[Senate Hearing 114-302]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 114-302

 PROCUREMENT, ACQUISITION, TESTING, AND OVERSIGHT OF THE NAVY'S GERALD 
                 R. FORD CLASS AIRCRAFT CARRIER PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 1, 2015

                               __________

         Printed for the use of the Committee on Armed Services
         
         
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                      COMMITTEE ON ARMED SERVICES

                     JOHN McCAIN, Arizona, Chairman

JAMES M. INHOFE, Oklahoma            JACK REED, Rhode Island
JEFF SESSIONS, Alabama               BILL NELSON, Florida
ROGER F. WICKER, Mississippi         CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire          JOE MANCHIN III, West Virginia
DEB FISCHER, Nebraska                JEANNE SHAHEEN, New Hampshire
TOM COTTON, Arkansas                 KIRSTEN E. GILLIBRAND, New York
MIKE ROUNDS, South Dakota            RICHARD BLUMENTHAL, Connecticut
JONI ERNST, Iowa                     JOE DONNELLY, Indiana
THOM TILLIS, North Carolina          MAZIE K. HIRONO, Hawaii
DAN SULLIVAN, Alaska                 TIM KAINE, Virginia
MIKE LEE, Utah                       ANGUS S. KING, JR., Maine
LINDSEY GRAHAM, South Carolina       MARTIN HEINRICH, New Mexico
TED CRUZ, Texas

                   Christian D. Brose, Staff Director

               Elizabeth L. King, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

                               __________

                            october 1, 2015

                                                                   Page

Procurement, Acquisition, Testing, and Oversight of the Navy's 
  Gerald R. Ford-class Aircraft Carrier Program..................     1

McFarland, Hon. Katrina G., Assistant Secretary of Defense 
  (Acquisition), Department of Defense...........................     7
Stackley, Hon. Sean J., Assistant Secretary, Research, 
  Development, and Acquisition, Department of the Navy; 
  Accompanied by Rear Admiral Donald E. Gaddis, USN, Program 
  Executive Officer, Tactical Aircraft, Department of the Navy, 
  and Rear Admiral Thomas J. Moore, USN, Program Executive 
  Officer, Aircraft Carriers, Department of the Navy, and Rear 
  Admiral Michael C. Manazir, USN, Director, Air Warfare (OPNAV).    11
Gilmore, Hon. J. Michael, Director of Operational Test and 
  Evaluation, Department of Defense..............................    27
Francis, Paul L., Managing Director of Acquisition and Sourcing 
  Management, U.S. Government Accountability Office..............    36

Questions for the Record.........................................    92

                                 (iii)

 
 PROCUREMENT, ACQUISITION, TESTING, AND OVERSIGHT OF THE NAVY'S GERALD 
                 R. FORD-CLASS AIRCRAFT CARRIER PROGRAM

                              ----------                              


                       THURSDAY, OCTOBER 1, 2015

                                       U.S. Senate,
                               Committee on Armed Services,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:31 a.m. in Room 
SD-G50, Dirksen Senate Office Building, Senator John McCain 
(chairman) presiding.
    Committee members present: Senators McCain, Wicker, Ayotte, 
Fischer, Cotton, Rounds, Ernst, Tillis, Sullivan, Reed, 
McCaskill, Manchin, Gillibrand, Donnelly, Hirono, Kaine, and 
King.

