum of 10 carrier air wings; and
(2) for each such carrier air wing, a dedicated and fully staffed headquarters.
This provision was codified as 10 U.S.C. 5062 note—that is, as a note (i.e., footnote) to 10 U.S.C.
5062.
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.2

2 For more on full funding, incremental funding, and AP funding, see CRS Report RL31404, Defense Procurement:
(continued...)
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Incremental Funding Authority for Aircraft Carriers
Section 121 of the FY2007 John Warner National Defense Authorization Act (H.R. 5122/P.L.
109-364 of October 17, 2006) granted the Navy the authority to use four-year incremental
funding for CVNs 78, 79, and 80. Under this authority, the Navy could fully fund each of these
ships over a four-year period that includes the ship’s year of procurement and three subsequent
years.
Section 124 of the FY2012 National Defense Authorization Act (H.R. 1540/P.L. 112-81 of
December 31, 2011) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use
five-year incremental funding for CVNs 78, 79, and 80. Since CVN-78 was fully funded in
FY2008-FY2011, the provision in practice applied to CVNs 79 and 80.
Section 121 of the FY2013 National Defense Authorization Act (H.R. 4310/P.L. 112-239 of
January 2, 2013) amended Section 121 of P.L. 109-364 to grant the Navy the authority to use 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).
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.3 The Ford-class design uses the basic Nimitz-class hull form but incorporates
several improvements, including features permitting the ship to generate 33% 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, reducing 50-year
life-cycle operating and support (O&S) costs for each ship by about $4 billion compared to the
Nimitz-class design, the Navy estimates. Navy plans call for procuring at least four Ford-class
carriers—CVN-78, CVN-79, CVN-80, and CVN-81.
CVN-78
CVN-78, which was named for President Gerald R. Ford in 2007,4 was procured in FY2008. The
Navy’s proposed FY2017 budget estimates the ship’s procurement cost at $12,887.0 million (i.e.,

(...continued)
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.
3 The CVN-78 class was earlier known as the CVN-21 class, which meant nuclear-powered aircraft carrier for the 21st
century.
4 §1012 of the FY2007 defense authorization act (H.R. 5122/P.L. 109-364 of October 17, 2006) expressed the sense of
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:
(continued...)
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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. To help cover cost growth on the ship, the ship received an
additional $1,374.9 million in FY2014-FY2016 in FY2015 in so-called cost-to-complete
procurement funding. The Navy’s proposed FY2017 budget does not request any additional
funding for the ship. The ship is scheduled for delivery to the Navy in late August or early
September 2016. It will likely be commissioned some months after that.
Figure 1. Navy Illustration of CVN-78

Source: Navy image accessed at http://www.navy.mil/management/photodb/photos/060630-N-0000X-001.jpg on
April 20, 2011.
CVN-79
CVN-79, which was named for President John F. Kennedy on May 29, 2011,5 was procured in
FY2013. The Navy’s proposed FY2017 budget estimates the ship’s procurement cost at $11,398.0
million (i.e., about $11.4 billion) in then-year dollars. The ship received advance procurement
funding in FY2007-FY2012, and the Navy plans to fully fund the ship in FY2013-FY2018 using

(...continued)
Background for Congress, by Ronald O'Rourke.
5 See “Navy Names Next Aircraft Carrier USS John F. Kennedy,” Navy News Service, May 29, 2011, accessed online
on June 1, 2011 at http://www.navy.mil/search/display.asp?story_id=60686. See also Peter Frost, “U.S. Navy’s Next
Aircraft Carrier Will Be Named After The Late John F. Kennedy,” Newport News Daily Press, May 30, 2011. CVN-79
is the second ship to be named for President John F. Kennedy. The first, CV-67, was the last conventionally powered
carrier procured for the Navy. CV-67 was procured in FY1963, entered service in 1968, and was decommissioned in
2007.
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congressionally authorized six-year incremental funding. The Navy’s proposed FY2017 budget
requests $1,291.8 million in procurement funding for the ship. The ship is scheduled for delivery
to the Navy in June 2022.
CVN-80
CVN-80, which was named Enterprise on December 1, 2012,6 is scheduled to be procured in
FY2018. The Navy’s proposed FY2017 budget estimates the ship’s procurement cost at $12,900.0
million (i.e., $12.9 billion) in then-year dollars. The Navy wants to use AP funding for the ship
FY2016 and FY2017, and then fully fund the ship in FY2018-FY2023 using congressionally
authorized six-year incremental funding. The Navy’s proposed FY2017 budget requests $1,370.8
million in AP funding for the ship.
CVN-81
CVN-81 is scheduled to be procured in FY2023. Under current plans, the Navy would use AP
funding for the ship in FY2021 and FY2022, and then fully fund the ship in FY2023-FY2028
using congressionally authorized six-year incremental funding. The Navy’s FY2017 budget
submission programs the initial increment of AP funding for the ship in FY2021.
Program Procurement Funding
Table 1 shows procurement funding for CVNs 78, 79, 80, and 81 through FY2021.



6 The Navy made the announcement of CVN-80’s name on the same day that it deactivated the 51-year-old aircraft
carrier CVN-65, also named Enterprise. (“Enterprise, Navy’s First Nuclear-Powered Aircraft Carrier, Inactivated,”
Navy News Service, December 1, 2012; Hugh Lessig, “Navy Retires One Enterprise, Will Welcome Another,” Newport
News Daily Press
, December 2, 2012.) CVN-65 was the eighth Navy ship named Enterprise; CVN-80 is to be the
ninth.
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Table 1. Procurement Funding for CVNs 78, 79, 80, and 81 Through FY2021
(Millions of then-year dollars, rounded to nearest tenth)
FY
CVN-78
CVN-79
CVN-80
CVN-81
Total
FY01
21.7 (AP)
0
0
0
21.7
FY02
135.3 (AP)
0
0
0
135.3
FY03
395.5 (AP)
0
0
0
395.5
FY04
1,162.9 (AP)
0
0
0
1,162.9
FY05
623.1 (AP)
0
0
0
623.1
FY06
618.9 (AP)
0
0
0
618.9
FY07
735.8 (AP)
52.8 (AP)
0
0
788.6
FY08
2,685.0 (FF)
123.5 (AP)
0
0
2,808.5
FY09
2,684.6 (FF)
1,210.6 (AP)
0
0
3,895.2
FY10
737.0 (FF)
482.9 (AP)
0
0
1,219.9
FY11
1,712.5 (FF)
902.5 (AP)
0
0
2,615.0
FY12
0
554.8 (AP)
0
0
554.8
FY13
0
491.0 (FF)
0
0
491.0
FY14
588.1 (CC)
917.6 (FF)
0
0
1,505.7
FY15
663.0 (CC)
1,219.4 (FF)
0
0
1,882.4
FY16
123.8 (CC)
1,569.6 (FF)
862.4 (AP)
0
2,555.8
FY17 (requested)
0
1,291.8 (FF)
1,370.8 (AP)
0
2,662.6
FY18 (programmed)
0
2,581.7 (FF)
1,779.5 (FF)
0
4,361.2
FY19 (programmed)
0
0
1,650.2 (FF)
0
1,650.2
FY20 (programmed)
0
0
1,734.5 (FF)
0
1,734.5
FY21 (programmed)
0
0
2,126.8 (FF)
968.4 (AP)
3,095.2
FY22-FY23 (projected)
0
0
3,375.8 (FF)
n/a
n/a
Total
12,887.0
11,398.0
12,900.0
n/a
n/a
Source: Table prepared by CRS based on FY2017 Navy budget submission.
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). The $3,375.8 mil ion in ful funding for CVN-80 is
to be divided between FY2022 and FY2023. Under current plans, CVN-81 would be funded with AP funding in
FY2021 and FY2022, and ful funding in FY2023-FY2028.
Changes in Estimated Unit Procurement Costs Since FY2008 Budget
Table 2 shows changes in the estimated procurement costs of CVNs 78, 79, 80, and 81 since the
budget submission for FY2008—the year of procurement for CVN-78.
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Table 2. Changes in Estimated Procurement Costs of CVNs 78, 79, 80, and 81
(As shown in FY2008-FY2017 budgets, in millions of then-year dollars)
Budget
CVN-78
CVN-79
CVN-80
CVN-81
Est.
Est.
Est.
Est.
proc.
Scheduled
proc.
Scheduled
proc.
Scheduled
proc.
Scheduled

cost
FY of proc.
cost
FY of proc.
cost
FY of proc.
cost
FY of proc.
FY08
10,488.9
FY08
9,192.0
FY12
10,716.8
FY16
n/a
FY21
FY09
10,457.9
FY08
9,191.6
FY12
10,716.8
FY16
n/a
FY21
FY10
10,845.8
FY08
n/aa
FY13b
n/aa
FY18b
n/a
FY23
FY11
11,531.0
FY08
10,413.1
FY13
13,577.0
FY18
n/a
FY23
FY12
11,531.0
FY08
10,253.0
FY13
13,494.9
FY18
n/a
FY23
FY13
12,323.2
FY08
11,411.0
FY13c
13,874.2
FY18c
n/a
FY23
FY14
12,829.3
FY08
11,338.4
FY13
13,874.2
FY18
n/a
FY23
FY15
12,887.2
FY08
11,498.0
FY13
13,874.2
FY18
n/a
FY23
FY16
12,887.0
FY08
11,347.6
FY13
13,472.0
FY18
n/a
FY23
FY17
12,887.0
FY08
11,398.0
FY13
12,900.0
FY18
n/a
FY23
Annual % change:
FY08 to FY09
-0.3

0%

0%

n/a

FY09 to FY10
+3.7

n/a

n/a

n/a

FY10 to FY11
+6.3

n/a

n/a

n/a

FY11 to FY12
0%

-1.5%

-0.1%

n/a

FY12 to FY13
+6.9%

+11.3%

+2.8%

n/a

FY13 to FY14
+4.1%

-0.6%

0%

n/a

FY14 to FY15
+0.5%

+1.4%

0%

n/a

FY15 to FY16
0%

-1.3%

-2.9%

n/a

FY16 to FY17
0%

+0.4%

-4.2%

n/a

Cumulative % change through FY17
Since FY08
+22.9%

+24.0%

+20.4%

n/a

(CVN-78 year
of proc.)
Since FY13
+4.6%

-0.1%

-7.0%

n/a

(CVN-79 year
of proc.)
Source: Table prepared by CRS based on FY2008-FY2017 Navy budget submissions.
a. n/a means not available; the FY2010 budget submission did not show estimated procurement costs for
CVNs 79 and 80.
b. The FY2010 budget submission did not show scheduled years of procurement for CVNs 79 and 80; the
dates shown here for the FY2010 budget submission are inferred from the shift to five-year intervals for
procuring carriers that was announced by Secretary of Defense Gates in his April 6, 2009, news conference
regarding recommendations for the FY2010 defense budget.
c. Although the FY2013 budget did not change the scheduled years of procurement for CVN-79 and CVN-80
compared to what they were under the FY2012 budget, it lengthened the construction period for each ship
by two years (i.e., each ship is scheduled to be delivered two years later than under the FY2012 budget).
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.
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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).
Section 122 of the FY2016 National Defense Authorization Act (S. 1356/P.L. 114-92 of
November 25, 2015) further amended the cost cap for the CVN-78 program to provide a revised
cap of $11,398.0 million for each follow-on ship in the program, plus adjustment for inflation and
other factors, and with a new provision stating that, if during construction of CVN–79, the Chief
of Naval Operations determines that measures required to complete the ship within the revised
cost cap shall result in an unacceptable reduction to the ship’s operational capability, the
Secretary of the Navy may increase the CVN–79 cost cap by up to $100 million (i.e., to $11.498
billion). If such an action is taken, the Navy is to adhere to the notification requirements specified
in the cost cap legislation.
Section 128 of H.R. 1735 states:
SEC. 128. Limitation on availability of funds for U.S.S. John F. Kennedy (CVN–79).
(a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise
made available for fiscal year 2016 for procurement for the U.S.S. John F. Kennedy
(CVN–79), $100,000,000 may not be obligated or expended until the date on which the
Secretary of the Navy submits to the congressional defense committees the certification
under subsection (b)(1) or the notification under paragraph (2) of such subsection, as the
case may be, and the reports under subsections (c) and (d)....
(c) Report on costs relating to CVN–79 and CVN–80.—
(1) IN GENERAL.—Not later than 90 days after the date of the enactment of this Act,
the Secretary of the Navy shall submit to the congressional defense committees a report
that evaluates cost issues related to the U.S.S. John F. Kennedy (CVN–79) and the U.S.S.
Enterprise (CVN–80).
(2) ELEMENTS.—The report under paragraph (1) shall include the following:
(A) Options to achieve ship end cost of no more than $10,000,000,000.
(B) Options to freeze the design of CVN–79 for CVN–80, with exceptions only for
changes due to full ship shock trials or other significant test and evaluation results.
(C) Options to reduce the plans cost for CVN–80 to less than 50 percent of the CVN–79
plans cost.
(D) Options to transition all non-nuclear Government-furnished equipment, including
launch and arresting equipment, to contractor-furnished equipment.
(E) Options to build the ships at the most economic pace, such as four years between
ships.
(F) A business case analysis for the Enterprise Air Search Radar modification to CVN–79
and CVN–80.
(G) A business case analysis for the two-phase CVN–79 delivery proposal and impact on
fleet deployments.
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Issues for Congress
FY2017 Funding Request
One issue for Congress is whether to approve, reject, or modify the Navy’s FY2017 procurement
and advance procurement (AP) funding requests for the CVN-78 program. In assessing this
question, Congress may consider various factors, including whether the Navy has accurately
priced the work to be funded in FY2017.
Potential for Combined Material Purchase for CVNs 80 and 81
Another potential issue for Congress is whether to provide advance procurement (AP) funding in
FY2017 for the purchase of materials for CVN-81, so as to enable a combined purchase of
materials for CVN-80 and CVN-81. The Navy’s proposed FY2017 budget does not request any
AP funding for the purchase of materials for CVN-81; as shown in Table 1, the Navy projects
that the initial increment of AP funding for CVN-81 will be requested for FY2021.
Supporters of providing funding in FY2017 for the purchase of materials for CVN-81 could argue
that doing so would increase economies of scale in the procurement of materials for the two
ships, reducing the costs of these materials (and thus the combined procurement cost of the two
ships) by potentially hundreds of millions of dollars. They could also argue that purchasing
materials for CVN-81 would send a signal to industry that the government is committed to
procuring CVN-81, which could give HII/NNS and CVN-78 class component manufacturers the
confidence needed to make investments for optimizing their work forces and capital plants for
building and making components for CVN-81, which in turn might further reduce the cost of
CVN-81.
Opponents of providing funding in FY2017 for the purchase of materials for CVN-81 could argue
that the resulting savings in materials costs for CVN-80 and CVN-81, when calculated on a net
present value (NPV) basis (i.e., when calculated so as to capture the time value of money), are
relatively small, and would consequently provide a relatively low return on the investment that
would be made by providing the additional FY2017 funding. They could also argue that
providing this funding could result in reductions in funding for other Navy or DOD programs that
are of higher priority or which would provide a higher return on investment.
A March 18, 2016, press report states:
The Aircraft Carrier Industrial Base Coalition [ACIBC] has asked lawmakers for “design
for affordability” research and development dollars to reduce the cost of building carriers
and for advance procurement funding for a block buy of CVN-80 and 81 materials.
The organization, and employees of companies from all tiers of the aircraft carrier supply
chain, made five requests during a two-day visit to Capitol Hill, which included private
meetings with lawmakers and an open-mic breakfast during which a dozen congressmen
expressed support for aircraft carriers and the companies that build them....
The dual-ship buy is one of the five ACIBC talking points for this year’s event. Coalition
chairman Richard Giannini told USNI News at the breakfast that the organization is
asking for $293 million to be pulled forward into the Fiscal Year 2017 budget to support
advance procurement for both CVN-80, the future Enterprise, and 81.
That will help us to consolidate the buying efforts,” said Giannini, who is also president
and CEO of Milwaukee Valve Company.
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“They’re going to start with this first block on the real long lead time stuff, the bigger
equipment, and then over the next several years we’ll do the same thing with the
suppliers that have shorter lead times. And what that will do is save about $400 to $500
million off the cost of the carrier.”
The group is also asking for $20 million in research in development money for a “design
for affordability” initiative, which aims to find more efficient ways to build the ship. A
similar effort for the Virginia-class attack submarine program saw a five-to-one return on
investment, he said.7
The possibility of a combined materials purchase for CVN-80 and CVN-81 was discussed at a
February 25, 2015, hearing on Department of the Navy acquisition programs before the Seapower
and Projection Forces subcommittee of the House Armed Services Committee. At this hearing,
the following exchange occurred:
REPRESENATIVE WITTMAN (continuing):
Secretary Stackley, traditionally, as you look at aircraft carrier advice, we've done them
in two-ship procurements....8
We've seen with Arleigh Burke-class destroyers as we purchase ships in groups [i.e.,
under multiyear procurement contracts], we've seen about 15 percent savings when we do
that just because of certainties especially for our suppliers for those ships especially
aircraft carriers.
Is there any consideration given to grouping advance procurement on CVN 80 and CVN
81...?
SEAN STACKLEY, ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH,
DEVELOPMENT, AND ACQUISITION:
Let me start with the advance procurement for CVN 80 and CVN 81. There's strong
argument for why that makes great sense. When you're procuring an aircraft carrier about
once every five years and you're relying on a very unique industrial base to do that what
you don't want to do is go through the start-stop-start-stop cycle over a stretched period
of time and that's a big cost impact.
But the challenge is by the same token, the build cycle for our carrier is greater than 10
years. So CVN 79, for example, she started her advance procurement in [FY]2009 and
then she will be delivering to the Navy in 2022. So that's a 13-year period.
So when you talk about doubling down and buying material to support two carriers five
years apart that have a 13-year build span, you're trying to buy material as much as 18
years ahead of when the carrier went through the fleet.
So it's a—it makes great sense looking at just from the program's perspective on why we
want to do that to drive the cost of the carrier down, there's risk associated with things
like not necessarily obsolescence but change associated with the carrier because the threat
changes and that brings change.
And then the investment that far in advance when the asset actually interests the fleet. As
the acquisition guy, I will argue for why we need to do that but getting through --
carrying that argument all the way through to say that we're going to take the [CVN] 80
which is in [FY]2018 ship, the [CVN] 81 which is at [sic:an] [FY]2023 ship, buy material

