The Navy is working to enhance its estimates of public shipyard drydock improvement projects after the first project in New Hampshire came in over cost estimates, the chief of naval operations (CNO) told a Senate panel Tuesday.
During a hearing of the Senate Armed Services Committee, Sen. Jeanne Shaheen (D-N.H.) welcomed the Navy starting work in the Shipyard Infrastructure Optimization Plan (SIOP) to upgrade the Navy’s four public shipyards, but raised concerns about “significant cost overruns in the multi-mission drydock project” at the Portsmouth Naval Shipyard in Maine.
The Portsmouth yard only repairs submarines and is the first to get new construction work on the new multi-mission drydock. This new drydock will allow it to perform work on the
Virginia-class submarine, which the shipyard cannot do with its current drydocks. The SIOP aims to upgrade several features of the four public shipyards that service nuclear-powered vessels.
CNO Adm. Mike Gilday said the cost overruns were due to two main issues: COVID-19 pandemic-related construction issues and because the Navy underestimated the complexity of the project.
“So, in terms of raw material, we saw significant growth in cost for lumber, for cement and for steel and that’s been pretty steady through the pandemic, although it’s beginning to level off now,” he said.
Beyond that unforeseen issue, the initial estimate was done two years ago and “I think, more importantly, was the complexity of that work and so what we’ve learned from that…we are now bringing in industry before we make the estimates so that we have a better informed idea of the complexity of the job,” Gilday continued.
The CNO said one example of talking with industry was that at the Portsmouth yard “it makes more sense for the contractor to do the foundational work, with respect to the fabrication and then to ship it down to the site rather than to do it in the shipyard.”
Gilday underscored $225 million requested in the Navy’s FY ‘22 unfunded priorities list to support Portsmouth drydock work and keep the project on schedule “is my number one unfunded on the list…because it’s vitally important that we keep the progress of that project on pace for the first Virginia-class” maintenance availability at Postmouth scheduled in 2026.
“I asked the committee’s support on that unfunded item, but nevertheless, I am committed to keeping that project on track for the very reason I just mentioned.”
The Navy is also planning to construct a multi-mission drydock in Hawaii and Sen. Mazie Hirono (D-Hawaii) repeated concerns about cost overruns and how the Navy will proceed. The service plans to start construction in fiscal year 2023 and be ready in time to also service new new Virginia-class submarines.
“Honestly, it is at the top of our priorities list as we go into the FY ‘23 budget bill for [military construction],” Gilday said. “We’re about to have a conference with industry out in Hawaii early next month to get a better understanding of the scope, the estimate, and we think right now that that project is probably in the six to seven-year timeframe based on the phasing. But we would like to get rolling as soon as possible on that effort.”
These initial underestimated costs come after the Government Accountability Office (GAO) published a report in 2019 that said since the Navy did not use best practices in developing the 20-year SIOP (Defense Daily, Nov. 25, 2019).
The Navy estimates that the work will cost up to $21 billion, but GAO said the true cost could add billions more.
GAO said the Navy did not include best practices like documenting key assumptions, accounting for inflation or addressing other risks that combined could add billions to the ultimate cost, since that initial estimate was preliminary without complete or reliable estimates.
“The extent to which the Navy’s plan addresses these deficiencies remains to be seen because complex planning has not been completed and proposed actions are complex and years away from being implemented,” GAO said at the time.