POGO Letter: Congress Should Require That The Navy Give It More Time to Mull Littoral Combat Ship Acquisition Change

Dec 09, 2010

Senate Armed Services Committee

228 Senate Russell Office Building

Washington, DC, 20510

Dear Chairman Levin and Ranking Member McCain,

The Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO’s investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government. We are troubled by a rushed proposal to change the Navy Littoral Combat Ship (LCS) sea frame acquisition strategy.

The Navy notified Congress of its proposal to change its acquisition strategy for LCS on November 3, 2010.[1] The proposed strategy, under which the Navy intends to buy up to 20 sea frames from two separate shipyards, is a substantial change from the current strategy. Currently, the Navy’s strategy is to “down select” (i.e. choose a winner) to one yard and (with the winning design in hand) hold another competition later to build a total of 19 ships—only 10 of which are now authorized under law.[2] To implement the new strategy, the Navy needs Congress to sign off on it and wants Congress to do so by mid-December. [3]

Congress should require that the Navy give it more time to get answers to the serious questions raised by, among others, the Congressional Research Service (CRS) in its November 29, 2010, report (attached) and the Government Accountability Office (GAO) in reports issued in August and December 2010. As CRS asked:

Does the timing of the Navy’s proposal provide Congress with enough time to adequately assess the relative merits of the down select strategy and the dual-award strategy? … Should the Navy ask the contractors to extend their bid prices for another, say, 30 or 60 or 90 days beyond December 14, so as to provide more time for congressional review of the Navy’s proposal?[4]

Congress needs time to consider whether the Navy’s new plan is fiscally responsible or whether it increases risks that already exist in the program. Congress should require that the Navy to ask the two contractor teams to extend their bid prices up-to 90 days beyond December 14. The two contractor teams are led by, respectively, Lockheed Martin and Austal USA.

The Navy’s justification for its new strategy is the purportedly low prices that both bidders have submitted in the current competition.[5] But it is not clear if these low bids are reasonable. The use of fixed-price contracts won’t necessarily prevent an underperforming shipyard from simply rolling its losses into its prices for follow-on ships.[6]

There can be no doubt that the LCS program has already had significant problems. For example, the sea frames were originally intended to cost about $220 million each.[7] But the ones built and under construction have ballooned up to over $600 million each.[8] Yet without any real data indicating that the program is likely to perform adequately in the future (the Navy has failed to meaningfully implement many of GAO’s recommendations in its August report), the Navy wants Congress’s help to lock the program into 20 ships over the next five years.

The Navy has not demonstrated the combined capabilities of the LCS sea frame(s) with its mission packages. It’s important to bear in mind that the LCS sea frame is effectively a “truck.” The LCS’s combat effectiveness derives from its modular “plug-and-play” mission packages (e.g., anti-submarine, mine-countermeasures, and surface warfare).[9] The LCS program has been struggling with developmental challenges with these mission packages that have led to postponed testing.[10] As the GAO states, “Until mission packages are proven, the Navy risks investing in a fleet of ships that does not deliver promised capability.”[11] Without effective mission capabilities, the LCS will be “largely constrained to self-defense as opposed to mission-related tasks.”[12]

Furthermore, it is likely that other shipyards that may be just as capable of building LCS sea frames as the two that would be awarded contracts under the dual-award strategy. Some, including CRS, have asked whether other shipyards will be frozen out of the LCS program--even after the first 20 ships have been built.[13] For that reason, we believe that, before approving the Navy’s proposal, Congress should carefully evaluate whether it may in fact stifle, rather than encourage, competition throughout the program’s lifecycle, as is required under the recently enacted weapon systems acquisition reform law.

This is not the first time the Navy has given Congress insufficient time to evaluate its LCS acquisition strategy. The last time the Navy asked Congress to approve its LCS acquisition strategy – just last year – there was short notice.[14] In 2002, the Navy gave “little or no opportunity for formal congressional review and consideration” of the Navy’s proposed LCS acquisition strategy, according to CRS.[15] This is deja vu all over again. The taxpayers deserve the careful consideration of Congress.

In sum, Congress should not approve the Navy’s acquisition strategy without a clear picture of the likely costs and risks. Furthermore, Congress should not allow the Navy to continue to skirt oversight. We appreciate your review of this letter and your time, and look forward to working with you on the Littoral Combat Ship Program. If you have any questions, please do not hesitate to contact Nick Schwellenbach at (202) 347-1122 or [email protected].

Sincerely,

Danielle Brian

Executive Director

[1] Congressional Research Service, Navy Littoral Combat Ship (LCS) Program, November 29, 2010, p. 6.

[2] CRS, p. 6.

[3] CRS, p. 6.

[4] CRS, p. 8.

[5] CRS, p. 6.

[6] CRS, p. 16.

[7] CRS, p. 3.

[8] CRS, p. 4.

[9] Government Accountability Office, Navy’s Ability to Overcome Challenges Facing the Littoral Combat Ship Will Determine Eventual Capabilities, p. 12.