7 Megan Eckstein, “Industry Pushing Congress for CVN-80 and 81 Block Buy, Research for Shipbuilding Efficiency,”
USNI News, March 18, 2016.
8 This appears to be a reference to the two-ship aircraft carrier buys of FY1983 (CVNs 72 and 73) and FY1988 (CVNs
74 and 75).
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early for that 2023 ship delivering to the Navy in the mid 2030s. That's going to be a
hard—it's going to be hard for me to carry the day in terms of our budget process.
WITTMAN:
So we have to have the compelling case for the specific things that from industrial base
perspective from a move the needle from a cost perspective justify the combined buys of
[CVN] 80 and [CVN] 81 together.
Well, it seems like even if the scale is an issue as far as how much you've have to expand
to do that and manage that within the budget, you could at least then identify those
critical suppliers and look for certainty to make sure that they can continue providing
those specialty parts and if you can at least pair it down, again, at a critical mass where
you can demonstrate economies scale saving that you get at least say, these are the areas
we need to maintain this industrial base especially for small scale suppliers that rely on
certainty to continue that effort.
So have you all given any thoughts to be able to scale at least within that area maybe not
to get 15 percent savings but still create certainty, make sure the suppliers are there but
also gain saving.
STACKLEY:
Yes, sir. We have a very conservative effort going on for the Navy and Newport News
[Shipbuilding] on all things cost related to the CVN 78 class for all the right reasons. We
are looking ahead at [CVN] 80 which is a 2016— the advance procurement starts in 2016
for the [CVN] 80, most of that could be nuclear material.
But Newport News [Shipbuilding] has bought the initiative to the table in terms of
combined buys from material and now we have to sort out can we in fact come up with
the right list of material that make sense to buy early, to buy combined, to get the savings
and not just savings people promising savings in the (inaudible) but to actually to be able
to book the savings so we can drive down the cost to those carriers.
So we are—I would say that we're working with industry on that. We've got a long way
to go to be able to carry the day inside the budget process. First inside the building and
then again, I will tell you, we're going to have some challenges convincing some folks on
the Hill that this makes sense to invest this early in the future aircraft carrier.9
Proposal to Deactivate Carrier Air Wing
Another aircraft carrier-related oversight issue for Congress for FY2017 is whether to approve,
reject, or modify the Navy’s FY2017 budget submission to deactivate a carrier air wing.
Implementing this proposal would reduce the number of carrier air wings from 10 to 9, which
would not be consistent with the above-noted legislative provision regarding the number of
carrier air wings that has been codified at 10 U.S.C. note. The Navy, as part of its proposal to
deactivate the air wing, may seek legislative relief from this provision.
In recent years, the number of carrier air wings has usually been one less than the number of
carriers—a difference intended to account for the fact that in recent years, one carrier typically
has been unavailable due to being in a lengthy mid-life refueling overhaul, known as a refueling
complex overhaul (RCOH). Since, as noted earlier, the commissioning into service of the Gerald

9 Source: transcript of hearing. Earlier versions of this CRS report discussed the possibility for reducing the
procurement costs of CVN-79 and CVN-80 through the use of a block buy of the two ships. See also Lara Seligman
and Marjorie Censer, “Huntington Ingalls Touts Cost Savings On CVN-79, Pushes Two-Ship Buy,” Inside the Navy,
June 15, 2015.
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R. Ford is to bring the Navy’s carrier force back to 11 ships, deactivating a carrier air wing would
mean that the number of carrier air wings would now be two less than the number of carriers.
As shown in Table 3, the Navy estimates that deactivating the air wing would save a net $926
million over the five-year period FY2017-FY2021. Stated the other way, this is the funding that
would need to be added back to the Navy’s budget to preserve the air wing during this five-year
period.
Table 3. Estimated Net Savings of Deactivating Carrier Air Wing
Millions of dollars, rounded to nearest tenth
Appropriation account
FY17
FY18
FY19
FY20
FY21
Total
Operation and maintenance, Navy (OMN)
85.5
89.1
106.6
111.7
73.4
466.3
Military Personnel, Navy (MPN)
46.1
94.1
96.2
98.5
101.1
436.0
Defense Health Agency—Navy (DHAN)
2.3
4.9
5.2
5.5
5.8
23.7
TOTAL
134.0
188.1
208.0
215.7
180.3
926.0
Source: Table prepared by CRS, based on data received from Navy Office of Legislative Affairs, March 15, 2006.
Notes: Totals may not add due to rounding. DHAN is the Navy’s acronym for its Medicare Eligible Retiree
Health Care Fund account.
A Navy point paper about the proposal to deactivate the air wing, organized in a question-and-
answer format, states:
Q: Why was the decision made to deactivate the 10th CVW?
A: The requirement for 10 CVWs was reassessed in the Navy’s PB17 budget [President’s
budget for FY2017—the Navy’s proposed FY2017 budget] for a number of reasons
including efficiencies gained through implementation of the Optimized Fleet Response
Plan [the Navy’s plan for managing ship operational cycles and deployments], the
predictability of aircraft carrier CVN maintenance schedules and deliveries, increasing
readiness of carrier air wing squadrons through all phases of training, and fiscal
constraints. We continue to assess our requirements, balancing today’s need with future
priorities.
Q: Will this cause increased stress on the force?
A: No. The Navy is committed to easing the transition for our affected personnel while
maintaining ability to meet future requirements. The Navy continually assesses and
accounts for risk by balancing today’s need with all future operational priorities and
requirements through 2025.
Q: What happens to our ability to surge our carrier air wings on short notice if the
need arose?

A: The Navy will be able to meet the CVW surge requirement as planned for within the
OFRP cycle.
Q: What’s the cost savings of deactivation the 10th CVW?
A: The Navy performed a cost benefit analysis and expects a savings of $926M [million]
across the Future Years Defense Plan [FY2017-FY2021], based on anticipated
operational requirements.
Q: When will this proposal go into effect?
A: The units will begin deactivation starting October 2016.
Q: What does a current operational carrier air wing consist of?
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A: A carrier air wing consists of one fully staffed headquarters, four strike fighter
squadrons (VFA or VMFA; 44 F/A-18A/C/E/F aircraft), one airborne early warning
squadron (VAW; four E-2C or five E-2D aircraft), one electronic warfare squadron
(VAQ; five or six EA-18G aircraft), one helicopter sea combat squadron (HSC; eight
MH-60S aircraft), one helicopter maritime strike squadron (HSM; 11 MH-60R aircraft),
one carrier onboard delivery detachment (VRC; two C-2A aircraft).
Q: What squadrons will be deactivated?
A: The units the Navy proposed for deactivation are:
-CVW-14 staff (NAS [Naval Air Station] Lemoore).
-VFA-15 (NAS Oceana) oldest legacy F/A 18C squadron. This removes the requirement
to move a squadron from Oceana to Lemoore in 2017 as was originally planned.
-VAQ 134 (NAS Whidbey Island) this squadron is being transitioned to become an
expeditionary Growler squadron and is being funded with PB-14. This alleviates the
requirement to stand up a new expeditionary squadron.
-VAW-112 (NAS Pt. Mugu) identified as the best squadron based on time in the training
cycle and proposed transition to E-2D.
-HSC-15 (NAS North Island) identified as best squadron based on time in the training
cycle.
-HSM-76 (NAS Jacksonville) will not stand up, it was funded in FY-17 (part of PB-16).
Q: How were the proposed squadrons chosen?
A: CNAF [Commander, Naval Air Forces] conducted an extensive review of operational
squadrons and units to determine which assets should be deactivated while meeting all
mission requirements. Considerations included: when squadrons are scheduled to
transition to a new airframe, where the squadron will be in their training cycle, as well as
trying to balance the impacts on geographic locations.
Q: What will happen to the aircraft from the eliminated squadrons?
A: Where applicable, the aircraft will be redistributed within existing squadrons in order
to support enduring Fleet requirements.
Q: What will happen to the Sailors from the deactivated squadrons?
A: As with any deactivation, the Sailors assigned to VFA-15, HSC-15 and VAW-112
will be reassigned to other operational billets and requirements. With the introduction of
a new distribution system for our enlisted Sailors, they will be re-distributed within the
Type Model Series [of aircraft] they were trained in. There would a gradual decrease in
the number of Sailors assigned to the squadrons (i.e. as sailors detach, they would not be
replaced) until the units are officially disestablished. Careful planning has been done to
ensure minimal impact on our personnel.
Q: Will air wings have a sufficient buffer to maintain, train and deploy with the
deactivation of the 10th CVW?

A: Yes. The Navy’s proposal alleviates excessive time between deployments for carrier
air wings while improving warfighting readiness posture across the force. Our forces will
remain healthy and ready to provide presence to ensure security and stability in the
world.
Q: Won’t the aircraft in remaining air wings be used at a higher rate increasing the
stress on the force?

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A: Readiness requirements will not change for the remaining squadrons during their
training and readiness cycles. The level loading of air wings to carriers provides
squadrons a more stable and predictable cycle.
Q: What happens when USS Gerald R. Ford (CVN 78) and USS John F. Kennedy
(CVN 79) come online?

A: The proposed plan matches the number of complete carrier air wings to the number of
operationally available carriers (nine) through 2025. This accounts for one carrier in
refueling and complex overhaul (RCOH) and one to two carriers in major scheduled
maintenance periods. The Navy will continue to assess requirements based on Global
Force Management Allocation Plan (GFMAP) changes in coming years.
Q. What do you mean by deactivation, how is that different from decommissioning?
A. Deactivation allows the administrative codes within our personnel and data systems to
remain in a holding status, while disestablishment or decommissioning is more final and
requires historical archiving of the unit. If requirements change in the future and we need
to reactivate a 10th air wing, it will require a less rigorous administrative process.10
Potential oversight issues for Congress include the following:
 The Navy states that the proposal to deactivate the carrier air wing “accounts for
one carrier in refueling and complex overhaul (RCOH) and one to two carriers in
major scheduled maintenance periods.” Will this be a sustained higher level of
carrier maintenance than in recent previous years? If not, why did the Navy not
propose to deactivate the air wing until now?
 What impact, if any, would deactivating the carrier air wing have on operational
risk in combat situations, particularly in a scenario of overlapping major regional
contingencies?
 If Congress were to provide the additional funding needed to retain the air wing
without reducing funding for other Navy programs, would the Navy prefer to
retain the air wing?
 If the next Administration, which takes office in January 2017 (i.e., in the fourth
month of FY2017) were to decide that it wanted to retain rather than deactivate
the air wing, perhaps as part of a plan to enlarge the size of the Navy, how easy
would it be to reverse early FY2017 actions to deactivate the air wing, and how
would the costs of stopping and then reversing a plan to deactivate the air wing
compare with the costs of retaining the air wing during FY2017?
Cost Growth and Managing Costs Within Program Cost Caps
For the past several years, cost growth in the CVN-78 program, Navy efforts to stem that growth,
and Navy efforts to manage costs so as to stay within the program’s cost caps have been
continuing oversight issues for Congress on the CVN-78 program.11 As shown in Table 2, the

10 Source: Email received by CRS from Navy Office of Legislative Affairs, March 14, 2016.
11 The Congressional Budget office (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
(continued...)
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estimated procurement costs of CVNs 78, 79, and 80 have grown 22.9%, 24.0%, and 20.4%,
respectively, since the submission of the FY2008 budget. Cost growth on CVN-78 required the
Navy to program $1,374.9 million in cost-to-complete procurement funding for the ship in
FY2014-FY2016 (see Table 1). As also shown in Table 2, however,
 while the estimated cost of CVN-78 grew considerably between the FY2008
budget (the budget in which CVN-78 was procured) and the FY2014 budget, it
has remained stable in the FY2015, FY2016, and FY2017 budgets;
 while the estimated cost of CVN-79 grew considerably between the FY2008
budget and the FY2013 budget (in part because the procurement date for the ship
was deferred by one year in the FY2010 budget),12 it has fluctuated a bit but
remained more or less stable since the FY2013 budget; and
 while the estimated cost of CVN-79 grew considerably between the FY2008
budget and the FY2011 budget (in part because the procurement date for the ship
was deferred by two years in the FY2010 budget),13 it has decreased a bit since
the FY2011 budget.
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.

(...continued)
estimate would be exceeded. (Congressional Budget Office, Resource Implications of the Navy’s Fiscal Year 2009
Shipbuilding Plan, June 9, 2008, p. 20.) GAO reported in August 2007 that:
Costs for CVN 78 will likely exceed the budget for several reasons. First, the Navy’s cost estimate,
which underpins the budget, is optimistic. For example, the Navy assumes that CVN 78 will be
built with fewer labor hours than were needed for the previous two carriers. Second, the Navy’s
target cost for ship construction may not be achievable. The shipbuilder’s initial cost estimate for
construction was 22 percent higher than the Navy’s cost target, which was based on the budget.
Although the Navy and the shipbuilder are working on ways to reduce costs, the actual costs to
build the ship will likely increase above the Navy’s target. Third, the Navy’s ability to manage
issues that affect cost suffers from insufficient cost surveillance. Without effective cost
surveillance, the Navy will not be able to identify early signs of cost growth and take necessary
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.)
12 Deferring the ship’s procurement from FY2012 to FY2013 put another year of inflation into the ship’s estimated cost
in then-year dollars (which are the type of dollars shown in Table 2), and may have reduced production learning curve
benefits in shifting from production of CVN-78 to production of CVN-79.
13 Deferring the ship’s procurement from FY2016 to FY2018 put additional years of inflation into the ship’s estimated
cost in then-year dollars (which are the type of dollars shown in Table 2), and may have reduced production learning
curve benefits in shifting from production of CVN-79 to production of CVN-80.
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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., the amended procurement cost cap for the program], for which the contractor is
responsible.
Sources of risk of cost growth on CVN-78 in the past have included, among other things, certain
new systems to be installed on CVN-78 whose development, if delayed, could delay the
completion of the ship. These systems include a new type of aircraft catapult called the
Electromagnetic Launch System (EMALS), a new aircraft arresting system called the Advanced
Arresting Gear (AAG), and the ship’s primary radar, called the Dual Band Radar (DBR).
Congress has followed these and other sources of risk of cost growth for years. The Navy in
March 2015 stated that of these sources of risk of cost growth, the one that it is currently
watching the most closely is the AAG, because of the discovery in testing of a problem that
required the redesign of key component of the AAG called the water twister. As a result of the
need to redesign the water twister, the Navy says, the effort to complete testing of the AAG has
fallen about two years behind schedule, adding risk to the Navy’s ability to meet its delivery date
for CVN-78.14
More generally, the Navy states, now that construction of CVN-78 is mostly complete,15 the
primary remaining risk of further cost growth on CVN-78 relates to the testing of equipment that
has been installed on the ship. If that testing reveals problems in the performance of equipment,
fixing those problems may add to the ship’s cost.
Navy officials have stated that they are working to control the cost of CVN-79 by equipping the
ship with a less expensive primary radar,16 by turning down opportunities to add features to the
ship that would have made the ship more capable than CVN-78 but would also have increased
CVN-79’s cost, and by using a build strategy for the ship that incorporates improvements over the
build strategy that was used for CVN-78. These build-strategy 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;