       OPENING STATEMENT OF SENATOR JOHN McCAIN, CHAIRMAN

    Chairman McCain. Good morning.
    For more than seven decades, the aircraft carrier has been 
the centerpiece of America's global power projection. We rely 
on our carrier fleet to defend our interests, our values, and 
our allies around the world, a mission that is more important 
than ever today as global threats multiply from Gulf to the 
Western Pacific to the North Atlantic.
    For 13 years, the Department of Defense has sought to 
develop our newest aircraft carrier, the USS Gerald R. Ford, 
marking the beginning of an entire new class of this ship. The 
Ford-class aircraft carrier program is one of our Nation's most 
complex and most expensive defense acquisition projects. It's 
also become, unfortunately, one of the most spectacular 
acquisition debacles in recent memory. And that's saying 
something. The Ford-class program is currently estimated to be 
more than $6 billion over budget. Despite the recent 
announcement of a 2-month delay, the first ship is scheduled 
for delivery next year. The second ship, however, is 5 years 
behind schedule. Significant questions still remain about the 
capability and reliability of the core systems of these 
aircraft carriers. And yet, when I asked the former Chief of 
Naval Operations [CNO] who's responsible for the cost overrun 
on the USS Gerald R. Ford, he said he didn't know.
    This committee has been actively involved with this program 
from the very start. And, since the beginning of this year, our 
oversight has increased significantly. At the direction of 
Senator Reed and myself, committee staff have conducted a 
thorough investigation of the Ford-class program. This work has 
entailed the request and review of thousands of pages of work 
plans, proprietary documents, contracting information, 
correspondence, and operational testing data, as well as 
numerous interviews with key players from the Office of the 
Secretary of Defense, the Navy, and the industry. This work has 
been done on a bipartisan basis, in keeping with the best 
traditions of this committee.
    As a result, we meet today with clear goals: to examine 
what has gone wrong with this program, to identify who is 
accountable, to assess what these failures mean for the future 
of our aircraft carrier fleet and Navy shipbuilding, and to 
determine whether any reforms to our defense acquisition system 
could prevent these failures from ever happening again.
    To help us answer these questions today are the key 
civilian and military officials who are responsible for 
developing, procuring, testing, and overseeing the Ford-class 
program. The Honorable Katrina McFarland, Assistant Secretary 
of Defense for Acquisition, is the principal advisor to the 
Secretary of Defense and Under Secretary of Defense for 
Acquisition, Technology, and Logistics [AT&L] on matters 
relating to acquisition. The Honorable Sean Stackley, Assistant 
Secretary of the Navy for Research, Development, and 
Acquisition, is the Navy's acquisition executive responsible 
for the research, development, and acquisition of Navy and 
Marine Corps systems. Rear Admiral Michael Manazir, who is 
Director of Air Warfare on the Navy staff, is responsible for 
Navy--naval aviation requirements. Rear Admiral Thomas Moore, 
Program Executive Officer for Aircraft Carriers, is responsible 
for aircraft carrier acquisition. Rear Admiral Donald Gaddis, 
Program Executive Officer for Tactical Aircraft, is responsible 
for naval tactical aircraft acquisition programs, including 
aircraft launch and recovery equipment. The Honorable J. 
Michael Gilmore, Director of Operational Test and Evaluation 
[DOT&E], is the senior advisor to the Secretary of Defense for 
operational and live-fire test and evaluation of weapon 
systems. And Mr. Paul Francis, Managing Director of Acquisition 
and Sourcing Management at the Government Accountability 
Office, whose 40-year career with GAO [Government 
Accountability Office] is focused mostly on major weapons 
acquisitions, especially shipbuilding.
    We thank each of our distinguished witnesses, and thank 
them for joining us today.
    In 2002, Secretary Donald Rumsfeld, the Office of the 
Secretary of Defense, and the Navy conceived of the USS Gerald 
Ford--Gerald R. Ford, or CVN-78, as a, quote, 
``transformational weapon system.'' They decided to develop 
concurrently and integrate onto one ship all at once a host of 
advanced and entirely unproven technologies, including a new 
nuclear reactor plant, a new electrical distribution system, a 
new enlarged flight deck, a new dual-band radar [DBR], a new 
electromagnetic catapult system to launch aircraft, and new 
advanced arresting gear [AAG] to recover them. This was the 
original sin, in my view, that so damaged this program.
    Since 2008, the estimated procurement cost for CVN-78 has 
grown by $2.4 billion, or 23 percent, for a total cost of $12.9 
billion. The story of the USS John F. Kennedy, or CVN-79, could 
