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LHA-1 Tarawa class Program

Five amphibious assault ships of the TARAWA class were authorized by the Congress, and construction of the first ship began in November 1971. All five ships were built at the Litton Ship Systems shipyard in Pascagoula, Louisiana. The five ships are virtually identical, thus forming a single series or class of ships. In this respect they are among the largest U.S. Navy ships to be built entirely by one shipyard. Prior to the construction of the Tarawa class, it was normal for a class of ships to be built in several shipyards, with each yard being assigned several of the ships.

The TARAWA or LHA program was based on the participation of the shipbuilding industry in acquisition processes known as Concept Formulation/Contract Definition and Total Package Procurement. The former process provides for industrial participation very early in the development phases of the ship to provide increased application of industrial design ingenuity and improved management of the program during the design and building phases. Under the Total Package Procurement concept all ships of the class are constructed at a single shipyard to assure similarity and to lower design and production costs. Support for the ships after they are in the fleet will be easier because of their similarity in design.

In mid-1967 contracts were awarded to three major shipbuilding corporations to assist the Navy in developing the LHA design. The basic requirements had been established earlier by the Navy and the Marine Corps. Part of the design requirements provide for performance requirements, such as speed, endurance, and troop/cargo capabilities. In addition, for the first time in a military ship-reliability and availability requirements are specified in the LHA program. This means that upon delivery to the Navy the ship must be capable of operating at sea for a specific number of days before requiring overhaul, and for extended at-sea periods in emergency situations. Also specified are times to load troops, for the ship to get underway, and for unloading troops and equipment in assault operations. All three of the shipbuilding firms submitted proposals for the development and multi-year production of the ships in January 1968. Subsequently, a team of naval and civilian experts made a detailed analysis of the three proposals and, in May 1968, the winning shipyard was named.

On 28 May 1968, the Secretary of Defense announced the award of a contract to build the new ships to the Ingalls Shipbuilding Division of Litton Industries. The LHA contract dated May 1, 1969 was a fixed-price-incentive contract that established a per-vessel target price of $112.50 million and a per-vessel ceiling price of $133.25 million. Therefore, the target price for five ships was $562.5 million. The estimate recognizes an increase to the per-vessel ceiling price which adds $103.8 million ($20.75 million X 5) to the price. The $109.7 million increase was specified in the contract as the maximum cancellation charge that may be paid to Litton as a result of canceling the last four LHAs.

Litton Industries had long been a manufacturer of aerospace equipment and had only recently entered the field of shipbuilding. It had constructed a new shipyard at Pascagoula and attempted to apply the techniques of the aerospace business to the new venture. There were, understandably, problems.

Shortly thereafter, the Navy notified Litton that it intended to reduce the number of ships to be constructed and delivered under the contract. Originally, the Marine Corps requested nine of these ships. Tentative approval had been given, but on 20 January 1971 the number was reduced to five. It was a blow to the Marine Corps, but at least production began on the ones approved.

On April 23, 1971, the Navy and Litton agreed to consider in one proposal and negotiation the reduction from nine to five ships; the establishment of the most economical, firm, and realistic delivery schedule mutually agreed upon; the establishment of a firm target cost, target price, and ceiling price; revised labor and material escalation provisions; and other appropriate matters.

The agreement obliged Litton to submit a proposal by October 29, 1971. In late summer of 1971, Litton notified the Navy it would not be able to submit the proposal by that date. By the end of 1971, it appeared that most of the problems had been corrected and the first LHA was back almost on schedule. In December 1970, when Litton requested an extension in the delivery time of the LHA-1. Submitting the proposal on March 31, 1972, Litton proposed a total firm target price of $1,039 million for five LHAs. Included in the proposed target price was a cost component termed a "request for equitable adjustment" amounting to $246.6 million.

On June 23, 1972, the Navy wrote Litton that it had reviewed the March 31 proposal and had found it almost completely unresponsive to the requirements specified in the April 23, 1971, agreement. On August 30, 1972, the Navy rejected Litton's request for equitable adjustment claim because it was based on an unacceptable total cost and total time. The Navy offered to evaluate any claim resubmitted which demonstrated cause and effect.