14 See, for example, Sam LaGrone, “NAVSEA: Advanced Arresting Gear Design Flaw Delayed Testing Schedule Two
Years, Adds Risk to On Time Ford Carrier Delivery,” USNI News, March 19, 2015; Mike McCarthy, “New Landing
System Biggest Challenge To Ford’s Delivery Date, Admiral Says,” Defense Daily, March 20, 2015: 1-2.
15 The Navy states that construction of CVN-78 was about 96% complete as of February 25, 2015; see Statement of the
Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and Acquisition), and Vice
Admiral Joseph P. Mulloy, Deputy Chief of Naval Operations for Integration of Capabilities and Resources, and
Lieutenant General Robert S. Walsh, Deputy Commandant, Combat Development and Integration & Commanding
General, Marine Corps Combat Development Command, before the Subcommittee on Seapower and Projection Forces
of the House Armed Services Committee on Department of the Navy Seapower and Projection Forces Capabilities,
February 25, 2016, p. 9.
16 See, for example, Megan Eckstein, “PEO Carriers: CVN-79 Will Have a New Radar, Save $180M Compared to
[CVN-78’s] Dual Band Radar,” USNI News, March 17, 2015; Christopher P. Cavas, “Dual Band Radar Swapped Out
In New Carriers,” Defense News, March 17, 2015; Christopher P. Cavas, “New US Carrier Radar Enters the Picture,”
Defense News, March 23, 2015.
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 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 Navy states that
The Navy is committed to delivering the lead ship of the class, Gerald R Ford (CVN 78)
within the $12.887 billion congressional cost cap. Sustained efforts to identify cost
reductions and drive improved cost and schedule performance on this first-of-class
aircraft carrier have resulted in highly stable cost performance since 2011. Based on
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 to reduce the cost to build the ship. The benefits of these changes in
build strategy and resolution of first-of-class impacts experienced on CVN 78 are evident
in early production labor metrics on CVN 79. These efforts are ongoing and additional
process improvements continue to be identified.
Alongside the Navy’s efforts to reduce the cost to build CVN 79, the FY 2016 National
Defense Authorization Act reduced the cost cap for follow ships in the CVN 78 class
from $11,498 million to $11,398 million. To this end, the Navy has further emphasized
stability in requirements, design, schedule, and budget, in order to drive further
improvement to CVN 79 cost. The FY 2017 President’s Budget requests funding for the
most efficient build strategy for this ship and we look for Congress’ full support of this
request to enable CVN 79 procurement at the lowest possible cost....
... The Navy will deliver the CVN 79 within the cost cap using a two-phased strategy
wherein select ship systems and compartments that are more efficiently completed at a
later stage of construction - to avoid obsolescence or to leverage competition or the use of
experienced installation teams - will be scheduled for completion in the ship’s second
phase of production and test. Enterprise (CVN 80) began construction planning and long
lead time material procurement in January 2016 and construction is scheduled to begin in
2018. The FY 2017 President’s Budget request re-phases CVN 80 funding to support a
more efficient production profile, critical to performance, below the cost cap. CVN 80
planning and construction will continue to leverage class lessons learned to achieve cost
and risk reduction, including efforts to accelerate production work to earlier phases of
construction, where work is more cost efficient.17
For additional background information on cost growth in the CVN-78 program, Navy efforts to
stem that growth, and Navy efforts to manage costs so as to stay within the program’s cost caps,
see Appendix A.

17 Statement of the Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition), and Vice Admiral Joseph P. Mulloy, Deputy Chief of Naval Operations for Integration of Capabilities
and Resources, and Lieutenant General Robert S. Walsh, Deputy Commandant, Combat Development and Integration
& Commanding General, Marine Corps Combat Development Command, before the Subcommittee on Seapower and
Projection Forces of the House Armed Services Committee on Department of the Navy Seapower and Projection
Forces Capabilities, February 25, 2016, pp. 8-9.
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Issues Raised in January 2016 DOT&E Report
Another oversight issue for Congress concerns CVN-78 program issues raised in a January 2016
report from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual
report for FY2015. The report stated the following in its section on the CVN-78 program:
Assessment
Test Planning
• A TEMP [Test and Evaluation master Plan] 1610 revision is under development to
address problems with the currently-approved TEMP 1610, Revision B. The Navy
submitted a revised TEMP 1610, Revision C that was disapproved on February 2, 2015,
because the Navy removed the previously (2007) agreed upon FSST [Full Ship Shock
Trial]. However, Revision C improved integrated platform-level developmental testing,
reducing the likelihood that platform-level problems will be discovered during IOT&E
[Initial Operational Test and Evaluation]. In addition, the Program Office is in the
process of refining the post-delivery schedule to further integrate testing. With the
Deputy Secretary of Defense’s direction to the Navy to conduct the FSST before the
initial deployment on CVN 78, the Navy desires to update TEMP 1610, Revision C.
DOT&E has not seen the Navy’s revision plan and given the extent of the updates
required may require a Revision D to TEMP 1610.
• The current state of the Navy’s VCVN [Virtual Carrier] model does not fully provide
for an accurate accounting of SGR [sortie generation rate] due to a lack of fidelity
regarding manning and equipment/ aircraft availability. Due to these limitations, in June
2015, COTF [Commander, Operational Test and Evaluation Force] rescinded the use of
VCVN for extrapolating live test results. The Navy has not stated how it intends to
extrapolate the live results to the 35‑day design reference mission on which the SGR
requirement is based. DOT&E agrees with the COTF decision. An alternative SGR
modeling and simulation approach should be developed by the Navy.
• The schedule to deliver the ship has slipped from September 2015 to April 2016. On
September 22, the Navy announced that sea trials would be delayed six to eight weeks
due to slower than expected progress in the shipboard test program. The ship’s post-
shipyard shakedown availability will follow delivery in late 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 is scheduled to begin in September
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, AAG, DBR, 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 are being tested
for the first time in their shipboard configurations aboard CVN 78. Reliability estimates
derived from test data for EMALS and AAG are discussed below. For DBR and AWE,
reliability data collection has not yet been reported to DOT&E, but is expected to start at
the completion of shipboard installation and checkout. Only engineering reliability
estimates have been provided to date.
• CVN 78 will include a new Heavy UNREP [underway replenishment] system that will
transfer cargo loads of up to 12,000 pounds. Currently, only one resupply ship has Heavy
UNREP on one station. The Navy plans to install a single Heavy UNREP station on each
additional resupply ship beginning in FY21 with [the] T-AO(X) [oiler].
EMALS
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• 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, present limitations on F/A-18E/F and EA-18G configurations, as well as the
system’s reliability remains uncertain.
• With the current limitations on EMALS for launching the F/A‑18E/F and EA-18G in
operational configurations (i.e., during test launches with wing-mounted 480-gallon
EFTs, the stress limits of the aircraft were exceeded), CVN 78 will be able to fly F/A-
18E/F and EA-18G, but not in the configuration that is required for normal operations. If
uncorrected, this problem would preclude normal employment from CVN‑78. Presently,
this configuration substantially reduces the operational effectiveness in of F/A-18E/F and
EA-18G flying combat missions from CVN 78. The Navy has conducted deadload
launches for changes to the EMALS Control Software to correct this issue in preparation
for land based aircraft test launches in 3QFY16 [third quarter of FY2016].
• In FY15, the Navy identified an inability to readily electrically isolate EMALS
components to perform concurrent maintenance. For safety of personnel, maintenance
and repair to catapults will likely be limited to non-flight operations periods. It is not
possible to readily electrically isolate equipment during flight operations due to the
shared nature of the Energy Storage Groups (ESGs) and Power Conversion Subsystem
inverters in the four launcher/ three ESG configuration. The primary means of physically
disconnecting major subsystems and the launchers are the Cable Disconnect Units
(CDUs). There is no circuit breaker or switch to secure power to the CDU; CDUs can
only be disconnected by first securing all feeding power, dissipating all stored energy
including spinning down the motor/generators, discharging capacitors, and then unbolting
and removing the bus disconnect links. This provision would prevent certain maintenance
and repair of launcher components while power is present in other components and while
other launchers are conducting flight operations. In contrast, on Nimitz class carriers with
steam catapults, maintenance on non-operating catapults while flight operations are
performed on operating catapults is allowed and routine. The effects on operational
performance of this are unclear, and will depend upon the extent to which EMALS
redundancy permits catapult operations to continue not withstanding component
equipment failures.
• In October 2015, the Navy discovered that one of three PPIS TRs [Prime Power
Interface Subsystems Transformer Rectifiers] had been damaged during shipboard
certification testing. Two of the three TRs are required for normal catapult operations.
The TRs were designed to last the life of the ship. Earlier faults discovered during
developmental testing resulted in stepwise improvements to the PPIS TR design and
construction. This failed TR had one of the four improvements. The PPIS is 130 inches
wide, 74 inches deep, 80 inches high, and weighs over 35,000 pounds. The replacement
PPIS will be shipped to and fault checked at Joint Base McGuire-Dix-Lakehurst, New
Jersey, and then shipped to Newport News, Virginia, for installation on CVN 78. The
removal of the old PPIS, which, due to the size and mass of the PPIS will require cutting
a hole in the ship’s hull, and installation of the new one will take several months, but is
not expected to delay testing or ship’s delivery.
• As of December 2014, the program estimates that EMALS has approximately 340
Mean Cycles Between Critical Failure (MCBCF) in the shipboard configuration, where a
cycle represents the launch of one aircraft. While this estimate is above the re-baselined
reliability growth curve, the re-baselined curve is well below the requirement of 4,166
MCBCF. The failure rate for the last reported MCBCF was 3.7 times higher than should
have been expected at this point in the development. Absent a major redesign, it is
unlikely EMALS will be capable of meeting the requirement of 4,166 MCBCF.
AAG
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• 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 AAG’s
reliability is uncertain. The Program Office redesigned major components that did not
meet system specifications during land-based testing. The Program Office last provided
reliability data in December 2013 and estimated that AAG had approximately 20 Mean
Cycles Between Operational Mission Failure (MCBOMF) in the shipboard configuration,
where a cycle represents the recovery of one aircraft. The requirement is an MCBOMF of
16,500. The Program Office expects to have a reliability estimate for the new design by
the end of 2015. The last reported failure rate was 248 times higher than should have
been expected at this point in the development.
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 DBR testing at Wallops Island is typical
of early developmental testing with the system still in the problem discovery phase.
Current results reveal problems with tracking and supporting missiles in flight, excessive
numbers of clutter/ false tracks, and track continuity concerns. More test-analyze-fix
cycles are necessary for DBR to develop and test fixes so that it can properly perform air
traffic control and engagement support on CVN 78. Previous test results emphasize the
necessity of maintaining a DBR/CVN 78 combat system asset at Wallops Island. The
removal of the MFR and the conclusion of developmental testing was originally
scheduled for 3QFY15, but the Navy decided to extend the Wallops Island testing
through 3QFY16. DOT&E concurs with this schedule change and considers it a
necessary part of delivering a fully-capable combat system in CVN 78.
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, and manning
shortfalls will not affect flight operations. DOT&E plans to assess CVN 78 performance
during IOT&E by comparing it to the SGR requirement as well as to the demonstrated
performance of the Nimitz class carriers.
• During the 2013 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.
Manning
• The latest Navy analysis of manning identified several areas of concern. The Navy has
re-designated some officer rooms as Chief Petty Officer (CPO) berthing spaces to resolve
a shortfall in CPO berthing.
• During some exercises, the berthing capacity for officers and enlisted will be exceeded,
requiring the number of evaluators to be limited or the timeframe to conduct the training
to be lengthened. This shortfall in berthing is further exacerbated by the 246 officer and
enlisted billets (roughly 10 percent of the crew) identified in the Manning War Game III
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as requiring a face-to-face turnover. These turnovers will not all happen at one time, but
will require heavy oversight and will limit the amount of turnover that can be
accomplished at sea and especially during evaluation periods.
• Manning must be supported at the 100 percent level, although this is not the Navy’s
standard practice on other ships and the Navy’s personnel and training systems may not
be able to support 100 percent manning. The ship is extremely sensitive to manpower
fluctuations. Workload estimates for the many new technologies such as catapults,
arresting gear, radar, and weapons and aircraft elevators are not yet well-understood.
Finally, the Navy is considering placing the ship’s seven computer networks under a
single department. Network management and the correct manning to facilitate continued
operations is a concern for a network that is more complex than historically seen on Navy
ships.
LFT&E [Live Fire Test and Evaluation]
• The Navy has made substantial progress on defining the scope of the Total Ship
Survivability Trial and the Analytical Bridge task. While these portions of the LFT&E
Management Plan were adequately defined in the Revision B document, DOT&E
returned the LFT&E Management Plan to the Navy solely on the basis of the FSST on
CVN 79 verses CVN 78. With the Deputy Secretary of Defense’s direction to the Navy to
reinsert the FSST, a revised LFT&E Management Plan is under development.
• CVN 78 has many new critical systems, such as EMALS, AAG, AWE, and DBR 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 is
unknown. Inclusion of data from shock trials early in a program has been an essential
component of building survivable ships. The current state of modeling and component-
level testing are not adequate to identify the myriad of problems that have been revealed
only through full ship shock testing.
• The FSST and component shock qualification test data could affect the design of future
carriers in the class and are critical to the assessment of the CVN 78 survivability against
operationally relevant threats. The FSST is scheduled to occur on CVN 78 in FY19.
Recommendations
• Status of Previous Recommendations. The Navy should continue to address the seven
remaining FY10, FY11, FY13, and FY14 recommendations.
1. Finalize plans that address CVN 78 Integrated Warfare System engineering and ship’s
self-defense system discrepancies prior to the start of IOT&E.
2. 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.
3. Provide scheduling, funding, and execution plans to DOT&E for the live SGR test
event during the IOT&E.
4. 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.
5. Conduct system-of-systems developmental testing to preclude discovery of
deficiencies during IOT&E.
6. 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.
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7. Aggressively fund and address a solution for the excessive EMALS holdback release
dynamics during F/A-18E/F and EA-18G catapult launches with wing-mounted 480-
gallon EFTs.
• FY15 Recommendations. The Navy should:
1. Ensure the continuation of funding and testing of the DBR at Wallops Island through
3QYFY16 address the problems discovered during initial developmental testing.
2. Begin tracking and reporting on a quarterly basis systems reliability for all new
systems but at a minimum for EMALS, AAG, DBR, and AWE.
3. The Navy should ensure the continued funding for component shock qualification of
both government and contractor furnished equipment.
4. Submit a TEMP for review and approval by DOT&E incorporating the Deputy
Secretary’s direction to conduct the FSST before CVN 78’s first deployment.18
Navy Study on Smaller Aircraft Carriers
Another oversight issue for Congress is whether the Navy should shift at some point from
procuring large-deck, nuclear-powered carriers like the CVN-78 class to procuring smaller
aircraft carriers. The issue has been studied periodically by the Navy and other observers over the
years. To cite one example, the Navy studied the question in deciding on the aircraft carrier
design that would follow the Nimitz (CVN-68) class. At a March 18, 2015, hearing on Navy
shipbuilding programs before the Seapower subcommittee of the Senate Armed Services
Committee, the Navy testified that it has initiated a new study on the question.19
Advocates of smaller carriers argue that they are individually less expensive to procure, that the
Navy might be able to employ competition between shipyards in their procurement (something
that the Navy cannot with large-deck, nuclear-powered carriers like the CVN-78 class, because
only one U.S. shipyard, HII/NNS, can build aircraft carriers of that size), and that today’s aircraft
carriers concentrate much of the Navy’s striking power into a relatively small number of
expensive platforms that adversaries could focus on attacking in time of war.
Supporters of large-deck, nuclear-powered carriers argue that smaller carriers, though
individually less expensive to procure, are less cost-effective in terms of dollars spent per aircraft
embarked or aircraft sorties that can be generated, that it might be possible to use competition in
procuring certain materials and components for large-deck, nuclear-powered aircraft carriers, and
that smaller carriers, though perhaps affordable in larger numbers, would be individually less
survivable in time of war than large-deck, nuclear-powered carriers.
At the March 18, 2015, hearing on Navy shipbuilding programs, the following exchange
occurred:
SENATOR ROGER WICKER, CHAIRMAN:
Well, Senator McCain expressed concern about competition. And I think that was with,
in regard to aircraft carriers.
SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE NAVY FOR RESEARCH,
DEVELOPMENT,AND ACQUISITION,

18 Department of Defense, Director, Operational Test & Evaluation, FY2015 Annual Report, January 2016, pp. 185-
188.
19 Spoken testimony of Sean Stackley, Assistant Secretary of the Navy for Research, Development, and Acquisition, in
response to a question from Senator John McCain, as reflected in transcript of hearing.
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Yes, Sir.
WICKER:
Would you care to respond to that?
STACKLEY:
He made a generic comment that we need competition to help control cost in our
programs and we are absolutely in agreement there. With specific regards to the aircraft
carrier, we have been asked and we are following suit to conduct a study to look at
alternatives to the Nimitz and Ford class size and type of aircraft carriers, to see if it make
sense.
We've done this in the past. We're not going to simply break out prior studies, dust them
off and resubmit it. We're taking a hard look to see is there—is there a sweet spot,
something different other than today's 100,000 ton carrier that would make sense to
provide the power projection that we need, that we get today from our aircraft carriers,
but at the same time put us in a more affordable position for providing that capability.
WICKER:
OK. But right now, he's—he's made a correct factual statement with regard to the lack of
competition.
STACKLEY:
Yes, Sir. There is—yes, there is no other shipyard in the world that has the ability to
construct a Ford or a Nimitz nuclear aircraft carrier other than what we have in Newport
News and the capital investment to do that is prohibitive to set up a second source, so
obviously we are—we are content, not with the lack of competition, but we are content
with knowing that we're only going to have one builder for our aircraft carriers.20
On March 20, 2015, the Navy provided the following additional statement to the press:
As indicated in testimony, the Navy has an ongoing study to explore the possible
composition of our future large deck aviation ship force, including carriers. There is a
historical precedent for these type[s] of exploratory studies as we look for efficiencies
and ways to improve our war fighting capabilities. This study will reflect our continued
commitment to reducing costs across all platforms by matching capabilities to projected
threats and Also [sic] seeks to identify acquisition strategies that promote competition in
naval ship construction. While I can’t comment on an ongoing study, what I can tell you
is that the results will be used to inform future shipbuilding budget submissions and
efforts, beyond what is currently planned.21
Section 128 of the FY2016 National Defense Authorization Act (S. 1356/P.L. 114-92 of
November 25, 2015) states:
SEC. 128. Limitation on availability of funds for U.S.S. John F. Kennedy (CVN–79).
(a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise
made available for fiscal year 2016 for procurement for the U.S.S. John F. Kennedy
(CVN–79), $100,000,000 may not be obligated or expended until the date on which the
Secretary of the Navy submits to the congressional defense committees the certification
under subsection (b)(1) or the notification under paragraph (2) of such subsection, as the
case may be, and the reports under subsections (c) and (d)....

