Navy’s small ship program criticized by GAO

Introduction

A government watchdog scolded the U.S. Navy for pushing ahead with a troubled $25 billion project to build a new generation of small, fast ships without accurate cost estimates and evidence that on-board equipment works.

The Navy’s Littoral Combat Ship (LCS) program aims to eventually build 55 of the vessels to detect underwater mines, fight pirates, and handle homeland defense missions in coastal waters. The program’s initial four ships have been dogged by cost overruns and schedule delays.

“Although the Navy has emphasized the importance of affordability to successful outcomes in the LCS program, it continues to make key investment decisions without a clear understanding of program costs,” the Government Accountability Office said in a new report to a U.S. House Armed Services subcommittee. “For LCS, the Navy determined it appropriate to award contracts for four ships and conduct negotiations for three more without completing a detailed, programwide, independent cost estimate—a strategy that contributed to less than optimal results.”

In addition to concerns about shipbuilding costs, the GAO also said the initial LCS ships’ on-board equipment was less than successful. Four of six missiles missed their targets in recent testing, mine sweeping and surface warfare systems had problems, and anti-submarine warfare systems did not perform well, the report said. “Until mission packages are proven, the Navy risks investing in a fleet of ships that does not deliver promised capability,” it said.

FAST FACT: The Navy awarded its first two LCS shipbuilding contracts in 2004 and 2005 and expected to pay $188 million and $223 million, respectively. However, each vessel cost about $500 million when delivered four years later. The Navy acknowledged last week it will miss its summer target for awarding a multibillion contract for the next batch of LCS ships but still aims to do so by the end of the year.

Other new reports released by the Government Accountability Office (GAO) or various federal Offices of Inspector General (OIG):

FINANCE

* IRS lost $90 million in 2008 tax revenue because taxpayers wrongly claimed foreign earned income tax exclusions, a provision for those with foreign income and a home in a foreign country (OIG)

HEALTH

* Veterans Administration should make decisions faster on whether it will pay for a prescription not included on VA’s formulary list of approved drugs (GAO)

MISC.

* Social Security Administration used 2009 stimulus law money to hire 2,115 employees to process disability and retirement payments, and to review disability decisions (OIG)

* State Dept’s Office of Middle East Partnership Initiative, which has received $640 million since 2002, needs tighter internal controls to oversee spending by grantees (OIG)