be worse, because the Department of Defense began building it 
before proving the new systems on CVN-78 and while continuing 
to make major changes to the CVN-79, including a new radar. 
This has made CVN-79, in essence, a second lead ship, with all 
of the associated problems. Its estimated cost has risen to 
$11.5 billion, a $2.3-billion, or 25-percent, increase, and the 
ship has been delayed 5 years, to 2024.
    Much of the cost growth and scheduled delays for the ship 
itself have been due to problems with its major components 
which the Navy has been developing separately. These systems, 
especially those that launch and recover aircraft, have faced 
their own significant cost growth and schedule delays, and they 
still are not ready. For example, the advanced arresting gear, 
or AAG, was built as a more efficient and effective way to 
recover a wider variety of aircraft on the carrier deck. 
However, AAG's development costs have more than quadrupled, and 
it is expected to make--to take twice as long as originally 
estimated, 15 years in total, to complete. As a result, if CVN-
78 goes to sea as planned in 2016, it will do so without the 
capability to recover all of the types of aircraft that would 
land on the ship. Furthermore, the cost and schedule programs 
with AAG have so driven up its per-unit cost that the Navy will 
be unable to upgrade on our older Nimitz-class carriers with 
this new system as originally planned. This means that, by the 
2030s, many of our naval aircraft may be able to land on just a 
few of our carriers.
    The Ford-class program is actually symptomatic of a larger 
problem, the dysfunction of our defense acquisition system as a 
whole. A decade of oversight reporting show that CVN-78 has 
been plagued by the same problems found throughout Navy 
shipbuilding, and indeed, most major defense acquisition 
programs: unrealistic business cases, poor cost estimates, new 
systems rushed to production, concurrent design and 
construction, and problems testing systems to demonstrate 
promised capability. All of these problems have been made worse 
by the absence of competition in aircraft carrier construction.
    What's more, the Ford-class program exemplifies the 
misalignment of accountability and responsibility in our 
defense acquisition system. To my knowledge, not a single 
person has ever been accountable--held accountable for the 
failures of this program. That is due, in no small part, to 
diffusion of authority across multiple offices and program 
managers. These blurred lines of accountability allow the 
leaders of our defense acquisition system to evade 
responsibility for results. Everyone is responsible, so no one 
is responsible.
    While the Navy and the contractors deserve much of the 
blame, the milestone decision authority for the Ford-class 
program rests with the Office of the Secretary of Defense, 
specifically the Under Secretary of Defense for Acquisition, 
Technology, and Logistics. AT&L is responsible for determining 
whether a program has a sound business case and for approving 
the start of development and production. The Navy can be 
faulted for excessive optimism and deficient realism. But, AT&L 
was neither complacent--was either complacent or complicit. 
Indeed, AT&L authorized the Navy to start construction of CVN-
78 when only 27 percent of the ship was designed and just 5 of 
its 13 new systems were mature. Despite 10 years of warnings 
from its own independent cost estimators and weapons testers, 
as well as the GAO, AT&L failed to make timely and effective 
course corrections.
    And lest anyone think that Congress is above reproach, we 
are not. While congressional oversight has helped to control 
the cost and improve the program, we could have intervened more 
forcefully and demanded more from the Department of Defense. 
And we did not.
    Ultimately, all of us need to internalize the lessons of 
this program. I am encouraged that the Navy appears to be doing 
so in their efforts to stabilize the program and change their 
approach to contracting for CVN-79.
    This year's National Defense Authorization Act [NDAA] also 
contains several provisions that increase oversight of the 
Ford-class program, streamline authority, accountability, and 
responsibility in our defense acquisition system. But, perhaps 
the lesson I would most stress is this: we cannot afford 
another acquisition failure like the Ford-class aircraft 
carrier, especially in the current fiscal environment. We 
simply cannot afford to pay $12.9 billion for a single ship. 
And if these costs are not controlled, we must be willing to 
pursue alternatives that can deliver similar capability to our 
warfighters on time and on budget. We must be willing to 
question whether we need to go back to 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. If we can't do better, 
everything must be on the table. And so long as I am Chairman, 
it will.
    I thank the witnesses and look forward to their testimony.
    [A series of charts follow:]
      
