Government Watchdog Finds Defective Ships Will Enter Navy

The Government Accountability Office (GAO) predicted stormy seas ahead for Navy ships about to enter their fleets. In a recent report, the GAO examined eight ships from February 2016 to July 2017 and determined that “all either entered or will likely enter the fleet with unfinished work and quality problems.”

The GAO reviewed ships from a variety of classes, sizes, and positions in the Navy’s fleet: the USS Somerset (a San Antonio-class amphibious transport dock), the USS America (an America-class amphibious assault ship), the USS Michael Murphy (an Arleigh Burke-class destroyer), Littoral Combat Ship (LCS) 3 and 4, the USS Mississippi (a Virginia-class submarine), the USS Gerald R. Ford (a Ford-class supercarrier), and the USS Zumwalt (a Zumwalt-class guided missile destroyer). The first six ships have completed the “post-delivery” period—after contractors deliver the ship to the Navy, but before the ship enters the fleet—while the latter two ships, the USS Ford and the USS Zumwalt, had not at the time of the investigation. (The USS Fordwas just commissioned on July 22.)

The GAO decided to review the Ford and Zumwalt because the Navy plans to “complete significantly more work” on them during the post-delivery period than on the other six ships, placing them “at a greater risk of being provided to the fleet…with incomplete construction work.” This is because the Navy’s delivery and post-delivery plans “deviate significantly from the Navy’s process for constructing more typical surface ships:” the Navy, rather than the contractor, will take on more work in order to “reach delivery more quickly, or incorporate later versions of technology.” For these reasons, the Senate report on the FY 2017 National Defense Authorization Act included a provision to review the post-delivery period, especially for aircraft carriers and lead ships. Both the USS Ford and the USS Zumwalt are leads in their class.

The post-delivery period is a crucial phase in Navy shipbuilding because it is the last time the Navy can dedicate funds to construction. If additional construction is needed after the end of the post-delivery period, “shipbuilding construction funding can no longer be obligated and other types of funding must be used, per Navy policy.” According to a Navy operations manual, Shipbuilding and Conversion funds are specifically used “to finance the construction of new ships and conversion of existing ships,” as opposed to fixing deficiencies. After that, the GAO writes, “full financial responsibility for maintaining and operating a ship” is shifted to the fleet. If ships are laden with deficiencies, this can create a “maintenance backlog” on day one, thereby “placing the fleet at even greater risk of absorbing excessive costs” and directing efforts away from missions. Unfortunately, the GAO discovered that all eight ships contained hundreds, and even thousands, of deficiencies.

Upon delivery to the Navy, the first six ships the GAO reviewed had a total of 7,175 deficiencies, 397 of which were categorized as Starred or Part I deficiencies. Starred deficiencies “significantly degrade a ship’s ability to perform an assigned primary or secondary mission” or endanger the lives of the crewmembers onboard, while a Part I deficiency may “cause the ship to be unseaworthy” or reduce its mission capabilities. For example, the Littoral Combat Ship 4, when provided to the Navy, had an inoperable radar system and could not differentiate between friendly and enemy ships.

Contractors are allowed to deliver ships with incomplete work; oftentimes “deferred work remains on the shipbuilding contract,” and so the contractor is contracted yet again to fix the deficiencies. This is a systemic issue in shipbuilding. As the GAO previously reported in March 2016, the Navy pays the contractor twice: first to build the ship, and then to repair “shipbuilder-responsible deficiencies.” In this way, the Navy is “essentially rewarding the shipbuilder for delivering a ship that needed additional work.”

Current Navy policy states that all issues (regardless of who corrects them) should be solved by the time a ship is provided to the fleet. According to OPNAVINST 4700.8K, naval instructions that outline procedures for shipbuilding, the Navy’s shipbuilding programs must provide ships “free from both contractor and government responsible deficiencies” to the fleet. But out of the 7,175 issues, 760 still remained when they were provided to the fleet, including 48 Starred or Part I deficiencies (only one ship—the USS Michael Murphy—was provided to the fleet without Starred or Part I deficiencies). The GAO also found “fleet-identified quality issues” on Littoral Combat Ships 3 and 4 and major deficiencies on the USS Ford.

Among the dozens of deficiencies found on the Littoral Combat Ships, officials found the communications system particularly unreliable. Built by Lockheed Martin, the system “frequently fails, with no replacement available.” Fleet officials found the system difficult to maintain due to a lack of spare parts—and “poor quality” in the first place. Inability to communicate across different platforms or with other ships could prevent the ship from carrying out its mission or responding to crises. Further issues on Littoral Combat Ship 4 forced the ship to delay deployment; similar to the communications system, no spare parts were available to fix the broken equipment. Furthermore, officials expressed “significant concerns” about the overall quality of both ships.

