Navy Shipbuilding: Increasing Focus on Sustainment Early in the Acquisition Process Could Save Billions

The U.S. Navy requested over $40 billion each of the last 3 years to build, operate, and sustain its fleet. Acquisition decisions made as ships are developed and built can have a long-term effect on sustainment costs and ship quality.

GAO was asked to assess the extent to which DOD considers and plans for sustainment when acquiring weapons. Among other objectives, this report assesses the extent to which: (1) Navy ship programs deliver ships to the fleet that can be sustained as planned; (2) the Navy develops and uses effective sustainment requirements during acquisition; (3) ship programs are effectively identifying and evaluating sustainment risks in planning documents; and (4) leadership considers programs' sustainment planning and outcomes. GAO reviewed DOD and Navy acquisition policy and guidance, evaluated acquisition plans, collected sustainment metrics, and conducted interviews with more than 100 organizations, including program office and fleet units. GAO assessed 11 classes of shipbuilding programs (all nine that delivered warships during the last 10 years, as well as two newer classes of ships).

The Navy has delivered warships—such as aircraft carriers, destroyers, and submarines—to its fleet over the past 10 years that require more effort to sustain than initially planned. In assessing how these classes of ships are sustained, GAO found 150 examples of class-wide problems, such as unreliable ship systems. These problems stemmed from shipbuilding programs not identifying, evaluating, or mitigating sustainment risks during the acquisition process. GAO found that it would cost the Navy $4.2 billion to correct just the 30 percent of these problems for which the Navy had data on estimated repair costs.

GAO found that shipbuilding programs' requirements for sustainment reflect weaknesses with how Department of Defense (DOD) policy defines these requirements for ships. Sustainment requirements should influence acquisition decisions that determine the sustainability of a ship class, such as the ship's design. However, the Navy's sustainment requirements do not provide key information on how reliable and maintainable mission-critical systems should be and, therefore, cannot adequately inform acquisition decisions.

GAO also found that shipbuilding programs did not consistently address sustainment risks in acquisition planning documents. For example, the operating and support costs included in cost estimates did not capture all sustainment risks that could affect costs or evaluate sensitivity to changing sustainment assumptions, contrary to DOD and Navy cost estimating guidance. As a result, for six shipbuilding programs whose costs GAO could assess, the Navy had underestimated sustainment costs by $130 billion, as shown below.

The Navy has begun making some changes to its acquisition oversight process, such as developing sustainment program baselines and adding a sustainment oversight review. While positive, these changes focus on considering sustainment after key decisions are made early in the acquisition process. GAO also found that DOD is not required to provide detailed information about shipbuilding programs' sustainment cost growth to Congress. As such, Congress does not have full insight into the extent of shipbuilding programs' cost growth and why such growth occurred.

GAO is making one matter for Congressional consideration to enhance oversight and 11 recommendations to help DOD and Navy improve ship sustainment. DOD concurred with 8 and partially concurred with 3 recommendations but did not describe specific actions, which GAO believes are necessary to improve sustainment outcomes.

The United States Navy requested over $40 billion in funding each of the  last three years to build, operate, and maintain a fleet of some of the most  technologically advanced ships in the world. Though these resources are  significant, the Navy has nevertheless struggled to build and maintain  ships to its desired standards within estimated cost and schedule. For  instance, we have previously found that in the seven-year period from  2012-2018, the Navy experienced over 27,000 days of unexpected  maintenance delays across all of its ship classes—delays that increase  sustainment costs and degrade readiness. Recent events—such as ship  collisions, submarines waiting idly for maintenance, and long delays in  deploying newly constructed Littoral Combat Ships (LCS)—have led  members of Congress, the Department of Defense (DOD), and the Navy  to re-examine how the Navy buys and sustains its ships.

We have reported extensively on challenges with the Navy’s shipbuilding  efforts and how it operates and maintains its new ships. For example, in  June 2018, we reported that the Navy consistently underestimated the  time and resources required to deliver its ships with their planned  capability, resulting in higher than expected costs, late delivery, and  defects. In 2013, we reported that the Chief of Naval Operations (CNO)  regularly accepted delivery of ships with a significant number of defects;  and, in 2017, we found that these defects were often not corrected by the  time ships were provided to the fleet. We have also reported on the  Navy’s challenges sustaining its ships. Specifically, in May 2017, we  reported that the Navy’s initiative to reduce the number of sailors onboard  its ships to achieve cost savings resulted in maintenance backlogs and  increased operating and support (O&S) costs. Further, in 2014 and  2017, we reported on challenges with the implementation of the statutorily  required product support managers (PSMs), whose role includes  implementing support strategies for weapon systems.

You requested that we undertake a body of work evaluating the extent to  which DOD adheres to statutes and policies regarding sustainment and  DOD’s efforts to reduce sustainment costs throughout the acquisition  process. This review focuses on the Navy’s shipbuilding portfolio and  assesses the extent to which: (1) the Navy’s shipbuilding programs  deliver ships to the fleet that can be sustained as planned; (2) the Navy  develops and uses effective key sustainment requirements during the  acquisition process; (3) shipbuilding programs effectively identify and  evaluate sustainment costs and risks in key acquisition planning  documents; (4) Navy and Congressional leadership have insight into and  effectively consider programs’ sustainment planning and outcomes; and  (5) the shipbuilding programs leverage PSMs during the acquisition  process.

To assess the role of sustainment in the acquisition process for  shipbuilding, we reviewed all shipbuilding programs that delivered  warships during the last 10 years, as well as two new shipbuilding  programs that are still in the early stages of development, from program  conception to the start of lead ship construction. We did not review the  Navy’s military sealift command ships because we focused our analysis  on warships. Table 1 lists the shipbuilding programs we reviewed.  Additional information on these programs is presented with our detailed  methodology in appendix I.

To determine the extent to which Navy’s shipbuilding programs deliver  ships to the fleet that can be sustained as planned, we examined nine  shipbuilding programs that had delivered ships and submarines to the  fleet over the last 10 years. We spoke to the operators and maintainers  responsible for these ships who identified sustainment challenges  affecting multiple ships in a class. We then traced these issues back to  the acquisition process—including concept development, design, and  construction—by collecting information developed during acquisition  pertaining to the design and construction of the ship class. We then  assessed whether or not the shipbuilding program and other stakeholders  identified and addressed these potential sustainment issues during the  acquisition process.

To assess the extent to which the Navy develops and uses key  sustainment requirements during the acquisition process that can be used  to inform acquisition decisions and reporting, we reviewed the Navy’s  requirements documents and DOD and Navy guidance documents such  as DOD’s Joint Capabilities Integration and Development System, as well  as interviewed Navy officials.

To assess the extent to which shipbuilding programs identify and evaluate  sustainment risks in key acquisition documents established by DOD and  Navy acquisition policy for sustainment planning, we reviewed Navy  acquisition documentation for the shipbuilding programs included in our  review, including life-cycle cost estimates, life-cycle sustainment plans,  and independent logistics assessments. We compared these acquisition  documents to applicable DOD and Navy guidance documents and GAO  best practices.

To assess the extent to which Navy leadership effectively considers  shipbuilding programs’ sustainment planning and outcomes, we reviewed  Navy policy governing the acquisition process and assessed the extent to  which Navy leadership conducted oversight in accordance with  acquisition policy by reviewing briefing documents and minutes for key  oversight meetings. We also assessed the extent to which DOD reports  information to Congress that provides insight into sustainment cost  growth for major acquisition programs.

Lastly, to assess the extent to which the Navy leverages PSMs during the  acquisition process, we assessed the role of the PSM by comparing PSM  guidance to sustainment planning documents that the PSM is responsible  for developing. We also interviewed program managers and PSMs about  PSMs’ involvement in the acquisition process. To support all of our  objectives, we interviewed officials from over 100 Navy organizations  involved in building, inspecting, testing, sustaining, and operating the  Navy ship classes included in our review to evaluate the extent to which  they are involved in the acquisition process and how they consider and  evaluate sustainment risk during the acquisition process. We took steps  to assess the reliability of the various data used in this report, and we  determined that these data are sufficiently reliable for our purposes. Full  details on these steps as well as additional details about our scope and  methodology can be found in appendix I.

We conducted this performance audit from April 2018 to March 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Navy shipbuilding is a costly and complex endeavor that requires billions  of dollars to develop, design, and construct ships. However, the  acquisition phase of a ship’s life cycle only accounts for approximately 30  percent of a ship program’s total life-cycle cost. Notionally, the remaining  70 percent of the life-cycle cost of a ship program is incurred after the  Navy delivers new ships to the fleet during the phase known as O&S.  DOD guidance states that these long-term sustainment costs are  determined in large part by decisions made early in the acquisition  process. Approximately 80 percent of a program’s O&S costs fixed at the  time the shipbuilding program’s requirements are set and the ship is  designed. Additionally, we have found that once these decisions are  made, it can be very difficult and costly to make changes if sustainment  improvements are needed.

According to DOD, operational support is a function of several related  factors—reliability, availability, maintainability, and cost—that are  determined in large part by decisions made before the start of  construction.

Reliability is the probability that an item, such as a system, can  perform a required function under stated conditions for a specified  period of time.

Availability is a measure of the degree to which an item is in an  operable state and can be called upon to work at the start of a mission  and at an unknown (random) point in time. In other words, the degree  to which a system is operable and available for mission tasking when  needed.

Maintainability is the ability of an item, such as a system, to be  retained in or restored to a specified condition when maintenance is  performed by skilled personnel using prescribed procedures and  resources, at each prescribed level of maintenance and repair.

Cost refers to the O&S costs associated with sustaining the ship.

When planning for and executing ship sustainment, DOD guidance states  that the program manager’s goal is generally to find a solution that  maximizes reliability, availability, and maintainability within cost  constraints. As the Navy acquires its ships, it makes a series of decisions  that have implications for how a ship class can be affordably sustained,  including decisions about engineering, ship design, equipment selection,  and planned maintenance approaches. As such, DOD guidance advises  acquisition programs, including Navy shipbuilding programs, to plan for  and design reliability, availability, and maintainability into the weapon  system early in the acquisition effort. For the purposes of this review, we  define early in the acquisition process as the time period between the  beginning of the program and the start of construction on the lead ship.  Giving attention to these sustainment issues early in the acquisition  process is intended to help programs ensure that their ships will be  sustainable and affordable over their entire life cycle. Conversely, if  reliability, availability, and maintainability are not adequately designed into  the ship, there is a risk the ship will cost more to own and operate than  expected and will not be available for use when needed by the fleet.

Since Navy ships are comprised of numerous systems that need to work  together, planning for sustainment and designing reliability, availability,  and maintainability into a ship is a complicated task. Most Navy ships can  accomplish several different missions, and accomplishing these missions  usually requires a set of mechanical, electrical, combat, information  technology, and other systems to work together. Each of these systems  individually needs to be reliable, available, and maintainable in order for  the ship as a whole to be sustainable. As such, addressing sustainment  during the acquisition process is an effort that requires coordination and  input from a variety of officials associated with the program, including the  program manager, requirements officials, ship design managers,  engineers, PSMs, and others.

DOD and Navy Policies for Acquisition Programs

DOD acquires new weapons, including ships, for its warfighters through a  process described in two key acquisition policies: Department of Defense  Directive 5000.01, which establishes the overarching framework for the  Defense Acquisition System, and Department of Defense Instruction  5000.02, which implements the Defense Acquisition System. These  policies provide management principles and detailed procedures,  respectively, for the execution and management of defense acquisition  programs. Specifically, these policies establish the phases of the  acquisition process, key milestone decision points, required acquisition  documentation, and roles and responsibilities for acquisition officials,  among other things. Under this framework, shipbuilding programs move  through several acquisition phases, including requirements setting,  material solution analysis, technology development, ship design, ship  construction, deployment, and sustainment. In order to proceed through  the acquisition process, shipbuilding programs must be reviewed  periodically at key decision points, called milestones, at which a Milestone  Decision Authority assesses the program’s progress in achieving its  goals. These milestones typically coincide with significant increases in the  resources devoted to the program. To ensure senior leadership is well- informed at these decision points, shipbuilding programs are generally  required to create or update key acquisition documents for milestone  reviews that contain information on the program’s requirements, costs,  and schedule, among other things.

The Navy has also established its own acquisition policy and processes  to supplement the DOD-wide acquisition policies and to oversee  acquisitions managed internally to the Navy. The Navy’s acquisition  policy, Secretary of the Navy Instruction 5000.2, provides instructions for  implementing the Defense Acquisition System within the Navy, as well as  additional Navy-specific acquisition procedures. In particular, Navy  acquisition policy establishes a series of seven Navy decision points  throughout the acquisition process, called Gate reviews, which  complement the DOD milestones. These Gate reviews are split into two  phases that the Navy calls passes: the first is led by the CNO and  focuses on requirements setting and the second is led by the Assistant  Secretary of the Navy for Research, Development, and Acquisition (ASN (RD&A)) and focuses on acquisition. As programs move through the  acquisition process, Navy leadership—comprised of officials from the  acquisition, requirements, resources, and warfighting communities— convenes Gate reviews to conduct oversight and ensure programs are on  track to achieve their acquisition and sustainment goals. Each Gate  review has a different objective and list of topics that need to be included  in the Gate briefing. Lastly, DOD and Navy policy both allow for the  Milestone Decision Authority to tailor the acquisition process outlined in  these policies. Figure 1 depicts the acquisition process for Navy  shipbuilding programs, as established by DOD and Navy acquisition  policies.

The Navy’s acquisition policy also details the acquisition responsibilities  of key Navy officials, including the ASN (RD&A), the CNO, and program  managers. The CNO and the ASN (RD&A) are key Navy leaders who  chair the Gate review process and approve acquisition documents. For  most shipbuilding programs, the ASN (RD&A) also serves as the decision  authority to approve the advancement of these programs through the  acquisition process at the appropriate milestones. Further, the policy  enclosures delineate various elements of acquisition programs, such as  systems engineering, testing, and sustainment planning.

DOD and Navy acquisition policies both include requirements for  shipbuilding programs to consider sustainment throughout the acquisition  process. For instance, prior to Milestone A, DOD policy states that  sustainment planning and considerations should inform the development  of program requirements and early ship design decisions. As programs  move into the design and construction phases, programs are to develop a  comprehensive product support package and evaluate it through  engineering reviews and other tests to ensure it is sufficient to meet  sustainment requirements and affordability targets. The planning  documents that comprise these support packages, such as life-cycle  sustainment plans (LCSPs), are intended to set the foundation for how  the fleet will sustain a class of ships.

Statutory Changes That Have Increased Attention on Sustainment during the Acquisition Process

In addition to the requirements set in DOD and Navy policies, Congress  has passed laws related to increasing DOD and Navy attention on  sustainment throughout the acquisition process. Chief among these is the  creation of the role of the PSM. A PSM should develop and implement a  comprehensive product support strategy for weapon systems, among  other things. More recently, Congress has directed organizational  changes related to DOD and Navy acquisition leaderships’ attention to  sustainment. In response, the Navy has added a sustainment function to  the ASN (RD&A)’s portfolio. The Navy implemented this direction in fiscal  year 2020 with the appointment of a Deputy Assistant Secretary for  Sustainment that reports to the ASN (RD&A). Congress has also  established several requirements related to DOD and Navy management  of acquisition programs’ O&S costs, sustainment planning, and  sustainment reporting. For example, statute requires weapon system  programs to consider, where appropriate, sustainment in key acquisition  documents, such as acquisition strategies, designs, contracting, and cost  estimates. Additionally, statute requires DOD to provide Congress with  annual Selected Acquisition Reports that have sustainment and life-cycle  cost information.

Key Documents That Support Sustainment Planning during the Acquisition Process

Shipbuilding programs are required to develop a suite of acquisition  documents that provide information about the goals of the program and  how the program office is developing and executing to these goals,  pursuant to DOD and Navy acquisition policies. Many of these key  acquisition documents contain information about the program’s  sustainment requirements and plans, as discussed below.

The Capability Development Document should define the  program’s operational requirements, including the program’s key  performance parameters. Key performance parameters are the most  critical requirements a system must demonstrate to deliver an  effective military capability. In 2007, DOD updated its requirements  setting policy, called the Joint Capabilities Integration and  Development System, to require all programs to establish key  performance parameters for sustainment in response to concerns that  acquisition programs were not adequately planning for sustainment.  This requirement helps ensure that acquisition programs provide a  weapon system to the warfighter with optimal availability and reliability  at an affordable price. The sustainment key performance parameter is  comprised of two measures—operational availability and materiel  availability—which addresses the availability of the ship while in  operations and under maintenance, respectively:

Operational availability measures the probability that a system  will be ready for use when expected. This requirement helps  programs determine how reliable, maintainable, and supportable a  system needs to be. Operational availability is also understood as  the percentage of time a ship can perform its primary mission.

Materiel availability measures the percentage of the total  inventory of a system that is operationally capable based on  materiel condition, which for ship platforms, is the percentage of a  ship class available for deployment. This metric helps programs  determine how many ships to buy in order to meet planned  deployment schedules. This requirement should inform decisions  that could increase or decrease planned maintenance time for a  shipbuilding program.

According to DOD guidance, the operational and materiel availability  requirements should be considered in tandem to produce ships that  work as expected and are available when needed, as shown in figure  2 below.

During the acquisition process, the operational availability requirement  should inform decisions about how to best increase reliability for  systems needed to meet the key performance parameter. To do this,  engineers can, among other things: (1) design systems that require  less frequent maintenance, (2) add redundancy to key systems, or (3)  ensure that systems can be fixed quickly and cheaply.