20 Transcript of hearing.
21 As printed in Sam LaGrone, “Navy Conducting Alternative Carrier Study,” USNI News, March 23, 2015.
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(d) Report on future development.—
(1) IN GENERAL.—Not later than April 1, 2016, the Secretary of the Navy shall submit
to the congressional defense committees a report on potential requirements, capabilities,
and alternatives for the future development of aircraft carriers that would replace or
supplement the CVN–78 class aircraft carrier.
(2) ELEMENTS.—The report under paragraph (1) shall include the following:
(A) A description of fleet, sea-based tactical aviation capability requirements for a range
of operational scenarios beginning in the 2025 timeframe.
(B) A description of alternative aircraft carrier designs that meet the requirements
described under subparagraph (A).
(C) A description of nuclear and non-nuclear propulsion options.
(D) A description of tonnage options ranging from less than 20,000 tons to greater than
100,000 tons.
(E) Requirements for unmanned systems integration from inception.
(F) Developmental, procurement, and lifecycle cost assessment of alternatives.
(G) A notional acquisition strategy for the development and construction of alternatives.
(H) A description of shipbuilding industrial base considerations and a plan to ensure
opportunity for competition among alternatives.
(I) A description of funding and timing considerations related to developing the Annual
Long-Range Plan for Construction of Naval Vessels required under section 231 of title
10, United States Code.
Legislative Activity for FY2017
Summary of Congressional Action on FY2016 Funding Request
Table 4
summarizes congressional action on the FY2017 procurement and advance procurement
funding request for the CVN-78 program.
Table 4. Congressional Action on FY2017 Funding Request
Millions of dollars, rounded to nearest tenth.
Authorization
Appropriation

Request
HASC
SASC
Conf.
HAC
SAC
Conf.
Procurement
1,291.8
1,291.8
1,291.8

1,271.2
1,275.8

Advance procurement
1,370.8
1,633.8
1,370.8

1,370.8
1,370.8

Source: Table prepared by CRS based on Navy’s FY2017 budget submission and committee and conference
reports.
Notes: HASC is House Armed Services Committee; SASC is Senate Armed Services Committee; HAC is
House Appropriations Committee; SAC is Senate Appropriations Committee; Conf. is conference agreement.
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FY2017 National Defense Authorization Act (H.R. 4909/S. 2943)
House (Committee Report)
The House Armed Services Committee, in its report (H.Rept. 114-537 of May 4, 2016) on H.R.
4909, recommends the funding levels shown in the HASC column of Table 4.
Section 121 of H.R. 4909 as reported states:
SEC. 121. Procurement authority for aircraft carrier programs.
(a) Procurement authority in support of construction of Ford class aircraft carriers.—
(1) AUTHORITY FOR ECONOMIC ORDER QUANTITY.—The Secretary of the Navy
may procure materiel and equipment in support of the construction of the Ford class
aircraft carriers designated CVN–80 and CVN–81 in economic order quantities when
cost savings are achievable.
(2) LIABILITY.—Any contract entered into under paragraph (1) shall provide that any
obligation of the United States to make a payment under the contract is subject to the
availability of appropriations for that purpose, and that total liability to the Government
for termination of any contract entered into shall be limited to the total amount of funding
obligated at time of termination.
(b) Refueling and complex overhaul of Nimitz class aircraft carriers.—
(1) IN GENERAL.—The Secretary of the Navy may carry out the nuclear refueling and
complex overhaul of each of the following Nimitz class aircraft carriers:
(A) U.S.S. George Washington (CVN–73).
(B) U.S.S. John C. Stennis (CVN–74).
(C) U.S.S. Harry S. Truman (CVN–75).
(D) U.S.S. Ronald Reagan (CVN–76).
(E) U.S.S. George H.W. Bush (CVN–77).
(2) USE OF INCREMENTAL FUNDING.—With respect to any contract entered into
under paragraph (1) for the nuclear refueling and complex overhaul of a Nimitz class
aircraft carrier, the Secretary may use incremental funding for a period not to exceed six
years after advance procurement funds for such nuclear refueling and complex overhaul
effort are first obligated.
(3) CONDITION FOR OUT-YEAR CONTRACT PAYMENTS.—Any contract entered
into under paragraph (1) shall provide that any obligation of the United States to make a
payment under the contract for a fiscal year after fiscal year 2017 is subject to the
availability of appropriations for that purpose for that later fiscal year.
Section 122 of H.R. 4909 as reported states:
SEC. 122. Sense of Congress on aircraft carrier procurement schedules.
(a) Findings.—Congress finds the following:
(1) In a report submitted to Congress on March 17, 2015, the Secretary of the Navy
indicated the Department of the Navy has a requirement of 11 aircraft carriers.
(2) In the Congressional Budget Office report titled “An Analysis of the Navy’s Fiscal
Year 2016 Shipbuilding Plan”, the Office stated as follows: “To prevent the carrier force
from declining to 10 ships in the 2040s, 1 short of its inventory goal of 11, the Navy
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could accelerate purchases after 2018 to 1 every four years, rather than 1 every five
years”.
(b) Sense of Congress.—It is the sense of Congress that—
(1) the plan of the Department of the Navy to schedule the procurement of one aircraft
carrier every five years will reduce the overall aircraft carrier inventory to 10 aircraft
carriers, a level insufficient to meet peacetime and war plan requirements; and
(2) to accommodate the required aircraft carrier force structure, the Department of the
Navy should—
(A) begin to program construction for the Ford class aircraft carrier designated CVN–81
in fiscal year 2022; and
(B) program the required advance procurement activities to accommodate the
construction of such carrier.
H.Rept. 114-537 states:
CVN–81 advance procurement
The budget request contained no funds for advance procurement associated with the
CVN–81 Carrier Replacement Program.
The committee believes that the Ford-class carrier replacement program is tracking to
deliver more efficiently with each proceeding aircraft carrier. For example, the committee
is anticipating a savings of over $1.40 billion between CVN–78 and CVN–79. The
committee notes the second year of advance procurement for CVN–80 has been included
in the budget request. While the committee believes that a more efficient learning curve
will be obtained with CVN–80 that will provide more savings, the committee also
believes additional savings could be obtained by procuring economic order quantity
material for CVN–80 and CVN–81.
Therefore, the committee recommends $263.0 million for advance procurement
associated with CVN–81 Carrier Replacement Program in Shipbuilding and Conversion,
Navy, to procure CVN–81 economic order quantity material. (Pages 20-21)
H.Rept. 114-537 also states:
Aircraft carrier design
The budget request [for the Navy’s research and development account] contained $30.1
million in PE [Program Element] 64567N to support improved affordability for new
construction aircraft carriers by providing additional design for affordability support.
The committee supports continued efforts by the Department of the Navy and the
shipbuilder to better manage total ownership costs and reduce manning requirements and
believes additional efforts will result in additional CVN 80/81 cost savings.
The committee recommends $50.1 million, an increase of $20.0 million, in PE 64567N
for new construction aircraft carrier affordability initiatives. (Page 59)
H.Rept. 114-357 also states:
Carrier Air Wing Force Structure
The budget request would deactivate the Navy’s 10th carrier air wing and its associated
squadrons. The committee notes that the Navy wishes to pursue deactivating the 10th
carrier air wing currently assigned to Naval Air Station Lemoore, which is in
contravention to the National Defense Authorization Act for Fiscal Year 2012 (Public
Law 112–81) to maintain 10 carrier air wings and associated headquarters. The
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committee does not believe the Navy has sufficient analysis to support the risk associated
with a reduction from ten to nine carrier air wings.
Therefore, the committee recommends $134.0 million, an increase of $2.3 million, in
PE87732N, and an increase of $131.7 million in Operations and Maintenance, Military
Personnel Navy, Reserve Personnel Navy, and Medicare Eligible Retiree Health Fund
Contribution Reserve Navy, in order to retain the 10th carrier air wing. (Pages 213-214)
A statement of Administration policy regarding H.R. 4909 as reported states:
Reduction in the Number of Navy Carrier Air Wings: The Administration objects to
Carrier Air Wing Restoration in section 4303 [the section with the funding table that
shows the funding that has been added for retaining the air wing in FY2017]. The
elimination of the tenth Carrier Air Wing proposed in the FY 2017 President's Budget
optimizes Carrier Air Wing force structure to meet Global Force Management Allocation
Plan demand, sustains the health and wholeness of Naval Aviation, and generates $926
million in FYDP savings. Additionally, if forced to retain the tenth Carrier Air Wing, the
Navy would require an additional $48 million in FY 2017 for military personnel and an
additional increase of 1,167 in end strength above the objectionable end strength increase
already in the bill.22
House (Floor Consideration)
On May 18, 2016, as part of its consideration of H.R. 4909, the House agreed to by voice vote
H.Amdt. 1038, an en bloc amendment that included, inter alia, amendment 59 printed in H.Rept.
114-571 of May 17, 2016, a rule providing for further consideration of H.R. 4909. The text of the
amendment is as follows:
SEC. 1070. REPORT ON CARRIER AIR WING FORCE STRUCTURE.
Not later than 180 days after the date of the enactment of this Act, the Secretary of
Defense shall submit to Congress a report on the impact of changes to existing carrier air
wing force structure and the impact a potential reduction to 9 carrier air wings would
have on overall fleet readiness if aircraft and personnel were to be distributed throughout
the remaining 9 air wings.
Senate
The Senate Armed Services Committee, in its report (S.Rept. 114-255 of May 18, 2016) on S.
2943, recommends the funding levels shown in the SASC column of Table 4.
Section 123 of S. 2943 as reported states:
SEC. 123. Certification on ship deliveries.
(a) In general.—The delivery of the USS JOHN F. KENNEDY (CVN–79), the USS
ZUMWALT (DDG–1000), and any other new construction ship that employs a multiple
phase delivery scheme shall be deemed to occur at the completion of the final phase of
construction.
(b) Certification requirement.—Not later than January 1, 2017, the Secretary of the Navy
shall certify that ship delivery dates have been adjusted in accordance with subsection (a).
The certification shall include the ship hull numbers and delivery date adjustments. The
adjustments shall be reflected in the budget of the President submitted under section

22 Executive Office of the President, Statement of Administration Policy, H.R. 4909—National Defense Authorization
Act for Fiscal Year 2017
, May 16, 2016, p. 6.
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1105(a) of title 31, United States Code, as well as Department of Defense Selected
Acquisition Reports.
Regarding Section 123, S.Rept. 114-255 states:
Certification on ship deliveries (sec. 123)
The committee recommends a provision that would require the Secretary of the Navy to
deem ship delivery to occur at the completion of the final phase of construction. The
Secretary would be required to submit a certification to the congressional defense
committees not later than January 1, 2017 that certifies ship delivery dates have been
adjusted, including the ship hull numbers and delivery date adjustments. The adjustments
would be reflected in the budget of the President submitted under section 1105(a) of title
31, United States Code, as well as Department of Defense Selected Acquisition Reports.
The committee notes that justification materials, which accompanied the President’s
fiscal year 2016 and 2017 budgets, as well as Department of Defense Selected
Acquisition Reports for the CVN–78 class aircraft carrier program, list the delivery date
of USS John F. Kennedy (CVN–79) as June 2022. However, the Navy plans to deliver
this ship in two phases. Phase I delivery, scheduled to complete in June 2022, will deliver
the ship with full propulsion capability, aircraft launch and recovery systems, and safe to
sail navigation systems. Phase II delivery, scheduled to complete in September 2024, will
add the remaining electronics and ordnance equipment, including the Ship Self-Defense
System, weapons systems, and Enterprise Air Search Radar. The committee believes
CVN–79 delivery should be deemed to occur at the end of Phase II delivery.
Similarly, the committee understands all three ships in the Zumwalt-class will employ a
dual delivery approach with hull, mechanical, and electrical (HM&E) systems delivery at
the shipbuilder in Maine and combat systems activation in California. In the case of USS
Zumwalt (DDG–1000), HM&E delivery is scheduled for 2016 and combat systems
activation is scheduled for 2018. The committee notes the President’s fiscal year 2017
budget lists April 2016 as the delivery date. The committee believes Zumwalt-class
delivery should be deemed to occur at the completion of the dual delivery approach,
following combat systems activation.
The committee is concerned the variance in the Navy’s definition of ship delivery may
obscure oversight of the program’s schedule, including whether or not a project has
breached its threshold delivery date. The committee is also concerned Navy ships are
being delivered in various degrees of completion and then, after a period of availabilities
and shakedowns, possibly several years later, the ship is delivered to the fleet for
operations. CVN–79 and the Zumwalt-class programs illustrate this practice.
Therefore, the committee also directs the Comptroller General of the United States to
submit a report, not later than March 1, 2017, that includes analysis and
recommendations regarding the Navy’s process for fully delivering ships from the time
the Navy takes custody of the vessel until the vessels are fully complete and ready for
operations. This review should examine the Navy’s cost and schedule milestones
throughout this process and how these milestones are reported to decision makers and
oversight agencies. The review should also propose a common definition and criteria for
Navy ship deliveries, including the associated dates. (Pages 9-10)
Section 125 of S. 2943 as reported states:
SEC. 125. Limitation on availability of funds for the Advanced Arresting Gear program.
(a) Limitation on funds.—None of the funds authorized to be appropriated by this Act or
otherwise made available for fiscal year 2017 for research and development, design,
procurement, or advanced procurement of materials for the Advanced Arresting Gear to
be installed on USS ENTERPRISE (CVN–80) may be obligated or expended until the
Secretary of Defense submits to the congressional defense committees the report
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described under section 2433a(c)(2) of title 10, United States Code, for the Advanced
Arresting Gear program.
(b) Baseline Estimate.—The Secretary of Defense shall deem the 2009 Advanced
Arresting Gear acquisition program baseline as the original Baseline Estimate and
execute the requirements of sections 2433 and 2433a of title 10, United States Code, as
though the Department had submitted a Selected Acquisition Report with this Baseline
Estimate included.
Regarding Section 125, S.Rept. 114-255 states:
Limitation on availability of funds for the Advanced Arresting Gear program (sec.
125)

