U.S. Lawmakers Take Aircraft Carrier Savings on Faith for the Time Being

(Bloomberg) -- Lawmakers gave conditional approval in their compromise defense policy bill for the U.S. Navy to buy its next two aircraft carriers in a single contract even though the service has yet to provide data showing how it can deliver on a promise of major savings.

The plan to buy the third and fourth carriers in the new class being built by Huntington Ingalls Industries Inc. was included in a $717 billion defense policy measure for fiscal 2019 agreed to on Monday by the House and Senate Armed Services Committees. The measure (H.R. 5515) adopted a proposal by House members to allow the combined contract provided that the Pentagon submits detailed certifications before the contract is signed.

Concerns over the price tag for the carriers were spurred by the spiraling cost of the first vessel in the class, the $13 billion Gerald R. Ford, which has become the costliest warship ever built. The Navy announced in mid-March that it was requesting data from Huntington Ingalls to show it could achieve “significant savings.”

‘Disappointed’ Lawmakers

Four months later, the Navy has yet to provide lawmakers such data, according to the explanatory report accompanying the defense bill that may be taken up on the House floor as soon as Wednesday.

“The conferees are disappointed that no related information” was provided to the defense committees “to enable fulsome consideration ” of the Navy’s proposal, members of the two committees said in the report. “Nonetheless, the conferees believe a two-ship procurement” could “result in significant cost savings.”

The compromise legislation would require Defense Secretary Jim Mattis to certify the contract meets all the legal requirements -- including specified projected savings percentages -- for multi-year contracts.

The Navy is currently reviewing the “two-ship buy proposal received from
the shipbuilder and continues to work with the Department of Defense on a detailed analysis of the potential savings," Captain Danny Hernandez, a Navy spokesman, said in an email.

©2018 Bloomberg L.P.