U.S. Navy's New Sub Risks Blowing Past $128 Billion, GAO Says

(Bloomberg) -- The U.S. Navy underplayed the development risks posed by key technologies for its new $128 billion Columbia-class nuclear-powered submarine, the Government Accountability Office said.

If the risks materialize, they are likely to result in increased costs and schedule delays for a program that already appears to be underfunded, the watchdog agency said in a report released Thursday on the Navy’s top acquisition program.

General Dynamics Corp. is the prime contractor for the submarine, which is designed to carry intercontinental ballistic missiles.

“The Navy underrepresented the program’s technology risks” in a key Pentagon assessment in 2015 when it failed to “identify these technologies as ‘critical,’” according to the report issued by Shelby Oakley, the GAO’s director of acquisition management. “Not identifying these technologies as critical means Congress may not have had the full picture of the technology risks and their potential effect on cost, schedule, and performance goals as increasing financial commitments were made.”

Akin to F-35

The 12-vessel Columbia-class is the Navy’s undersea equivalent of Lockheed Martin Corp.’s F-35 jet program in terms of potential cost and strategic importance. Any major cost increase could affect the Navy’s quest to increase its total fleet to 355 vessels from 279 today.

The projected $128 billion acquisition cost, which incorporates expected inflation, puts the new submarines behind only the $406.5 billion F-35, the $165 billion multi-service ballistic-missile defense network and the Navy’s $164.3 billion Virginia-class submarine program in cost.

More immediately, the Navy estimate sees procurement spending for the submarine program increasing to $2.8 billion in fiscal 2019 from $773 million this year. It would hit $5.1 billion in 2022. That doesn’t include long-range operating and support costs.

Limited Confidence

The Defense Department approved the program entering development last year. It did so even though the Navy assigned only a 45 percent confidence level to its cost projection, the GAO disclosed in its new report.

“This means that it is more likely than not that actual costs to research, develop, and buy the submarines will exceed the Navy’s $128 billion estimate,” the GAO said. “Any difficulties in ongoing technology development efforts would likely worsen the picture.”

The estimates “are optimistic because they do not account for a sufficient amount of program risk due to ongoing technology development, as well as the likely costs to design and construct the submarines,” according to the report.

The GAO praised the Navy for its effort “to complete much of the submarine’s overall design prior to starting construction to reduce the risk of cost and schedule growth.” A top Pentagon official once described the F-35 program’s approach of building the planes while still developing them as “acquisition malpractice.”

Still, the Navy in September awarded a $5.1 billion contract for General Dynamics “while critical technologies remain unproven -- a practice not in line with best practices that has led to cost growth and schedule delays on other programs,” GAO says.

‘Affordable Price’

The Pentagon disagreed almost entirely with the report’s thrust in comments attached to it.

“The program accurately represented all program risks” at the 2015 review, former Acting Undersecretary for Acquisition James MacStravic said. “The Columbia program has adopted key tenets to promote success in meeting cost, schedule and performance requirements.”

Captain Danny Hernandez, a Navy spokesman, said in an email that “the Columbia program complied with all Navy, DoD, and statutory requirements for conducting” the technology readiness assessment. He said the program “is well-positioned to provide needed capability at an affordable price.”

The technologies that the GAO identified as key while questioning their state of maturity are:

  • The Integrated Power System, which uses an electric drive to propel the submarine through the water, unlike other current U.S. subs, which use a mechanical drive system
  • The propulsor, which takes the place of the traditional propeller for moving the vessels and is part of a “coordinated stern”
  • A “stern area section technical feature that’s comprised of three sub-components” that weren’t spelled out in the report because they are classified.

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