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman McCain. Senator Reed.

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Well, thank you very much, Mr. Chairman. Let 
me commend you for calling this extremely important hearing, 
and not only calling the hearing, but for your attention to 
this issue over many, many years, and your advice and your 
insistence that we pay close attention to this program, and 
other programs, too.
    The Gerald Ford-class aircraft carrier program has been 
plagued by delays and cost overruns since its inception over a 
decade ago, and today's hearing will focus on many of the 
problems that we've seen during the execution of the program.
    Some of these delays and inefficiencies are the 
responsibility of the shipbuilder, who has been operating on a 
cost-plus incentive-fee type of contract and has been slow to 
apply modern building techniques that the shipbuilder is using 
in other programs, such as the Virginia-class program.
    Some of the problems stem from including new technologies 
that were not sufficiently matured into the design of the ship. 
These immature technologies included systems that are critical 
for successful operation of the aircraft carrier: the advanced 
arresting gear, the electromagnetic aircraft launch system 
[EMALS], and the dual-band radar. Each of these systems have 
posed schedule challenges and is millions of dollars over 
budget.
    While we recognize that designing and building an aircraft 
carrier is a difficult and costly enterprise, the committee is 
concerned that some of these problems were foreseeable and 
should have been resolved years ago. But, I believe there's a 
larger issue woven into this drama. If we look back at the 
inception of the program, the Navy was facing the inevitable 
retirement of the USS Enterprise, CVN-65, which was scheduled 
to run out of fuel about 2013 or 2014. This pressurized a 
schedule for starting the first ship in the CVN-21 program, 
which evolved into what would become the next aircraft carrier, 
the Gerald R. Ford. The CVN-21 program was intended to evolve 
technologies over a two-ship program, CVNX-1 and CVNX-2, and 
install new systems when they had achieved sufficient maturity 
to warrant inclusion. While that might not have been a 
perfect--the two-step approach--the two-step plan was more in 
keeping with the spiral acquisition approach favored by the 
Weapon Systems Acquisition Reform Act of 2009. However, in late 
2002, the Navy was directed, as Senator McCain indicated, by 
the Secretary of Defense to pursue a program that was more 
transformational. This involved incorporating all of the new 
technologies on the first ship, which caused DOD [Department of 
Defense] to make risky choices in the aircraft carrier program. 
And we are living with the results of those choices now in the 
delayed deliveries and increased cost.
    The Navy is not blameless in this process, either. The Navy 
shares blame for failing to lay out potential off-ramps for 
risky technologies that did not mature in time to meet the 
underlying schedule. I believe the Navy could have done this 
even within the parameters of transformation. While such off-
ramps may not have prevented all the problems we have faced, it 
would have had--at least given us better options when we had 
unpleasant discoveries during the development phase.
    The Navy and the contractors share blame for starting 
construction of ship before sufficient work had been completed 
on the design of the ship. And history has shown that this 
inevitably leads to inefficient production, schedule delays, 
and cost increase.
    Finally, Congress shares responsibility for having approved 
the Department of Defense approach to acquiring these aircraft 
carriers. The only change to the program that Congress insisted 
upon was instituting a legislative cost cap on the three ships 
in the program. And, while I think this cost gap has brought 
some better discipline to the program, it has not prevented 
cost and schedule problems.
    I look forward hearing from these witnesses on this 
important program about changes that have been made and can be 
made in the future to prevent the cost and schedule overruns 
that we see today.
    And, once again, thank you, Mr. Chairman, for your 
leadership.
    Chairman McCain. I thank the witnesses. And we will hear 
opening witness statements from Secretary McFarland, Secretary 
Stackley, Dr. Gilmore, and Mr. Francis, and then we will 
proceed with questions.
    We will begin with you, Secretary McFarland. Welcome.

STATEMENT OF HON. KATRINA G. McFARLAND, ASSISTANT SECRETARY OF 
          DEFENSE (ACQUISITION), DEPARTMENT OF DEFENSE

    Ms. McFarland. Chairman McCain, Ranking Member Reed, and 
distinguished members of this committee, I appreciate the 
opportunity to appear today to testify about procurement, 
acquisition, testing, and oversight of the Navy's CVN-78 Gerald 
R. Ford-class aircraft carrier program.
    I ask that my prepared statement be taken and submitted for 
the record.
    Chairman McCain. Without objection. All statements will be 
included.
    Ms. McFarland. Thank you.
    The CVX program was initiated in 1996. Its development and 
procurement timelines have spanned numerous administrations and 
multiple changes in acquisition policy, as the Chairman and the 
Ranking Member noted. The program has been subject of many--
multiple program reviews looking to reduce costs and achieve 
efficiencies that have redirected the acquisition approach or 
technical baseline.
    As with all the Department's programs, the CVN-78 has had 
to compete for the resources in the President's budget review. 
And, while each change in policy, acquisition approach, or 
technical baseline was made in the best interests of the 
warfighter, the Department, and the taxpayer in mind, the 
cumulative effect of these changes has resulted in program 
instability.
    Since 2010, and coincident with the introduction of the 
Department's better buying power initiatives, this program has 
been largely stabilized. While technical challenges remain, the 
Under Secretary of Defense for Acquisition, Technology, and 
Logistics continues to work with the Navy to tailor the program 
and ensure
appropriate oversight at both the Navy staff level as well as 
OSD [Office of the Secretary of Defense].
    We've established an excellent relationship with the Navy 
and worked together to change processes and policies that have 
impacted the ability of the program to succeed, to include 
revitalizing the acquisition workforce and the skills of them--
of whom we represent here, several thousand men and women who 
lead our Nation's shipbuilding acquisition.
    The timeline and complexities associated with the 
construction of aircraft carriers are enormous and sensitive to 
a wide range of technological, economic, policy, and business 
factors, many of which cannot be predicted in time to be 
readily mitigated. Nevertheless, we are committed to applying 
the resources needed to keep control of aircraft carrier 
program costs and schedules for the CVN-78, -79, and all that 
follow, and deliver these carriers to meet the needs of the 
warfighter.
    Again, thank you for the opportunity to appear today. And I 
look forward to your questions.
    [The prepared statement of Ms. McFarland follows:]