At the same time, the materiel availability requirement should inform  how many ships are purchased based on the quantity needed to  accomplish missions at any one time. It also informs acquisition  decisions that could affect the length of maintenance availabilities,  such as maintenance time needed to repair or replace key  components.

The Life-Cycle Cost Estimate should provide information on the total  estimated cost to develop, build, deploy, sustain, and dispose of a  ship class over its life cycle, regardless of funding source. The life- cycle cost estimate is based on program objectives and operational  requirements for the ship class. It should reflect a realistic appraisal of  the program’s risks and the level of cost most likely to be realized.  The life-cycle cost estimate includes O&S costs, which provide  information on the estimated costs for crewing, operations,  maintenance, sustaining support, continuing system improvements,  and indirect support.

The Acquisition Program Baseline (APB) is an overarching  acquisition document that describes the shipbuilding program and  presents the program’s approved cost, schedule, and performance  goals. The APB is a formal, binding agreement between the Milestone  Decision Authority, Program Manager, and their acquisition chain of  command to be used for tracking and reporting on the program.

The Life-Cycle Sustainment Plan (LCSP) should document the  program’s product support strategy and governs planning for  sustainment during the acquisition process, as well as the execution  of sustainment activities after ships are delivered to the fleet. The  LCSP describes the efforts necessary to develop and integrate  sustainment requirements into the ship’s development, design,  procurement, testing, fielding, and operation. It also lists the activities  necessary for the shipbuilding program to develop, implement, and  deliver a product support package that maintains affordable  operational effectiveness over the ship’s life cycle. For example, the  LCSP should contain information on sustainment engineering, O&S  cost estimates and affordability constraints, reliability analysis, and  sustainment contracts, among other things.

The Independent Logistics Assessment (ILA) should be an  impartial analysis of a program’s sustainment planning and execution  to determine its ability to meet established performance and  sustainment requirements. The ILA is intended to assess the  adequacy of the program’s product support strategy, product support  risks that are likely to drive future O&S costs, changes to system  design that could reduce O&S costs, and effective strategies for  managing O&S costs. According to DOD guidance, programs should  use the results of the ILA to improve sustainment outcomes.

Acquisition and Sustainment Stakeholders for Shipbuilding Programs

There are a large number of Navy stakeholders involved in the effort to  design, build, and support a ship class over its life cycle. In general, the  acquisition community is led by the ASN (RD&A), while the operations  and sustainment community is led by the CNO. Naval Sea Systems  Command (NAVSEA) provides support to both the acquisition and  sustainment communities and is comprised of experts across multiple  disciplines. Figure 3 provides more information on the various acquisition  and sustainment stakeholders that support the Navy’s ship classes.

The ASN (RD&A) acts as the Navy Service Acquisition Executive and  oversees the Navy’s shipbuilding program offices.

Program Executive Offices are responsible for the life cycle  management of their assigned programs. The program executive  office is led by a program executive officer who, according to DOD’s  updated acquition policy, should balance the risk, cost, schedule,  performance, interoperability, sustainability, and affordability of a  portfolio of acquisition programs and deliver an integrated suite of  mission capability to users. For ships, there is a shipbuilding  program office that is responsible for acquiring ships and an in-service  program office that supports ships in sustainment. In some cases,  these program offices are located within the same program executive  office while, in other cases, these offices are split between different  Navy organizations (typically the program executive office and  NAVSEA). As such, the Navy’s shipbuilding programs and some  program executive offices do not have responsibility for ship programs  throughout their life cycle.

The shipbuilding program offices manage their assigned  shipbuilding programs through program initiation, technology  development, ship design, construction, testing, and delivery.

Acquisition program managers lead shipbuilding program  offices and are responsible for the management of a program.  Acquisition policies delineate a number of sustainment-related  responsibilities for acquisition program managers, such as: developing and implementing an LCSP to inform  acquisition and sustainment phases of the program; developing strategies for managing intellectual property; using systems engineering to identify tradeoffs between  life-cycle costs and performance requirements during  design and construction;  implementing a comprehensive reliability and  maintainability engineering program; developing an obsolescence management plan; monitoring the program’s performance against its  sustainment requirements and developing strategies to  improve operational availability, O&S affordability,  maintainability, and reliability, as necessary; and working with a PSM, among other things.

Product Support Managers (PSMs) generally work with the  acquisition program manager and are tasked with developing  and implementing a comprehensive product support strategy  for their assigned programs. PSMs are supposed to ensure  that a comprehensive product support strategy is developed  and implemented.

The CNO is the senior military officer of the Department of the Navy,  overseeing the Navy’s fleet and NAVSEA, among other organizations.  The CNO also has acquisition responsibilities, such as approving a  shipbuilding program’s requirements and determining whether to accept  delivery of ships from the shipbuilders.

The Office of the Chief of Naval Operations (OPNAV) is a  collection of offices under the purview of the CNO responsible for  various functions necessary for the operation of the Navy. For  example, there are divisions within OPNAV that manage the Navy’s  budget, logistics, and requirements setting process, among other  things.

The operational fleet forces (fleet) of the Navy, including  operational units and type commands, assume full financial  responsibility for operating and maintaining ships.

Naval Supply Systems Command provides supply and services  support to the Navy by managing supply chains and inventory for  Navy aircraft, surface ships, submarines, associated weapons  systems, and non-nuclear ordinance stockpiles.

NAVSEA is responsible for providing expertise in designing, engineering,  building, buying, and maintaining ships, submarines, and combat systems  to meet the fleet’s operational requirements. NAVSEA is comprised of  directorates and warfare centers that specialize in these areas of  expertise. NAVSEA reports to the CNO, but also supports the  shipbuilding program offices, and is organized by the following  specialties, among others:

Naval Sea Systems Command Engineering Directorate (NAVSEA  05) is an engineering command that is comprised of cost estimators,  ship designers, systems engineers, and other technical experts.  Among other things, this office is responsible for the development of  life-cycle cost estimates and systems engineering for ships.

Naval Sea Systems Command Acquisition and Commonality  Directorate (NAVSEA 06) is a command that brings together  personnel dedicated to bridging communication gaps between  government and industry, in order to enable cost reductions and  commonality throughout the acquisition life cycle. Among other things,  this office leads the Navy’s ILA process.

Naval Warfare Centers are a group of centers that offer services on  a fee-for-service basis, including: obsolescence mitigation, in-service  engineering, and data analysis, among many other tasks.

Navy Spends Billions to Fix New Ships That Are More Difficult and Costly to Sustain than Shipbuilding Programs Initially Planned

Shipbuilding program officials did not identify or mitigate sustainment  risks during the acquisition process that subsequently resulted in  significant and costly problems for the fleet. During the course of our  review, the fleet identified 150 problems that affected multiple ships in a  class. These problems resulted in more effort and cost for the fleet in  sustainment than expected. In particular, we estimated that the Navy’s  fleet has spent or is planning to spend at least $4.2 billion to mitigate and  correct approximately 30 percent of these problems beyond what was  planned for during the acquisition process. We could not quantify the cost  impact of the remaining 70 percent of problems because the Navy was  unable to provide data on the cost to correct them. Examples from the  SSN 774, LPD 17 Flight I, and LHD 8/LHA 6 ship classes illustrate how  shipbuilding program officials did not identify and mitigate sustainment  risk during the acquisition process, which resulted in significant and costly  maintenance paid for by the fleet once realized.

The Fleet Identified over a Hundred Problems with New Ships That Required More Maintenance Effort than Planned for During Acquisition

The fleet identified 150 sustainment problems affecting multiple ships in a  class that required more sustainment effort than planned for during  acquisition, which we verified through Navy data and documentation.  Officials in the fleet, such as operators, maintainers, and engineers,  reported these problems to us as major class-wide problems requiring  more sustainment effort than planned. These problems manifested after  ships were delivered and most of these problems have yet to be resolved.  Where data were available on the cost to correct the problems, we  estimated that the fleet paid at least $4.2 billion and had to perform more  onerous maintenance than planned. These problems stemmed from  shipbuilding program officials not identifying or mitigating sustainment  risks in sustainment planning during the acquisition process, before ships  were delivered to the fleet. Figure 4 summarizes the number of problems  among multiple ships in the same class that required more sustainment  effort than the shipbuilding programs’ had planned. It also reflects the  costs associated with fixing these problems for the 30 percent of the  problems where we could identify these costs based on available data.

According to fleet leadership, these problems contribute to the fleet’s  inability to maintain ships at planned cost and schedule, which we have  previously found is a significant Navy-wide issue. In part to  accommodate this extra effort, the Navy has experienced maintenance  delays and has had to defer planned maintenance for ships in operations  that the fleet determined was not as urgent as other maintenance needs.  For instance these problems have contributed to: nearly 5,300 total days of delays to planned maintenance availabilities  since 2012 on ships built during the last 10 years, new ships deferring planned maintenance, and  insufficient funding to meet maintenance needs.

To generate the list of 150 problems, we interviewed operators and  maintainers for the shipbuilding programs in our review and asked them  to discuss problems that occurred across multiple ships in the same  class. We then verified these problems with available Navy data on  system reliability and equipment failures. The list of problems only  includes those that stemmed from risks that were not identified,  evaluated, or mitigated by the shipbuilding program offices in their  sustainment planning during the acquisition process. The list does not  include problems that can be attributed to normal wear and tear or  problems caused by sailor error. The estimate of $4.2 billion in additional  costs to address these problems includes the fleet’s cost to correct or  mitigate problems, but excludes costs associated with day-to-day  maintenance that the fleet must perform.

If the Navy’s fleet chooses to correct a problem, it typically requires the  Navy to replace systems on ships that have already been delivered to the  fleet or are under contract, which can be a costly undertaking. According  to fleet maintenance officials, if a permanent correction is not  implemented, the Navy’s operators and maintainers typically have to  incorporate a more onerous maintenance approach than expected. The  effects of more onerous day-to-day maintenance costs are hard to  quantify using available Navy data. For example, the Navy used a brand  new toilet and sewage system on the CVN 77 and 78, similar to what is  on a commercial aircraft, but increased in scale for a crew of over 4,000  people. To address unexpected and frequent clogging of the system, the  Navy has determined that it needs to acid flush the CVN 77 and 78’s  sewage system on a regular basis, which is an unplanned maintenance  action for the entire service life of the ship. According to fleet  maintenance officials, while each acid flush costs about $400,000, the  Navy has yet to determine how often and for how many ships this action  will need to be repeated, making the full cost impact difficult to quantify.  We generally did not include these types of ongoing costs in our  calculation.

In our cost calculation, we also excluded costs associated with adding  sailors to ships to address maintenance gaps because sailors have been  added for many reasons, making it difficult to isolate the money spent on  sailors to address equipment problems. For instance, we omitted the  $225 million that the fleet plans to spend to add sailors to LCS class  ships, even though the Navy is taking this action in part, to ensure that  the ship’s crew can perform necessary maintenance.

The Fleet Experienced Problems as a Result of Risks That Were Not Identified, Evaluated, or Mitigated in Shipbuilding Programs’ Sustainment Planning

We determined that the 150 problems identified by the fleet generally fall  into three categories: (1) problems maintaining commercial equipment on  ships, (2) ship design that did not effectively consider maintainability, and  (3) untested sustainment assumptions that turned out to be incorrect after  ships were delivered to the fleet. We found that nearly all Navy  shipbuilding programs we reviewed experienced problems in each of  these three categories, as shown in figure 5.

The following examples illustrate each of the three categories of  problems:

Problems maintaining commercial equipment on ships. Dozens of  primarily commercial systems on multiple SSN 774 class submarines  are experiencing unexpected failures. During the acquisition process,  the Navy based sustainment planning decisions on the assumption  that these parts would last for the life of the submarine without the  need for any maintenance. According to officials, the Navy did not  verify these assumptions and now at least 16 of these systems  require scheduled maintenance and several more systems need  periodic updates that were not previously planned. As a result, as we  have previously found, operators and maintainers have had difficulty  obtaining the spare parts, accomplishing this planned maintenance  within resource constraints.

Ship designs that did not effectively consider maintainability.

The Navy used a new design for CVN 77’s stores elevators, which are  used to move provisions between decks. However, among other  issues, the elevators are too small to fit a standard sized pallet jack.  Thus, provisions cannot be loaded or unloaded with a pallet jack or a  forklift and must be manually unpacked and stacked by hand on to the  elevator. Unloading is further complicated, according to the ship’s  crew, because the elevator doors are so small that the average sailor  cannot stand up as they enter and exit the elevator. The fleet has  mitigated a few of these problems, but a redesign of the elevator  would be necessary to fit standard pallets and fully resolve the other  problems.

Untested sustainment assumptions that turned out to be  incorrect after ships were delivered to the fleet. The Navy had  originally planned to use a contractor to conduct the majority of LCS  maintenance. However, the fleet determined that a heavy reliance on  contracted support is inefficient for maintaining and sustaining the  LCS and is in the process of establishing maintenance teams  comprised of Navy personnel. Since it planned to use contractor  support, the LCS shipbuilding program officials stated that they did not  purchase the technical documentation necessary to maintain the  commercial equipment used on the ship. As a result, fleet engineers  told us that they are now attempting to buy and develop the necessary  maintenance data, which adds cost and complexity to the  maintenance process.

The following section highlights four of the 150 problems identified by the  fleet. Other examples from among these 150 issues are discussed  throughout the report when appropriate to illustrate how the acquisition  process contributed to sustainment problems. A full listing of the 150  problems is in a version of this report that is for official use only.

Example One—LPD 17 Flight 1 Titanium Piping

In an effort to improve sustainment of the LPD 17 class ships, the Navy  decided to install titanium piping to carry seawater for firefighting and to  cool machinery instead of copper-nickel piping because of its lighter  weight and increased durability. However, instead of saving effort in  sustainment, these pipes required more maintenance effort than planned  and, in many cases, eventually had to be replaced. Early in the  acquisition process, the Navy studied this decision and discovered that  unlike copper-nickel piping, titanium piping carrying seawater is  susceptible to “biofouling”—meaning sea life such as shellfish grow inside  the pipes—as shown in figure 6.

To prevent biofouling, Navy engineers determined that a chlorination  system—which adds chlorine to seawater entering the ship in order to kill  biological material in the water—and a dechlorination system—which  removes the chlorine before the seawater is dumped from the ship— would be needed and included specifications for the shipbuilder to install  these systems. Then, according to shipbuilding program officials, after the  ship was on contract, the shipbuilder reported to the Navy that it could not  find suitable chlorination and dechlorination systems. The program office  decided to proceed with ship construction absent these systems and  evaluate the extent of the biofouling problem after ship delivery.

We reviewed the LPD 17 program’s sustainment planning documents and  found that a discussion of this sustainment risk was not included in any of  the maintenance planning documents, and, according to the fleet, this risk  was not communicated to the Navy’s maintenance organizations. In July  2009, about one year after the lead ship was provided to the fleet, Navy  operators and maintainers began to notice biofouling in the piping  system. Biofouling degraded the functionality of a number of other  systems on the ship that depend on the water delivered by the piping  system, resulting in overheating of main and ship service engines and  loss of electric power generation, among other problems. To address  these and related issues across the LPD 17 class, the Navy’s fleet spent  at least $250 million to: (1) buy and install new copper-nickel piping that is  now costlier, heavier, and not as durable as titanium; (2) install  chlorination systems that were later found to be unreliable, requiring  significant maintenance; and (3) conduct unplanned maintenance and  replace systems that broke due to shellfish contamination, among other  interventions.

Example Two—SSN 774 Special Hull Treatment

The Navy’s attack submarines utilize a special covering on the hull.  However, as shown in figure 7, portions of the hull-covering have de- bonded from the hull resulting in additional maintenance requirements  during scheduled availabilities. Shipbuilding program officials told us that,  during the acquisition process, they did not analyze how long the special  hull treatment would last even though it is a critical technology. According  to the program office, they now have identified the root cause and have  continuously conducted engineering analysis to monitor and improve the  material and construction processes. Due to the 5 to 6 year process of  building a submarine, the time from identification to proven success can  be 8 to 10 years, which is a long time to wait to know if a potential  solution works in operations.

However, in the meantime, the shipbuilding program has continued to  deliver submarines to the fleet without knowing how long the special hull  treatment will adhere to the vessel. As a result, maintainers cannot  effectively plan for special hull treatment replacements in advance and,  instead, are replacing material as needed. Performing timely and  necessary maintenance is further complicated because it takes up to two  years to receive this material after the Navy orders it from the  manufacturer. Currently, Navy maintainers are budgeting $735 million to  address the missing hull treatment on 11 of the 14 submarines  constructed prior to implementing the potential solution.

