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U.S. Navy Tries To Rein In Carrier Costs

Feb. 21, 2012 - 12:02PM   |  
By CHRISTOPHER P. CAVAS   |   Comments
The aircraft carrier Gerald R. Ford (CVN 78), seen under construction at Newport News Shipbuilding, is the most expensive ship in the U.S. Navy's shipbuilding program.
The aircraft carrier Gerald R. Ford (CVN 78), seen under construction at Newport News Shipbuilding, is the most expensive ship in the U.S. Navy’s shipbuilding program. (Newport News Shipbuilding)
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The new aircraft carrier Gerald R. Ford (CVN 78) is the largest and most expensive ship in the U.S. Navy’s shipbuilding program, with a total price tag to develop and build the ship topping $15 billion. And the cost is rising for the ship, the first of a new class of nuclear-powered carriers likely to remain in production for several decades.

The Navy, as part of its fiscal 2013 budget request released Feb. 13, is asking for another $811 million for “fact-of-life cost increases,” a figure that will drive the ship closer to a congressionally imposed cost cap.

Two of the Navy’s top officials explained the reasons behind the increase in a Feb. 17 interview with Defense News.

“This was a very unique ship,” said Bob Work, undersecretary of the Navy. “The original Navy plan was to spread the transition of technology over three ships, and in the 2002-2003 time frame the office of [then-Defense Secretary Donald Rumsfeld] directed the Navy to put most of the technology into a single ship, which made our challenge very, very high.”

The ship’s keel-laying ceremony was held in November 2009 at Newport News Shipbuilding in Newport News, Va., owned by Huntington Ingalls Industries (HII). The Ford is scheduled to be delivered in September 2015, but construction delays have put that date in doubt.

And, to get a better handle on the design and avoid similar problems, the Navy is seeking to delay by two years construction of the next ship in the class, the John F. Kennedy (CVN 79), although that won’t change the one-every-five-years pace at which carriers are bought.

“We’re about 17 weeks behind where we need to be to launch in July of 2013,” Sean Stackley, the Navy’s top acquisition official, said Feb. 17. “I do not propose to make that time up, because right now the most important thing we’ve got going on with the 78 is controlling cost.

“I expect the delivery will delay by at least that much,” Stackley added. “But we’re managing that pretty tightly right now.”

As for the Kennedy, Stackley emphasized that “we’re being very deliberate about capturing lessons learned from the lead ship. We do not want a build plan that repeats the build plan on the CVN 78.

“That means that all the things that precede the start of construction associated with design, plans, material procurement, they all have to be exactly in line. And the degree of completion, outfitting, etc., associated with the construction of the build units, we’re working that plan now so that CVN 79, frankly, is built to a higher degree of completion and readiness each step of the way, than CVN 78.”

Stackley acknowledged that what he called the “optimal build plan” for the Kennedy “translates to a potentially two-year delay for the delivery.”

Work and Stackley said development of the new Electromagnetic Aircraft Launch System (EMALS) is not a factor in the Ford’s current cost growth.

“We continue to test and it continues to go well” despite “a couple of test wrinkles,” Stackley said of EMALS. “But we don’t have a scenario where the system is not meeting the testing requirement.” Production at General Atomics of the system’s components to be fitted in the ship also is “on schedule.”

But changes to the dual-band radar (DBR) program developed by Raytheon have led to a portion of the cost increases.

“That’s a fallout of the previous decision to not install the volume search radar on DDG 1000,” Stackley explained, referring to a decision in 2010 to eliminate half the radar from the three Zumwalt-class destroyers. “That shifted the testing and integration requirements to the carrier, and that shows up as a bill on the carrier.”

The $811 million is being added to the Navy’s 2014 and 2015 budget requests. The DBR accounted for most of the $208 million in government-furnished equipment; $330 million is for non-recurring engineering design — essentially first-of-class design work; and $273 million is for construction overruns.

Construction costs for the Ford are capped by the 2007 defense authorization bill at $11.8 billion in 2008 dollars, including $2.9 billion for detail design work and $8.6 billion for ship construction. Not included in that total is $3.7 billion in research, design, testing and engineering money.

The ship’s cost growth has affected the Navy’s shipbuilding budget plans, which are already being reduced by the Budget Control Act.

“It would be hard to say this $811 million caused a specific issue,” Work said. “But at the macro level it contributed to us moving a submarine from 2014 to 2018, and to deciding to shift a destroyer from 2014 to 2013. You can’t tie it directly, because we had a big cut in topline, so we were just juggling all the different requirements.”

Stackley noted he is keeping the pressure on the shipbuilder to hold down further cost growth on the carrier program.

“I’ve made it very clear to HII that the issues that are most dear to the Navy and shipbuilding also happen to be the most dear to HII and shipbuilding,” Stackley said. “Cost growth on the carrier has indirectly impacted those exact programs.”

Any delay in the delivery of the Ford will not affect a congressionally mandated waiver to allow the carrier force to temporarily drop to 10 ships — a move the Navy requested so that it would not have to perform an expensive refit of the carrier Enterprise to keep that ship running through 2015. The Big E, soon to make its final deployment, is set to begin inactivation in November.

The 10-ship waiver is tied to the decommissioning of the Enterprise and the entry into service of the Ford, and not to any specific date.

Delaying the Kennedy’s delivery to the fleet from 2020 to 2022 should not affect the Navy’s carrier levels, Work said, because of an overlap period of a few years before the carrier Nimitz — the ship the Kennedy will replace — is decommissioned. The Nimitz now is scheduled for retirement in 2025, although the date can change.

“Going up to 12 carriers for a couple of years incurs cost on the operations and support side. And on the construction side it pressurizes the construction schedule, and we want to be careful it doesn’t create cost on the construction side,” Stackley said.

“You lay out the optimal build plan for controlling cost on the carrier, and lay on top of that the operational requirements and the budget profile, and look for the sweet spot,” he added.

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