             Prepared Statement by Ms. Katrina G. McFarland
    Chairman McCain, Ranking Member Reed, and distinguished members of 
the Committee, I appreciate the opportunity to appear before the 
subcommittee and testify about the procurement, acquisition, testing, 
and oversight of the Navy's CVN-78 Gerald R. Ford-class aircraft 
carrier program.
                    evolution of the cvn-78 program
    The CVX program was initiated in 1996. This was right on the heels 
of the famous ``Perry Memo'' of 1994 which began Secretary of Defense 
Perry's reduction of the acquisition workforce and directed the armed 
services to use commercial specification and standards instead of the 
index of military specifications and standards. This was the era of 
Total Systems Performance Responsibility (TSPR) and Large Systems 
Integrators (LSI). We believed that trusting industry over Government 
was the right way to obtain the end of the Cold War Dividends. And as 
the acquisition strategy and material solution for the CVX was being 
deliberated, the 1997 Defense Reform Initiative led by Secretary of 
Defense William Cohen was codified, which had four pillars of reform: 
Re-engineer (adopt modern business practices), Consolidate (streamline 
organizations to eliminate redundancy) Compete, and Eliminate (which 
ultimately reduced the Acquisition Workforce by 56 percent).
    With the turn of the century, USD AT&L Jacques Gansler put forth a 
new path with his 2000 acquisition reform initiative of 3 ``top line'' 
goals--reduce cycle time for the development and delivery of new weapon 
systems, reduce total ownership costs, and ``right size'' the Defense 
Acquisition Workforce and infrastructure to realize savings thru 
efficiencies. This continued to erode the engineering expertise within 
the Department of Defense (DOD) further (as evidenced later when in 
2007, then Navy Secretary Don Winter would note the overreliance on 
contractors).
    By 2000, the CVN(X) Acquisition Strategy that had been proposed by 
the Navy was an evolutionary, three-step development of the 
capabilities planned for the CVN. This evolutionary strategy intending 
to mature technology and align risk with affordability originally 
involved using the last ship of the CVN-68 Nimitz-class, USS George H. 
W. Bush (CVN-77), as the starting point for insertion of some near term 
technology improvements including information network technology and 
the new Dual Band Radar (DBR) system from the DD(X) (now DDG 1000) 
program, to create an integrated warfare system that combined the 
ship's combat system and air wing mission planning functions.
    However, the then incoming Secretary of Defense Donald Rumsfeld in 
2002 directed re-examination of the CVN program, among others, to 
reduce the overall spend of the department and increase the speed of 
delivery to the warfighters. As a result of the SECDEF's direction, the 
Navy proposed to remove the evolutionary approach and included a new 
and enlarged flight deck, an increased allowance for future 
technologies (including electric weapons), and an additional manpower 
reduction of 500 to 800 fewer sailors to operate. On December 12, 2002, 
a Program Decision Memorandum approved by then Deputy Secretary of 
Defense Paul Wolfowitz codified this Navy proposal and gave this 
direction back to the DOD enterprise. The ship was renamed the CVN-21 
to highlight these changes. By Milestone B in April 2004, the Navy had 
evaluated the technologies intended for three ships, removed some of 
them, and consolidated the remaining ones into a single step of 
capability improvement on the lead ship. The new plan acknowledged 
technological, cost, and schedule challenges were being put on a single 
ship, but assessed this was achievable. The Acting USD AT&L (Michael 
Wynne) at that milestone also directed the Navy to use a hybrid of the 
Service Cost Position and Independent Cost Estimate (ICE) to baseline 
the program funding in lieu of the ICE, (although one can easily argue 
even the ICE was optimistic given these imposed circumstances).
    By 2004, DOD and Congressional leadership had lost confidence in 
the acquisition system, and Deputy Secretary of Defense Gordon England 
established the Defense Acquisition Performance Assessment (DAPA) panel 
to conduct a sweeping and integrated assessment of ``every aspect'' of 
acquisition. The result was the discovery that the Industrial Base had 
consolidated, that excessive oversight and complex acquisition 
processes were cost and schedule drivers, and a focus on requirements 
stability was key to containing costs. From this, a review of the 
requirements of the CVN resulted in a revised and solidified ``single 
ship'' Operational Requirements Document (ORD) for the Ford-class as 
defined today, with the CVN-78 as lead ship.
    On the heels of a delay because of the budgetary constraints in 
2006, the start of the construction of CVN-78 was delayed until 2008, 
but the schedule for delivery was held constant, further compounding 
risks and costs. The Navy's testimony covers these technical and 
schedule risks and concurrency challenges well.
