http://www.dailypress.com/business/dp-biz_fordcosts_0925sep26,0,6541131.story?track=rss
Carrier estimates raise red flags
Navy insists its budget for the Gerald R. Ford is realistic but few independent analysts agree.
By DAVID LERMAN 202-824-8224
September 26, 2007
WASHINGTON - Federal investigators raised more red flags Monday on the Navy's newest aircraft carrier, warning that the cost of the Gerald Ford warship will likely exceed budget forecasts.
The Government Accountability Office, the investigative arm of Congress, said the budget for the first in a new line of carriers is "optimistic" and that "substantial risk remains" in the development of new technologies needed for the ship.
Expanding on warnings first issued in July, a new GAO report faults the Navy for providing "insufficient cost surveillance" and for assuming that the complex new ship can be built in less time than was needed for the previous two carriers.
The Ford, scheduled to get under construction in Newport News next year, carries an estimated price tag of $13.7 billion. That includes $8.1 billion for construction and $5.6 billion in design and development work that will be used on all succeeding carriers in the class.
While the Navy has long insisted that its cost estimate is realistic, few independent analysts agree.
The Congressional Research Service has warned of a "substantial possibility of cost growth." And the nonpartisan Congressional Budget Office told Congress this summer that the ship's eventual price tag could be more than $1 billion higher than forecast.
The Ford, slated for delivery in 2015 to replace the USS Enterprise, is billed as a next-generation warship that will reduce maintenance costs, allow for increased combat flights, and provide a nearly three-fold increase in electrical power for new weapons, among other things.
But the technologies needed for the ship — some still in development — raises questions among many experts about whether the cost projections are realistic.
With more than 70 percent of the design work now completed, the GAO noted that key systems like the nuclear propulsion plant and electric system appear on track.
"Yet substantial risk remains, which the budget may not accommodate," the report concluded. "The budget is optimistic, with a target cost for construction that the Navy will in all likelihood exceed."
Development snags on a new aircraft launching system, new arresting gear to catch returning planes, and a new radar all threaten to increase costs, the GAO found.
The Navy has stood by its estimates, saying new technologies are proceeding and their development is being managed effectively.
"I don't think it's too optimistic," said Vice Adm. Paul Sullivan, commander of Naval Sea Systems Command, when asked about the $8.1 billion construction forecast in July. "On the carrier, I think we have a pretty robust cost estimate."
But the GAO questioned why the Navy thinks shipyard workers will require less time to build a ship with new technologies than they needed to build the most recent Nimitz-class carriers with proven designs.
The Ford is expected to require 42.7 million hours to complete, compared to 43.1 million for the George H.W. Bush carrier and 45 million for the USS Ronald Reagan, according to a GAO analysis of Navy data.
Navy officials told the GAO that costs incurred from building a lead ship like the Ford will be offset by design changes that make the ship easier to build.
"However, our past work has found that labor-hour savings based on efficiencies often did not materialize as expected," the report said.
Higher costs for the Ford would frustrate Navy efforts to find more money for shipbuilding and expand the size of a dwindling fleet.
By all accounts, the Navy is spending more and more to build fewer and fewer ships.
During the Bush administration, the Navy will be spending 15 percent more money and buying 40 percent fewer ships than it purchased during the Reagan administration in the 1980s, according to the Congressional Budget Office.
Rep. Roscoe Bartlett, R-Md., chairman of the House Armed Services subcommittee on sea power who requested the GAO study, said a cost increase of just 10 percent on the Ford carrier would require an additional $1 billion.
"In this budget environment, that's going to be a difficult sell," Bartlett said in a statement.
Responding to the GAO, the Defense Department agreed to most of the watchdog agency's recommendations, including increasing its cost surveillance efforts and providing monthly reports on cost performance.
The GAO also urged Congress to direct Defense Secretary Robert Gates to provide certification that the Navy is using realistic cost estimates for the Ford.
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