A Government Accountability Office (GAO) report released Tuesday on the Gerald R. Ford-class aircraft carriers finds the Navy is continuing to underestimate the cost of these ships past the first vessel.
The GAO said while the new carrier class is meant to reduce costs and improve capabilities, the first version costs nearly $2.4 billion more than estimates and the Navy is underestimating the cost of the second ship by up to hundreds of millions of dollars. The original sensitive GAO report was issued in March 2017.
The report found the cost estimate for the second Ford-class aircraft carrier, CVN-79, is not reliable and does not address the lessons learned from CVN-78. “As a result, the estimate does not demonstrate that the program can meet its $11.4 billion cost cap,” the GAO said.
The office noted cost growth in the first ship was due to challenges with technology development, design, construction, and an optimistic budget estimate.
“Instead of learning from the mistakes of CVN 78, the Navy developed an estimate for CVN 79 that assumes a reduction in labor hours needed to construct the ship that is unprecedented in the past 50 years of aircraft carrier construction,” the report said.
The Navy negotiated 18 percent fewer labor hours for the CVN-79 than required on CVN-78 after it developed the program estimate. The GAO said this is optimistic compared to labor hour reductions calculated in independent cost reviews conducted by the Naval Center for Cost Analysis and the Office of Cost Assessment and Program Evaluation in 2015.
“Navy analysis shows that the CVN 79 cost estimate may not sufficiently account for program risks, with the current budget likely insufficient to complete ship construction,” the report said.
GAO also said the Navy’s reporting mechanisms only provide a limited insight into the overall Ford-class program and individual ship costs. These mechanisms include budget requests and annual acquisition reports to Congress.
The report highlighted that for the 11 years before 2015, no independent cost estimates were conducted for any of the Ford-class ships while the program received over $15 billion in funding. The program’s Selected Acquisition Reports, which include annual cost, status, and performance reports to Congress, only provide aggregate program costs for all three ships in the class, the GAO said.
This limits transparency on individual ship costs and diminishes Congress’ “diminished ability to oversee one of the most expensive programs in the defense portfolio,” GAO said.
The National Defense Authorization Act (NDAA) for Fiscal Year 2007 set separate congressional caps for the lead sand subsequent carriers in this class. It also set up six provisions for the Navy to make adjustments without seeking statutory authority. This includes factors like economic inflation and the insertion of new technologies.
The cap is now at $12.9 billion for the lead and $11.4 billion for the following ships. In the 2014 NDAA Congress added several more allowable adjustments for CVN-78 because of “urgent and unforeseen requirements identified during shipboard testing.”
Sen. John McCain (R-Ariz.), chairman of the Senate Armed Services Committee, also expressed frustration with the Ford-class carriers at a hearing Thursday by noting an extra $20 million request for CVN-78 in the fiscal 2018 budget request.
He debated with Acting Navy Secretary Sean Stackley if the request is a breach of the budget caps. Stackley said not yet because they are still examining whether the funding will be required pending post-delivery repairs. The Navy is doing everything it can to stay within the existing cap and will keep Congress informed as they complete a post-delivery assessment of the carrier, he added.
McCain disagreed and said Congress has not been properly informed. Stackley said they are providing monthly reports, including fixes for the motor turbine generators but for now “we are not ready to trip the cost cap.”
McCain said his question was not properly answered and would follow up with questions in writing.
The Ford-class carriers are being built by Huntington Ingalls Industries’ [HII] Newport News Shipbuilding.