    By 2009, this Committee had issued a floor statement in support of 
the Weapon Systems Acquisition Reform Act (WSARA). Congress was now 
united in its pursuit of acquisition reform and, in concert, USD AT&L 
re-issued and updated the Department of Defense's acquisition 
instruction (DODI 5000.2) in 2008. WSARA included strengthening of the 
`Nunn-McCurdy'' process with requires DOD to report to Congress when 
cost growth on a major program breaches a critical cost growth 
threshold. This legislation required a root-cause assessment of the 
program and assumed program termination within 60 days of notification 
unless DOD certified in writing that the program remained essential to 
national security.
    WSARA had real impact on the CVN-78, as by 2008 and 2009 the 
results of all the previous decisions were instantiated in growth of 
cost and schedule. Then USD AT&L John Young required the Navy to 
provide a list of descoping efforts and directed the Navy to have an 
off-ramp back to steam catapults if the Electromagnetic Aircraft 
Launching System (EMALS) remained a problem for the program. He also 
directed an independent review of all of the CVN-78 technologies by a 
Defense Support Team (DST). Prior to the DST, the Navy had chartered a 
Program Assessment Review (PAR) with USD (AT&L) participation of EMALS/
Advanced Arresting Gear (AAG) versus steam. One of the key PAR findings 
was converting the EMALS and AAG production contracts to firm, fixed 
price contracts to cap cost growth and imposed negative incentives for 
late delivery.
    The Dual Band Radar (DBR) cost and risk growth was a decision by-
product of the DDG 1000 program Nunn-McCurdy critical unit cost breach 
in 2010. Faced with a need to reduce cost on the DDG 1000 program and 
the resultant curtailment of the program, the expectation of 
development costs being borne by the DDG 1000 program was no longer the 
case and all of the costs associated with the S-band element 
development and a higher share of the X-band element then had to be 
supported by the CVN-78 program.
    The design problems encountered with AAG development have had the 
most deleterious effects on CVN-78 construction of any of the three 
major advanced technologies including EMALS and DBR. Our view of AAG is 
that these engineering design problems are now in the past and although 
delivery of several critical components have been delayed, the system 
will achieve its needed capabilities before undergoing final 
operational testing prior to deployment of the ship. Again, reliability 
growth is a concern, but this cannot be improved until a fully 
functional system is installed and operating at the Lakehurst, New 
Jersey land based test site, and on board CVN-78.
    With the 2010 introduction by then USD AT&L Ashton Carter (now in 
its third iteration by under USD AT&L Frank Kendall) of the continuous 
process improvement initiative that was founded in best business 
practices and WSARA called ``Better Buying Power,'' the CVN underwent 
affordability, ``Should Cost,'' and requirements assessment. Navy's use 
of the ``Gate'' process has stabilized the cost growth and reset good 
business practices .However, there is still much to do. We are in the 
testing phase of program execution prior to deployment and we had been 
concerned about the timing of the Full Ship Shock Trial (FSST). After 
balancing the operational and technical risks, the Department decided 
to execute FSST on CVN-78 prior to deployment.
    EMALS and AAG are also a concern with regard to final operational 
testing stemming from the development difficulties that each 
experienced. The Navy still needs to complete a significant amount of 
land-based testing to enable certification of the systems to launch and 
recover the full range of aircraft that it is required to operate under 
both normal and emergency conditions. This land-based testing is 
planned to complete before the final at-sea operational testing for 
these systems begins.
                               way ahead
    USD AT&L continues to work with Navy to tailor the program and 
ensure appropriate oversight at both the Navy Staff level as well as 
OSD. Our review of the Navy's plan for maintaining control of the cost 
for CVN-79 included an understanding of the application of lessons 
learned from the construction of CVN-78 along with the application of a 
more efficient construction plan for the ship including introduction of 
competition where possible. We have established an excellent 
relationship with the Navy to work together to change process and 
policies that have impacted the ability of the program to succeed, to 
include revitalizing the acquisition workforce and their skills.
    We are confident in the Navy's plan for CVN-79 and CVN-80 and, as 
such, Under Secretary Kendall recently authorized the Navy to enter 
into the detail design and construction phase for CVN-79 and to enter 
into advanced procurement for long lead time materials for CVN-80 
construction. OSD and the Navy are committed to delivering CVN-79 
within the limits of the cost cap legislated for this ship.
    Our focus areas from this point forward are:

      Getting CVN-78 delivered with no further cost growth.
      Preparing for and completing the remaining test program 
for CVN-78.
      Ensuring the cost reduction initiatives being implemented 
for CVN-79 construction are closely monitored and are paying off as 
projected.

    From a programmatic standpoint we are minimizing the administrative 
burden on the program by tailoring program documentation and reporting 
requirements. This tailoring will ensure program personnel are focused 
on the shipyard and test programs rather than documentation for review 
purposes. In addition to the quarterly reports from the program, we are 
implementing an annual review of the program to maintain awareness of 
the progress on testing of CVN-78 and the cost of CVN-79. These reviews 
are expected to occur in the December timeframe each year.
                               conclusion
    The goals of the Department are to correct the problems encountered 
on the Gerald R. Ford, and deliver successive ships within cost, 
providing capability, and on schedule. This will not be easy. The 
timeline and complexities associated with the construction of aircraft 
carriers are enormous and sensitive to a wide range of technological, 
economic, policy and business factors, many of which cannot be 
predicted in time to be readily mitigated. Nevertheless, we are 
committed to applying the resources needed to keep control of aircraft 
carrier program costs and schedule for the CVN-78, CVN-79, and all that 
follow.

    Chairman McCain. Secretary Stackley.

   STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY, 
RESEARCH, DEVELOPMENT, AND ACQUISITION, DEPARTMENT OF THE NAVY; 
  ACCOMPANIED BY REAR ADMIRAL DONALD E. GADDIS, USN, PROGRAM 
 EXECUTIVE OFFICER, TACTICAL AIRCRAFT, DEPARTMENT OF THE NAVY, 
   AND REAR ADMIRAL THOMAS J. MOORE, USN, PROGRAM EXECUTIVE 
 OFFICER, AIRCRAFT CARRIERS, DEPARTMENT OF THE NAVY, AND REAR 
 ADMIRAL MICHAEL C. MANAZIR, USN, DIRECTOR, AIR WARFARE (OPNAV)