Example Three—LHD 8 and LHA 6 Machinery Control System

To enable reduced crew sizes and sustainment costs, the Navy chose to  use an automated machinery control system on LHD 8 and LHA 6.  Sailors describe the machinery control system as a vital software-based  system that controls the operation of 92 percent of shipboard systems.  The Navy initially sought to purchase a highly-automated commercial  system that would perform tasks previously completed by the ship’s crew.  However, according to the shipbuilding program, during the acquisition  process, it verified reliability testing conducted by the manufacturer of the  system. At the end of the shipbuilding process, the Navy discovered that  this system required more maintenance and sustainment effort than  planned. Specifically, the Navy’s Board of Inspection and Survey—the  organization that inspects ships prior to delivery—discovered problems  with this system on LHD 8 in March 2009. The Board of Inspection and  Survey identified false alarms and a lack of technical documentation as a  serious defect. Specifically, the test report found that the system’s  spurious and numerous alarms created an environment whereby the  ship’s sailors would be conditioned to ignore alarms and that more sailors  would be needed to monitor the ship’s systems. Nevertheless, the CNO  decided to take delivery of the ship and the shipbuilding program did not  correct these problems prior to providing the ship to the fleet. Additional  problems emerged on LHD 8’s first deployment, such as overheating that  led to failure of the electrical distribution system resulting in loss of power  on multiple occasions. However, the technical data provided by the  manufacturer, according to Navy engineers, was insufficient for the  sailors to operate, troubleshoot, and repair the system. Further,  according to ship engineers and the shipbuilding program, 9 of 28 critical  components within the machinery control system hardware were obsolete  when LHA 6 was delivered to the Navy. As a result, fleet officials told us  that it has been difficult to obtain replacement parts. The Navy has spent  over $90 million to repair the software and replace key components of the  system on LHD 8, LHA 6, and LHA 7.

Example Four—LPD 17 Flight I Knuckleboom Crane

The LPD 17 Flight I knuckleboom crane carries boats and cargo (such as  ammunition) from the ship to the water and back again, and is pictured  below in figure 8. However, according to Navy reliability data, this system  only works 30 percent of the time it is supposed to and has been difficult  for sailors to use and maintain since the lead ship was delivered in 2005,  nearly 15 years ago.

There are a number of challenges in sustaining this crane that the Navy  did not identify or sufficiently mitigate during the acquisition process. For  example, the fleet does not have the necessary technical data to operate  and fix the system, spare parts can be difficult to find or take many  months to obtain, and pieces of the system are obsolete. According to  fleet officials who use the data, the shipbuilding program office did not  acquire sufficient technical data nor conduct sustainment planning for this  large and complicated crane primarily because they planned to contract  for the maintenance of the entire ship, including this system. The Navy  subsequently discovered that contracting for the maintenance of the  whole ship was cost prohibitive and maintenance responsibility was  transferred back to the Navy. However, because there had not been  adequate sustainment planning, the fleet did not have necessary  resources, such as technical data, to effectively maintain the system.

Additionally, as the fleet has been developing the capacity to maintain this  crane, the shipbuilding program office continues to accept cranes with  unmitigated risks leading to unplanned fleet effort. For example, across  the eleven LPD 17 Flight I ships that have been delivered, there are four  different versions of the crane, which further complicates maintainability  because it increases the types of spare parts needed and the knowledge  required of the sailors to fix the system. Specifically, officials stated that  sailors who learned to maintain a crane on one ship cannot transfer all of  their knowledge to other ships in the class. Due to the numerous  sustainment challenges the fleet has experienced with this crane on LPD  17 Flight I, LPD 17 program officials told us that the Navy has since  revised its new construction crane requirements for LPD 17 Flight II.  According to the shipbuilding program office, these requirements allow  the shipbuilder to use a more standard crane, which will be easier to  sustain. While we could not calculate the added costs of maintaining this  crane, we found that the Navy has spent over $10 million on the following  actions: (1) contracting with the original equipment manufacturer for  repairs, (2) replacing key components of the system, and (3) making  changes to improve the system.

DOD Policy for Shipbuilding Sustainment Requirements Results in Inadequate Information for Acquisition Decisions and Reporting That Is Misleading

DOD policy that the Navy uses to set sustainment requirements does not  capture factors that affect whether ships are reliable and maintainable.  This results in shipbuilding programs having ineffective sustainment  requirements that do not support sound acquisition decisions. When  sustainment requirements are used to inform acquisition decisions, they  can help ensure that shipbuilding programs design and build reliable  ships that can be effectively sustained within planned costs. The  effectiveness of a shipbuilding program’s sustainment requirements  depends on how the requirements are set, used, and reported.

Setting the sustainment requirements. We found that weaknesses  with specific portions of DOD’s requirements policy resulted in the  Navy setting sustainment requirements that are poorly defined and  not representative of the availability of the ship during operations and  sustainment.

Using the sustainment requirements. To achieve the requirements,  shipbuilding programs need to incorporate the requirements into  decisions made throughout the acquisition process, such as  developing the ship design. Due to problems setting the requirements,  shipbuilding programs cannot incorporate the sustainment  requirements into acquisition decisions.

Reporting on the sustainment requirements. Statute requires that  programs report on the status of these requirements on a regular  basis. However, the Navy’s reporting on these requirements is  misleading because it is based on the Navy’s deficient sustainment  requirements and it does not reflect the fleet’s experience.

Navy Ship Sustainment Requirements Reflect Weaknesses with How DOD Policy Defines Requirements for Ships

The Navy sets sustainment requirements based on definitions for ships  established by DOD policy, called the Joint Capabilities Integration and  Development System, but the shipbuilding programs’ requirements are  not robust even when they follow DOD policy. This is because the  definitions for ship sustainment requirements in DOD requirements  setting policy do not capture all factors that reduce the ability of ships to  achieve their missions. For example, the definitions of operational and  materiel availability in this policy exclude key factors and failures that  reduce ship availability, such as catastrophic failures of mission-critical  systems and unplanned maintenance. DOD policy states that the purpose  of sustainment requirements is to ensure ships work when expected and  are available when needed. But because the definitions of these  requirements for ships do not capture all factors that can influence  operational or materiel availability, the specific definitions for setting  sustainment requirements for ships do not support the achievement of  this goal. DOD’s requirements setting policy has designated these metrics  to be key performance requirements since 2007, which means that they  are one of a small number of mandated critical requirements that a  weapon system must demonstrate. Without a definition for ship  sustainment requirements in DOD policy that accounts for all factors that  make Navy ships unavailable for operations, Navy shipbuilding programs  cannot reasonably ensure that they are setting sustainment requirements  that will result in reliable, maintainable, and available ships.

In 2015, DOD added guidance to its policy that instructed shipbuilding  programs to establish operational and materiel availability requirements  based on the extent to which ships are expected to experience major  failures, referred to as category 4 casualty reports. The fleet writes  casualty reports when there are significant equipment failures that  contribute to the ship’s inability to perform its missions. There are three  categories of casualty reports (2, 3, and 4), with category 4 being the  most severe. According to Navy guidance, category 3 and 4 casualty  reports indicate degradation to critical mission capability that needs  immediate repair, while category 2 reports contain failures that are  important to the fleet but do not affect the ship’s core missions. In  particular, DOD policy was updated to define operational and materiel  availability for ships as follows:

Operational availability (work when expected) is the percentage of  time an operationally deployed ship is not in a category 4 casualty  report state over a given operating period. The Navy typically sets this  requirement at approximately 80 percent for shipbuilding programs.

Materiel availability (ready when needed) is the portion of a ship  class available for tasking. Ships are typically not available for tasking  when in a planned maintenance availability or have an open category  4 casualty report.

The Navy followed DOD requirements setting policy by establishing these  key performance parameters for the four shipbuilding programs we reviewed that established requirements since fiscal year 2015—SSBN  826, FFG(X), DDG 51 Flight III, and LPD 17 Flight II. Prior to 2015, there  were no ship-specific definitions in DOD requirements setting policy.  Shipbuilding programs that set requirements prior to 2015 have generally  adapted the definitions in JCIDS for calculating and reporting operational  and materiel availability, which is why we include examples from these  programs as appropriate  The following two sections discuss shortfalls with DOD’s policy for setting  sustainment requirements for Navy shipbuilding programs.

Setting Operational Availability Requirements for Shipbuilding Programs

DOD’s definition of operational availability for ships in its policy is  problematic because it defines operational availability: (1) using category  4 casualty reports and (2) for the entire ship with a single metric. As a  result, the operational availability requirement does not capture all critical  failures that reduce a ship’s ability to perform mission-critical tasks.

Category 4 casualty reports. DOD’s operational availability definition for  ships counts only the most severe casualty reports—category 4. The  definition excludes category 3 casualty reports, which also represent a  severe degradation to the Navy’s primary missions. According to several  fleet officials, category 4 casualty reports are typically used only in rare  instances when the entire ship is out of commission. Fleet officials added  that category 3 casualty reports can also represent severe mission-critical  casualties that affect the ability of the ship to perform primary missions. In  addition, the Navy’s categorization of casualty reports tends to be  subjective or based on other factors than the severity of the defect, such  as, according to maintenance officials, communicating a maintenance  priority. In other words, there are additional deficiencies that could be  mission-critical that may not be captured by category 3 or 4 casualty  reports.

Of the 11 ship classes in our review, six have delivered ships and have  casualty report data available. We reviewed Navy casualty report data for  18 ships from these six ship classes and found that all of these ships had  near-perfect operational availability when using only category 4 casualty  reports. However, when we calculated operational availability using  category 3 casualty reports, we found that 14 of these 18 ships fell short  of their operational availability targets. Table 2 summarizes the category 3  and 4 casualty reports during two LCS missions as an example of how  major failures are captured as category 3, and not category 4, equipment  casualties.

Therefore, by using category 4 casualty reports to define operational  availability, the Navy is developing a requirement that does not accurately  account for all ship failures that affect whether or not a ship works as  expected.

Setting operational availability at a whole ship level. DOD  requirements setting policy specifies that shipbuilding programs should  establish a single metric for the entire ship. However, when set at the ship  level, the operational availability requirement is not effective at capturing  the probability of whether or not a ship and its systems will work as  expected. This is because ships are comprised of hundreds of systems  that are of varying importance to achieving missions. For example, a ship  may have an air-defense mission that requires a select group of  systems—such as an air-search radar and a missile system—to work  together to achieve the mission. However, a ship-level requirement is set  using a single metric for the entire ship, which does not account for the  fact that some systems are critical to achieving a ship’s primary missions  while some systems are not as critical. Further, a ship level requirement  is difficult to calculate. According to a Naval Sea Systems Command  operational availability manual, it is improbable that the operational  availability of hundreds of complex systems within a ship can be  accurately calculated and represented in a ship level requirement.

Figure 9 below illustrates how setting requirements pursuant to DOD  requirements setting policy resulted in an operational availability  requirement for the FFG(X) program that the fleet considers  unacceptable.

According to Navy handbooks and manuals on using operational  availability during ship design, the operational availability requirement is a  more effective input for acquisition decisions when it is set at the mission  level. Since ships have multiple missions, this would result in multiple  operational availability requirements instead of a single ship-level  requirement. The Navy’s operational availability handbooks and manuals endorse this approach because a mission-level requirement is focused on  a smaller group of systems that support the mission and, therefore, allows  the Navy to prioritize availability for these key systems. Setting  operational availability requirements by mission area would provide  shipbuilding programs with information about how to identify and prioritize  key systems for additional reliability analysis or sustainment planning to  ensure that they will be sufficiently available to meet mission needs. Also,  even though this would likely result in several operational availability  requirements for each ship class, it would simplify the calculation of these  requirements, which could make them more helpful inputs for acquisition  decisions.

Setting Materiel Availability Requirements for Shipbuilding Programs

We found that DOD’s definition of materiel availability for Navy ship  classes in its requirements setting policy does not ensure that ships will  be ready when needed—the purpose of the materiel availability  requirement. This is because DOD requirements setting policy for ships  does not specifically account for other factors that affect materiel  availability—such as unplanned maintenance, unplanned losses, and  training—during which times ships may not be available for operations.

Unplanned maintenance. Unplanned maintenance can occur when  planned ship maintenance lasts longer than expected or a mission- critical failure occurs during deployment that needs immediate  attention. As our prior work has found, Navy ships experience  significant levels of unplanned maintenance. For example, from  fiscal year 2012 through fiscal year 2018, the Navy has reported over  3,900 days of unplanned maintenance across the ships we reviewed.

Unplanned losses. Unplanned losses are instances when a ship is  out of commission for an extended length of time due to severe  damage or when a vessel was not prioritized for maintenance. For  example, we have previously reported that due to heavy shipyard  workload, some submarines are waiting significantly longer than  planned—in some cases several months or years—to enter  maintenance periods.

Training. The Navy also conducts several training periods, and the  DOD requirements setting policy does not address whether or not a  ship is considered available or unavailable during these training  periods.

Six of the 11 shipbuilding programs we reviewed developed their program  requirements since DOD made sustainment requirements mandatory in  2007. One of these six programs—LHA 6—did not established a materiel  availability requirement as required by DOD requirements setting policy.  LHA program officials told us that materiel availability does not apply to  ships, which is not reflected in DOD requirements setting policy. Four  shipbuilding programs—DDG 51 Flight III, LPD 17 Flight II, FFG(X), and  LCS—developed materiel availability requirements that generally align  with DOD’s requirements setting policy and, as such, do not specifically  account for unplanned maintenance, unplanned losses, and training. The  remaining shipbuilding program—SSBN 826—went above and beyond  DOD requirements setting policy by incorporating these additional areas  that could affect materiel availability. Program officials stated that  sustainment requirements are more critical to achieving the SSBN 826’s  missions than other shipbuilding programs. However, DOD and Navy  guidance clearly state that materiel availability is a mandatory critical  requirement for all programs. Since DOD’s definition for materiel  availability does not include all factors that could result in a ship being  unavailable for operations, shipbuilding programs cannot ensure that  ships will be ready when needed.

Sustainment Requirements Are Inadequate to Support Well-Informed Decisions during the Acquisition Process

Because of how DOD policy defines sustainment requirements for ships,  these requirements do not provide the information needed to support  acquisition decisions. In particular, the Navy’s sustainment requirements  developed according to DOD policy rarely provide adequate information  about how reliable, available, and maintainable ships need to be, which is  necessary to support well-informed decisions pertaining to ship concept  development, design, and construction. For example, during the  acquisition process, shipbuilding program offices make decisions that  transform top-level requirements—like operational and materiel  availability—into detailed, low-level requirements that can be achieved  with available resources. We found that ongoing and new shipbuilding  programs continue to make acquisition decisions that influence  sustainment without the information that could be provided by better- defined sustainment requirements. Since shipbuilding programs cannot  use these requirements to inform acquisition decisions, they cannot  ensure that ships will be sufficiently reliable and available.

The following two sections discuss the Navy’s issues with using  sustainment requirements when making acquisition decisions for its  shipbuilding programs.

Using Operational Availability Requirements in Acquisition Decisions

The Navy’s operational availability requirements for ships—which follow  the DOD policy discussed above—do not provide adequate information to  support acquisition decisions that affect whether or not ships are reliable  enough to meet their missions. For example, in January 2020, we found  that engineers can use a variety of activities when designing weapon  systems to increase reliability to meet requirements, such as conducting  failure analysis and adding redundant systems. In order for these  engineering decisions to be successful, the requirements that inform the  process must be firm, well-defined, feasible, and affordable. However,  when the operational availability requirements do not adequately describe  the needed reliability and maintainability for key systems—as is the case  for most of the shipbuilding programs we reviewed—Navy engineers  cannot ensure that the ship’s design supports the program’s top-level  operational availability requirement. Further, they cannot identify aspects  of the design that could put the requirement at risk.

Instead of using the operational availability requirement to inform  decisions across all key ship systems, Navy ship engineers told us that  they interpret the requirement to only apply to catastrophic failures that  put the entire ship out of commission. Therefore, in practice, shipbuilding  program officials told us that they only apply this requirement to systems  that the ship needs to get underway, such as the main engines and  propellers. As such, shipbuilding programs are making engineering  decisions during the acquisition process for many mission-critical  systems, such as radars, weapons, and systems necessary for launching  and recovering aircraft, without understanding how often these systems  need to work to achieve key missions. This means the operational  availability requirement only applies to the bare minimum of ship systems  needed to get underway rather than the full complement of systems  needed to meet the ship’s missions. For instance, LPD 17 Flight I ships  can often sail away and are considered operationally available even as  key systems—such as the knuckleboom crane, davit, air conditioning,  and potable water systems among others—work less than 75 percent of  the time the ship is at sea, according to fleet databases that track system  failures. By interpreting the requirement to only focus on systems needed  to move the ship and not accounting for other mission critical systems,  shipbuilding programs cannot ensure that all critical systems needed to  meet missions will work as expected.

In addition, since shipbuilding programs have a ship-level operational  availability requirement and interpret this requirement to focus on systems  needed to get ships underway, they have not consistently leveraged  available data on various ship systems when making engineering and  ship design decisions. Navy sustainment experts told us that shipbuilding  programs rarely use data on the actual availability of ship systems. If the  requirement was set at the mission-level and focused on key systems, the  data could show whether or not planned systems, already operating in the  fleet, are available enough to meet requirements. Then, if the data shows  that these systems are not sufficiently available, shipbuilding programs  could make investments in improving the availability, such as improving  supply support, making the system more reliable, or adding redundancy.  Since shipbuilding programs cannot use operational availability  requirements to make informed acquisition decisions, they are at risk of  continuing to deliver ships to the fleet that are not as reliable and  sustainable as needed.

Using Materiel Availability Requirements in Acquisition Decisions

Of the five shipbuilding programs we reviewed that had established  materiel availability requirements, we found that only one program has a  requirement that provides adequate information for acquisition decisions.  In particular, the SSBN 826 program’s materiel availability requirement  has been a key input in establishing the submarine class’ planned  maintenance schedules and procedures. Shipbuilding program officials  told us they are using the maintenance period length determined by the  materiel availability requirement to inform acquisition decisions—such as  adjusting the submarine’s design to facilitate timely maintenance. For  instance, the SSBN 826 shipbuilding program assessed the potential  effect of new technology on the amount of maintenance that the  submarine is planned to undergo. In doing so, the shipbuilding program  officials believe that, if the new technology works as planned, the SSBN  826 class will meet the same presence requirement as its antecedent  class with two fewer submarines. While this concept is a good example of  how materiel availability can be used during the acquisition process, it is  too early to know if the Navy’s plan will work for this class of submarines  and fleet officials told us that they have doubts that the Navy can achieve  this goal as planned.