The USS Ford was delivered to the Navy with “a significant amount of work” scheduled for the post-delivery period. According to the report, the amount of construction and certifications still in need of completion forced the Navy to push deployment from FY 2019 to FY 2021, even though the ship was delivered in May 2017. These two to four years of work will cost about $780 million, which may end up exceeding the $12.9 billion construction cost cap for the ship. Similar to the LCS, when the USS Ford was delivered to the Navy, it had “significant incomplete construction”—the Navy needed to build 367 compartments, install 10 updated systems, and complete “at least 147 other work deferral requests.” This deferred work will cost at least $65 million. The Congressional Research Service (CRS) has noted that the procurement cost of the ship has steadily climbed. In 2008, the estimated cost was roughly $10.5 billion. Now, it is close to $13 billion.

To make matters worse, the GAO discovered that crucial operating and radar systems continue “to have poor or unknown reliability.” Conducting trials and fixing these systems will add to the amount of work needed and likely further delay deployment. POGO has reported extensively on the Ford-class ship, pointing out that the Ford’s schedule slipped by over three years and that “cost overruns will balloon and promised combat capabilities will shrink” with every deficiency the Navy finds.

Cost caps for the Ford were meant to control spending and increase discipline in the program, but the GAO found that they may also encourage program managers to accept ships with more deficiencies to avoid busting the cap.

A lack of consistency and consensus over ship completeness also contributes to this problem. Current Navy policy states that “ships and submarines will be fully mission-capable…at delivery,” but the GAO noted that the policy does not provide a definition of “mission-capable.” This leaves the definition of completeness open to interpretation. When the GAO surveyed the seven naval offices involved, six agreed that all Starred deficiencies ought to be corrected before a ship is deemed complete; only one thought that “any major repair work” and modernizations should be finished in order to be deemed complete. Officials from the seven offices all thought that “delivering a ship free from all government and contractor deficiencies is not realistic.”

The GAO also found that ships were not adequately inspected before entering the fleet. The operations manual requires the Navy’s Board of Inspection and Survey to “conduct trials as an independent verification of a ship’s readiness for acceptance and delivery.” While the Board does conduct acceptance trials when the Navy receives a ship, and partway through the post-delivery period, the Board does not conduct trials immediately before ships enter the fleet, potentially leaving deficiencies undiscovered and unresolved until after the post-delivery period has ended. Remaining deficiencies would then need to be resolved by the fleet. As a result, according to the GAO, the Board “is not in a position to verify each ship’s readiness for the fleet, as is required by Navy policy.”

Incomplete work and unresolved deficiencies can snowball into multi-million dollar problems, as evidenced by the USS Somerset. Soon after it was provided to the fleet in July 2015, the couplings broke—and continued to break every three months. The coupling cost the fleet $600,000 each time it failed. Because the ship had already entered the fleet, officials could no longer use Shipbuilding and Conversion funds to cover the construction costs. Instead, they had to use the Operations and Maintenance fund, which is intended for “day-to-day costs of operating naval forces” such as fuel—not for repairing deficiencies that should have been fixed before the end of the post-delivery period. Beyond the monetary cost, the broken couplings resulted in lost time: rather than fulfilling mission objectives, the ship floated in and out of repair for months.

To ensure that the fleet receives the most cost-effective, high-quality ships, the GAO offered four recommendations: to use OPNAVINST 4700.8K “as the primary criteria” for reviewing ship completeness and determining when a ship should be “mission-capable”; to study the timing, cost, and benefits of inspecting ships before entering the fleet; to improve Selected Acquisition Reports to Congress to better reflect the shipbuilding process; and to include more Department of Defense (DoD) guidance in said reports. The DoD disagreed with the first three recommendations.

The DoD chiefly disagreed with the GAO’s recommendation to use OPNAVINST 4700.8K for reviewing ship completeness, which states that shipbuilders must deliver ships that are “complete,” “free from both contractor and government responsible deficiencies,” and are “capable of supporting the Navy’s mission from the first day of active service.” This would make the definition of “mission capable” synonymous to “free of deficiencies.” The Department dismissed the GAO’s recommendation, instead stating that delivery of Navy ships follows multiple instructions that, when combined, “provide very detailed requirements.” This seemed to contradict the earlier statements of Navy acquisition officials, who had confirmed that the instructions serve as the primary policy for quality controls.

It is disconcerting that fleets may have to grapple with hundreds of deficiencies aboard newly commissioned ships. A realistic and specific standard of “ship completeness” would go a long way in holding contractors accountable, ensuring that ships are constructed on time and on budget, and providing the highest quality ships to fleets at a more affordable price.