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LCS Program - 2016 GAO Review

In December 2016 the Government Accountability Office found that the Navys vision for the Littoral Combat Ship (LCS) program had evolved significantly over the last 15 years, reflecting degradations of the underlying business case. Initial plans to experiment with two different prototype ships adapted from commercial designs were abandoned early in favor of an acquisition approach that committed to numerous ships before proving their capabilities. Cost, schedule, and capability expectations have eroded over time, as shown in the table below. More recently, the Navy attributed a series of engineering casualties on delivered LCS to shortfalls in crew training, seaframe design, and construction quality.

By the end of 2016 the Navy had 8 delivered LCS, with 14 more in some stage of the construction process (including LCS 21, with a planned December 2016 construction start). With 26 ships delivered or under contract, the LCS program stood at a crossroads. The Navys fiscal year 2017 budget request asked Congress to fund the last two planned LCS. The LCS evolution was complicated by the fact that major commitments have been made to build large numbers of ships before proving their capabilities. Whereas acquisition best practices embrace a fly before you buy approach, the Navy has subscribed to a buy before you fly approach for LCS.

Concerned about the LCSs survivability and lethality, in 2014 the Secretary of Defense directed the Navy to evaluate alternatives. After rejecting more capable ships based partly on cost, schedule, and industrial base considerations, the Navy chose the existing LCS designs with minor modifications and re-designated the ship as a frigate. Many of the LCSs capabilities are yet to be demonstrated and the frigates design, cost, and capabilities are not well-defined.

The Navy proposed to commit quickly to the frigate in what it calls a block buy of 12 ships. . The Navy planned to request fiscal year 2018 authorization for its frigate block buy approach. Of note, the pricing the Navy intends to seek from the shipyards will be for 12 basic LCS. Only later will the shipyards submit their proposals for adding frigate capabilities to the LCS hulls. Congress will be asked to authorize this approach many months before the Department of Defense (DOD) prepares an independent cost estimate. Further, there is no industrial base imperative to continue with the Navys planned pace for the frigate acquisition. LCS workload backlogs, when combined with 2 LCS awarded earlier in 2016 and 2 more planned for award in fiscal year 2017, will take construction at both shipyards into 2021.

The Navy has attributed a series of recent engineering casualties on delivered LCS to shortfalls in crew training, seaframe design, and construction quality. According to the Navy, these failures have resulted in substantial downtime and costs for repairs or replacements. By virtue of using guaranty provisions as opposed to warranties (such as the U.S. Coast Guard generally uses), the Navy is responsible for paying for the vast majority of defects. Specifically regarding LCS, for LCS 4, the Navys guaranty provisions were structured such that the Navy paid all of the costs to correct all defects. For LCS 3, the shipbuilder was responsible for 30 percent of the cost of the first $100,000 in defects a number the Navy surpassed just days after delivery. Thus, the Navy was 100 percent responsible for the costs of all remaining defects. For LCS 5-8, the shipbuilder is responsible for some portion of the first $1 million in defects for each ship.

The LCS under construction exceeded contract cost targets, with the government responsible for paying for a portion of the cost growth. This growth has prompted the Navy to request $246 million in additional funding for fiscal years 2015-2017, largely to address cost overruns on 12 LCS seaframes. Similarly, deliveries of almost all LCS under contract at both shipyards.

(LCS 5-26) have been delayed by several months, and, in some cases, close to a year or longer. Navy officials recently reported that, despite having had 5 years of LCS construction to help stabilize ship delivery expectations, the program would not deliver four LCS in fiscal year 2016 as planned.

The LCS mission packages have also lagged behind expectations. The Navy has fallen short of demonstrating that the LCS with its mission packages can meet the minimum level of capability defined at the beginning of the program. A total of 24 LCS seaframes will already be delivered by the time all three mission packages achieve only a minimum level of capability.

Since 2007, delivery of the total initial mission package operational capability has been delayed by about 9 years (from 2011 to 2020) and the Navy has lowered the level of performance needed to achieve the initial capability for two packagessurface warfare and mine countermeasures. As the Navy continues to concurrently deliver seaframes and develop mission packages, it has become clear that the seaframes and mission package technologies were not mature and remain largely unproven.

Mission packages were initially intended to be quickly swapped out in an expeditionary theater in a matter of days. By 2016 plans called for mission packages to be swapped within 72 hours only if all the equipment and personnel are in theater. An LCS executing a package swap could be unavailable for between 12-29 days. The Navy expected mission package swaps will be more infrequent than initially envisioned.

The Navy acknowledged LCS weapon systems were under-performing and offered little chance of survival in a combat scenario. LCS lacked the ability to operate independently in combat and should not be employed outside a benign, low threat environment unless escorted by a multi-mission combatant providing credible anti-air, anti-surface, and anti-submarine protection.

GAO noted that the Navys plan, which moved the frigate award forward from fiscal year 2019 to fiscal year 2018, was an acceleration that continued a pattern of committing to buy ships in advance of adequate knowledge. Specifically, the Navy has planned for its downselect award of the frigate to occur before detail design of the ship begins. Awarding a contract before detail design is completed though common in Navy ship acquisitions has resulted in increased ship prices. Further, without a year of frigate detail design that had been previously planned before the contract award, the Navy plans to rely on a contractor-driven design process that is less prescriptive than a government-driven design process. This approach is similar to what the Navy used for the original LCS program, whereby the shipyards were given performance specifications and requirements, selecting the design and systems that they determined were best suited to fit their designs in a producible manner.



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Page last modified: 08-12-2016 18:56:50 ZULU