The committee recommends a provision that would restrict the obligation or expenditure
of amounts authorized to be appropriated by this Act or otherwise made available for
fiscal year 2017 for research and development, design, procurement, or advanced
procurement of materials for the Advanced Arresting Gear (AAG) to be installed on USS
Enterprise (CVN–80) until the Secretary of Defense submits to the congressional defense
committees the report required under section 2433a(c)(2) of title 10, United States Code,
commonly referred to as a Nunn-McCurdy certification, for the AAG program.
The provision would also direct the Secretary of Defense to deem the 2009 AAG
acquisition program baseline as the original baseline estimate and to execute the
requirements of sections 2433 and 2433a of title 10, United States Code, as though the
Department had submitted a Selected Acquisition Report with this baseline estimate
included. This subsection provides clarity on the original baseline estimate, which is a
necessary element of a Nunn-McCurdy review.
The committee remains concerned with the current cost, schedule, and performance of
the AAG program, which is on the critical path for the Navy’s newest aircraft carrier,
USS Gerald R. Ford (CVN–78). The committee finds the AAG program has exceeded the
program acquisition unit cost (PAUC) critical cost growth thresholds as prescribed in
section 2433 of title 10, United States Code.
In 2009, the Navy reported what the committee understands to have been the last AAG
acquisition program baseline (APB), which estimated AAG costs of: $331.0 million for
development, $145.0 million for procurement, and a program acquisition unit cost of
$123.0 million.
In 2013, the program breached the major defense acquisition program (MDAP) threshold
at which time the program should have been re-designated as an MDAP with a new APB.
However, the Department did not take these actions. According to the Government
Accountability Office (GAO), AAG breached the MDAP development threshold by
November 2013 with estimated costs of: at least $480.0 million for development, $503
million for procurement, and a program acquisition unit cost of $246.0 million. Although
the Navy re-designated AAG as an MDAP (ACAT 1C) in July 2015, the Navy still has
not updated the APB or begun submitting Selected Acquisition Reports.
In February 2016, the President’s budget request for fiscal year 2017 estimated AAG
costs of: $927.0 million for development, and $483.0 million for procurement, from
which the committee calculated a program acquisition unit cost of $353.0 million.
In April 2016, Navy officials provided the committee with an update, estimating AAG
costs of: $1.3 billion for development, from which the committee calculated a program
acquisition unit cost of $446.0 million.
For the purposes of this provision, the committee considers the 2009 APB to constitute
the original baseline estimate and the November 2013 GAO reporting to constitute the
current baseline estimate. As a result, through February 2016, the committee finds the
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program acquisition unit cost has risen $230.0 million, or 186 percent compared to the
original baseline estimate, and $107.0 million, or 43 percent, compared to the current
baseline estimate. Based on both percentage increases, the committee finds the AAG
program has exceeded the PAUC critical cost growth thresholds as prescribed in section
2433 of title 10, United States Code, warranting a Nunn-McCurdy review.
The committee is also concerned by other elements of the AAG program.
First, the system development and demonstration contract schedule for delivery has more
than quadrupled in length, while the AAG promised capability has yet to materialize.
Second, a critical element of the Navy’s business case for AAG was an ability to land the
next generation of aircraft, both heavier and lighter than those in service today. A more
sensitive braking system—featuring a water twister to absorb 70 percent of the force—
would recover these new aircraft safely and with less unnecessary stress. Facing
persistent delays in software development, the committee notes that in February 2016, the
Navy authorized an easing of these requirements to: (1) meet just the legacy Mark 7
operating envelope, (2) eliminate the requirement to backfit Nimitz-class carriers with
AAG, and (3) redefine what constitutes initial operational capability for AAG.
Third, the committee understands a fatigue life review of the water twister is on-going
and may result in the need for a significant re-design of components in order to meet the
requirement for a service life of 25 years, which Navy officials acknowledge it cannot
currently meet. The Navy has already procured AAG systems for the first two Ford-class
ships, which will require additional effort and cost to re-design and fix.
Fourth, the committee is concerned by the 18-month delay to redesignate AAG as an
MDAP and the continued delay updating the APB and issuing Selected Acquisition
Reports.
Fifth, delays at the AAG land-based test site and with software development for
recovering the full range of carrier air wing aircraft are unacceptable. In September 2015,
Navy officials informed the committee that aircraft would be landing at the test site by
the end of 2015. As of April 2016, this event has yet to occur.
Sixth, as the Director of Operational Test and Evaluation has noted in his annual reports,
the reliability data the Navy is collecting is still not sufficient to determine if the mean
time between failures will be acceptable. Additionally, the committee is concerned that
high cycle testing—which is necessary to understand system performance under more
realistic operational tempo—will not occur at the land-based test site until fiscal year
2018.
Seventh, the committee understands that in January 2015 the Navy considered using the
legacy Mark 7 arresting gear for USS John F. Kennedy (CVN–79) instead of AAG, but
decided to continue with AAG, in part because the installation of the Mark 7 was
estimated to cost $87.0 million more than AAG. This appears to be a shortsighted
decision given the extraordinary and continuing development delays and cost growth,
including more than $500.0 million since this decision was made in February 2015.
The committee believes the Navy must pause and reconsider the way ahead, including the
best business case, for the arresting gear on CVN–79 and CVN–80, and notes the Navy
has already begun such a review. The committee believes returning to a variant of the
Mark 7 arresting gear is a viable option that should be considered. The committee
encourages the Navy to maximize competition and ensure government data rights of
AAG, as well as of any other arresting gear that may be pursued.
Therefore, the committee directs the Secretary of Defense to conduct a reassessment of
the AAG program, in accordance with sections 2433 and 2433a of title 10, United States
Code. (Pages 11-13)
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Section 126 of S. 2943 as reported states:
SEC. 126. Limitation on procurement of USS JOHN F. KENNEDY (CVN–79) and USS
ENTERPRISE (CVN–80).
(a) Limitation.—Of the funds authorized to be appropriated by this Act or otherwise
made available for fiscal year 2017 for advance procurement or procurement of USS
JOHN F. KENNEDY (CVN–79) or USS ENTERPRISE (CVN–80), not more than 25
percent may be obligated or expended until the Secretary of the Navy and the Chief of
Naval Operations submit to the congressional defense committees the report required
under subsection (b).
(b) Report on CVN–79 and CVN–80.—Not later than December 1, 2016, the Secretary of
the Navy and the Chief of Naval Operations shall submit to the congressional defense
committees a report on alternatives, including de-scoping requirements if necessary, to
achieve a CVN–80 procurement end cost of $12,000,000,000. In addition, the report shall
describe all applicable CVN–80 alternatives that could be applied to CVN–79 to enable
an $11,000,000,000 procurement end cost.
(c) Annual report on CVN–79 and CVN–80.—
(1) IN GENERAL.—The Secretary of the Navy and the Chief of Naval Operations shall
annually submit, with the budget of the President submitted to Congress under section
1105(a) of title 31, United States Code, a progress report describing efforts to attain the
CVN–79 and CVN–80 procurement end costs specified in subsection (b).
(2) ELEMENTS.—The report under paragraph (1) shall include the following elements:
(A) A description of progress made toward achieving the procurement end costs specified
in subsection (b), including realized cost savings.
(B) A description of specific low value-added or unnecessary elements of program cost
that have been reduced or eliminated.
(C) Cost savings estimates for current and planned initiatives.
(D) A schedule including a spend plan with phasing of key obligations and outlays,
decision points when savings could be realized, and key events that must take place to
execute initiatives and achieve savings.
(E) Instances of lower estimates used in contract negotiations.
(F) A description of risks to achieving the procurement end costs specified in subsection
(b).
(G) A description of incentives or rewards provided or planned to be provided for
meeting the procurement end costs specified in subsection (b).
Regarding Section 126, S.Rept. 114-255 states:
Limitation on procurement of USS John F. Kennedy (CVN–79) and USS Enterprise
(CVN–80) (sec. 126)

The committee recommends a provision that would limit more than 25 percent of funds
authorized to be appropriated by this Act or otherwise made available for fiscal year 2017
for advance procurement or procurement of USS John F. Kennedy (CVN–79) or USS
Enterprise (CVN–80) from being obligated or expended until the Secretary of the Navy
and Chief of Naval Operations submit a report to the congressional defense committees.
The committee notes the progress that has been made in controlling the cost of the Ford-
class aircraft carrier program. In fiscal year 2008, the cost estimate of CVN–78 was $10.5
billion, CVN–79 was $9.2 billion, and CVN–80 was $10.7 billion. In fiscal year 2015,
these estimates had risen to $12.9 billion, $11.5 billion, and $13.9 billion, respectively. In
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the fiscal year 2017 budget request, the estimates stood at $12.9 billion, $11.4 billion, and
$12.9 billion, respectively.
The Navy has largely attributed the progress made in arresting cost growth to “design for
affordability” initiatives, which will improve efficiency and cost effectiveness in aircraft
carrier construction. These initiatives require an investment of tens of millions of dollars
to yield savings in excess of one billion dollars. The committee expects these initiatives
to yield the projected savings and believes the Navy and industrial base are capable of
achieving greater savings through these initiatives coupled with increased savings from:
the Ford-class learning curve, CVN–80 repeating the design of CVN–79, and increased
competition. To this end, the committee supported a series of provisions in the National
Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92) that required
reports on cost reduction opportunities for CVN–79 and CVN–80 (sec. 128), alternatives
for the future development of aircraft carriers (sec. 128), and independent studies of fleet
platform architectures (sec. 1067). The committee expects the Navy to leverage these
reports in identifying further cost reduction options for aircraft carriers.
Therefore, the committee directs the Secretary of the Navy and Chief of Naval
Operations to submit a report no later than December 1, 2016 that provides alternatives to
achieve a CVN–80 procurement end cost of $12.0 billion. In addition, the report shall
describe all applicable CVN–80 alternatives that could be applied to CVN–79 to enable
an $11.0 billion procurement end cost. The provision also requires the Secretary of the
Navy and Chief of Naval Operations to provide annual progress reports compared to
these end cost goals with the President’s budget request. (Pages 13-14)
Section 1088 of S. 2943 as reported states:
SEC. 1088. Reduction in minimum number of Navy carrier air wings and carrier air wing
headquarters required to be maintained.
(a) Codification and reduction.—Section 5062 of title 10, United States Code, is amended
by adding at the end the following new subsection:
“(e) The Secretary of the Navy shall ensure that the Navy maintains—
“(1) a minimum of 9 carrier air wings; and
“(2) for each such carrier air wing, a dedicated and fully staffed headquarters.”.
(b) Repeal of superseded requirement.—Section 1093 of the National Defense
Authorization Act for Fiscal Year 2012 (Public Law 112–81; 125 Stat. 1606; 10 U.S.C.
5062 note) is repealed.
Regarding Section 1088, S.Rept. 114-255 states:
Reduction in minimum number of Navy carrier air wings and carrier air wing
headquarters required to be maintained (sec. 1088)

The committee recommends a provision that would amend section 5062 of title 10,
United States Code, to reduce the number of air wings required to be maintained and
fully staffed from 10 to 9.
While the committee does not believe cutting naval aviation infrastructure is advisable in
the current security environment, inadequate funding for defense prevents the
Department of the Navy from funding all necessary requirements. Should adequate
funding become available, the committee intends to repeal this provision. (Page 282)
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FY2017 DOD Appropriations Act (H.R. 5293/S. 3000)
House
The House Appropriations Committee, in its report (H.Rept. 114-577 of May 19, 2016) on H.R.
5293, recommends the funding levels shown in the HAC column of Table 4. The recommended
reduction of $20.6 million in procurement funding includes a reduction of $2.1 million for
“Surface ship torpedo defense system cost growth,” a reduction of $9.4 million for “EMALS cost
growth,” and a reduction of $9.1 million for “Advanced arresting gear cost growth.” (Page 155)
Senate
The Senate Appropriations Committee, in its report (S.Rept. 114-263 of May 26, 2016) on S.
3000, recommends the funding levels shown in the SAC column of Table 4. The recommended
reduction of $16 million in procurement funding is for “Restoring acquisition accountability:
Reduction in change orders growth.” (Page 98)


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Appendix A. Cost Growth and Managing Costs
Within Program Cost Caps
This appendix presents additional background information on cost growth in the CVN-78
program, Navy efforts to stem that growth, and Navy efforts to manage costs so as to stay within
the program’s cost caps.
October 1, 2015, Senate Armed Services Committee Hearing
Cost growth and other issues in the CVN-78 program were reviewed at an October 1, 2015,
hearing before the Senate Armed Services Committee. Below are excerpts from the prepared
statements of the witnesses at the hearing.
OSD ASD Testimony
The prepared statement of the Assistant Secretary of Defense (Acquisition) within the Office of
the Secretary of Defense (OSD) states in part:
By 2000, the CVN(X) Acquisition Strategy that had been proposed by the Navy was an
evolutionary, three-step development of the capabilities planned for the CVN. This
evolutionary strategy intending to mature technology and align risk with affordability
originally involved using the last ship of the CVN 68 NIMITZ Class, USS GEORGE H.
W. BUSH (CVN 77), as the starting point for insertion of some near term technology
improvements including information network technology and the new Dual Band Radar
(DBR) system from the DD(X) (now DDG 1000) program, to create an integrated
warfare system that combined the ship’s combat system and air wing mission planning
functions.
However, the then incoming Secretary of Defense Donald Rumsfeld in 2002 directed re-
examination of the CVN program, among others, to reduce the overall spend of the
department and increase the speed of delivery to the warfighters. As a result of the
SECDEF’s direction, the Navy proposed to remove the evolutionary approach and
included a new and enlarged flight deck, an increased allowance for future technologies
(including electric weapons), and an additional manpower reduction of 500 to 800 fewer
sailors to operate. On December 12, 2002, a Program Decision Memorandum approved
by then Deputy Secretary of Defense Paul Wolfowitz codified this Navy proposal and
gave this direction back to the DOD enterprise. The ship was renamed the CVN-21 to
highlight these changes. By Milestone B in April 2004, the Navy had evaluated the
technologies intended for three ships, removed some of them, and consolidated the
remaining ones into a single step of capability improvement on the lead ship. The new
plan acknowledged technological, cost, and schedule challenges were being put on a
single ship, but assessed this was achievable. The Acting USD AT&L (Michael Wynne)
at that milestone also directed the Navy to use a hybrid of the Service Cost Position and
Independent Cost Estimate (ICE) to baseline the program funding in lieu of the ICE,
(although one can easily argue even the ICE was optimistic given these imposed
circumstances).
By 2004, DOD and Congressional leadership had lost confidence in the acquisition
system, and Deputy Secretary of Defense Gordon England established the Defense
Acquisition Performance Assessment (DAPA) panel to conduct a sweeping and
integrated assessment of “every aspect” of acquisition. The result was the discovery that
the Industrial Base had consolidated, that excessive oversight and complex acquisition
processes were cost and schedule drivers, and a focus on requirements stability was key
to containing costs. From this, a review of the requirements of the CVN resulted in a
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revised and solidified “single ship” Operational Requirements Document (ORD) for the
FORD Class as defined today, with the CVN 78 as lead ship.
On the heels of a delay because of the budgetary constraints in 2006, the start of the
construction of CVN 78 was delayed until 2008, but the schedule for delivery was held
constant, further compounding risks and costs. The Navy’s testimony covers these
technical and schedule risks and concurrency challenges well.
By 2009, this Committee had issued a floor statement in support of the Weapon Systems
Acquisition Reform Act (WSARA). Congress was now united in its pursuit of acquisition
reform and, in concert, USD AT&L re-issued and updated the Department of Defense’s
acquisition instruction (DoDI 5000.2) in 2008. WSARA included strengthening of the
‘Nunn-McCurdy” process with requires DOD to report to Congress when cost growth on
a major program breaches a critical cost growth threshold. This legislation required a
root-cause assessment of the program and assumed program termination within 60 days
of notification unless DOD certified in writing that the program remained essential to
national security.
WSARA had real impact on the CVN 78, as by 2008 and 2009 the results of all the
previous decisions were instantiated in growth of cost and schedule. Then USD AT&L
John Young required the Navy to provide a list of descoping efforts and directed the
Navy to have an off-ramp back to steam catapults if the Electromagnetic Aircraft
Launching System (EMALS) remained a problem for the program. He also directed an
independent review of all of the CVN 78 technologies by a Defense Support Team
(DST). Prior to the DST, the Navy had chartered a Program Assessment Review (PAR)
with USD (AT&L) participation of EMALS/Advanced Arresting Gear (AAG) versus
steam. One of the key PAR findings was converting the EMALS and AAG production
contracts to firm, fixed price contracts to cap cost growth and imposed negative
incentives for late delivery.
The Dual Band Radar (DBR) cost and risk growth was a decision by-product of the DDG
1000 program Nunn-McCurdy critical unit cost breach in 2010. Faced with a need to
reduce cost on the DDG 1000 program and the resultant curtailment of the program, the
expectation of development costs being borne by the DDG 1000 program was no longer
the case and all of the costs associated with the S-band element development and a higher
share of the X-band element then had to be supported by the CVN 78 program.
The design problems encountered with AAG development have had the most deleterious
effects on CVN 78 construction of any of the three major advanced technologies
including EMALS and DBR. Our view of AAG is that these engineering design problems
are now in the past and although delivery of several critical components have been
delayed, the system will achieve its needed capabilities before undergoing final
operational testing prior to deployment of the ship. Again, reliability growth is a concern,
but this cannot be improved until a fully functional system is installed and operating at
the Lakehurst, New Jersey land based test site, and on board CVN 78.
With the 2010 introduction by then USD AT&L Ashton Carter (now in its third iteration
by under USD AT&L Frank Kendall) of the continuous process improvement initiative
that was founded in best business practices and WSARA called “Better Buying Power,”
the CVN underwent affordability, “Should Cost,” and requirements assessment. Navy’s
use of the “Gate” process has stabilized the cost growth and reset good business practices
.However, there is still much to do. We are in the testing phase of program execution
prior to deployment and we had been concerned about the timing of the Full Ship Shock
Trial (FSST). After balancing the operational and technical risks, the Department decided
to execute FSST on CVN 78 prior to deployment.
EMALS and AAG are also a concern with regard to final operational testing stemming
from the development difficulties that each experienced. The Navy still needs to
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complete a significant amount of land-based testing to enable certification of the systems
to launch and recover the full range of aircraft that it is required to operate under both
normal and emergency conditions. This land-based testing is planned to complete before
the final at-sea operational testing for these systems begins....
USD AT&L continues to work with Navy to tailor the program and ensure appropriate
oversight at both the Navy Staff level as well as OSD. Our review of the Navy’s plan for
maintaining control of the cost for CVN 79 included an understanding of the application
of lessons learned from the construction of CVN 78 along with the application of a more
efficient construction plan for the ship including introduction of competition where
possible. We have established an excellent relationship with the Navy to work together to
change process and policies that have impacted the ability of the program to succeed, to
include revitalizing the acquisition workforce and their skills.
We are confident in the Navy’s plan for CVN 79 and CVN 80 and, as such, Under
Secretary Kendall recently authorized the Navy to enter into the detail design and
construction phase for CVN 79 and to enter into advanced procurement for long lead time
materials for CVN 80 construction. OSD and the Navy are committed to delivering CVN
79 within the limits of the cost cap legislated for this ship.23
OSD DOT&E Testimony
The prepared statement of the Director, Operational Test & Evaluation (DOT&E), within OSD
states in part:
The Navy intends to deliver CVN 78 early in calendar year 2016, and to begin initial
operational test and evaluation (IOT&E) in late calendar year 2017. However, the Navy
is in the process of developing a new schedule, so some dates may change. Based on the
current schedule, between now and the beginning of IOT&E, the CVN 78 program is
proceeding on an aggressive schedule to finish development, testing, troubleshooting, and
correction of deficiencies for a number of new, complex systems critical to the
warfighting capabilities of the ship. Low or unknown reliability and performance of the
Advanced Arresting Gear (AAG), the Electromagnetic Aircraft Launch System
(EMALS), the Dual Band Radar (DBR), and the Advanced Weapons Elevators (AWE)
are significant risks to a successful IOT&E and first deployment, as well as to achieving
the life-cycle cost reductions the Navy has estimated will accrue for the Ford-class
carriers. The maturity of these systems is generally not at the level that would be desired
at this stage in the program; for example, the CVN 78 test program is revealing problems
with the DBR typical of discoveries in early developmental testing. Nonetheless, AAG,
EMALS, DBR, and AWE equipment is being installed on CVN 78, and in some cases, is
undergoing shipboard checkout. Consequently, any significant issues that testing
discovers before CVN 78’s schedule-driven IOT&E and deployment will be difficult, or
perhaps impossible, to address.
Resolving the uncertainties in the reliability and performance of these systems is critical
to CVN 78’s primary function of conducting combat operations. CVN 78 has design
features intended to enhance its ability to launch, recover, and service aircraft. EMALS
and AAG are key systems planned to provide new capabilities for launching and
recovering aircraft that are heavier and lighter than typically operated on Nimitz-class
carriers. DBR is intended to enhance radar coverage on CVN 78 in support of air traffic
control and ship self-defense. DBR is planned to reduce some of the known sensor