On August 31, 1972, Litton and the Navy executed a contract modification which gave the contracting officer the right to unilaterally determine certain unresolved issues if the parties failed to agree on such issues by February 28, 1973. The Navy and Litton conferred on many occasions and sought to negotiate and agree on suitable revisions and adjustments as contemplated by the April 23, 1971, agreement and the August 31, 1972, modification.

In most fixed-price construction contracts, payments are made on the basis of the percentage of physical progress made in performing the contract. The fixed-price- incentive LHA contract, however, provided for payments on the basis of physical progress starting 40 months after award. Payments for the first 40 months were to be on a cost-incurred basis to cover anticipated high startup and preliminary design effort. Litton's price proposal was conditioned upon including these provisions in the contract.

The cost-incurred method of payment was to have ceased on September 1, 1972, by which time the amounts that would have been paid on the basis of physical progress were to have been computed and compared with payments. To the extent that payments exceeded those that would have been made on the basis of physical progress, Litton was to repay the difference to the Government. The contract also provided that further payments by %he Navy be suspended until Litton repaid. For a variety of reasons, the Navy extended the date for progress payment conversion to February 28, 1973. The progress measurement issues were to be negotiated by that date or determined unilaterally by the Navy in case of disagreement.

On September 29, 1972, Litton submitted a proposed system for measuring physical progress. During negotiations the Navy and Litton reached agreement on the system but failed to reach agreement on specific weighting factors necessary to measure physical progress and on measurement of material physical progress. Accordingly, the contracting officer's decision of February 28, 1973, specified the weighting factors and the manner for measuring material progress.

At February 28, 1973, no agreement had been reached on any of these unresolved issues and the contracting officer made a unilateral determination on each outstanding issue. This action established a total contract price of $795.3 million, a delivery schedule, a progress payment system, and escalation provisions. The amount of funds estimated to complete the program over the $970 million previously approved is $169.2 million. These funds were included in the fiscal year 1974 budget, but no reserve for claims had been designated.

On March 1, 1973, Litton announced that its Ingalls Shipbuilding division and the Navy were $108 million apart in the negotiation of a final fixed price to produce five LHAs. Litton said (1) the difference between its estimate and the Navy's estimate represents the cost of work and schedule delays caused by the Navy's actions and not included in the original contract, (2) the Navy's unilateral price is unreasonable and unrealistic, and (3) it intends to seek an equitable settlement. The next day Litton notified the Navy that it was appealing the contracting officer's decision to the Armed Services Board of Contract Appeals. On 30 March 1973 Litton requested a go-day extension for filing the complaint because of the complex legal and factual questions requiring review and the amount in issue (over $400 million). The complaint was submitted on July 5, 1973. In it Litton alleged that the contracting officer's determination establishing, among other things 2 the firm target price of $795.3 million, the delivery schedule, and cancellation costs was in error. Due to the stage of these proceedings and the complexities invalved, the Board could not estimate when its review would be completed.

The Navy informed Litton that after March 1, 1973, payments would be made on the basis of physical progress rather than the cost incurred. The Navy said that Litton owes the Navy approximately $55 million for payments in excess of physical progress payments earned. On March 1, 1973, Litton said the failure of the unilateral decision to recognize the Navy's responsibility for costs and delays had established the need to repay $55 million. Litton said that such a repayment was not due and that it would oppose the Navy's claim. On March 6, 1973, Litton obtained a temporary restraining order barring the Navy from collecting any payments on this debt. As of July 1973, the restraining order was still in effect and the Navy continued to reimburse Litton on a cost-incurred basis.

The date of 01 December 1973 was to be an important one for the Marine Corps. On that day, the Commandant, General Robert E. Cushman, Jr., arrived in Pascagoula. He had succeeded General Chapman as CMC on 1 January 1972. General Cushman, winner of the Navy Cross for heroism in the recapture of Guam in 1944, had come to Mississippi to attend the launching of the first LHA. It was to be named the USS Tarawa (LHA 1). In his speech at the launching he said he felt a sense of exhilaration "at the impending arrival of a versatile amphibious assault ship designed from the keel up with the requirements of its landing forces in mind. In the current vernacular, this one really `gets it all together.'" He went on to predict that "The LHA will be the backbone of our amphibious forces for the rest of this century ." At the conclusion of the speech he turned and said: "It is with great personal pride that I present to you the sponsor of Tarawa . . . my own personal wife ." A few minutes later she broke the traditional bottle of champagne on the bow of the Tarawa - a major development had arrived.

