Budget Problems on New Carrier Ford to Be Expected, Analysts Say

The Navy's cost overruns and delays in building the aircraft carrier Gerald R. Ford at Newport News Shipbuilding drew intense criticism during a recent Senate hearing, but some defense analysts say such budget problems should be expected with a new state-of-the-art weapon system.

The Ford project began with too much rosy optimism about the price -- with the first ship now $2.4 billion over budget -- but the higher cost couldn't be avoided, independent defense analysts said.

However, critics -- most prominently Senate Armed Services Committee Chairman John McCain -- aren't buying that view.

McCain, an Arizona Republican, argued in a report last week that in building the first-generation Ford -- CVN 78 -- the Navy is guilty of "excessive optimism" and the Pentagon's acquisitions office "was either complacent or complicit" in the cost overruns.

"Since the Second World War, the aircraft carrier has been the centerpiece of our Navy's fleet," McCain wrote. "But the decisions made on the CVN 78 program now threaten to end that legacy."

The Ford, originally championed by then-Defense Secretary Donald Rumsfeld under President George W. Bush, is the first of a new generation of flattops that are intended to launch a third more sorties a day than today's carriers with 25 percent fewer sailors on board.

In addition to an updated hull and nuclear reactor, the ship is to include technologies that hadn't yet been fully developed when Congress approved funding eight years ago. Among them: an aircraft launch system that relies on electromagnetics instead of steam, more advanced arresting gear, and a new radar system.

Delays and other problems are blamed for huge cost increases.

The price of the Ford ballooned to $12.9 billion -- a 23 percent increase over its $10.5 billion estimate in 2007. The ship, which is more than 90 percent complete, is due to be delivered to the Navy next year. The Navy currently has 10 carriers.

As for the next two Ford-class carriers, the John F. Kennedy (CVN 79) will be $11.5 billion and the Enterprise (CVN 80) $13.5 billion -- each more than $2 billion higher than estimated in 2007.

The root of the problem, according to a Government Accountability Office report this month, is that the Ford was funded and construction began without regard for the high risk of developing new technologies. The Pentagon was using a "knowingly deficient business case," the report states.

Bryan Clark, senior fellow at the Center for Strategic and Budgetary Assessment, said low-balling the price is not unusual.

"If they said the carrier cost $13 billion up front, it would have been harder to find the money but they still would have built it," said Clark, a former strategic planner for the Navy. "It's just easier to say 'yes' when something sounds reasonably priced."

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It shouldn't surprise anyone that the carriers cost more than originally estimated, said Loren Thompson, COO of the Lexington Institute, a conservative think tank.

"It's just the nature of the beast that it's hard to predict these things," Thompson said. "We're paying one day's worth of federal spending every five years for a unique asset that maintains control of the seas and the skies above. I don't think the price is too high."

Sen. Tim Kaine, who is on the Armed Services Committee, said there needs to be more efficient ways to build ships, but the Ford expenses are not out of line with the development of new ships.

The Virginia Democrat noted a Congressional Budget Office study that found cost overruns for other first-in-class ships averaged about 28 percent of the original estimate, while the Ford is 23 percent.

"I'm not defending 23 percent," Kaine said. But given that Rumsfeld's original directive was to build a state-of-the-art ship, "it's not surprising."

Congress must accept responsibility for the higher cost, too, Kaine said. As recently as 2010, the Navy was telling the Senate committee and others that the service's level of confidence in the price estimate was less than 50 percent. But there was a desire on Capitol Hill to get started on the ships, Kaine said.

"Congress can gripe now but, frankly, a lot of the members of Congress who gave the green light are not here now," said Kaine, who was elected in 2012.

What matters moving forward, Kaine said, is whether the Ford and subsequent new carriers meet two crucial tests: Can the program stay within the current cost estimates? Will the Navy's transformational carrier perform as promised?

The recent GAO report cast doubts on both, arguing that the reliability of the new aircraft launch and recovery system raises questions whether the crew can be cut by almost 700 sailors as promised and also questions the Navy's estimates for the number of man-hours needed to build the JFK and the Enterprise.

When asked about criticisms of the Ford project, Christie Miller, spokeswoman for Newport News Shipbuilding, said in an email: "CVN 78 is a first-in-class ship with the unique challenges associated with lead ships. We continue to work closely with the Navy to complete shipboard testing and apply lessons learned to further increase efficiencies."

McCain said in his recent report that if the Ford costs continue to rise, "we must be willing to pursue alternatives, including building smaller, cheaper aircraft carriers that could bring new competitors into this market. We might even have to consider rebalancing our long-range strike portfolio with fewer carriers and more land-based or precision-guided weapons."

Analysts Clark and Thompson said it isn't financially feasible for Washington or private industry to spend the considerable money needed to develop another carrier builder.

Kaine said he's convinced McCain doesn't consider it financially realistic to set up second carrier builder, but his strong criticisms are intended to get the Navy and Newport News Shipbuilding to pay attention.

"He has a suspicion of a monopoly: Will a monopoly deliver the best price?" Kaine said. "He thinks there can be a better culture of doing better estimating. He's always going to look for ways to keep hammering."

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