23 Statement of Hon Katharina McFarland, Assistant Secretary of Defense (Acquisition), Before the Senate Armed
Services Committee on Procurement, Acquisition, Testing and Oversight of the Navy’s Gerald R. Ford Class Aircraft
Carrier Program, October 1, 2015, 5 pp.
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limitations on Nimitz-class carriers that utilize legacy radars. The data currently available
to my office indicate EMALS is unlikely to achieve the Navy’s reliability requirements.
(The Navy indicates EMALS reliability is above its current growth curve, which is true;
however, that growth curve was revised in 2013, based on poor demonstrated
performance, to achieve EMALS reliability on CVN 78 a factor of 15 below the Navy’s
goal.) I have no current data regarding DBR or AWE reliability, and data regarding the
reliability of the re-designed AAG are also not available. (Poor AAG reliability in
developmental testing led to the need to re-design components of that system.) In
addition, performance problems with these systems are continuing to be discovered. If the
current schedule for conducting the ship’s IOT&E and first deployment remain
unchanged, reliability and performance shortfalls could degrade CVN 78’s ability to
conduct flight operations.
Due to known problems with current aircraft carrier combat systems, there is significant
risk CVN 78 will not achieve its self-defense requirements. Although the CVN 78 design
incorporates several combat system improvements relative to the Nimitz-class, these
improvements (if achieved) are unlikely to correct all of the known shortfalls. Testing on
other ships with similar combat systems has highlighted deficiencies in weapon
employment timelines, sensor coverage, system track management, and deficiencies with
the recommended engagement tactics. Most of these limitations are likely to affect CVN
78 and I continue to view this as a significant risk to the CVN 78’s ability to defend itself
against attacks by the challenging anti-ship cruise missile and other threats proliferating
worldwide.
The Navy’s previous decision to renege on its original commitment to conduct the Full
Ship Shock Trial (FSST) on CVN 78 before her first deployment would have put CVN
78 at risk in combat operations. This decision was reversed in August 2015 by the Deputy
Secretary of Defense. Historically, FSSTs for new ship classes have identified for the
first time numerous mission-critical failures the Navy had to address to ensure the new
ships were survivable in combat. We can expect that CVN 78’s FSST results will have
significant and substantial implications on future carriers in the Ford-class and any
subsequent new class of carriers.
I also have concerns with manning and berthing on CVN 78. The Navy designed CVN 78
to have reduced manning to reduce life-cycle costs, but Navy analyses of manning on
CVN 78 have identified problems in manning and berthing. These problems are similar to
those seen on other recent ship classes such as DDG 1000 and the Littoral Combat Ship
(LCS)....
There are significant risks to the successful completion of the CVN 78 IOT&E and the
ship’s subsequent deployment due to known performance problems and the low or
unknown reliability of key systems. For AAG, EMALS, AWE and DBR, systems that are
essential to the primary missions of the ship, these problems, if uncorrected, are likely to
affect CVN 78’s ability to conduct effective flight operations and to defend itself in
combat.
The CVN 78 test schedule leaves little or no time to fix problems discovered in
developmental testing before IOT&E begins that could cause program delays. In the
current program schedule, major developmental test events overlap IOT&E. This overlap
increases the likelihood problems will be discovered during CVN 78’s IOT&E, with the
attendant risk to the successful completion of that testing and to the ship’s first
deployment.
The inevitable lessons we will learn from the CVN 78 FSST will have significant
implications for CVN 78 combat operations, as well as for the construction of future
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carriers incorporating the ship’s advanced systems; therefore, the FSST should be
conducted on CVN 78 as soon as it is feasible to do so.24
Navy Testimony
The prepared statement of the Navy witnesses at the hearing states in part:
In June 2000, the Department of Defense (DOD) approved a three-ship evolutionary
acquisition approach starting with the last NIMITZ Class carrier (CVN 77) and the next
two carriers CVNX1 (later CVN 78) and CVNX2 (later CVN 79). This approach
recognized the significant risk of concurrently developing and integrating new
technologies into a new ship design incrementally as follows:
• The design focus for the evolutionary CVN 77 was to combine information network
technology with a new suite of multifunction radars from the DDG 1000 program to
transform the ship’s combat systems and the air wing’s mission planning process into an
integrated warfare system.
• The design focus for the evolutionary CVNX1 (future CVN 78) was a new Hull,
Mechanical and Electrical (HM&E) architecture within a NIMITZ Class hull that
included a new reactor plant design, increased electrical generating capacity, new zonal
electrical distribution, and new electrical systems to replace steam auxiliaries under a
redesigned flight deck employing new Electromagnetic Aircraft Launch System
(EMALS) catapults together with aircraft ordnance and fueling “pit-stops”. Design goals
for achieving reduced manning and improved maintainability were also defined.
• The design focus for the evolutionary CVNX2 (future CVN 79) was a potential “clean-
sheet” design to “open the aperture” for capturing new but immature technologies such as
the Advanced Arresting Gear (AAG) and Advanced Weapons Elevators (AWE) that
would be ready in time for the third ship in the series; and thereby permit the experience
gained from design and construction of the first two ships (CVN 77 and CVN 78) to be
applied to the third ship (CVN 79).
Early in the last decade, however, a significant push was made within DOD for a more
transformational approach to delivering warfighting capability. As a result, in 2002, DOD
altered the program acquisition strategy by transitioning to the new aircraft carrier class
in a single transformational leap vice an incremental three ship strategy. Under the
revised strategy, CVN 77 reverted back to a “modified-repeat” NIMITZ Class design to
minimize risk and construction costs, while delaying the integrated warfare system to
CVN 78. Further, due to budget constraints, CVN 78 would start construction a year later
(in 2007) with a NIMITZ Class hull form but would entail a major re-design to
accommodate all the new technologies from the three ship evolutionary technology
insertion plan.
This leap ahead in a single ship was captured in a revised Operational Requirements
Document (ORD) in 2004, which defined a new baseline that is the FORD Class today,
with CVN 78 as the lead ship. The program entered system development and
demonstration, containing the shift to a single ship acquisition strategy. The start of CVN
78 construction was then delayed by an additional year until 2008 due to budget
constraints. As a result, the traditional serial evolution of technology development, ship
concept design, detail design, and construction – including a total of 23 developmental
systems incorporating new technologies originally planned across CVN 77, CVNX1,
CVNX2 - were compressed and overlapped within the program baseline for the CVN 78.

24 Statement by J. Michael Gilmore, Director, Operational Test and Evaluation, Office of the Secretary of Defense,
Before the Senate Armed Services Committee, [October 1, 2015], 19 pp.
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Today, the Navy is confronting the impacts of this compression and concurrency, as well
as changes to assumptions made in the program planning more than a decade ago....
Given the lengthy design, development, and build span associated with major warships,
there is a certain amount of overlap or concurrency that occurs between the development
of new systems to be delivered with the first ship, the design information for those new
systems, and actual construction. Since this overlap poses cost and schedule risk for the
lead ship of the class, program management activities are directed at mitigating this
overlap to the maximum extent practicable.
In the case of the FORD Class, the incorporation of 23 developmental systems at various
levels of technical maturity (including EMALS, AAG, DBR, AWE, new propulsion
plant, integrated control systems) significantly compounded the inherent challenges
associated with accomplishing the first new aircraft carrier design in 40-years. The
cumulative impact of this high degree of concurrency significantly exceeded the risk
attributed to any single new system or risk issue and ultimately manifested itself in terms
of delay and cost growth in each element of program execution; development, design,
material procurement (government and contractor), and construction....
Shipbuilder actions to resolve first-of-class issues retired much of the schedule risks to
launch, but at an unstable cost. First-of-class construction and material delays led the
Navy to revise the launch date in March 2013 from July 2013 to November 2013.
Nevertheless, the four-month delay in launch allowed increased outfitting and ship
construction that were most economically done prior to ship launch, such as completion
of blasting and coating operations for all tanks and voids, installation of the six DBR
arrays, and increased installations of cable piping, ventilation, electrical boxes, bulkheads
and equipment foundations. As a result, CVN 78 launched at 70 percent complete and
77,000 tons displacement – the highest levels yet achieved in aircraft carrier construction.
This high state of completion at launch enabled improved outfitting, compartment
completion, an efficient transition into the shipboard test program, and the on-time
completion of key milestones such as crew move aboard.
With the advent of the shipboard test program, first time energization and grooming of
new systems have required more time than originally planned. As a result, the Navy
expects the sea trial schedule to be delayed about six to eight weeks. The exact impact on
ship delivery will be determined based on the results of these trials. The Navy expects no
schedule delays to CVN 78 operational testing and deployability due to the sea trials
delay and is managing schedule delays within the $12.887 billion cost cap.
Additionally, at delivery, AAG will not have completed its shipboard test program. The
program has not been able to fully mitigate the effect of a two-year delay in AAG
equipment deliveries to the ship. All AAG equipment has been delivered to the ship and
will be fully installed on CVN 78 at delivery. The AAG shipboard test and certification
program will complete in time to support aircraft launch and recovery operations in
summer 2016....
The Navy, in coordination with the shipbuilder and major component providers,
implemented a series of actions and initiatives in the management and oversight of CVN
78 that crossed the full span of contracting, design, material procurement, GFE,
production planning, production management and oversight. The Secretary of the Navy
directed a detailed review of the CVN 78 program build plan to improve end-to-end
aircraft carrier design, material procurement, production planning, build and test, the
results of which are providing benefit across all carriers. These corrective measures
include:
• CVN 78 design was 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 change.
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• CVN 78 construction fee was reduced, consistent with contract provisions. However,
the shipbuilder remains incentivized by the contract shareline to improve upon current
cost performance.
• Contract design changes are under strict control; authorized only for safety, damage
control, and mission-degrading deficiencies.
• Following a detailed “Nunn-McCurdy-like” review in 2008-2009, the Navy converted
the EMALS and AAG production contract to a firm, fixed price contract, capping cost
growth to each system.
• In 2011, Naval Sea Systems Command completed a review of carrier specifications
with the shipbuilder, removing or improving upon overly burdensome or unneeded
specifications that impose unnecessary cost on the program. Periodic reviews continue.
Much of the impact to cost performance was attributable to shipbuilder and government
material cost overruns. The Navy and shipbuilder have made significant improvements
upon material ordering and delivery to the shipyard to mitigate the significant impact of
material delays on production performance.
These actions include:
• The Navy and shipbuilder instituted optimal material procurement strategies and best
practices (structuring procurements to achieve quantity discounts, dual-sourcing to
improve schedule performance and leveraging competitive opportunities) from outside
supply chain management experts.
• The shipbuilder assigned engineering and material sourcing personnel to each of their
key vendors to expedite component qualifications and delivery to the shipyard.
• The shipbuilder inventoried all excess material procured on CVN 78 for transfer to
CVN 79.
• The Program Executive Officer (Carriers) has conducted quarterly Flag-level GFE
summits to drive cost reduction opportunities and ensure on-time delivery of required
equipment and design information to the shipbuilder.
The CVN 78 build plan, consistent with the NIMITZ Class, had focused foremost on
completion of structural and critical path work to support launching the ship on-schedule.
Achieving the program’s cost improvement targets required that CVN 78 increase its
level of completion at launch, from 60 percent to 70 percent. To achieve this 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 and identify fundamental
changes that are yielding marked improvement.
• The shipbuilder established specific launch metrics by system and increased staffing for
waterfront engineering and material expediters to support meeting those metrics. This
ultimately delayed launch, but drove up pre-outfitting to the highest levels for CVN new
construction which has helped stabilize cost and improve test program and compartment
completion performance relative to CVN 77.
• The shipbuilder linked all of these processes within a detailed integrated master
schedule that has provided greater visibility to performance and greater ability to control
cost and schedule performance across the shipbuilding disciplines.
These initiatives, which summarize a more detailed list of actions being implemented and
tracked as a result of the end-to-end review, were accompanied by important
management changes.
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• In 2011, the Navy assigned a second tour Flag Officer with considerable carrier
operations, construction, and program management experience as the new Program
Executive Officer (PEO).
• The new PEO established a separate Program Office, PMS 379, to focus exclusively on
CVN 79 and CVN 80, which enables the lead ship Program Office, PMS 378, to focus on
cost control, schedule performance and the delivery of CVN 78.
• In 2012, the shipbuilder 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 ship foremen to strengthen CVN 78 performance.
• The new PEO and shipyard president began conducting bi-weekly launch readiness
reviews focused on cost performance, critical path issues and accomplishment of the
targets for launch completion. These bi-weekly reviews will continue through delivery.
• Assistant Secretary of the Navy (Research, Development, and Acquisition) (ASN
(RD&A)) conducts quarterly reviews of program progress and performance with the PEO
and shipbuilder to ensure that all that can be done to improve on cost performance is
being done.
The series of actions taken by the Navy and the shipbuilder are achieving the desired
effect of arresting cost growth, establishing stability, and have resulted in no changes in
the Government’s estimate at completion over the past four years. The Department of the
Navy is continuing efforts to identify cost reductions, drive improved cost and schedule
performance, and manage change. The Navy has established a rigorous process with the
shipbuilder that analyzes each contract change request to approve only those change
categories allowed within the 2010 ASN(RD&A) change order management guidance.
This guidance only allows changes for safety, contractual defects, testing and trial
deficiencies, statutory and regulatory changes that are accompanied by funding and value
engineering change proposals with instant contract savings. While the historical average
for contractual change level is approximately 10 percent of the construction cost for the
lead ship of a new class, CVN 78 has maintained a change order budget of less than four
percent to date despite the high degree of concurrent design and development.
Finally, the Navy has identified certain areas of the ship whose completion is not required
for delivery, such as berthing spaces for the aviation detachment, and has removed this
work from the shipbuilder’s contract. This deferred work will be completed within the
ship’s budgeted end cost and is included within the $12,887 million cost estimate. By
performing this deferred work in the post-delivery period using CVN 78 end cost
funding, it can be competed and accomplished at lower cost and risk to the overall ship
delivery schedule....
The CVN 79 cost cap was established in 2006 and adjusted by the Secretary of the Navy
in 2013, primarily to address inflation between 2006 and 2013 plus $325 million of the
allowed increase for non-recurring engineering to incorporate design improvements for
the CVN 78 Class construction.
The Navy and the shipbuilder conducted an extensive affordability review of carrier
construction and made significant changes to deliver CVN 79 at the lowest possible cost.
These changes are focused on eliminating the largest impacts to cost performance
identified during the construction of CVN 78 as well as furthering improvements in
future carrier construction. The Navy outlined cost savings initiatives in its Report to
Congress in May, 2013, and is executing according to plan.
Stability in requirements, design, schedule, and budget, are essential to controlling and
improving CVN 79 cost, and therefore is of highest priority for the program.
Requirements for CVN 79 were “locked down” prior to the commencement of CVN 79
construction. The technical baseline and allocated budget for these requirements were
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agreed to by the Chief of Naval Operations and ASN(RD&A) and further changes to the
baseline require their approval, which ensures design stability and increases effectiveness
during production. At the time of construction contract award, CVN 79 has 100 percent
of the design product model complete (compared to 65 percent for CVN 78) and 80
percent of initial drawings released. Further, CVN 79 construction benefits from the
maturation of virtually all new technologies inserted on CVN 78. In the case of EMALS
and AAG, the system design and procurement costs are understood, and CVN 79
leverages CVN 78 lessons learned....
A completed FORD Class design enabled the shipbuilder to fully understand the “whole
ship” bill of materials for CVN 79 construction and to more effectively manage the
procurement of those materials with the knowledge of material lead times and qualified
sources accrued from CVN 78 construction. The shipbuilder is able to order ship-set
quantities of material, with attendant cost benefits, and to ensure CVN 79 material will
arrive on time to support construction need. Extensive improvements have been put in
place for CVN 79 material procurement to drive both cost reductions associated with
more efficient procurement strategies and production labor improvements associated with
improved material availability. Improved material availability is also a critical enabler to
many construction efficiency improvements in CVN 79.
The shipbuilder has developed an entirely new material procurement and management
strategy for CVN 79. This new strategy consists of eight separate initiatives....
The shipbuilder and the Navy have performed a comprehensive review of the build
strategy and processes used in construction of CVN 78 Class aircraft carriers as well as
consulted with other Navy shipbuilders on best practices. As a result, the shipbuilder has
identified and implemented a number of changes in the way they build aircraft carriers,
with a dedicated focus on executing construction activities where they can most
efficiently be performed. The CVN 79 build sequence installs 20 percent more parts in
shop, and 30 percent more parts on the final assembly platen, as compared to CVN 78.
This work will result in an increase in pre-outfitting and work being pulled to earlier
stages in the construction process where it is most efficiently accomplished....
In conjunction with the Navy and the shipbuilder’s comprehensive review of the build
strategy and processes used in construction of CVN 78 Class aircraft carriers, a number
of design changes were identified that would result in more affordable construction.
Some of these design changes were derived from lessons learned in the construction of
CVN 78 and others seek to further simplify the construction process and drive cost
down....
In addition to the major focus discussed above, the shipbuilder continues to implement
capital improvements to facilities that serve to reduce risk and improve productivity....
To enhance CVN 79 build efficiency and affordability, the Navy is implementing a two-
phase delivery plan. The two-phase strategy will allow the basic ship to be constructed
and tested in the most efficient manner by the shipbuilder (Phase I) while enabling select
ship systems and compartments to be completed in Phase II, where the work can be
completed more affordably through competition or the use of skilled installation teams....
The CVN 80 planning and construction will continue to leverage class lessons learned in
the effort to achieve cost and risk reduction for remaining FORD Class ships. The CVN
80 strategy seeks to improve on CVN 79 efforts to frontload as much work as possible to
the earliest phases of construction, where work is both predictable and more cost
efficient....
While delivery of the first-of-class FORD has involved challenges, those challenges are
being addressed and this aircraft carrier class will provide great value to our Nation with
unprecedented and greatly needed warfighting capability at overall lower total ownership
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cost than a NIMITZ Class CVN. The Navy has taken major steps to stem the tide of
increasing costs and drive affordability into carrier acquisition.25
GAO Testimony
The prepared statement of the GAO witness at the hearing states in part:
The Ford-class aircraft carrier’s lead ship began construction with an unrealistic business
case. A sound business case balances the necessary resources and knowledge needed to
transform a chosen concept into a product. Yet in 2007, GAO found that CVN 78 costs
were underestimated and critical technologies were immature—key risks that would
impair delivering CVN 78 at cost, on-time, and with its planned capabilities. The ship
and its business case were nonetheless approved. Over the past 8 years, the business case
has predictably decayed in the form of cost growth, testing delays, and reduced
capability—in essence, getting less for more. Today, CVN 78 is more than $2 billion
over its initial budget. Land-based tests of key technologies have been deferred by years
while the ship's construction schedule has largely held fast. The CVN 78 is unlikely to
achieve promised aircraft launch and recovery rates as key systems are unreliable. The
ship must complete its final, more complex, construction phase concurrent with key test
events. While problems are likely to be encountered, there is no margin for the
unexpected. Additional costs are likely.
Similarly, the business case for CVN 79 is not realistic. The Navy recently awarded a
construction contract for CVN 79 which it believes will allow the program to achieve the
current $11.5 billion legislative cost cap. Clearly, CVN 79 should cost less than CVN 78,
as it will incorporate lessons learned on construction sequencing and other efficiencies.
While it may cost less than its predecessor, CVN 79 is likely to cost more than estimated.
As GAO found in November 2014, the Navy’s strategy to achieve the cost cap relies on
optimistic assumptions of construction efficiencies and cost savings—including
unprecedented reductions in labor hours, shifting work until after ship delivery, and
delivering the ship with the same baseline capability as CVN 78 by postponing planned
mission system upgrades and modernizations until future maintenance periods.
Today, with CVN 78 over 92 percent complete as it reaches delivery in May 2016, and
the CVN 79 on contract, the ability to exercise oversight and make course corrections is
limited. Yet, it is not too late to examine the carrier’s acquisition history to illustrate the
dynamics of shipbuilding—and weapon system—acquisition and the challenges they
pose to acquisition reform. The carrier’s problems are by no means unique; rather, they
are quite typical of weapon systems. Such outcomes persist despite acquisition reforms
the Department of Defense and Congress have put forward—such as realistic estimating
and “fly before buy.” Competition with other programs for funding creates pressures to
overpromise performance at unrealistic costs and schedules. These incentives are more
powerful than policies to follow best acquisition practices and oversight tools. Moreover,
the budget process provides incentives for programs to be funded before sufficient
knowledge is available to make key decisions. Complementing these incentives is a
marketplace characterized by a single buyer, low volume, and limited number of major
sources. The decades-old culture of undue optimism when starting programs is not the