Officials from other shipbuilding program offices told us that they are not  using the materiel availability requirement to inform maintenance  decisions. Further, according to these shipbuilding program offices, the  materiel availability requirements do not connect with the ship class’  planned maintenance schedules and, therefore, they do not make  decisions to ensure that planned maintenance can be achieved within  specific time frames. Program officials from several of these programs  stated that the materiel availability requirement is not critical to  performance goals, and, as such, it is not a priority to achieve this  requirement. Without improving how the Navy defines and uses materiel  availability requirements, shipbuilding programs are missing opportunities  to make informed acquisition decisions about how ships are maintained  and, therefore, cannot ensure that ships are available for operations when  needed.

Reported Sustainment Requirements Do Not Reflect the Fleet’s Experience

The Navy’s reports to Congress are misleading because they do not  reflect all of the failures and factors that reduce ship operational and  materiel availability once ships are in the fleet. Shipbuilding programs  report all key requirements in their Selected Acquisition Reports to  Congress, including operational and materiel availability. According to  DOD guidance for executing Selected Acquisition Reports, DOD program  offices should provide accurate information to Congress to aid in  determining if the program is meeting its key requirements. We  reviewed the December 2018 Selected Acquisition Reports for the five  shipbuilding programs that reported one or both of these sustainment  requirements to Congress. We found that the Navy reported that these  shipbuilding programs were meeting or surpassing their sustainment  requirements. However, based on our analysis of data on mission-critical  failures after ships were delivered, we found failures that would prevent  these ships from conducting critical missions. Hence, the Navy’s reports  to Congress do not reflect the actual availability of ships in the fleet. As a  result, Congress does not have full insight into whether shipbuilding  programs are on track to meet their operational and materiel availability  requirements.

The following two sections further discuss the Navy’s issues with  reporting sustainment requirements for its shipbuilding programs.

Reporting on Operational Availability Requirements to Congress

We found three out of seven shipbuilding programs report on operational  availability in their Selected Acquisition Reports. These three programs all  stated that they were meeting or exceeding their requirements, but these  reports often did not match the fleet’s experience. For example:

For one vessel class, the Navy reported that it was exceeding its  operational availability goal by over 10 percent. At the same time,  however, several mission critical systems are unreliable. Officials from  the fleet stated that critical ship equipment is consistently failing.

The Navy is reporting that another ship class—that has yet to finish  construction —is exceeding its operational availability target by 5  percent. This ship class has already experienced several catastrophic  failures that limit its ability to conduct primary missions during its  limited at-sea periods.

These examples demonstrate how reporting based on a ship-level  operational availability requirement does not provide insight into reliability  and maintainability problems that the fleet is experiencing and that  prevent ships from meeting missions. Consequently, Congress is not  receiving accurate information on the results of its investments and the  sustainment problems the fleet is experiencing.

Reporting on Materiel Availability Requirements to Congress

We found that two of the Navy’s shipbuilding programs we reviewed  currently report materiel availability in Selected Acquisition Reports to  Congress. One other shipbuilding program that has materiel availability  as a key requirement in its approved baseline does not report this  requirement, contrary to DOD guidance. For example, the LCS  shipbuilding program indicates that it is meeting the requirement despite  evidence of issues with materiel availability. The Navy’s Selected  Acquisition Report for the LCS states that the program is meeting its  materiel availability requirement even though internal DOD reports state  that the LCS’ materiel availability is significantly below its requirement.  Further, fleet officials stated they are worried the maintenance workload  required for the LCS class ships may result in additional unplanned  maintenance delays that further reduce materiel availability. The Navy  has also chosen to take steps that will reduce the materiel availability of  the ship class throughout the ship class’ service life, such as assigning  the first four ships as test ships, making one of every four LCS a training  ship on a rotating basis, and increasing planned maintenance days,  among other things. Since several of the Navy’s shipbuilding programs  do not report information to Congress on this critical requirement,  Congress does not have insight into whether or not ships are as available  as intended.

Shipbuilding Programs Do Not Consistently Identify and Evaluate Sustainment Costs and Risks in Acquisition Documents

The shipbuilding programs included in our review did not consistently  conduct effective sustainment planning when developing three key  acquisition documents: life-cycle cost estimates, life-cycle sustainment  plans (LCSPs), and independent logistics assessments (ILAs). According  to DOD and Navy acquisition policy, these documents, along with other  documents, help programs ensure the ships they are acquiring can be  sustained affordably and adequately over their life cycle. However, for the  shipbuilding programs in our review, we found that these documents did  not provide a thorough assessment of the sustainment implications and  risks for many of the programs’ acquisition decisions. Specifically, we  found that: 1) O&S costs in shipbuilding programs’ life-cycle cost  estimates did not account for major sustainment risks and grew  significantly; 2) LCSPs rarely included information needed to demonstrate  ships could reliably meet sustainment requirements at an affordable cost;  and 3) ILAs did not consistently identify major sustainment risks that were  subsequently realized by the fleet. Because shipbuilding programs are  not effectively using these acquisition documents to plan for sustainment,  they are passing unmitigated sustainment risks on to the fleet.

O&S Cost Estimates Have Significantly Increased, Largely Because Life- Cycle Cost Estimates Did Not Account for Sustainment Risks

We found that shipbuilding programs’ current estimates of O&S cost are  significantly higher than initial estimates. This is largely because the Navy  cost estimators based their initial estimates for the shipbuilding programs  in our review on unproven sustainment assumptions without assessing  the potential cost risk of the assumptions. According to shipbuilding  program officials, O&S cost estimates grew after shipbuilding programs  revised their sustainment assumptions, such as by increasing the number  of crew required to operate and maintain the ships or by changing the  level of maintenance needed for various ship systems. We compared  programs’ initial life-cycle cost estimates for the six shipbuilding programs  in our scope that had available estimates to current cost estimates that  were updated after programs delivered ships to the fleet. As shown in  table 3, we found that the shipbuilding programs’ estimates of O&S costs  increased by over $130 billion from the initial estimate to the most recent  estimate. Navy cost estimators stated that up to 20 percent, $26 billion, of  the cost estimate growth could be accounted for by process changes that  resulted in including more indirect costs, such as health and child care for  sailors, into O&S estimates. Further, we adjusted our analysis to  account for any program quantity changes over time. Even accounting for  these changes, the Navy still experienced over $100 billion in O&S cost  growth.

The O&S cost growth for these six shipbuilding programs is likely higher  than the $130 billion that we calculated in table 3. This is because the  Navy has not updated these estimates to reflect actual O&S costs for  several of the ship classes. For example, the LCS program, in its initial  O&S cost estimate, projected $7.1 million (in fiscal year 2019 dollars) per  year per hull for maintenance. However, thus far, the average LCS  seaframe currently costs $21 million (in fiscal year 2019 dollars) per hull  per year to maintain—an increase of over $13 billion if these higher than  planned maintenance costs continue over the life of the ship class.

We found that the shipbuilding programs we reviewed underestimated  initial O&S costs, largely because cost estimators used unproven O&S  assumptions without assessing the sensitivity of those assumptions on  potential cost growth, as discussed below.

The O&S costs estimates we reviewed had grown primarily because  initial unproven assumptions turned out to be optimistic. O&S cost  estimates for four of the six shipbuilding programs we reviewed were  based on a Navy-wide effort that began in the early 2000s to reduce crew  sizes on Navy ships and lower O&S costs by, among other things,  replacing some sailors with automated systems. We found that cost  estimators used the shipbuilding program offices’ unverified assumptions  regarding crew size to develop the initial O&S estimate for four of these  six programs. Over time, the Navy found that the automated systems  were not as reliable as planned and, therefore, reduced crewing levels  were not realistic. To address this and other issues, the Navy added  sailors back on to ships—resulting in increases in O&S cost estimates.  For example, cost estimators for the CVN 78 class initially estimated a 15  to 23 percent decrease in crewing levels compared to the previous class  of carriers in order to create O&S savings. However, the Navy is now in  the process of adding crew back on to the ship, even before its initial  deployment, thereby contributing to increased O&S cost estimates, as  shown in Table 4.

Similarly, DDG 1000, LCS, and LPD 17 program officials also reported  that increasing crew sizes was a major contributor to higher sustainment  costs for these programs.

Further, the shipbuilding programs we reviewed made assumptions  based on unproven initiatives, in conjunction with reducing crew sizes that  ended up having a greater effect on the cost of maintaining ships than  initially estimated. For example, for four ship classes—SSN 774, DDG  1000, LPD 17 Flight I, and LCS—the Navy originally planned to use a  maintenance initiative called performance-based logistics, which called  for the use of contractors to conduct maintenance instead of sailors on  board the ships. In 2001, DOD policy recommended that all weapon  systems use performance-based logistics and Navy shipbuilding  programs subsequently anticipated that this strategy would reduce  maintenance costs. Based on our review of shipbuilding program cost  estimates, we found that Navy cost estimators included cost savings from  these new and unproven approaches—assuming that they would work as  expected. Shipbuilding program officials stated that the Navy has now  largely abandoned this approach after attempting to contract for  performance-based logistics and discovering that it was much more costly  than planned.

Another initiative that began in the early 2000s involved the Navy using  more shipbuilder-provided commercially-bought systems on ships rather  than systems the Navy developed and provided to the ship. However,  maintaining commercial systems has been more expensive than  anticipated for a variety of reasons, such as systems becoming obsolete  and challenges acquiring manufacturer support. For example, the SSN  774 shipbuilding program made an effort to use commercial equipment  that it assumed would never need repair or replacement—meaning that  these parts would last the life of the submarine—without evaluating  whether these parts actually had no repair needs. Further, SSN 774  program officials told us that the program office did not plan for the Navy  to support many of the submarine’s commercial components because  they initially planned to contract for logistics support. In all, the SSN 774  program asserted that over 4,000 parts on the submarine class would not  need maintenance for the duration of the submarine’s life. However, since  the submarines have been operating, many of these parts are failing,  which has created unanticipated expenses. For example, Navy  maintenance officials stated that they are planning to pay $360 million  over the next 12 years to maintain a part of the propulsion system that it  wrongly assumed would not need any maintenance at the time O&S costs  were established.

No Risk and Sensitivity Analyses for Key Assumptions

A key reason that shipbuilding programs underestimated O&S costs is  that the Navy’s cost estimators did not test the sensitivity of key O&S cost  assumptions to quantify risks. According to DOD and Navy guidance and  GAO-identified cost estimating best practices, cost estimates should  include risk and sensitivity analyses to understand how changing program  assumptions can affect cost—including O&S costs. However, for the six  cost estimates that we reviewed, the Navy did not conduct risk and  sensitivity analysis on key sustainment assumptions, such as unproven  crewing and maintenance assumptions. The Navy’s cost estimators told  us that they typically only conduct sensitivity analysis on the acquisition  portion of a life-cycle cost estimate and not the O&S portion of the  estimate. Instead, cost estimators told us that they use shipbuilding  program office assumptions about the crew and how the ship class will  operate as defined requirements that will not change. However, as  discussed throughout this report, we found numerous instances in which  incorrect maintenance assumptions resulted in billions of dollars of O&S  cost growth.

As a result, Navy’s cost estimators had reduced estimated O&S costs to  reflect the programs’ presumed sustainment efficiencies without  accounting for and quantifying the corresponding risk inherent in these  assumptions. As such, in several cases, shipbuilding programs had  optimistic estimates of O&S cost that later grew when unproven  assumptions did not pan out as anticipated. According to shipbuilding  program officials, their programs experienced significant O&S cost growth  because the initial cost estimate did not sufficiently account for the risk of  major changes to the program, such as revisions to the shipbuilding  program’s assumptions about sustainment, that were realized once ships  were provided to the fleet. For example, on the shipbuilding programs that  adopted reduced crewing initiatives, Navy cost estimators reduced O&S  costs due to fewer planned sailors on board, but did not determine how  the O&S costs would be affected if automation did not achieve its  intended efficiencies and the Navy had to add additional sailors to the  crew. If the Navy’s cost estimators had conducted risk and sensitivity analyses of the O&S costs early in the acquisition process, shipbuilding  programs could have had better insight into how much their O&S costs  might increase if the key sustainment assumptions were not correct. Such  insight into the potential sustainment cost impact could help shipbuilding  programs identify the assumptions most likely to drive O&S cost growth.  In turn, this information could help shipbuilding programs justify allocating  additional resources during the acquisition process to ensure these  sustainment assumptions are achieved, such as investing in additional  testing to ensure the reliability of automated systems needed to reduce  crewing levels.

See figure 10 for an example of how unproven assumptions that were not  evaluated using risk and sensitivity analyses led to optimistic O&S cost  estimates for the DDG 1000 program.

Navy officials told us that they are considering several pilot programs to  improve cost estimators’ ability to conduct sensitivity analyses of  maintenance costs, but have yet to provide details on these programs or  the time frame for implementing them. While it is not possible for  shipbuilding programs to predict future O&S costs with complete  certainty, risk and sensitivity analyses could help shipbuilding programs’  better identify potential drivers of cost growth. In the absence of this cost  analysis, shipbuilding programs will lack a clear assessment of the range  of O&S costs their ships may require after they are delivered to the fleet.  Additionally, without this O&S cost information, shipbuilding programs  cannot provide Navy leadership with full insight into the range of  resources that will potentially be required to sustain new ship classes  over their lifetime or support recommendations for additional resources  during acquisition to achieve sustainment assumptions.

Shipbuilding Programs’ LCSPs Rarely Include Information Described in Policy and Guidance and Are Not Used to Inform Acquisition Decisions

Five of the eleven shipbuilding programs we reviewed do not have  LCSPs, and we found that the six programs that have LCPS do not use  them to inform acquisition decisions that could help ensure ships are  sustainable at an affordable cost. As of a September 2011 policy  memorandum, DOD guidance requires every acquisition program we  reviewed to have a LCSP. Shipbuilding programs, according to DOD  acquisition policy, should develop and maintain LCSPs beginning at  Milestone A, which is early in the acquisition process. According to DOD  guidance, these plans should be the basis for all of the programs’  sustainment efforts. In particular, shipbuilding programs’ LCSPs should  include information that demonstrates how a ship class can be affordably  operated and maintained while meeting its sustainment requirements. To  do so, DOD guidance describes that shipbuilding programs should use  LCSPs to establish connections between life-cycle costs, reliability  requirements, and crew size estimates, and identify and address  sustainment issues, among other things.

With nearly half of its shipbuilding programs not having completed  LCSPs, the Navy is making acquisitions decisions without the context of a  comprehensive sustainment planning document to help identify and  mitigate the sustainment effect of its decisions. Figure 11 provides an  example of a sustainment issue with the CVN 78 advanced arresting  gear, which was identified during testing but not addressed in a LCSP.

Officials from two of the five shipbuilding programs that do not have  LCSPs stated that they had drafts of the plan, in some cases for several  years, which leadership has yet to approve. In another case, shipbuilding  program officials stated that they were not required to complete an LCSP  even though DOD’s 2011 guidance directed them to create these plans  immediately.

For the six shipbuilding programs that had LCSPs, we found several  challenges with how the programs develop and use these documents.

Specifically, we found that the LCSPs: (1) rarely included a business case  analysis, as required, that analyzed the relationship between life-cycle  costs, reliability requirements, and crew size estimates; and (2) rarely  identified and addressed sustainment issues in line with guidance.

We found that none of the six LCSPs we reviewed contained business  case analyses as required by DOD acquisition policy and guidance.  According to DOD’s acquisition policy, an acquisition program’s LCSP  should include a business case analysis annex, which should contain  relevant assumptions, constraints, and analyses used to develop the  product support strategy to the LCSP. According to DOD’s guidance for  PSMs, who are responsible for developing and maintaining LCSPs,  acquisition programs should use a product support business case  analysis to help establish a product support package that balances  sustainment costs against required sustainment outcomes. As such, the  LCSP’s business case analysis is a tool to help programs assess the  costs, benefits, and risks of key acquisition decisions from a sustainment  perspective. Additionally, the LCSP should contain information on the  activities needed to achieve the sustainment key performance parameters  and a discussion of how much funding is required for those efforts.

For example, Navy leadership approved the LCSP for FFG(X) in March  2019 even though the plan lacked the required sustainment business  case analysis. Instead, the FFG(X) LCSP contains ship-level sustainment  requirements and O&S cost information from the program’s life-cycle cost  estimate, but no accompanying business case analysis demonstrating  how the desired sustainment requirements (operational and materiel  availability) can be achieved within these costs. As another example,  several ship classes were designed with highly automated systems to  enable reduced crew sizes and lower O&S costs, such as the LHD 8/LHA  6 machinery control system discussed earlier in this report. However, the  LCSPs for these programs did not analyze the extent to which meeting  O&S estimates and sustainment requirements were reliant on the  reliability of these automated systems and the risks associated with using  automation.

Without connecting life-cycle costs to key sustainment factors such as  reliability and crew size estimates, the Navy will not know if its  sustainment planning is achievable within cost constraints until ships are  provided to the fleet and have been operated for a significant period of  time. We have previously found that it is often too expensive or time- consuming to make meaningful changes to the ship at this point in the  shipbuilding process.

