Navy Contractors Feud Over Who Pays for Fixes to Troubled $13 Billion Warship
(Bloomberg) -- Almost two years after the U.S. Navy’s costliest warship was first hobbled by manufacturing defects with its propulsion system, the two companies at the center of the breakdown are haggling over who will have to pay back taxpayers for fixing the problem.
Aircraft carrier-builder Huntington Ingalls Industries Inc. and subcontractor General Electric Co. are in talks over who will pay the Navy for fixes it made on the propulsion system of the troubled $13 billion USS Gerald R. Ford. The service last month declared the system finally fixed, though the carrier still has a number of other shortfalls.
Those talks are sensitive enough that the Navy won’t comment publicly on how much taxpayers have spent so far fixing the issue. “Publishing interim cost information could jeopardize the pending negotiations,” Captain Danny Hernandez, a Navy spokesman, said in an email, declining to comment further.
The dispute over repayment “demonstrates the importance of the Navy evaluating options for warranties in its shipbuilding contracts to better protect itself and the taxpayer,” said Shelby Oakley, a Government Accountability Office director who monitors Navy shipbuilding programs, said in an email.
The propulsion problem, which forced the carrier back to port during sea trials in January 2018, is just one of many issues the next-generation warship has faced. The electromagnetic system to launch planes and the arresting gear to catch them when they land have caused repeated delays in the ship’s readiness, and it was delivered to the Navy without operating elevators needed to transport munitions from storage bays to the flight deck.
The Ford’s repeated setbacks have drawn the ire of lawmakers. In July, Senate Armed Services Chairman James Inhofe complained to President Donald Trump’s nominee for chief of naval operations, Vice Admiral Michael Gilday, about the holdups. Gilday has since been confirmed for the post as a full admiral.
“The ship was accepted by the Navy incomplete, nearly two years late, two-and-a-half billion dollars over budget, and 9 of 11 weapons elevators still don’t work with costs continuing to grow,” said Inhofe, an Oklahoma Republican.
Vice Admiral Thomas Moore, head of the Naval Sea Systems Command, told reporters in February that the Navy was paying for the repairs “until GE and Newport News figure out who has the liability for it. At some point you’ve got to pay them to get the work done.”
The Navy’s carrier program office said in an March 8, 2018 assessment to Congress that an inspection of the carrier’s four main thrust bearings after the January failure revealed “machining errors” by GE workers at a Lynn, Massachusetts, facility during the original manufacturing as “the actual root cause.”
Return to Port
The bearing overheated and “after securing the equipment to prevent damage, the ship safely returned to port.” The bearing is one of four that transfers thrust from the ship’s four propeller shafts.
According to the Navy’s statement last month, Huntington Ingalls’ Newport News unit said the propulsion problems were “due to a manufacturing defect (not improper operation) in the propulsion train component that affected the same component in the other propulsion trains.”
Huntington Ingalls spokeswoman Beci Benton said “we continue to work with appropriate stakeholders to support resolution of this situation.”
GE said in a statement last month that “we continue to work closely with Newport News Shipyard and the U.S. Navy to resolve the issue. We are monitoring the situation, and if circumstances change in a manner that requires disclosure as a material event” in SEC filings “we would certainly do so.”
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