25 Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition), Rear Admiral Donald E. Gaddis, Program Executive Officer, Tactical Aircraft, Department of the Navy,
Rear Admiral Thomas J. Moore, Program Executive Officer, Aircraft Carriers, Department of the Navy, Rear Admiral
Michael C. Manazir, Director, Air Warfare (OPNAV), Before the Senate Armed Services Committee on Procurement,
Acquisition, Testing, and Oversight of the Navy’s Gerald R. Ford Class Aircraft Carrier Program, October 1, 2015, 22
pp.
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consequence of a broken process, but rather of a process in equilibrium that rewards
unrealistic business cases and, thus, devalues sound practices.26
Additional Navy, CBO, and GAO Testimony, Reports, and Other
Documents
This section presents additional discussions of cost growth in the CVN-78 program, Navy efforts
to stem that growth, and Navy efforts to manage costs so as to stay within the program’s cost caps
from the Navy, CBO, and GAO, starting with the most recent item.
March 2016 GAO Report
A March 2016 GAO report assessing major DOD weapon acquisition programs stated the
following regarding the status of the CVN-78 program, including the potential for cost growth:
Technology and Design Maturity
The Navy reported that 9 of CVN 78's 13 critical technologies are mature, though testing
of immature technologies continues to reveal issues. The Navy began deadload testing of
the electromagnetic aircraft launch system (EMALS) from the ship's deck but halted
testing in 2015 due to a system component failure. The Navy plans to begin testing
EMALS and the advanced arresting gear (AAG) on board CVN 78 with aircraft in 2016.
AAG began shipboard testing in July 2015, with projected completion after CVN 78
delivers. The dual band radar (DBR) also began shipboard testing this year, despite
problems land-based testing revealed that could affect the radar's air traffic control
functionality. Both AAG and DBR are still engaged in land-based testing. The Navy will
replace DBR on CVNs 79 and 80 with the Enterprise Air Surveillance Radar suite, but
has not yet awarded a contract to develop the new radar. If the new radar cannot fit within
the existing design, CVNs 79 and 80, which use the CVN 78 design, would require
design modifications.
Production Maturity
CVN 78 is over 95 percent complete and scheduled to deliver in May 2016, at the
earliest, about 6 to 8 weeks later than planned due to delayed sea trials. To manage
remaining risks, the Navy deferred some work until after ship delivery, a decision that
could obscure costs and result in delivery of an incomplete ship. Construction continues
on CVN 79, which is 14 percent complete. The Navy awarded the detail design and
construction contract for this ship in June 2015. In February 2015, the Navy also
requested the first year of advance procurement funding for CVN 80.
Other Program Issues
In 2007, Congress established a procurement cost cap of $10.5 billion for CVN 78 and
since then, lead ship procurement costs increased by almost 23 percent to the current
statutory cost cap of $12.9 billion. The National Defense Authorization Act (NDAA) for
Fiscal Year 2016 reduced the cap for CVN 79 to $11.4 billion, though costs for this ship
may also increase. The Office of the Secretary of Defense and the Congressional Budget
Office expect CVN 79 to surpass the earlier statutory cost cap of $11.5 billion by at least
$235 million. The Navy asserts it will meet CVN 79's cost cap, but assumes

26 Government Accountability Office, Ford Class Aircraft Carrier[:] Poor Outcomes Are the Predictable
Consequences of the Prevalent Acquisition Culture
, GAO-16-84T, October 1, 2015, summary page. (Testimony Before
the Committee on Armed Services, U.S. Senate, Statement of Paul L. Francis, Managing Director Acquisition and
Sourcing Management.)
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unprecedented efficiency gains in construction–that CVN 79's production hours will be
18 percent lower than CVN 78. The Navy also adopted a two-phased acquisition
approach for CVN 79 that will shift some construction to a post-delivery period.
According to program officials, this will enable the Navy to procure and install electronic
systems at the latest possible date to prevent obsolescence prior to ship deployment.
However, this strategy results in a less capable and complete ship at delivery. The Navy
is also transferring the costs of a number of known capability upgrades from CVN 79 to
other accounts by deferring work to future maintenance periods–obscuring CVN 79's
actual costs.
In August 2015, the Deputy Secretary of Defense directed the Navy to complete the full
ship shock trial on CVN 78, not CVN 79. The NDAA for fiscal year 2016 restricts the
obligation or expenditure of fiscal year 2016 funds for CVN 79 until the Navy takes
certain steps, including either certifying it will conduct the shock trial on CVN 78 before
the ship's first deployment or submitting a notification of the waiver to this requirement.
Program Office Comments
In its comments, the Navy stated that all costs to complete CVN 78 will be included
under the $12.9 billion cost cap. In 2013, the Navy deferred some non-critical work to a
post-delivery period to allow the shipbuilder to focus on the completion of new
technologies and other critical work to deliver the ship in the most cost effective manner.
All work will be completed under the cost cap prior to the start of Initial Operational
Testing and Evaluation. The Navy noted that the statement for CVN 79, "this strategy
will delay some construction and costs to after ship delivery", is incorrect. The Navy will
deliver a complete and deployable ship at the end of Phase II construction.
GAO Response
As we reported in October 2015, CVN 78 must complete its final, more complex,
construction phase concurrent with key test events, with no margin for the unexpected.
Additional costs are likely. The Navy believes that our statement regarding CVN 79's
capability at ship delivery is incorrect. However, as the Navy states in its comments, the
ship will not be fully complete and deployable at delivery (known as Phase I) in fiscal
year 2022, but rather much later–in fiscal year 2025 at the end of Phase II construction.27
October 2015 CBO Report
An October 2015 CBO report on the potential cost of the Navy’s 30-year shipbuilding plan states
the following regarding the CVN-78 program:
The Navy’s current estimate of the total cost of the lead ship of the CVN-78 class is
$12.9 billion in nominal dollars for the period from 2001 to 2016, an amount that is equal
to the cost cap set in law.19 CBO used the Navy’s inflation index for naval shipbuilding
to convert that figure to $14.7 billion in 2015 dollars, or 23 percent more than the amount
requested in the President’s budget proposal when the ship was first authorized in 2008.
The Navy’s estimate does not include $4.7 billion in research and development costs that
apply to the entire class.
Because construction is nearly finished and no major problems have arisen in the test
program (which is about half completed), CBO used the Navy’s estimate for the lead ship
to estimate the cost of successive ships in the class. That does not mean that all of the
cost risk has been eliminated, but CBO estimates that the remaining risk of cost growth

27 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-16-
329SP, March 2016, p. 98.
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would be less than $100 million for the ship. (CBO thus no longer expects the $500
million in cost growth it had estimated for last year’s report.)
The next carrier after 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 $11.5 billion in nominal dollars and $10.6 billion in 2015 dollars. The
Navy’s selected acquisition report on the CVN-79 states that “the Navy and shipbuilder
have made fundamental changes in the manner in which the CVN 79 will be built to
incorporate lessons learned from CVN 78 and eliminate key contributors to cost
performance challenges realized in the construction of CVN 78.”20 Although CBO
expects the Navy to achieve a considerable cost reduction in the CVN-79 compared with
the CVN-78, CBO’s estimates are somewhat higher than the Navy’s. Specifically, CBO
estimates that the cost of the ship will be $11.9 billion in nominal dollars and $11.3
billion in 2015 dollars, about 4 percent more than the Navy’s estimate.
The Navy estimates an average cost of $11.3 billion for the 6 carriers in the 2016
shipbuilding plan, the CVN-80 through CVN-85. CBO’s estimate is $12.3 billion per
ship. Both estimates are substantially lower for the 2016 plan than they were for 2015.
The Navy’s current estimate incorporates the effects of efforts to reduce costs for the
CVN-79 and successive ships in the class. CBO’s estimate is based on the Navy’s
estimate for the final cost of the CVN-78, which reduced the estimated cost of succeeding
ships in the class. CBO’s estimate is still above the Navy’s, however, because CBO
projects smaller reductions in price than the Navy predicts and because CBO anticipates
real cost growth in the naval shipbuilding industry.28
February 2015 Department of the Navy Testimony
At a February 25, 2015, hearing on Department of the Navy acquisition programs, Department of
the Navy officials testified:
The Navy is committed to delivering CVN 78 within the $12.887 billion Congressional
cost cap. Sustained efforts to identify cost reductions and drive improved cost and
schedule on this first-of-class aircraft carrier have resulted in highly stable performance
since 2011.
Parallel efforts by the Navy and shipbuilder are driving down and stabilizing aircraft
carrier construction costs for the future John F Kennedy (CVN 79) and estimates for the
future Enterprise (CVN 80). As a result of the lessons learned on CVN 78, the approach
to carrier construction has undergone an extensive affordability review. The Navy and the
shipbuilder have made significant changes on CVN 79 to reduce the cost to build the ship
as detailed in the 2013 CVN 79 report to Congress. The benefits of these changes in build
strategy and resolution of first-of-class impacts on CVN 79 are evident in metrics
showing significantly reduced man-hours for completed work from CVN 78. These
efforts are ongoing and additional process improvements continue to be identified.
The Navy extended the CVN 79 construction preparation contract into 2015 to enable
continuation of ongoing planning, construction, and material procurement while
capturing lessons learned associated with lead ship construction and early test results.
The continued negotiations of the detail design and construction (DD&C) contract afford
an opportunity to incorporate further construction process improvements and cost
reduction efforts. Award of the DD&C contract is expected in third quarter FY 2015.
This will be a fixed price-type contract.