Limited Identification and Mitigation of Sustainment Issues

LCSPs we reviewed rarely identified and proposed a plan to address  programs’ sustainment issues, as described by guidance. According to  DOD’s LCSP guidance, acquisition programs should assess their  progress, challenges, and corrective actions when developing a plan to  sustain a ship class. Two shipbuilding programs identified some  sustainment risks and only one of the six LCSPs included plans for  mitigating or correcting these risks. In the absence of proactively  identifying and mitigating sustainment risks in the LCSP during the  acquisition process, as described by guidance, we found that the Navy  discovered and mitigated many of its sustainment challenges only after  ships were delivered to the fleet. Without creating LCSPs that identify  sustainment risks and proposing a plan to mitigate these risks, the Navy  cannot ensure that it is making acquisition decisions that support ship  sustainment.

Two examples of significant sustainment risks that were experienced by  nearly all of the programs we reviewed, but not identified or mitigated in  LCSPs are: (1) insufficient technical data and (2) the use of performance- based logistics.

Technical data. The LCSPs we reviewed that included an intellectual  property strategy, as required by DOD acquisition policy during the  operations and support phase, did not consistently address the full  spectrum of potential intellectual property related issues, such as  attaining intellectual property needed to repair and replace ship systems.  According to DOD’s acquisition policy, shipbuilding programs should  document the intellectual property strategy initially in the acquisition  strategy and later in the LCSP to assess technical data needs and  determine what intellectual property deliverables and license rights the  program needs to acquire from contractors. Nearly all of the LCSPs we  reviewed stated, in general terms, that the Navy would obtain the  technical data to which it had rights. However, in these LCSPs, the Navy  did not address how this strategy met the Navy’s needs for competitive  and affordable acquisition and sustainment over the life cycle of a ship  class, such as to ensure maintenance could be carried out as planned by  a ship’s crew. Without ship programs fully planning for acquiring needed  intellectual property to maintain ship systems in the LCSP, we found that  the fleet was often not aware that certain ship systems were considered  proprietary and only discovered what intellectual property was unavailable  after ship systems were broken and Navy maintainers could not repair  them. At this point, fleet maintainers stated that it is often too late to  implement proactive strategies, such as working on an agreement with  the manufacturer. Instead, after ships are delivered, fleet maintainers told  us that they have several options, all of which are expensive and time- consuming. Fleet maintainers can (1) purchase these data on an  expensive sole-source basis from the original equipment manufacturer;  (2) spend significant time and effort reverse-engineering the system to be  able to repair it; or (3) pay the manufacturer to conduct maintenance.

Performance-based logistics. For three shipbuilding programs that  planned to use performance-based logistics, the shipbuilding programs  assumed it would work as expected and did not identify the risks  associated with this maintenance approach or develop any mitigation  plans. For example, as stated earlier in figure 10, the DDG 1000 program  adopted a performance-based logistics approach during the acquisition  process in an attempt to reduce sustainment costs. As such, the  program’s LCSP stated that a contractor would be responsible for  maintaining the ships in the class, including a number of new and unique  systems installed on the ships. However, the LCSP also noted that the  DDG 1000 program had not been able to determine how much the  performance-based logistics approach was likely to cost or what  sustainment outcomes the Navy could expect from this approach, in large  part due to the number of new systems installed on the ships. After the  shipbuilding program delivered the first ship in the class from the  shipyard, DDG 1000 program officials determined that the fleet and other  Navy maintenance organizations would instead be responsible for the  maintenance that the shipbuilding program previously planned to execute  by hiring a contractor. According to fleet officials, since taking over  maintenance responsibility, the Navy has also determined that these  systems are difficult to sustain, citing lack of commonality, missing  technical data, and other challenges. In some cases, the fleet is now  replacing DDG 1000’s unique systems after delivery with systems  common to other Navy ships in an effort to mitigate sustainment cost  growth and readiness effects. Despite these critical changes in the  sustainment approach, the DDG 1000 program has not updated its LCSP  since 2009.

ILAs Do Not Consistently Evaluate Shipbuilding Programs’ Sustainment Planning

While the Navy has conducted an ILA on nearly every shipbuilding  program we reviewed, we found that many of these assessments did not  identify key sustainment issues or make recommendations to mitigate  them. ILAs are conducted by assessment teams comprised of officials  from across the Navy. The Navy ILA teams often validated program office  sustainment assumptions contained in the LCSPs and other sustainment  planning documents without evaluating those assumptions and identifying  key areas of risk—even when programs introduced new sustainment  concepts. DOD acquisition policy establishes that ILAs should provide an  independent assessment of the shipbuilding program’s sustainment  planning, including the identification and evaluation of issues that are  likely to drive future O&S costs, design changes that could reduce O&S  costs, and the adequacy of the product support strategy, among other  things. ILAs are also supposed to make recommendations for mitigating  the issues identified in the report, according to DOD and Navy guidance.  Statutory requirements similarly emphasize the role of ILAs in identifying  and mitigating sustainment risks that could increase O&S costs, and  require DOD to establish guidance that requires the Navy to conduct ILAs  prior to key acquisition decision points, including milestone decision  events.

ILAs for the shipbuilding programs included in our review did not  sufficiently identify and evaluate the program offices’ sustainment  assumptions and risks during the acquisition process. This was the case  even when Navy testers had identified sustainment risks in early  assessments conducted prior to the development of the LCSPs and ILAs.  The following examples discuss instances in which Navy testers or  maintainers identified sustainment risk before the ILA was conducted that  have since caused sustainment challenges for the fleet, but the ILA team  did not identify or make recommendations to address these problems.

The SSN 774 shipbuilding program. As early as 2014, supply officials  identified delays in over 1,000 supply orders for spare parts—many of  these orders were in excess of 5 months old. However, in 2016, the  ILA team rated this area as low risk and found that the supply support  planning and execution was “outstanding.” Since supply support was  rated as “low risk,” the ILA team did not make any recommendations  to improve this planning. Subsequently, the SSN 774 class has  experienced significant supply support issues. For example, the  Navy’s maintainers routinely cannibalize hundreds of parts in 2017  and 2018 from SSN 774 class submarines to prepare other  submarines for deployment, at an estimated rework cost of $2-3  million per year.

The CVN 78 shipbuilding program. In 2013, testers stated that the  number of berthing spaces on CVN 78 class carriers may not be  sufficient to accommodate the planned crew size, particularly for the  life of the carrier. When conducting its ILA in 2016, the ILA team rated  crewing as low risk and the assessment noted extensive analysis had  been conducted to validate the platform crewing profile. However, the  ILA team did not document validation of the assumptions  underpinning this analysis, such as whether or not automated  systems needed to reduce crew levels would work as intended. The  crewing concerns identified in 2013, but for which the ILA team did not  make recommendations, are now a problem for the Navy’s fleet. For  example, the Navy has already increased the size of the planned crew  to the maximum allowed by the ship’s design. Nonetheless, additional  crewing concerns persist for key systems—including the weapons  elevators, advanced arresting gears, the machinery control system,  among others—that are not yet well understood and may require  additional sailor support to operate and maintain.

The LCS shipbuilding program. In 2005 and 2006, Navy testers  expressed significant concerns about the validity of the assumptions  necessary to execute the program’s logistics support plan, specifically  that the design of the new logistics system failed to include needed  features to enable this logistics approach. In 2012, the Navy ILA team  rated this area as low risk, specifically noting that the LCS program  had developed a wide-range of well-written, informative, and  comprehensive logistics planning documents. However, in part, since  the ILA team did not recognize that the underlying issues previously  identified by the testers had not been mitigated, the program provided  ships to the fleet that had logistics issues. Specifically, the CNO  conducted a study in 2016 that found the shipbuilding program’s  logistics approach to be unstable and overly complex. As a result, the  Navy is undertaking an overhaul of the LCS logistics approach, by  taking actions such as creating Navy-led maintenance teams.

The DDG 1000 shipbuilding program. The Navy requires significant  volumes of technical data to manage the systems on the DDG 1000.  In 2005, Navy testers noted that there were many details absent from  the technical data management plan, including multiple sections that  were left blank. In 2011, the Navy’s ILA team found that technical data  management was low risk and stated that the requirements for  technical data were well-written and clearly identified. According to  fleet engineers and maintainers, as of September 2019—more than 3  years after lead ship delivery—all of the manuals remain in draft and  are accurate enough for the sailors to acquaint themselves with  systems, but not sufficient for supporting these systems. For example,  fleet maintenance officials stated that several key documents for  operating and maintaining critical ship systems, which were identified  in the ILA as sufficiently complete, are not suitable for crew use.

Several Navy officials across NAVSEA and shipbuilding program offices  told us that ILAs are largely a document compliance check and vary  significantly depending on the competency of the lead assessor.  Therefore, in practice, according to Navy officials responsible for  conducting these assessments, ILAs are not a thorough assessment of a  ship classes’ logistics planning. This falls short of the purpose of ILAs,  stated in Navy guidance, which is to provide acquisition programs with an  effective measure of the program’s product support planning and  execution.

Officials from the NAVSEA organization responsible for ILA guidance also  told us that they are in the process of improving how the Navy conducts  ILAs for ships, such as by developing a new handbook and refocusing  ILAs to better assess the quality of the sustainment planning. Specifically,  these officials discussed the following five improvements: 1) starting ILAs  as early as preliminary design; 2) tying the ILAs more closely to  programs’ systems engineering efforts; 3) increasing focus on analytics,  modeling, and simulation; 4) giving the Navy’s fleet and maintainers  approval authority over the assessment; and 5) making investments to  ensure that assessments are always led by officials with appropriate skills  and expertise. If the Navy makes changes such as these or others, it  would be a positive step toward making ILAs a more thorough and  effective assessment of shipbuilding programs’ sustainment planning  early in the acquisition process. However, these officials also stated that  there is pushback from Navy program offices regarding these  improvements because a more robust ILA requires more time and money  from shipbuilding programs. Navy officials also noted that implementing  the planned improvements is predicated on finding evaluators to conduct  ILAs with appropriate skill sets, which has been a challenge. Until the  Navy evaluates and implements proposed changes or other changes to  improve the ILA process, the Navy will continue to be at risk of not  identifying and resolving shipbuilding programs’ sustainment challenges  during the acquisition process, before ships are provided to the fleet.

Navy Leadership Does Not Ensure Shipbuilding Programs Effectively Consider Sustainment and Congress Does Not Have Full Insight into Sustainment Cost Growth

We found that the senior leaders responsible for shipbuilding program  oversight—the ASN (RD&A) and the CNO—have generally prioritized  acquisition outcomes during Gate reviews, without considering how  acquisition decisions affect sustainment outcomes. Navy acquisition  policy states, however, that programs should be managed from a life- cycle perspective, with attention to both acquisition and sustainment  outcomes. In an effort to increase senior leaders’ and shipbuilding  programs’ attention on sustainment outcomes and to be responsive to  Congressional efforts to improve weapon system sustainment, the Navy  recently began pursuing two new initiatives—a Gate 7 for sustainment  and the sustainment program baseline. These are promising steps that  could help increase leadership insight into shipbuilding programs’  sustainment outcomes once ships are delivered to the fleet. However, we  found that some of these efforts will likely not address the underlying  need for Navy leadership to improve its consideration of shipbuilding  programs’ sustainment goals early in the acquisition process as programs  are making the decisions that have a long-term effect on ship  sustainment. In addition, Congressional decision makers do not have full  insight into sustainment cost growth.

Navy Leadership Has Not Consistently Considered Sustainment in Gate Reviews, and Some Recent Changes Will Not Address Existing Shortfalls

Navy leadership has not consistently reviewed shipbuilding programs’  sustainment planning at acquisition Gate reviews. According to senior  Navy policy officials, in an effort to increase leadership attention on  program sustainment, the Navy recently updated its acquisition policy to  add a Gate for sustainment, called Gate 7. However, this recent change  will not address the need for leadership to more consistently assess  sustainment during earlier Gates. In addition, the Navy established a  Deputy Assistant Secretary for Sustainment within the ASN (RD&A)’s  office who will be responsible for managing the Navy’s sustainment  funding and life-cycle management policies. However, it is too soon to  assess the role that this official may have in the acquisition process.

The Navy’s acquisition policy states that participants in Gate reviews  should review program health and discuss and resolve areas of concern.  Additionally, shipbuilding programs should be overseen and executed  from a life-cycle perspective—in other words, with attention paid to  balancing near-term acquisition outcomes and long-term sustainability. In  support of this goal, the policy establishes required sustainment-related  briefing content or actions for each Gate. While Gate 7 will function as the  dedicated Gate for sustainment, all of the earlier Gates have sustainment- related requirements as well, as shown in Table 5 below.

These Gate reviews offer Navy leadership opportunities to conduct  oversight of shipbuilding programs’ sustainment planning during early  phases of the acquisition process when key program decisions about  requirements, design, and contracts are being made.

Navy Leadership Has Not Consistently Used the Gate Process to Review Shipbuilding Programs’ Sustainment Planning and Outcomes

Navy acquisition policy establishes that leadership should be briefed on a  number of sustainment factors at Gate reviews, with a program’s life- cycle sustainment strategy/plan and O&S cost drivers being the minimum  amount of sustainment information required for nearly all Gate reviews,  as presented in table 5. We analyzed briefings and meeting minutes  prepared for the 22 Gate reviews held for the shipbuilding program in our  review between fiscal year 2014 and 2018. We found that Navy  leadership had not assessed shipbuilding programs’ life-cycle  sustainment strategies/plans in approximately 86 percent of Gate reviews  and had not assessed O&S cost drivers in approximately 64 percent of  Gate reviews, as shown in figure 12. According to Navy acquisition policy,  this sustainment information should have been evaluated during all 22 of  the Gate reviews held between fiscal year 2014 and 2018 for the  shipbuilding programs included in our review.

Instead, we found that the Gate reviews most often discussed acquisition  updates. While a focus on acquisition updates during Gate reviews is  appropriate, by infrequently devoting attention to how acquisition  decisions affect sustainment, Navy leadership is missing an opportunity to  assess the comprehensiveness and validity of shipbuilding programs’  sustainment plans and cost estimates, among other sustainment factors.  As we previously discussed, shipbuilding programs’ LCSPs and O&S cost  estimates were incomplete or insufficient, and, therefore, did not provide  a thorough assessment of the programs’ sustainment risks. Additionally,  Navy leadership is not consistently using Gate reviews to communicate to  shipbuilding programs that achieving sustainment goals is a high priority.

For pre-construction Gate reviews (Gates 1-5), Navy leadership  evaluated three of the programs included in our report—SSBN 826,  FFG(X), and DDG 51—in the 5-year period between fiscal year 2014 and  2018. These Gate review briefings included some discussion of program  sustainment but did not meet all of the objectives and goals described by  Navy acquisition policy for sustainment briefing content, as presented in  table 5. As such, the Gate reviews did not provide a complete  assessment of whether the programs’ acquisition decisions about  sustainment would support the delivery of ships that could meet  sustainment requirements at an affordable cost. Officials from the majority  of programs included in our review told us that these early phases of the  program are critical because it is at this point in the program where  decisions are made that can have a long-term effect on ship sustainment,  and it is difficult to make significant changes to sustainment outcomes  after these key decisions are made.

For example, when Navy leadership reviewed the SSBN 826 program at  a Gate 4 review in November 2015 and a Gate 5 review in September  2016, the briefing discussed the SSBN 826 program’s sustainment costs  in detail, including O&S cost goals, cost drivers, and contract incentives  for O&S affordability. However, among other things, the Gate 4 briefing  did not include a review of the program’s life-cycle sustainment strategy,  and the Gate 5 briefing did not verify that all critical technical data and  intellectual property issues had been addressed, which fleet and  engineering officials stated are known sustainment issues for the Virginia  class of submarines. Officials from the SSBN 826 program stated that  some sustainment information that was not discussed in the Gate reviews  was addressed in other forums. For example, leadership approved the  program’s LCSP in August 2016, between the Gate 4 and Gate 5  reviews. In another example, when Navy leadership reviewed Flight III of  the DDG 51 program at a combined Gates 4 and 5 review in March 2014,  none of the required sustainment topics were included in the briefing.

By not thoroughly assessing and resolving the sustainment effect of early  acquisition decisions during its Gate reviews, Navy leadership is missing  opportunities to ensure that shipbuilding programs are adequately  considering sustainment goals and is at risk of allowing programs to  proceed through the acquisition process without verifying that there is  adequate planning for sustainment.

For Gate 6 reviews held between fiscal year 2014 and 2018, we similarly  found that Navy leadership did not consistently discuss sustainment, even  as programs began ship construction and delivering ships to the fleet.  Our analysis of Gate 6 documentation showed that the primary focus of  most Gate 6 briefings and meeting minutes was acquisition outcomes,  such as construction progress or follow-on ship contract awards. In  particular, we found that 16 of the 18 Gate 6 reviews we assessed for  eight shipbuilding programs did not include information about both the  program’s life-cycle sustainment plan and O&S cost drivers, which are  part of the required briefing content for every Gate 6 review. Officials from  most of the programs in our review confirmed that leadership placed  greater emphasis on acquisition updates than sustainment during Gate 6  reviews. For example, the SSN 774 program is pursuing a reduction in  total ownership costs initiative for its Block IV submarines, but the  program’s recent Gate 6 briefings included only limited details on design  changes that the program was pursuing to improve sustainment and no  information on the anticipated O&S cost savings from the effort. Officials  from this program confirmed that leadership has historically focused only  on acquisition issues during the Gate 6 reviews. Additionally, we found  that Navy leadership issued sustainment-related action items to only  three of the eight programs in the Gate 6 reviews we assessed, even  though all of these programs had ongoing sustainment challenges, as  discussed earlier in this report.