The five ships were constructed by advanced shipbuilding techniques, with modules or large sections of the ships being assembled separately and then joined together on a shipway. This technique of modular construction is used at a number of modern shipyards, including two in the United States and several in the Soviet Union. When assembly of the ships is completed they are individually moved onto a floatable launch platform and then lowered into the water.

Questions had been asked about the effect of LHA schedule and cost problems on the DD-963 program and about the shipyard's physical capability to handle both programs simultaneously. A principal concern of both Litton and the Navy was the unintended simultaneous construction of LHAs and DD-963s and the adverse effect that a slippage in the construction schedule of one program could have on the other program. The Navy reviewed and concurred in Litton's plans for scheduling the erection of ship modules or sections and the movement of these modules from the bays to the ship integration areas and the launch area. Under Litton's erection plans the smaller and more quickly constructed destroyers may be moved around an LHA for launch, The Navy stated that these plans '*provide sufficient confidence in the adequacy of Ingalls facilities to perform the DD-963 Class and LHA-1 Class shipbuilding activities." By 1973 the first LHA was originally scheduled for delivery 19 months before delivery of the first destroyer. Under present schedules the first destroyer will be delivered about 5 months before the first LHA. The unintended overlap in production of the LHAs and the destroyers may cause problems not previously anticipated. Although the two programs have been completely integrated in plans, some slippage in delivery of the destroyers was anticipated.

It would be a serious oversight not to recognize the unique nature of the procurement for these two programs. For the first time, the Navy delegated to the contractor almost complete responsibility for decisions in the program execution and complete design responsibility, including conceptual work, parametric studies, and preliminary drawings.

Litton was also responsible for systems; therefore, less Government-furnished equipment is supplied. Integration of all ship systems, including design of the command and control system and associated computer support. The integrated logistic support system, including maintenance and supply support. Litton identified skills and numbers of crew to man the ships as well as training programs and manuals supporting maintenance and operations.

Requiring the contractor to establish unit costs for production and delivery schedules on complex products at an early time and to guarantee performance before design and test have been accomplished poses a serious responsibility on Litton in this form of procurement. Actual cost, schedule, and performance often do not match these early contractual commitments, and the differences are the root of much of the criticism of apparent cost growth. Rowever, serial production after the design is stabilized should have some advantages: It improves component standardization where it is not otherwise obtained (ships), restrains the Government in requesting changes in design , permits the contractor to stabilize its work force and work plan with mutual benefit from the efficiencies achieved, and stimulates improvements in shipyard plant and methods. But it does inhibit the participation of the Government agencies which must monitor the acquisition process to insure that, within the terms of the contract, the program is progressing in a manner consistent with the funding authorization and that the ships being produced are compatible with the fleet and its support systems.

The Contractor reported the first slippage on the LHA program in December 1970. At that time, it was estimated that the LHA-1 would be delivered about 10 months late. By 1973 delays of two to three years were projected. The reasons for the slippages were entangled in the charges countercharges between Litton and the Navy. There were no major technical problems, and changes were being held down to a very low level. The key issues remained whether management can increase the labor force productivity to the planned level, provide skilled craftsmen when needed, synchronize the production plan, and sustain pressure on these factors for the necessary time.

The launch for the first or lead LHA, the TARAWA, took place in late 1973. This ship was then completed alongside a dock and was ready for service by mid-1976. The four other ships of this class followed at regular intervals. The estimates of total slippage on the LHA ranges from 26 l/2 month for LHA-1 to 44 months for LHA-5. Four additional units were canceled in 1971.

On June 20, 1978, Litton and the Navy aqreed to a claim settlement. The settlement provided for a $265 million contract price increase to cover existinq company claims aqalnst the Navy. It also provided for (1) the contractor to absorb a 5200 mllllon loss throuqh adjustrnq the LHA contract billinq base, (2) the Navy to absorb a 5182 mllllon loss throush increaslnq the contract price under the authority of Public Law 85-804, (3) the Navy and the contractor to share 20 and 80 percent of future cost underruns, respectively, and (4) the Navy and the contractor to share future cost overruns equally up to $100 million and the contractor to be solely responsible for costs above that amount.



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