28 Congressional Budget Office, An Analysis of the Navy’s Fiscal Year 2016 Shipbuilding Plan, October 2015, pp. 21-
23.
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Additionally, the Navy will deliver the CVN 79 using a two-phased strategy. This
enables select ship systems and compartments to be completed in a second phase,
wherein the work can be completed more efficiently through competition or the use of
skilled installation teams responsible for these activities. This approach, key to delivering
CVN 79 at the lowest cost, also enables the Navy to procure and install shipboard
electronic systems at the latest date possible.
The FY 2014 NDAA adjusted the CVN 79 and follow ships cost cap to $11,498 million
to account for economic inflation and non-recurring engineering for incorporation of lead
ship lessons learned and design changes to improve affordability. In transitioning from
first-of-class to first follow ships, the Navy has maintained Ford class requirements and
the design is highly stable. Similarly, we have imposed strict interval controls to drive
changes to the way we do business in order to ensure CVN 79 is delivered below the cost
cap. To this same end, the FY 2016 President’s Budget request aligns funding to the most
efficient build strategy for this ship and we look for Congress’ full support of this request
to enable CVN 79 to be procured at the lowest possible cost.
Enterprise (CVN 80) will begin long lead time material procurement in FY 2016. The FY
2016 request re-phases CVN 80 closer to the optimal profile, therefore reducing the
overall ship cost. The Navy will continue to investigate and will incorporate further cost
reduction initiatives, engineering efficiencies, and lessons learned from CVN 78 and
CVN 79. Future cost estimates for CVN 80 will be updated for these future efficiencies
as they are identified.29
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
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

29 Statement of the Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Joseph P. Mulloy, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Lieutenant General Kenneth J. Glueck, Jr., Deputy Commandant, Combat Development and Integration
& Commanding General, Marine Corps Combat Development Command, Before the Subcommittee on Seapower and
Projection Forces of the House Armed Services Committee on Department of the Navy Seapower and Projection
Forces Capabilities, February 25, 2015, pp. 5-6.
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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 78.30
For the full text of the Navy’s report, see the Appendix B.
May 2013 Navy Testimony
In its prepared statement for a May 8, 2013, hearing on Navy shipbuilding programs before the
Seapower subcommittee of the Senate Armed Services Committee, the Navy stated that
In 2011, the Navy identified spiraling cost growth [on CVN-78] associated with first of
class non-recurring design, contractor and government furnished equipment, and ship
production issues on the lead ship. The Navy completed an end-to-end review of CVN 78
construction in December 2011 and, with the shipbuilder, implemented a series of
corrective actions to stem, and to the extent possible, reverse these trends. While cost
performance has stabilized, incurred cost growth is irreversible....
As a result of lessons learned on CVN 78, the approach to carrier construction has
undergone an extensive affordability review; and the Navy and the shipbuilder have made
significant changes on CVN 79 that will reduce the cost to build the ship. CVN 79
construction will start with a complete design, firm requirements, and material
economically procured and on hand in support of production need. The ship’s build
schedule also provides for increased completion levels at each stage of construction with
resulting improved production efficiencies....
Inarguably, this new class of aircraft carrier brings forward tremendous capability and
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.31
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

30 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.
31 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.
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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.
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.32
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

32 Transcript of hearing.
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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.33
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 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.
Sincerely, [signed] Ray Mabus
Attachment: As stated
Copy to: The Honorable Carl Levin, Chairman
[Attachment]
Improving Cost Performance on CVN 78

33 Transcript of hearing.
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CVN 78 is nearing 40 percent completion. Cost growth to-date is attributable to increases
in design, contractor furnished material, government furnished material (notably, the
Electromagnetic Aircraft Launching System (EMALS), Advanced Arresting Gear
(AAG), and the Dual Band Radar (DBR)), and production labor performance. To achieve
the best case outcome, the program must execute with zero additional cost growth in
design and material procurement, and must improve production performance. The Navy
and the shipbuilder have implemented a series of actions and initiatives in the
management and oversight of CVN 78 that cross the full span of contracting, design,
material procurement, government furnished equipment, production planning,
production, management and oversight.
CVN 78 is being procured within a framework of cost-plus contracts. Within this
framework, however, the recent series of action taken by the Navy to improve contract
effectiveness are achieving the desired effect of incentivizing improved cost performance
and reducing government exposure to further cost growth.
 CVN 78 design has been converted from a ‘level of effort, fixed fee’ contract to a
completion contract with a firm target and incentive fee. Shipbuilder cost
performance has been on-target or better since this contract was changed.
 CVN 78 construction fee has been retracted, consistent with contract performance.
However, the shipbuilder is incentivized by the contract shareline to improve upon
current performance to meet agreed-to cost goals.
 Contract design changes are under strict control; authorized only for safety, damage
control, mission-degrading deficiencies, or similar. Adjudicated changes have been
contained to less than 1 percent of contract target price.
 The Navy converted the EMALS and AAG production contract to a firm, fixed price
contract, capping cost growth to that system and imposing negative incentives for
late delivery.
 Naval Sea Systems Command is performing a review of carrier specifications with
the shipbuilder, removing or improving upon overly burdensome or unneeded
specifications that impose unnecessary cost on the program.
The single largest impact to cost performance to-date has been contractor and
government material cost overruns. These issues trace to lead ship complexity and CVN
78 concurrency, but they also point to inadequate accountability for carrier material
procurement, primarily during the ship’s advance procurement period (2002-2008).
These effects cannot be reversed on CVN 78, but it is essential to improve upon material
delivery to the shipyard to mitigate the significant impact of material delays on
production performance. Equally important, the systemic material procurement
deficiencies must be corrected for CVN 79. To this end, the Navy and shipbuilder have
taken the following actions.
 The Navy has employed outside supply chain management experts to develop
optimal material procurement strategies. The Navy and the shipbuilder are reviewing
remaining material requirements to employ these best practices (structuring
procurements to achieve quantity discounts, dual-sourcing to improve schedule
performance and leverage competitive opportunities, etc.).
 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.
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 The Program Executive Officer (Carriers) is conducting quarterly flag-level
government furnished equipment summits to drive cost reduction opportunities and
ensure on-time delivery of required equipment and design information to the
shipbuilder.
The most important finding regarding CVN 78 remaining cost is that the CVN 78 build
plan, consistent with the NIMITZ class, focuses foremost on completion of structural and
critical path work to support launching the ship on-schedule. This emphasis on structure
comes at the expense of completing ship systems, outfitting, and furnishing early in the
build process and results in costly, labor-intensive system completion activity during
later; more costly stages of production. Achieving the program’s cost improvement
targets will require that CVN 78 increase its level of completion at launch, from current
estimate of 60 percent to no less than 65 percent. To achieve this goal and drive greater
focus on system completion:
 the Navy fostered a collaborative build process review by the shipbuilder with other
Tier 1 private shipyards in order to benchmark its performance arid identify
fundamental changes that would yield marked improvement;
 the shipbuilder has established specific launch metrics by system (foundations,
machinery, piping, power panels, vent duct, lighting, etc.) and increased staffing for
waterfront engineering and material expediters to support meeting these metrics;
 the shipbuilder has linked all of these processes within a detailed integrated master
schedule, providing greater visibility to current performance and greater ability to
control future cost and schedule performance across the shipbuilding disciplines;
 the Navy and shipbuilder are conducting Unit Readiness Reviews of CVN 78
erection units to ensure that the outfitted condition of each hull unit being lifted into
the dry-dock contains the proper level of outfitting.
These initiatives, which summarize a more detailed list of actions being implemented and
tracked as result of the end-to-end review, are accompanied by important management
changes.
 The shipbuilder has assigned a new Vice President in charge of CVN 78, a new Vice
President in charge of material management and purchasing, and a number of new
general shop foreman to strengthen CVN 78 performance.
 The Navy has assigned a second tour Flag Officer with considerable carrier
operations, construction, and program management experience as the new Program-
Executive Officer (PEO).
 The PEO and shipyard president conduct bi-weekly launch readiness reviews
focusing on cost performance, critical path issues and accomplishment of the target
for launch completion.
 The Assistant Secretary of the Navy (Research, Development, and Acquisition)
conducts a monthly review of program progress and performance with the PEO and
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
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2013 President’s Budget request with the first year of incremental funding. Two years
have been added to the CVN 79 production schedule in this budget request, afforded by
the fact that CVN 79 will replace CVN 68 when she inactivates. To improve affordability
for CVN 79, the Navy plans to leverage this added time by introducing a fundamental
change to the carrier procurement approach and a corresponding shift to the carrier build
plan, while incorporating CVN 78 lessons learned.
The two principal ‘documents’ which the Navy and shipbuilder must ensure are correct
and complete at the outset of CVN 79 procurement are the design and the build plan.
Design is governed by rules in place that no changes will be considered for the follow
ship except changes necessary to correct design deficiencies on the lead ship, fact of life
changes to correct obsolescence issues, or changes that will result in reduced cost for the
follow ship. Exceptions to these rules must be approved by the JROC, or designee.
Accordingly, the Navy is requesting procurement authority for CVN 79 with the Design
Product Model complete and construction drawings approximately 95 percent complete
(compared to approximately 30 percent complete at time of lead ship authorization).
As well, first article testing and certification will be complete for virtually all major new
equipments introduced in the FORD Class. At this point in time, the shipbuilder has
developed a complete bill of material for CVN 79. The Navy is working with the
shipbuilder to ensure that the contractor’s material estimates are in-line with Navy
‘should cost’ estimates; eliminating non-recurring costs embedded in lead ship material,
validating quantities, validating escalation indices, incorporating lead ship lessons
learned. The Navy has increased its oversight of contractor furnished material
procurement, ensuring that material procurement is competed (where competition is
available); that it is fixed priced; that commodities are bundled to leverage economic
order quantity opportunities; and that the vendor base capacity and schedule for receipt
supports the optimal build plan being developed for production.
In total, the high level of design maturity and material certification provides a stable
technical baseline for material procurement cost and schedule performance, which are
critical to developing and executing an improved, reliable build plan.
In order to significantly improve production labor performance, based on timely receipt
of design and material, the Navy and shipbuilder are reviewing and implementing
changes to the CVN 79 build plan and affected facilities. The guiding principles are:
 maximize planned work in the shops and early stages of construction;
 revise sequence of structural unit construction to maximize learning curve
performance through ‘families of units’ and work cells;
 incorporate design changes to improve FORD Class producibility;
 increase the size of erection units to eliminate disruptive unit breaks and improve
unit alignment and fairness;
 increase outfitting levels for assembled units prior to erection in the dry-dock;
 increase overall ship completion levels at each key event.
The shipbuilder is working on detailed plans for facility improvements that will improve
productivity, and the Navy will consider incentives for capital improvements that would
provide targeted return on investment, such as:
 increasing the amount of temporary and permanent covered work areas;
 adding ramps and service towers for improved access to work sites and the dry-dock;
 increasing lift capacity to enable construction of larger, more fully outfitted super-
lifts:
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An incremental improvement to carrier construction cost will fall short of the
improvement necessary to ensure affordability for CVN 79 and follow ships.
Accordingly, the shipbuilder has established aggressive targets for CVN 79 to drive the
game-changing improvements needed for carrier construction. These targets include:
 75 percent Complete at Launch (15 percent> [i.e., 15 percent greater than] FORD);
 85-90 percent of cable pulled prior to Launch (25-30 percent> FORD);
 30 percent increase in front-end shop work (piping details, foundations, etc);
 All structural unit hot work complete prior to blast and paint;
 25 percent increase to work package throughput;
 100 percent of material available for all work packages in accordance with the
integrated master schedule;
 zero delinquent engineering and planning products;
 resolution of engineering problems in < 8 [i.e., less than 8] hours.
In parallel with efforts to improve shipbuilder costs, the PEO is establishing equally
aggressive targets to reduce the cost of government furnished equipment for CVN 79;
working equipment item by equipment item with an objective to reduce overall GFE
costs by ~$500 million. Likewise, the Naval Sea Systems Command is committed to
continuing its ongoing effort to identify specification changes that could significantly
reduce cost without compromising safety and technical rigor.
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.34
Press Reports
A July 2, 2015, press report states:
The Navy plans to spend $25 million per year beginning in 2017 as a way to invest in
lowering the cost of building the services’ new Ford-class aircraft carriers, service
officials said.
“We will use this design for affordability to make new improvements in cost cutting
technologies that will go into our ships,” said Rear Adm. Michael Manazir, Director, Air
Warfare....
“We just awarded a contract to buy long lead item materials [for CVN-79] and lay out an
allocated budget for each of the components of that ship. We want to build the ship in the
most efficient manner possible,” Rear Adm. Thomas Moore, Program Executive Officer,
Carriers, said.
Navy leaders say the service is making positive strides regarding the cost of construction
for the USS Kennedy and plans to stay within the congressional cost cap of $11.498
billion....

34 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.
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The $25 million design for affordability initiative is aimed at helping to uncover
innovative shipbuilding techniques and strategies that will accomplish this and lower
costs.
Moore said the goal of the program is to, among other things, remove $500 million from
the cost of the third Ford-class carrier, the USS Enterprise, CVN 80.
“It is finding a million here and a million there and eventually that is how you get a
billion dollars out of the ship from (CVN) 78 to (CVN) 79. The goal is to get another
$500 million out of CVN 80. The $25 million dollars is a pretty prudent investment if we
can continue to drive the cost of this class of ship down,” Moore told reporters recently.
Moore explained that part of the goal is to get to the point where a Ford-class carrier can
be built for the same amount of man-hours it took to build their predecessor ships, the
Nimitz-class carriers.
“We want to get back to the goal of being able to build it for historical Nimitz class levels
in terms of man hours for a ship that is significantly more capable and more complex to
build,” Moore added.
The money will invest in new approaches and explore the processes that a shipyard can
use to build the ship, Moore added.
“They’ve made a significant investment in these new welding machines. These new
welding machines allow the welder to use different configurations. This has significantly
improved the throughput that the shipyard has,” Moore said, citing an example of the
kind of thing the funds would be used for.
The funds will also look into whether new coatings for the ship or welding techniques
can be used and whether millions of feet of electrical cabling can be installed in a more
efficient manner, Moore added.
Other cost saving efforts assisted by the funding include the increased use of complex
assemblies, common integrated work packages, automated plate marking, weapons
elevator door re-design and vertical build strategies, Navy officials said.
Shipbuilders could also use a new strategy of having work crews stay on the same kind of
work for several weeks at a time in order to increase efficiency, Moore said. Also, some
of the construction work done on the USS Ford while it was in dry dock is now being
done in workshops and other areas to improve the building process, he added.35
A June 29, 2015, press report states:
Newport News Shipbuilding will see cost reduction on the order of 18 percent fewer man
hours overall from the first Ford-class aircraft carrier to the second, according to a
company representative.
Ken Mahler, Newport News vice president of Navy programs, touted the shipyard's cost
savings on the John F. Kennedy (CVN-79) during a June 15 interview with Inside the
Navy
. This reduction was facilitated by the investments the shipyard is making in carrier
construction, as well as lessons learned from the first ship, the Gerald R. Ford (CVN-78),
which will deliver next year.36
A June 23, 2015, press report states:

35 Kris Osborn, “Navy Launches New Affordability Plan for Ford-Class Carriers,” DOD Buzz, July 2, 2015.
36 Lara Seligman, “Newport News See 18 Percent Fewer Man Hours On Second Ford Carrier,” Inside the Navy, June
29, 2015.
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The Pentagon’s cost-assessment office now says the Navy’s second aircraft carrier in a
new class will exceed a congressionally mandated cost cap by $235 million.
That’s down from an April estimate that the USS John F. Kennedy, the second warship in
the new Ford class, would bust a $11.498 billion cap set by lawmakers by $370 million.37
The Navy maintains that it can deliver the ship within the congressional limit.
“The original figure was a draft based on preliminary information,” Navy Commander
Bill Urban, a spokesman for the Pentagon’s Cost Assessment and Program Evaluation
office, said in an e-mail. As better information, such as updated labor rates, became
available, the office “revised its estimate to a more accurate number,” he said.38
A June 15, 2015, press report states:
[Rear Admiral Tom] Moore [program executive officer for aircraft carriers]. said the
program would save a billion dollars by decreasing the man hours needed to construct the
ship by 18 percent from CVN-78 to 79—down to about 44 million manhours. He said
this reduction is only a first step in taking cost ouot of the carrier program. The future
Enterprise (CVN-80) will take about 4 million manhours out, or another 10 percent
reduction, for a savings of about $500 million.
But beyond seeking ways to take cost out, the contract itself reduces the risk to the
government, Moore said.
“The main construction of the ship is now in a fixed price environment, so that
switchover really limits the government’s liability,” he said.
Without getting into specific dollar amounts due to business sensitivities, Moore
explained that “this is the lowest target fee we’ve ever had on any CVN new
construction. Look at tghe shape of the share [government-contractor cost] share lines,
because the share lines at the end of the day are a measure of risk. So where we’d like to
get quickly to [a] 50/50 [share line], in past carrier contracts we’ve been out at 85/15,
90/10—which basically means for every dollar over [the target cost figure, up to the
ceiling cost figure], the government picks up 85 cents on the dollar. And this contract
very quickly gets to 50/50. The other thing is ceiling price—on a fixed-price contract, the
ceiling price is the government’s maximum liability. And on this particular contract,
again, it is the lowest ceiling price we’ve ever had [for a CVN].”39

37 See Anthony Capaccio, “Aircraft Carrier $370 Million Over Congressional Cost Cap,” Bloomberg News, May 19,
2015.
38 Anthony Capaccio, “Second New Carrier Now Seen Busting a Cost Cap by $235 Million,” Bloomberg News, June
23, 2015.
39 Megan Eckstein, “Navy: CVN-79 Contract Has Lowest Ceiling Price Ever; R&D Investment Will Take Out Further
Cost,” USNI News, June 15, 2015.
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Appendix B. 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-79.40

40 Aircraft Carrier Construction, John F Kennedy (CVN 79), Report to Congress, March 2013, 17 pp. An annotation on
the report’s cover page indicates that the report was authorized for public release on May 16, 2013. The report was
posted at InsideDefense.com (subscription required) on June 21, 2013. See also Megan Eckstein, “Navy Plan To
Congress Outlines New Strategies To Save On CVN-79,” Inside the Navy, June 24, 2013.
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Author Contact Information

Ronald O'Rourke

Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610

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