Although nearly 90 percent of the Gate 6 reviews we assessed did not  include briefing content on the program’s life-cycle sustainment plan and  O&S costs, as required, nearly all of the Gate 6 reviews included a  discussion of at least one ongoing sustainment challenge affecting the  ship class. In these cases, the discussion centered on mitigating realized  sustainment issues already being experienced by the fleet after ship  delivery. For example, all of the LPD 17 Gate 6 reviews over the past 5  years included updates on the activities of the LPD 17 Strike Team and  its progress in resolving class-wide design and construction issues that  negatively affected the ships’ operational availability and reliability after  they began fleet operations. While Gate 6 can be used as a venue to  discuss sustainment issues that are already being experienced by the  fleet, until Navy leadership more consistently reviews programs’  sustainment planning and expected outcomes during earlier Gates,  programs will continue to be at risk of delivering ships to the fleet that  have unmitigated sustainment risks or are unaffordable.

Recent Gate Process Changes Enhance Sustainment Focus, but Do Not Address the Need to Consider Sustainment Issues Earlier in the Acquisition Process

The Navy recently updated its acquisition policy to expand the scope of  its Gate process and add a new Gate 7 for sustainment. Effective March  2019, the Gate 7 reviews will begin 5 years after shipbuilding programs  achieve initial operational capability and recur every 5 years thereafter.  As such, Navy officials told us that the scope of the Gate 7 review will be  oversight of programs that are well into production and delivering ships to  the fleet. According to the Navy’s acquisition policy, Gate 7 will evaluate  the effectiveness of a program’s product support strategy, compare actual  sustainment costs to estimates, discuss fleet-identified sustainment  issues, and assess sustainment risks and mitigation measures, among  other things.

Senior officials told us that the Navy developed a Gate 7 for sustainment  for two reasons. First, similar to our findings, officials stated that the Navy  recognized sustainment was generally not being discussed during  existing Gate reviews, particularly during Gate 6 reviews as ships were  starting to be delivered to the fleet, even though this was required briefing  content for Gate 6 in the Navy’s acquisition policy. Second, in the  National Defense Authorization Act for Fiscal Year 2017, Congress  directed the military services to conduct sustainment reviews on major  weapons systems—such as the shipbuilding programs included in our  review—within 5 years of the weapon system achieving initial operational  capability and then periodically throughout their life cycles. Such  sustainment reviews are to assess the weapon system’s product support  strategy, performance, and O&S costs. Based on our analysis of the  Navy’s revised acquisition policy, the new Gate 7 appears responsive to  the Congressional requirement for sustainment reviews and, if  implemented as planned, will provide an oversight forum for addressing  realized sustainment challenges.

However, we found that adding a new Gate to the end of the acquisition  process is too late to drive meaningful improvements to sustainment  outcomes and is not sufficient to address current shortfalls in how the  Navy’s acquisition process addresses sustainment concerns. Senior Navy  officials we spoke to who had knowledge of this change expressed doubt  that a Gate 7 for sustainment would be an effective means of holding  programs accountable for addressing acquisition-related sustainment  issues, since it occurs late in the acquisition process. Whereas the Gate 7  for sustainment will occur at the end of the acquisition process, the  decisions that influence sustainment outcomes, such as decisions about  ship design and the planned sustainment strategy, are made much earlier  in the process, normally between Gates 1 and 5. Thus, while Gate 7 will  provide leadership with insight into the execution of ship sustainment and  any challenges being experienced by the fleet, it does not address the  need for Navy leadership to evaluate shipbuilding programs’ efforts to  design and plan for sustainable ships during earlier Gates, when key  long-term decisions are being made. According to a senior Naval Sea  Systems Command official, Gate 7 is timed well for being able to “sit back  and admire the problem” as opposed to preventing the issue. Until Navy  leadership brings attention to sustainment during earlier Gate reviews, it  will continue to miss opportunities to proactively ensure shipbuilding  programs are acquiring sustainable ships before they are provided to the  fleet.

Acquisition Program Baselines Currently Include Few Sustainment Goals and Ongoing Improvements Lack an Accountability Mechanism

We found that acquisition program baselines (APB)—which are intended  to be binding agreements between leadership and the program manager  and document the program’s goals—currently include limited information  about sustainment. While the Navy is developing a new initiative to create  a dedicated baseline for sustainment, it does not have a mechanism for  holding shipbuilding programs accountable for sustainment goals during  the acquisition process. Like all major weapon systems, shipbuilding  programs have APBs that summarize the programs’ cost, schedule, and  performance goals and set the baseline from which programs must, as  appropriate, obtain approval from agency leadership to deviate and must  report certain changes to Congressional defense committees.

Statute requires that baselines will contain information on the program’s  cost estimate, schedule, performance, and supportability, among other  factors. In practice, for shipbuilding programs in our review, we found  that the program goals established in the APB are largely focused on  acquisition cost, acquisition schedule, and performance requirements,  with limited information provided on sustainment. In particular, the  sustainment information provided is generally limited to a high-level O&S  cost estimate and the sustainment key performance parameters, if the  program has them.

A Congressionally established panel, called the Section 809 panel,  charged with making recommendations to improve the efficiency and  effectiveness of DOD’s acquisition process, among other things, recently  studied challenges with the sustainment of major weapon systems. It  similarly found that the APB does not provide sufficient governance of the  sustainment phase of an acquisition program since it is focused on  acquisition cost, schedule, and performance goals. The panel further  noted that program success has been measured against the achievement  of the APB’s acquisition goals, so program managers have generally  prioritized the achievement of acquisition outcomes and deemphasized  sustainment. As a result, the panel recommended the creation of an  additional program baseline, called the sustainment program baseline  (SPB), to help ensure programs are held accountable for sustainment- related outcomes and establish balance between acquisition and  sustainment priorities. In March 2019, the Navy initiated an effort to begin  developing an SPB framework. Senior officials stated that the Navy  intends to pilot the SPB with a few aviation programs in fiscal year 2020  before expanding the initiative to ship classes that are already in  sustainment, and then finally to programs that are still in the acquisition  process.

According to Navy officials involved with this initiative, the SPB is  intended to complement the APB, and Navy leadership will use the two  program baselines to review and approve the acquisition and sustainment  aspects of a program throughout the acquisition process. The  shipbuilding program should draft the initial SPB early in the acquisition  process to support Milestone A and update it as the program matures.  Officials in the office of the ASN (RD&A) told us that the Navy plans for  the SPB to be grounded in a program’s sustainment key performance  parameters for operational and materiel availability and include targets for  various other sustainment metrics, such as sparing, equipment failure  rates, mission capable time, and logistics time, among others. The SPB  should also provide detailed information about all of the costs and funding  sources that will support sustainment. Navy officials identified a number  of potential improvements the SPB could offer for how shipbuilding  programs consider sustainment, such as devoting additional time and  resources to the development of sustainment metrics early in a  shipbuilding program, assessing the sustainment effect of acquisition  decisions, creating a common understanding of a program’s sustainment  goals across disparate stakeholders, and providing a more accurate  accounting of sustainment funding. If the Navy implements the SPB as  described, it will likely be a positive step toward ensuring shipbuilding  programs are increasing their focus on sustainment planning during the  acquisition process.

While the SPB could potentially provide increased attention on program  sustainment, we found that developing this new baseline may not fully  address the underlying challenge of shipbuilding programs managing to  the APB’s acquisition goals and the lack of consideration of sustainment  in acquisition decision-making. This is because, according to current  proposals, programs will continue to be measured against the APB during  the acquisition process, with the SPB not serving as the governing  baseline until later in the program life cycle during the sustainment phase.  Instead, during the acquisition process, the Navy’s efforts related to the  SPB will be limited to initially developing the SPB and updating it as the  program matures. While updates to the SPB during the acquisition  process could provide more transparency into the sustainment effect of  various acquisition decisions within the program and to leadership, this  approach primarily documents the sustainment effect of a decision.  Because the APB will remain the governing baseline during the  acquisition process and the program will not be measured against the  SPB until the sustainment phase, shipbuilding programs will continue to  have an incentive to prioritize acquisition outcomes over sustainment  when making acquisition decisions.

Congress Does Not Have Insight into Shipbuilding Programs’ O&S Cost Growth during the Acquisition Process

DOD does not provide Congress with detailed information on the extent  and causes of shipbuilding programs’ O&S cost growth during the  acquisition process. For example, a mechanism for Congressional  oversight of major defense acquisition programs’ unit cost growth, called  the Nunn-McCurdy statute, is focused on acquisition costs and not  sustainment cost estimates. A Nunn-McCurdy breach is triggered by  increases in a program’s unit cost estimates against the acquisition unit  cost goals established in the program’s APB. The Nunn-McCurdy statute  provides Congress greater visibility into major defense acquisition  programs’ estimated acquisition cost growth and encourages DOD to  manage costs by requiring programs in a breach to include acquisition  cost estimates in Selected Acquisition Reports and notify Congress of a  breach. While the APB also includes O&S cost estimates, the Nunn- McCurdy statute does not require reporting of O&S cost growth to  Congress.

The Nunn-McCurdy statute also requires DOD to take a series of actions  whenever a program experiences critical acquisition cost growth, which is  growth in the program acquisition unit cost estimate of at least 25 percent  over the current baseline estimate documented in the APB or of at least  50 percent over the initial baseline estimate. Among other things, these  actions include (1) conducting a root cause analysis of the cost growth,  (2) reassessing program costs, and (3) terminating the program or taking  other steps that include restructuring the program. If DOD decides not to  terminate a program that has critical cost growth, the Secretary of  Defense must restructure the program in a manner that addresses the  root cause of the cost growth, rescind the program’s most recent  Milestone decision, and review the program regularly, among other tasks.

As stated earlier, we found that leadership oversight during Gate reviews  and program execution is primarily focused on acquisition outcomes.  Additionally, as the Section 809 panel noted, the Nunn-McCurdy breach  provided a strong incentive for major defense acquisition programs to  control acquisition cost, but that there was not an equivalent incentive for  controlling sustainment costs. As such, the shipbuilding programs’  acquisition decisions and Congress’ oversight mechanisms have focused  on acquisition cost outcomes, without a comparable focus on sustainment  cost outcomes during the acquisition process. For example, when the  DDG 1000 program experienced a critical acquisition cost growth breach,  the Nunn-McCurdy statute required DOD to reassess and certify to  Congress the need for the program at the increased cost levels. DOD  was also required to identify and address the cause of the acquisition cost  growth when reassessing the program and conduct additional program  oversight, among other things. According to DDG 1000 program officials,  DOD and the Navy recognized that the acquisition decisions leading up to  and following the breach would have a sustainment effect. For example,  the decision to reduce the number of ships in the class to manage  acquisition cost growth has contributed to higher per ship O&S costs, as  the investment needed to sustain this new class is now spread across  fewer ships than initially planned. However, the focus of their restructuring  efforts was on addressing the acquisition cost growth. By contrast, there  was not a similar effort to manage growth in the program’s O&S cost  estimates, which have increased by more than 50 percent on a per ship  per year basis.

For the six shipbuilding programs with O&S cost estimates we were able  to assess, we found that four experienced cost growth greater than 50  percent for their average annual O&S per hull cost, as compared to the  programs’ original estimates. Table 6 shows the extent of these  shipbuilding programs’ O&S cost estimate growth over time. This level of  cost growth for acquisition costs would have constituted a Nunn-McCurdy  breach.

While the Selected Acquisition Reports for these programs include some  information on shipbuilding programs’ O&S costs, this reporting does not  provide Congress with detailed information about the causes of the cost  growth and potential program changes to address it and, therefore, does  not facilitate the same level of oversight as is given to acquisition unit cost  growth. In particular, DOD was not required to notify Congress that the  programs had experienced high levels of O&S cost growth above a  certain threshold, and DOD was not required to identify the root cause of  the O&S cost growth and restructure the programs to address the cost  growth. As a case in point, for the programs we reviewed, Navy  leadership only directed one of the programs—LPD 17—to identify  opportunities to reduce O&S costs following a Gate 6 review. For other  programs that had extensive O&S cost growth, the programs were not  required to take additional steps during the shipbuilding process to  manage these costs and mitigate the long-term sustainment effect of their  acquisition decisions. The LCS program, for example, has seen the  highest rate of per ship O&S cost growth among the shipbuilding  programs included in our O&S cost analysis, but Congress and agency  leadership have not required the shipbuilding program to take action to  address these issues. Instead, the shipbuilding program continues to  deliver ships to the fleet that are significantly more expensive to maintain  than initially planned and which have significant maintenance and  logistics challenges, according to sustainment officials. The fleet is now  undertaking its own efforts to improve sustainment outcomes for LCS,  such as changing its crewing and maintenance approaches, which are  further adding to the O&S cost growth for the program.

According to DOD and Navy acquisition policy, program managers should  be the single point of accountability for the full life cycle of ship programs.  However, without a mechanism to provide Congress with more detailed  information about shipbuilding programs’ O&S cost growth and the drivers  of such cost growth, Congress cannot know if shipbuilding programs are  accounting for the full life-cycle implications of their acquisition decisions.  In particular, without such a mechanism, Congress will continue to lack  full insight into the extent to which shipbuilding programs’ O&S cost  estimates have grown over time and what steps DOD and the Navy could  take to better control O&S cost growth during the acquisition process.

Product Support Managers Have Limited Influence in the Acquisition Process

Congress directed DOD to establish PSMs as key sustainment managers  for weapons systems, such as shipbuilding programs. However, we found  that PSMs in the shipbuilding program offices have limited influence on  decisions made during the acquisition process that affect ship  sustainment. In 2009, Congress passed legislation that required DOD to  appoint PSMs to support each major weapon system. According to  DOD guidance, PSMs are senior sustainment officials in program offices  who are tasked with ensuring that DOD weapon systems, including Navy  ships, are reliable and can be maintained effectively at an affordable cost.  The guidance states that PSMs should be involved in the acquisition  decision-making process to ensure the weapon system—in this case a  ship—can be supported throughout its life cycle. All but one of the  shipbuilding programs included in our review have a dedicated PSM.  However, we found that these sustainment experts have generally had  limited involvement in key acquisition decisions, such as developing  sustainment requirements and estimating O&S costs, because: (1) Navy  acquisition policy does not ensure that PSMs are involved early in the  acquisition process when key decisions that affect sustainment are made,  and (2) their responsibilities to support sustainment outcomes during the  acquisition process are often at odds with the program office’s  overarching focus on acquisition cost and schedule outcomes.

Navy Policy Does Not Require PSMs to Be Involved Early in the Acquisition Process

Navy acquisition policy does not ensure that PSMs are appointed early  enough to inform key acquisition documentation and initiate sustainment  planning early in the acquisition process. Until recently, Navy acquisition  policy did not specify when PSMs should be involved in the acquisition  process. However, a March 2019 update to the Navy’s acquisition policy  established that Navy leadership should assign PSMs by initiation  (normally Milestone B). We found that this timing is too late in the  acquisition process, as critical acquisition decisions that have significant  repercussions for sustainment are made before Milestone B, such as  developing the program’s requirements and initial sustainment strategy.  For example, according to DOD’s PSM guidance, PSMs need to be  involved prior to initiation of the program. Among other things, the PSM  should provide a sustainment perspective into key decisions such as  developing the acquisition strategy and setting requirements. This  guidance also states that the PSM is responsible for authoring or  providing input on key program documents, such as the LCSP, which are  required by Milestone A. The Navy policy, therefore, does not facilitate  the early contributions of PSMs to key documents as described by DOD  guidance, and it does not help ensure PSMs are appointed to shipbuilding  program offices early enough to influence key decisions about the  program’s sustainment.

For its two most recent shipbuilding programs, which began after the  enactment of the PSM legislation in 2009, Navy acquisition policy has not  ensured that PSMs are involved early enough in the acquisition process  to influence decisions that affect sustainment. As a result, the programs  have appointed PSMs at different points in the acquisition process and  their ability to influence key decisions has varied, with the PSM appointed  earlier able to affect more decisions related to sustainment. For example,  the SSBN 826 program’s PSM was appointed before the program  reached Milestone A. This is in line with DOD guidance but before Navy  acquisition policy requires the PSM to be appointed. As a result, the  SSBN 826 PSM stated that he was involved in the setting of the  program’s sustainment requirements and has subsequently used those  requirements to ensure sustainment is being considered in the acquisition  process, including during the development of the submarine’s design. By  contrast, the FFG(X) program, which began in 2017, does not yet have a  dedicated PSM as the program approaches the Milestone B review. While  this is permitted by the Navy’s acquisition policy, the program has now  made critical sustainment decisions, such as developing the sustainment  strategy, the maintenance and training schedule, and the sustainment key  performance parameters, without a PSM.

