Bloomberg.com
November 21, 2014
U.S. Aircraft Carrier’s Cost Likely to Rise Again, GAO Says
By David Lerman and Tony Capaccio
The cost of the U.S. Navy’s new aircraft carrier is likely to keep rising from the $12.9 billion now estimated, with the final price masked by deferring some work until after the ship is delivered, the Government Accountability Office said.
In the latest in a series of reports offering political ammunition to critics of the Navy’s most expensive warship, the GAO yesterday reaffirmed its earlier concerns that the Ford-class carrier being built by Huntington Ingalls Industries Inc. (HII) will cost more and take longer to complete than advertised.
“With the shipbuilder embarking on one of the most complex phases of construction with the greatest likelihood for cost growth, cost increases beyond the current $12.9 billion cost cap appear likely,” the watchdog agency said.
To stay within the cost cap, the Navy is deferring some work, including installing satellite communications equipment and correcting defects, until after the ship is delivered, to create a funding reserve, according to the report.
“This approach obscures visibility into the true cost of the ship and results in delivering a ship that is less complete than initially planned,” the GAO said.
The report may serve as fodder for renewed attacks on the Navy’s construction plans from the Senate Armed Services Committee. Senator John McCain, an Arizona Republican poised to become chairman of the panel in January, has been a persistent critic of the carrier.
McCain Criticism
McCain said in a statement that “after $2.4 billion in cost overruns on this ship already, the Navy is now trying to artificially shift more cost overruns until after the Ford’s delivery.”
“The Armed Services Committee will be seeking further explanation from the Navy on this troubling report and will work to hold those responsible for these cost overruns accountable,” McCain said.
Huntington, the only U.S. builder of aircraft carriers, defended the progress of the Gerald R. Ford, which is the first major redesign of a carrier since the 1960’s-era Nimitz class.
The Ford is 83 percent complete and “we continue to see improvements on our performance on Ford and we continue to further increase efficiencies and to retire risk,” said Beci Brenton, a spokeswoman for the Newport News, Virginia-based shipbuilder.
The GAO, the investigative arm of Congress, urged lawmakers to consider revising legislation that set the cost cap on the ship “to improve accountability of Ford-class construction costs.”
‘Operational Capabilities’
The Pentagon rejected that advice, saying all needed funding is already included, according to a written response to the report by Katrina McFarland, assistant secretary of defense for acquisition.
The GAO also found that Ford will deploy “without demonstrating full operational capabilities” because some requirements, such as increasing aircraft launch rates, won’t be met in time and will limit the carrier’s operations.
The Navy is confident that a ship will be delivered under the cost cap, said Commander Thurraya Kent, a Navy spokesman.
Deferring “some non-critical work, such as air wing berthing spaces, that are not required at delivery was done to allow the shipbuilder to focus his resources on the most critical activities to deliver the ship,” Kent said.
To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net; Larry Liebert, Michael Shepard
November 21, 2014
U.S. Aircraft Carrier’s Cost Likely to Rise Again, GAO Says
By David Lerman and Tony Capaccio
The cost of the U.S. Navy’s new aircraft carrier is likely to keep rising from the $12.9 billion now estimated, with the final price masked by deferring some work until after the ship is delivered, the Government Accountability Office said.
In the latest in a series of reports offering political ammunition to critics of the Navy’s most expensive warship, the GAO yesterday reaffirmed its earlier concerns that the Ford-class carrier being built by Huntington Ingalls Industries Inc. (HII) will cost more and take longer to complete than advertised.
“With the shipbuilder embarking on one of the most complex phases of construction with the greatest likelihood for cost growth, cost increases beyond the current $12.9 billion cost cap appear likely,” the watchdog agency said.
To stay within the cost cap, the Navy is deferring some work, including installing satellite communications equipment and correcting defects, until after the ship is delivered, to create a funding reserve, according to the report.
“This approach obscures visibility into the true cost of the ship and results in delivering a ship that is less complete than initially planned,” the GAO said.
The report may serve as fodder for renewed attacks on the Navy’s construction plans from the Senate Armed Services Committee. Senator John McCain, an Arizona Republican poised to become chairman of the panel in January, has been a persistent critic of the carrier.
McCain Criticism
McCain said in a statement that “after $2.4 billion in cost overruns on this ship already, the Navy is now trying to artificially shift more cost overruns until after the Ford’s delivery.”
“The Armed Services Committee will be seeking further explanation from the Navy on this troubling report and will work to hold those responsible for these cost overruns accountable,” McCain said.
Huntington, the only U.S. builder of aircraft carriers, defended the progress of the Gerald R. Ford, which is the first major redesign of a carrier since the 1960’s-era Nimitz class.
The Ford is 83 percent complete and “we continue to see improvements on our performance on Ford and we continue to further increase efficiencies and to retire risk,” said Beci Brenton, a spokeswoman for the Newport News, Virginia-based shipbuilder.
The GAO, the investigative arm of Congress, urged lawmakers to consider revising legislation that set the cost cap on the ship “to improve accountability of Ford-class construction costs.”
‘Operational Capabilities’
The Pentagon rejected that advice, saying all needed funding is already included, according to a written response to the report by Katrina McFarland, assistant secretary of defense for acquisition.
The GAO also found that Ford will deploy “without demonstrating full operational capabilities” because some requirements, such as increasing aircraft launch rates, won’t be met in time and will limit the carrier’s operations.
The Navy is confident that a ship will be delivered under the cost cap, said Commander Thurraya Kent, a Navy spokesman.
Deferring “some non-critical work, such as air wing berthing spaces, that are not required at delivery was done to allow the shipbuilder to focus his resources on the most critical activities to deliver the ship,” Kent said.
To contact the reporters on this story: David Lerman in Washington at dlerman1@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net; Larry Liebert, Michael Shepard