For the nine shipbuilding programs in our review that started prior to  2009, key acquisition decisions were made without the input of a senior  sustainment official who has the responsibility and authority of a PSM.  Nearly all of the PSMs for these nine programs stated they that they were  not involved in or did not have insight into key acquisition decisions that  took place early in the acquisition process, such as ship design. Instead,  PSMs told us that their job has been to implement decisions that were  already made. For example, one PSM said that “the die has been cast”  once major decisions about automation, crew size, and service life are  made, and after that all the PSM can do is “try to undo the sustainment  harm that has been caused.” Given these results, officials from nearly all  of the shipbuilding programs we spoke with stated that shipbuilding  programs should assign PSMs at the very beginning of the program when  key decisions are being made about how and what to acquire. In  particular, program officials stated that the PSM should be appointed at  the start of the program to ensure early decisions consider sustainment.  Such decisions include establishing the sustainment requirements,  developing the acquisition strategy, and designing the ship. We  previously found that Navy PSMs considered early appointment of the  PSM critical to ensuring they can influence their programs’ sustainment  considerations.

If shipbuilding programs do not appoint PSMs early in the acquisition  process, the programs will continue to make critical decisions that affect  sustainment without the input of the programs’ senior sustainment official.  Without revising its acquisition policy to establish that PSMs should be  appointed to shipbuilding programs at the beginning of the acquisition  process, the Navy cannot ensure PSMs are involved early enough to  influence key decisions that affect sustainment, such as requirements  setting and the drafting of the LCSP.

PSM Responsibilities Can Be at Odds with Shipbuilding Program Cost and Schedule Objectives

Since PSMs focus on sustainment and the shipbuilding programs focus  on managing acquisition outcomes, the PSMs’ roles and responsibilities  are at times at odds with the goals and priorities of the program office in  which they work. A Navy working group recently found that the  effectiveness of PSMs is limited because the PSM’s goals do not always  align with the shipbuilding program’s acquisition cost and schedule goals.

The Navy issued a strategic plan for fiscal years 2018 to 2023 that was  focused on strengthening the life-cycle logistics workforce that supports  acquisition programs, including PSMs. The strategic plan established a  working group on product support authority, which found that program  manager and PSM roles and responsibilities are often in conflict and  misaligned, reducing the authority and effectiveness of PSMs. As a result,  the working group is assessing possible changes to improve the  effectiveness of PSMs, such as revising Navy policy to better reflect the  PSMs’ statutory authority or increasing PSMs’ independence by creating  an additional reporting chain of command outside of their acquisition  program.

We similarly found that the ability of PSMs to influence key acquisition  decisions may be limited because their focus on improving sustainment  outcomes can be at odds with the shipbuilding programs’ emphasis on  achieving acquisition goals, such as acquisition cost and schedule. As  discussed above, Navy leadership has generally only focused on  shipbuilding programs’ acquisition outcomes during the Gate process,  without considering how acquisition decisions affect sustainment. In turn,  program officials from all of the shipbuilding programs we reviewed  reported that Navy leadership had directed them to prioritize the  achievement of acquisition outcomes, such as acquisition cost goals,  during the execution of their programs, and none had been directed to  devote additional attention to sustainment. Additionally, officials in many  of the shipbuilding programs we reviewed told us that a key ASN (RD&A)  memorandum on managing acquisition costs framed their decision- making, including decisions about program changes to improve  sustainment. This focus on managing acquisition costs can run counter  to PSMs’ efforts to improve sustainment outcomes, such as increasing  system reliability or providing adequate technical documentation, as these  efforts frequently require investment of additional shipbuilding funds.  Rather than investing acquisition funds to improve sustainment outcomes,  we found that shipbuilding programs instead have an incentive to delay  sustainment improvements until after ships are delivered to the fleet and  funding sources other than those managed by the shipbuilding program  can be used for these purposes. According to officials from 16 different  acquisition, engineering, and sustainment offices, because shipbuilding  programs are only responsible for ships until they are provided to the  fleet, the Navy’s shipbuilding programs have an incentive to delay  sustainment improvements until after ships are delivered to the fleet,  when other parts of the Navy take over responsibility for funding them. As  one fleet official explained, shipbuilding programs are not incentivized to  address sustainment issues because the shipbuilding programs are held  responsible only for the achievement of acquisition cost goals and not for  sustainment cost goals. Some Navy officials characterized this dynamic  as throwing sustainment concerns “over the fence” once ships are  provided to the fleet.

Further, we found that Navy leadership made decisions, in some cases,  even though PSMs expressed concerns about the feasibility of  implementing the decision from a sustainment perspective. Figure 13  provides an example of when LCS sustainment officials in the  shipbuilding program expressed concern about the feasibility of the LCS  crew size.

While it is important for shipbuilding programs to manage acquisition cost  and schedule, focusing only on these acquisition outcomes reduces the  effectiveness of the PSM and increases the risk that ships will have long- term sustainment challenges.

The quantity and breadth of issues identified in this report—resulting in  billions of dollars in unexpected costs, maintenance delays, and  unreliable ships—suggest that existing policies and guidance have not  ensured that new ships are reliable and can be sustained as planned.  Recently, due to some of these problems, DOD and the Navy have  recognized the importance of considering the requirements and costs of  sustainment during the acquisition process, and Congress has passed  legislation related to sustainment planning. This report, along with other  DOD initiatives discussed in this review, demonstrate that the Navy needs  to take many steps to infuse its acquisition decision-making with a greater  focus on sustainment outcomes. Systemic changes are needed to  improve shipbuilding programs’ sustainment outcomes, including:  setting clear sustainment requirements that are useful for acquisition  decision-making and reporting the results to Congress,  improving O&S cost estimates, sustainment planning, and logistics  assessments, and  involving the PSM early in the acquisition process.

However, these changes will only be successful if Navy leadership  commits more time, attention, and resources to ensuring that sustainment  is thoroughly considered throughout the acquisition process. Until the  Navy resolves these issues, its shipbuilding programs will continue to  pass costly sustainment risk to the fleet that results in ships and  submarines that experience major sustainment problems.

Congress should consider developing an oversight mechanism for  evaluating shipbuilding programs’ sustainment cost estimate growth  during the acquisition process, with requirements for the Navy to: (1)  report sustainment cost estimate growth information to Congress and (2)  reassess shipbuilding programs that are experiencing a high level of  sustainment cost estimate growth.

We are making the following 11 recommendations to DOD:  The Secretary of Defense should change its definition for setting  operational availability for ships in its Joint Capabilities Integration and  Development System policy by adding information that defines the  operational availability requirement by mission area in addition to the ship  level and includes all equipment failures that affect the ability of a ship to  perform primary missions. (Recommendation 1)

The Secretary of Defense should change its definition for setting materiel  availability for ships in its Joint Capabilities Integration and Development  System requirements policy to include all factors that could result in a  ship being unavailable for operations, such as unplanned maintenance,  unplanned losses, and training. (Recommendation 2)

The Secretary of the Navy should direct the ASN (RD&A) and the CNO,  once DOD requirements setting policy is revised, to update existing  operational availability requirements for ongoing shipbuilding programs.  When revising these requirements, the Navy should set operational  availability requirements that: (1) are based on failures that affect the  ability of a ship to perform primary missions and (2) are set at the mission  level instead of ship level. (Recommendation 3)

The Secretary of the Navy should direct the ASN (RD&A) and the CNO,  once DOD requirements setting policy is revised, to update the materiel  availability requirements for ongoing shipbuilding programs. When  developing or revising these requirements, the Navy should set materiel  availability requirements that fully capture all factors that could preclude a  ship from being ready when needed. (Recommendation 4)

The Secretary of the Navy should direct the ASN (RD&A) and the CNO,  once the Navy revises its sustainment requirements, to ensure that  shipbuilding programs report operational availability and materiel  availability requirements in Selected Acquisition Reports, and alternatives  to the Selected Acquisition Reports, for Congress. (Recommendation 5)

The Secretary of the Navy should direct the Commander of Naval Sea  Systems Command to ensure that cost estimators follow current guidance  and GAO-identified best practices and conduct sensitivity analyses and  other analyses to improve their assessment of cost risk in the O&S costs  in shipbuilding programs’ life-cycle cost estimates. (Recommendation 6)

The Secretary of the Navy should direct the ASN (RD&A) to ensure all  shipbuilding programs develop and update LCSPs, in accordance with  DOD policy, that demonstrate how a ship class can be affordably  operated and maintained while meeting sustainment requirements,  including associated business case analyses and identifying sustainment  risk. (Recommendation 7)

The Secretary of the Navy should direct the Commander of Naval Sea  Systems Command to evaluate and implement changes to the ILA in  order to position the ILA to effectively identify key sustainment risks and  make recommendations for risk mitigation, which may include existing  Navy proposals to change the ILA process. (Recommendation 8)

The Secretary of the Navy should direct the ASN (RD&A) and the CNO to  ensure sustainment-related briefing topics prescribed by the Navy’s  acquisition policy are consistently discussed at Gate reviews.  (Recommendation 9)

The Secretary of the Navy should direct the ASN (RD&A) and the CNO to  implement the sustainment program baseline initiative for shipbuilding  programs and, in so doing, develop a mechanism that ensures that  sustainment outcomes are a factor in shipbuilding programs’ decision- making during the acquisition process. (Recommendation 10)

The Secretary of the Navy should revise SECNAVINST 5000.2 and other  associated guidance to ensure PSMs are assigned to shipbuilding  program offices in time to inform early acquisition decisions, including  development of the program’s sustainment requirements and LCSPs.  (Recommendation 11)

We provided a draft of our report to DOD for comment. DOD’s written  comments are reprinted in appendix III of this report. DOD concurred with  8 recommendations and partially concurred with 3 recommendations.  However, for at least 5 of the recommendations in which DOD partially  concurred and concurred, DOD did not describe the specific actions it is  planning to take to address our recommendations. These are discussed  below.

In response to our first and second recommendations on operational and  materiel availability requirements, DOD stated that the Navy and Joint  Staff would revisit requirements definitions for shipbuilding programs to  better ensure that they are traceable to a ship’s mission and can be used  across ship development and fielding. DOD also agreed that it will align  the sustainment definitions with how the Navy defines critical failures for  ship programs. While these are important steps, they do not fully address  our recommendations. Specifically, DOD officials told us that the  department plans to continue defining operational availability with a single  metric for an entire ship or ship class. While this approach is appropriate  for materiel availability, as we state in the report, it is misaligned with  Navy guidance for operational availability, which states that such an  approach is not mathematically feasible for ships. Until DOD ensures that  its sustainment requirements for ships are well-defined and usable during  acquisition and sustainment, shipbuilding programs will continue to  implement requirements that do not result in reliable and available ships.

In response to our third and fourth recommendations, DOD agreed to  incorporate changes to its requirements-setting policy into new  shipbuilding programs. However, DOD and the Navy may miss key  opportunities to improve the Navy’s sustainment requirements for existing  programs, including at least four ship classes that have plans for a new  flight, block, and/or major modification. This approach also excludes  existing programs that have established requirements but have yet to  start design or construction. Changing these requirements, in line with our  recommendation, would help ensure that more rigorous sustainment  requirements inform Navy ship designs. For example, as we discuss in  the report, the current FFG(X) operational availability requirement would  allow the ships to be out of service for extraordinary lengths of time. Until  the FFG(X) requirement and those for other existing ships (such as DDG  51 Flight III) are remedied, the sustainment requirements will continue to  be poorly defined and unable to influence design decisions in a manner  that results in more reliable ships.

In response to our fifth recommendation, DOD concurred with the  recommendation because it stated that it already reports the status of  both sustainment requirements in its Selected Acquisition Reports.  However, as we state in our report, implementing this recommendation is  dependent on the Navy changing the definition of its sustainment  requirements to improve the accuracy of its reporting to Congress. Since  DOD only agreed to modify material availability requirements for existing  ship programs as it deemed appropriate, its Selected Acquisition Reports  could continue to be misleading for many of its ship programs because  they may not reflect all of the failures and factors that reduce operational  and materiel availability once ships are in the fleet.

In addition to DOD’s response, the Navy’s ASN (RD&A) also submitted a  letter stating that he generally agreed with the recommendations and  indicated that his office has already started making some changes over  the last 10 years to improve consideration of sustainment while acquiring  ships. The Navy also sought to add context to some of our report findings.  We respond to the ASN RD&A’s letter in appendix III. DOD and the Navy  also provided technical comments that we incorporated as appropriate.

We are sending copies of this report to the Secretary of Defense,  Secretary of the Navy, interested congressional committees, and other  interested parties. This report will also be available at no charge on  GAO’s website at http://www.gao.gov.

If you or your staff have any questions concerning this report, please  contact me at (202) 512-4841 or by e-mail at oakleys@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in appendix IV.

Appendix I: Objectives, Scope, and Methodology

This review assesses the extent to which: (1) the Navy’s shipbuilding  programs deliver ships to the fleet that can be sustained as planned; (2)  the Navy develops and uses effective key sustainment requirements  during the acquisition process; (3) shipbuilding programs effectively  identify and evaluate sustainment costs and risks in key acquisition  planning documents; (4) Navy and Congressional leadership have insight  into and effectively consider programs’ sustainment planning and  outcomes; and (5) the shipbuilding programs leverage Product Support  Managers (PSMs) during the acquisition process. The scope of our  review included all shipbuilding programs for warships that had ships  under construction or in development in the last 10 years, from fiscal  years 2009 through 2019. We defined a shipbuilding program as under  construction if any ship in the class was under construction in the last 10  years. We defined a shipbuilding program as in development if the Navy  had awarded a development or design contract for the class in the last 10  years. We excluded military sealift command vessels and other Navy  vessels with logistics missions from this review to help ensure that our  resources matched the scope of our review. We assessed LHD 8 and  CVN 77 as their own classes for the purposes of our review because the  Navy considers them to be transitional designs between antecedent  classes. These parameters resulted in 11 ship classes for inclusion in our  review. We also selected several ships within these classes to serve as  case studies for additional analysis. To select these ship-specific case  studies, we reviewed all warships delivered from fiscal years 2007-2018  and selected up to four of the most recent hulls within this time frame  from each class as case studies. We selected these ships for additional  analysis because they are still relatively new, but the fleet has had  experience maintaining them and could discuss sustainment challenges  for those ships, if any. All ship classes and case study hulls in scope are  listed in table 7.

Over the course of this audit, we interviewed officials from over 100 Navy  organizations involved in designing, building, inspecting, testing,  sustaining, and operating Navy ships to gain an understanding of the  extent to which they are involved in the acquisition process and how they  consider and manage sustainment risk during the acquisition process.  These interviews also provided information on the nature and magnitude  of sustainment issues being experienced by the fleet on recently  delivered ships. These included approximately 30 interviews with  organizations reporting to the ASN (RD&A), 31 interviews with  organizations reporting to the Chief of Naval Operations, 29 interviews  with organizations within Naval Sea Systems Command (NAVSEA),  interviews with shipbuilders that have been awarded multiple Navy  shipbuilding contracts, and three interviews with other Department of  Defense (DOD) entities. We conducted these interviews in several  locations throughout the United States, including Washington, D.C.; San  Diego, CA; Norfolk, VA; Philadelphia, PA; and Mechanicsburg, PA.  During visits to naval bases, we toured DDG 111, DDG 1000, LHD 8,  LPD 22, LCS 3, LCS 4, CVN 77, and CVN 78.

To identify the extent to which ships can be sustained as planned, we  interviewed shipbuilding program officials, in-service program officials,  engineers, and fleet organizations, as well as analyzed ship and system  performance data from many Navy organizations. Through this  assessment, we identified and analyzed 150 significant class-wide issues  across the shipbuilding programs in our scope that required more  sustainment resources than planned. Such issues include systems or  parts that exhibited poor design, construction, reliability, or planning;  systems that were obsolete before or soon after ship delivery; and  systems that could not be maintained by the fleet due to vendor or  manufacturer proprietary information. We counted only issues that were  class-wide, meaning they were related to ship design, equipment used  across the class, or construction procedures, rather than hull-specific  issues that could be caused by a unique accident or sailor error. We also  did not assess issues related to fleet preference. For example, one ship’s  crew told us they did not prefer the location in which consoles for  operating a certain system were installed, as they are typically installed in  a different location on other ship classes. However, because the consoles  were installed in the location specified in the design, we eliminated this  issue from our analysis. We also eliminated issues if maintenance and  other work on the affected system were accounted for during the  acquisition process in the program’s initial Operating and Support (O&S)  cost estimate, rather than being an unexpected expense. For example,  program offices can address expected obsolescence by budgeting for  future system modernizations or purchasing quantities of spare parts that  will last for the ship’s entire life cycle.

To identify the costs associated with fixing problems that are the result of  not being able to sustain ships as planned, we reviewed documentation  from Navy organizations, budget justifications, and estimates provided by  Navy officials. We were able to collect cost information for 30 percent of  the problems reported to us by the fleet. To assess the extent to which  maintenance schedules are executed as planned, we analyzed Navy data  on regularly scheduled, depot-level maintenance periods for surface  ships—including those maintained at overseas homeports and in the  United States. NAVSEA collects and manages data on these  maintenance periods—known as Chief of Naval Operations maintenance  availabilities—for surface ships, submarines, and aircraft carriers. We  obtained the data on surface ship depot-level maintenance periods used  by NAVSEA’s Surface Maintenance Engineering Planning Program and  the Commander, Navy Regional Maintenance Center. We reviewed the  data we obtained for inconsistency errors and, when possible, obtained  multiple documents that discussed the same problem for validation. We  then discussed these problems with multiple officials across the Navy,  including officials involved in ship maintenance and operation. From these  efforts, we determined that these data are sufficiently reliable for the  purposes of this report.

To assess the extent to which shipbuilding programs develop and use  effective sustainment requirements during the acquisition process, we  reviewed DOD requirements setting policy and determined the extent to  which shipbuilding programs set requirements in accordance with this  policy. In doing so, we assessed the extent to which DOD policy aligned  with fleet experience and captured all factors that influence ship  availability and analyzed any discrepancies. We then assessed the extent  to which the Navy set sustainment requirements that contributed to well- informed decision-making throughout the acquisition process and in  accordance with DOD policy and Navy guidance. To assess how  accurately the Navy measures operational availability and materiel  availability outcomes, we reviewed the Navy’s operational availability  measurements as reported in Selected Acquisition Reports to Congress,  and compared these values to fleet reliability data and casualty reports,  as well as information about the ships’ performance obtained in interviews  with Chief of Naval Operations and NAVSEA officials.

To assess the extent to which shipbuilding programs effectively identify  and evaluate sustainment costs and risks in key acquisition planning  documents, we evaluated the Navy’s development and use of life-cycle  cost estimates, Life-Cycle Sustainment Plans and Independent Logistics  Assessments. To evaluate the Navy’s development of O&S cost  estimates, we reviewed the life-cycle cost estimates created when  programs were in development and compared them to updated estimates  of O&S costs reported in Selected Acquisitions Reports and Navy  provided data. We adjusted program estimates for quantity to more  accurately capture cost growth between initial and current O&S  estimates. Further, we adjusted the estimates for inflation to compare the  O&S estimates as accurately as possible. For programs that experienced  O&S cost growth, we interviewed program officials and Navy cost  estimators to determine the process that the Navy’s cost estimators used  to build O&S cost estimates for shipbuilding programs and to discuss the  reasons for cost growth. We also reviewed DOD cost estimation guidance  to determine whether the cost estimators and programs complied with its  requirements. While we have previously found issues with the reliability of  the Navy’s cost estimates, we believe that the cost estimates we  reviewed are sufficiently reliable for the purposes of this report. To  evaluate the Navy’s use of key sustainment planning documents, we  reviewed LCSPs and ILAs for programs in our scope. We interviewed  program, NAVSEA, fleet, and maintenance officials to determine the  extent to which the LCSPs and ILAs for those programs were used to  plan for sustainment, including whether these documents identified and  mitigated sustainment risks. We compared the results of the ILAs to  realized ship sustainment problems that we identified through interviews  shipbuilding program officials, in-service program officials, engineers, and  fleet organizations, as well as to analyses of ship and system  performance data from many Navy organizations.

To evaluate the extent to which Navy and Congressional leadership has  insight into and considers sustainment planning and outcomes, we  examined the Navy’s Gate review process and Congress’ Nunn-McCurdy  breach process. To assess the Navy’s use of the Gate review process,  we reviewed Navy acquisition policy governing the reviews, as well as the  briefings and meeting minutes from reviews for programs in our scope  from fiscal years 2014 through 2018. We compared the content of the  briefings and meeting minutes to the acquisition policy to determine the  extent to which required sustainment topics were briefed and discussed  at each review and identified other mentions of sustainment issues that  were outside the scope of the policy requirements. We also reviewed a  recent revision to Navy acquisition policy that creates a Gate 7 review for  sustainment and interviewed senior Navy officials to obtain their  perspectives on how Gate 7 will affect ship sustainment. To assess Navy  leadership’s effectiveness in holding shipbuilding programs’ accountable  for achieving sustainment outcomes using Acquisition Program Baselines  (APB), we reviewed statute that established the APB as well as the  findings of the Section 809 Panel, which recommended the creation of the  SPB to supplement the APB. We also interviewed Navy officials involved  in developing the SPB framework in accordance with the Panel’s  recommendations to obtain information on their work. To determine what  information Navy shipbuilding programs are required to provide to  Congress about sustainment cost issues during the acquisition process,  we reviewed the statutory requirements found in Nunn-McCurdy, a key  Congressional oversight tool requiring information about baselines and  cost estimate growth. We also assessed how the Nunn-McCurdy breach  influenced programs’ management of acquisition and sustainment costs  by interviewing Navy officials in the shipbuilding program offices, Office of  the Chief of Naval Operations, and ASN (RD&A) offices, among others.  Additionally, we reviewed O&S cost growth for programs in our scope and  compared the percent increase to the 50 percent cost growth threshold  used for Nunn-McCurdy acquisition cost breaches to determine if the  sustainment cost growth was of a magnitude the Congress considers  critical for acquisition costs.

To assess how shipbuilding programs leverage PSMs during the  acquisition process, we reviewed DOD and Navy acquisition guidance  governing the roles and responsibilities of program offices, program  managers, and PSMs. We interviewed officials from shipbuilding  programs in our scope about their priorities and responsibilities  throughout the life cycle of a ship class. Further, we reviewed legislation  creating the PSM role, DOD and Navy acquisition guidance regarding  PSMs, prior GAO reporting on PSMs, and interviewed PSMs from  programs in our scope. We compared the key acquisition activities that  legislation requires PSMs to participate in with the activities the PSMs  reported they had participated in. We also compared DOD and Navy   guidance on assigning PSMs to a program office to when program  officials told us the PSMs needed to be assigned to be effective. We also  reviewed findings that NAVSEA logistics officials reached about the  authority and effectiveness of PSMs.

We conducted this performance audit from April 2018 to March 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Appendix II: List of Fleet-Identified Ship Class Problems That Required More Sustainment Resources than Planned

In addition to responding to our recommendations, the Assistant Secretary of the  Navy for Research, Development, and Acquisition (ASN (RD&A)) provided  observations on a number of issues related to the findings in our report. In his letter,  the ASN (RD&A) agreed with our recommendations but sought to add context to our  report’s conclusion that the Navy can save billions by improving its consideration of  sustainment throughout the acquisition process. Our response to the ASN (RD&A)’s  letter is as follows.

In his letter, the ASN (RD&A) highlighted a number of changes that the Navy has  instituted over the last 10 years to improve sustainment planning, including policies  pertaining to life cycle sustainment plans and independent logistics assessments,  strengthening the role of the Product Support Managers, and establishing a new  Gate 7 review focused on sustainment. We agree that the Navy’s framework for  including sustainment planning in the acquisition process offers promise and we  discuss these policies and processes in depth in this report. However, we found  considerable weaknesses in the Navy’s application of its own policies. Specifically,  we found that the Navy did not provid a thorough assessment of the sustainment  implications and risks in its LCSPs and ILAs and Product Support Managers aften  are not assigned until well into a shipbuilding program thereby limiting their influence  on early acquisition decisions. While adding a Gate 7 offers benefits, it is not a  substitute for discussions about sustainment concepts during earlier Gates, when  key long-term decisions are being made. Our findings and recommendations  demonstrate that DOD and the Navy should better use the policies and processes it  currently has, including the Gate reviews, as well as Product Support Managers,  LCSPs and ILAs, to improve their understanding of how their acquisition decisions  will affect sustainment.

In his letter, the ASN (RD&A) stated that many of the Navy’s ship programs were  designed with sustainment initiatives early in the acquisition process and, further,  acknowledged that these initiatives did not achieve efficiencies as initially planned.  We agree with both of these points, as we discuss in depth in this report. Whereas  the ASN (RD&A) indicated in his letter that leadership, philosophical, and technology  changes can lead to outcomes that were not originally envisioned, we found that  these initiatives largely failed because, early in the acquisition process, the Navy did  not sufficiently assess the costs or evaluate the risks associated with pursuing these  initiatives. Absent such analysis, the Navy did not mitigate the risks that threatened  their success. The ASN (RD&A) highlighted several examples of sustainment  initiatives considered early in the acquisition process for several ships. We believe  that these examples (many of which we discuss in our report) serve to further  highlight our findings. For example:

The ASN (RD&A) discussed the use of a “full service contractor,” meaning  performance-based logistics for LPD 17 class ships. According to the ASN  (RD&A), while this approach had been successfully used for aircraft, the  Navy had never applied it to ships. As we state in our report, in attempting to  use performance-based logistics for several shipbuilding programs including  LPD 17 class ships, the Navy did not consider the challenges in implementing  this radical departure from traditional ship maintenance and did not consult  the fleet on this change until after ships were delivered. The Navy’s life-cycle  sustainment plans and cost estimates for several shipbuilding programs did  not articulate how much the performance-based logistics approach was likely  to cost or what sustainment outcomes the Navy expected. For instance, for  three out of the four programs that pursued performance-based logistics, the  Navy learned that this approach was cost-prohibitive once it began seeking  contractors to sustain its ships.

The ASN (RD&A) stated that the Navy’s focus on Ford class sustainment has  reduced sustainment costs and labor by an estimated $4 billion across the  Ford class carriers compared to the previous class of carriers. However, it is  too early to tell how much the Navy will save compared to the cost of its  previous class of carriers because the Navy’s fleet has yet to operate the new  carrier. Further, while the O&S estimated for the Ford class may currently be  lower than the previous carrier class, our report notes that the O&S costs for  the Ford class carrier program are nearly $46 billion more than initially  estimated. Finally, in his letter, the ASN (RD&A) stated that the Navy plans to  correct the vast majority of CVN 78 sustainment problems (including those  we identified in this report) with ship construction funding—and these cost will  not be passed on to the fleet. The $4.2 billion to address the 150 problems  that we identified in this report already excludes all ship construction funding  and also excludes corrections on CVN 78. Our calculation of $4.2 billion only  includes the costs to correct the problems that are not funded using ship  construction funding.

We agree with the ASN (RD&A)’s assertion that external factors can take place over  the lengthy time needed to design and build a new ship that can lead to changes that  were not initially envisioned. While the Navy cannot prepare for all of the unknowns,  it can critically evaluate sustainment assumptions that form the basis of its  shipbuilding programs early in the acquisition process. Such analysis could  significantly improve the Navy’s ability to response to changes over time and  increase the likelihood of success. Further, critical analysis could also help decision  makers determine when an initiative is too risky before implementing it on an entire  shipbuilding program.

In its letter, the ASN (RD&A) also states that a careful reading of the early program  documentation demonstrates that sustainment stakeholders were involved in the  acquisition process. We reviewed available acquisition documents for 11 shipbuilding  programs in the last 20 years and found that sustainment leadership, specifically the  CNO and other in OPNAV, attended meetings and approved sustainment planning  documents. However, we found that sustainment was rarely discussed during early  acquisition meetings—even when the planned shipbuilding programs sought new  sustainment initiatives. Further, we reviewed thousands of Navy documents and met  with over 100 Navy organizations and found that sustainment organizations across  the Navy that are responsible for ship sustainment have a limited role in the  acquisition process, even when having such a role could have likely prevented many  of the problems we discuss in the report.

As we state in our report, the quantity and breadth of the 150 problems we found— resulting in billions of dollars in unexpected costs, maintenance delays, and  unreliable ships—suggest that existing policies and guidance have not ensured that  new ships are reliable and can be sustained as planned. We are concerned that the  ASN (RD&A)’s letter is an indication that the Navy’s shipbuilding program offices will  not take the necessary action to improve sustainment planning during the acquisition  process. The ASN (RD&A)’s letter did not mention the recent establishment of a new  Deputy Assistant Secretary for Sustainment that we discuss in our report. We believe  that this office has the opportunity to contribute to improved outcomes byp providing  leadership to ensure that sustainment considerations are critically evaluated during  the acquisition process. Absent such leadership, the Navy is at risk of continuing to  provide ships to the fleet that are incomplete, unreliable, and cost more than  expected to maintain.

Appendix IV: GAO contact and Staff Acknowledgments

In addition the contact name above, the following staff members made  key contributions to this report: Diana Moldafsky, Assistant Director;  Laurier Fish, Analyst-in-Charge; Jillian Schofield; Sarah Evans; Lori  Fields; Ann Halbert-Brooks; Joshua Garties; Laura Greifner; Tara Kumar;  Shivarthn Maniam; Alexis Olson; Kya Palomaki; Anne Louise Taylor; and  Tonya Woodbury. Carl Barden; Brian Bothwell; Anna Irvine; and Jean  McSween also made contributions to this report.

Defense Acquisitions: Senior Leaders Should Emphasize Key Practices  to Improve Weapon System Reliability. GAO-20-151. Washington, D.C.:  January 14, 2020.

Guided Missile Frigate: Navy Has Taken Steps to Reduce Acquisition  Risk, but Opportunities Exist to Improve Knowledge for Decision Makers.  GAO-19-512. Washington, D.C.: August 9, 2019.

DOD Acquisition Reform: Leadership Attention Needed to Effectively  Implement Changes to Acquisition Oversight. GAO-19-439. Washington,  D.C.: June 5, 2019.

Columbia Class Submarine: Overly Optimistic Cost Estimate Will Likely  Lead to Budget Increases. GAO-19-497. Washington, D.C.: April 8, 2019.

DOD Depot Workforce: Services Need to Assess the Effectiveness of  Their Initiatives to Maintain Critical Skills. GAO-19-51. Washington, D.C.:  December 14, 2018.

Navy and Marine Corps: Rebuilding Ship, Submarine, and Aviation  Readiness Will Require Time and Sustained Management Attention.  GAO-19-225T. Washington, D.C.: December 12, 2018.

Navy Readiness: Actions Needed to Address Costly Maintenance Delays  Facing the Attack Submarine Fleet. GAO-19-229. Washington, D.C.:  November 19, 2018.

Navy Readiness: Actions Needed to Address Costly Maintenance Delays  Affecting the Attack Submarine Fleet. GAO-19-192C. Washington, D.C.:  October 31, 2018.

Navy Shipbuilding: Past Performance Provides Valuable Lessons for  Future Investments. GAO-18-238SP. Washington, D.C.: June 6, 2018.

Columbia Class Submarine: Immature Technologies Present Risks to  Achieving Cost, Schedule, and Performance Goals. GAO-18-158.  Washington, D.C.: December 21, 2017.

Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Affecting the Fleet. GAO-17-809T.  Washington, D.C.: September 19, 2017.

Naval Shipyards: Actions Needed to Improve Poor Conditions That Affect  Operations. GAO-17-548. Washington, D.C.: September 12, 2017.

Weapon Systems Management: Product Support Managers’ Perspectives  on Factors Critical to Influencing Sustainment-Related Decisions.   GAO-17-744R. Washington, D.C.: September 12, 2017.

Navy Readiness: Actions Needed to Address Persistent Maintenance,  Training, and Other Challenges Facing the Fleet. GAO-17-798T.  Washington, D.C.: September 7, 2017.

Navy Shipbuilding: Policy Changes Needed to Improve the Post-Delivery  Process and Ship Quality. GAO-17-418. Washington, D.C.: July 13, 2017.

Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.

Navy Ship Maintenance: Action Needed to Maximize New Contracting  Strategy’s Potential Benefits. GAO-17-54. Washington, D.C.: November  21, 2016.

Littoral Combat Ship: Need to Address Fundamental Weaknesses in LCS  and Frigate Acquisition Strategies. GAO-16-356. Washington, D.C.: June  9, 2016.

Defense Inventory: Further Analysis and Enhanced Metrics Could  Improve Service Supply and Depot Operations. GAO-16-450.  Washington, D.C.: June 9, 2016.

Military Readiness: Progress and Challenges in Implementing the Navy’s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.

Navy and Coast Guard Shipbuilding: Navy Should Reconsider Approach  to Warranties for Correcting Construction Defects. GAO-16-71.  Washington, D.C.: March 3, 2016.

Acquisition Reform: DOD Should Streamline Its Decision-Making Process  for Weapon Systems to Reduce Inefficiencies. GAO-15-192. Washington,  D.C.: February 24, 2015.

Ford-Class Aircraft Carrier: Congress Should Consider Revising Cost  Cap Legislation to Include All Construction Costs. GAO-15-22.  Washington, D.C.: November 20, 2014.

Weapon Systems Management: DOD Has Taken Steps to Implement  Product Support Managers but Needs to Evaluate Their Effects.   GAO-14-326. Washington, D.C.: April 29, 2014.

Navy Shipbuilding: Opportunities Exist to Improve Practices Affecting  Quality. GAO-14-122. Washington, D.C.: November 19, 2013.

Trends in Nunn-McCurdy Cost Breaches for Major Defense Acquisition  Programs. GAO-11-295R. Washington, D.C.: March 9, 2011.

Defense Management: DOD Needs Better Information and Guidance to  More Effectively Manage and Reduce Operating and Support Costs of  Major Weapons Systems. GAO-10-717. Washington, D.C.: July 20, 2010.

Best Practices: High Levels of Knowledge at Key Points Differentiate  Commercial Shipbuilding from Navy Shipbuilding. GAO-09-322.  Washington, D.C.: May 13, 2009.

Defense Logistics: Improved Analysis and Cost Data Needed to Evaluate  the Cost-effectiveness of Performance Based Logistics. GAO-09-41.  Washington, D.C.: December 19, 2008.

Defense Acquisitions: Cost to Deliver Zumwalt-Class Destroyers Likely to  Exceed Budget. GAO-08-804. Washington, D.C.: July 31, 2008.

Defense Acquisitions: Realistic Business Cases Needed to Execute Navy  Shipbuilding Programs. GAO-07-943T. Washington, D.C.: July 24, 2007.

About 70% of a ship’s lifecycle costs are operations and maintenance costs.

Maintaining the Navy’s new ships will cost $130 billion more than planned.

We investigated every class of ships the Navy recently built and found 150 examples of systemic maintenance problems. Sailors showed us things like failed engines, faulty electronics, and clogged toilets.

These problems might have been prevented with some attention to future maintenance concerns when designing and building the ships.

We made 11 recommendations to help the Navy focus on maintenance concerns earlier. We suggested that Congress consider enhancing its oversight in this area.