    Mr. Stackley. Mr. Chairman, Ranking Member Reed, members of 
the committee, thank you for the opportunity to appear today to 
discuss the CVN-78 carrier program.
    This committee, and no one more than you, Mr. Chairman, 
fully understands the role of the carrier as an instrument of 
American diplomacy, power projection, and global security. 
George Will summed it well in his column just yesterday, ``The 
Navy's operations on which the sun never sets are the Nation's 
nerve endings connecting it with a turbulent world, for though 
the next President may be elected without addressing the Navy's 
size and configuration, for 4 years he or she will be acutely 
aware of where the carriers are.''
    The newest of these carriers will be the Gerald R. Ford, 
CVN-78, the Nation's first new carrier design since the Nimitz 
was authorized by Congress in 1967. The Ford itself will be in 
service for 50 years in a three-ship class until almost 2080. 
It is, therefore, imperative, as this committee has so clearly 
impressed upon the Department and reemphasizes here today, that 
our future carrier force have the capability necessary to 
defeat the future threat, but, two, that it does so at a cost 
that the Nation can bear.
    Designing, building, manning, operating, and maintaining 
these incredibly complex ships is beyond any other nation's 
undertaking. Those members who have visited the Ford under 
construction fully appreciate the daunting numbers that measure 
her: tens of thousands of tons of structure, thousands of miles 
of cable and fiber optics, hundreds of miles of pipe, thousands 
of compartments, hundreds of ship systems, tens of thousands of 
sensors integrated to drive greater than 1,000 megawatts of 
nuclear power across the globe throughout its life. It is a 
remarkable demonstration of what American industry is able to 
achieve, and it is a quantum increase in capability for our 
warfighter, capability required by our Navy in the century 
ahead.
    To be clear, however, this program has had significant 
challenges resulting in unacceptable cost growth. And to 
understand the cause of this cost growth, it's important to 
understand the carrier's history.
    As the Nimitz approached mid-life, requirements were 
drafted to modernize future carriers to a traditional serial 
evolution of technology development, ship design, and 
construction. A total of 23 new capabilities were to be 
incrementally introduced across three ships, commencing with 
CVN-77, at a pace consistent with the maturity of the related 
technologies. These development capabilities would provide a 
33-percent increase in the rate at which aircraft are launched 
and recovered, a propulsion plant providing three times the 
electrical generating capacity and 25 percent more energy than 
Nimitz, increased service life allowances to enable future 
modernization, increase survivability, including improvements 
to the combat system, firefighting systems, weapons handling, 
and basic hull design, and, importantly, a $4 billion reduction 
per ship in total ownership cost over the ship's 50-year life. 
Technology development was initiated for the electromagnetic 
aircraft launching system, or EMALS, the advanced arresting 
gear, or AAG, and the advanced weapons elevators. Modernization 
of weapons, sensors, and communications systems would be 
accomplished by incorporating new capabilities developed, or 
being developed, by other programs, including the DDG-1000's 
state-of-the-art dual- band radar. A new power distribution, 
advanced degalcing system, and automated control systems would 
be incorporated to improve survivability. A new reactor plant, 
propulsion and machinery control systems would be developed to 
meet power requirements. The carrier's superstructure, or 
island, would be redesigned to accommodate the new electronics 
systems and to enable improved flight-deck operations. And all 
of these upgrades would contribute to a total manpower 
reduction of 1,200 sailors.
    As the Chairman has pointed out, in 2002 with priority 
placed on transformation by the Secretary of Defense, DOD 
changed course such that the three-ship incremental 
modernization would be accomplished in a single step on a 
single ship, CVN-78. This decision resulted in what has proven 
to be a critically high degree of concurrent development, 
design, material procurement, and construction. Costs were 
estimated, and design and construction proceeded with 
inadequate information regarding the complexity of the new 
systems and with inadequate risk factors to account for the 
high degree of concurrency, ultimately impacting cost and 
performance in each phase of development, design, build, and 
test of CVN-78.
    Today, design is effectively complete, and production is 
near 95 percent complete, and we are focused on completing the 
test program and delivering the lead ship. Actions put in place 
from 2009 through 2011 have been effective in halting the early 
cost growth on CVN-78, including converting the design from a 
level of effort to a completion contract with a firm target and 
incentive fee, placing contract design changes under strict 
control, reducing fee consistent with contract provisions, yet 
incentivizing improvements upon current cost performance, 
removing overly burdensome specifications that impose 
unnecessary cost, contracting and competing alternative sources 
of supply to mitigate the significant impact of material 
delays, raising completion levels at each stage of construction 
to improve production efficiencies. Meanwhile, following a 
detailed Nunn-McCurdy-like review in 2009, the Navy converted 
the EMALS and AAG contract to a firm fixed- price contract for 
production to cap cost on each of those systems. And the 
shipbuilder subjected its build process to review by competitor 
shipyards in order to identify fundamental changes necessary to 
improve their performance.
    Finally, management changes were instituted and coupled 
with increased readiness reviews focused on cost performance 
and critical path issues to ensure we're doing all that can be 
done to improve cost performance.
    I personally conduct reviews on no less than a quarterly 
basis, often monthly, and have assigned, for these past 4-plus 
years, Rear Admiral Moore, the Navy officer with the single 
greatest experience across carrier operations, construction, 
and program management, as the program executive officer. And, 
importantly, while we confront the impacts of concurrency on 
CVN-78, we've made essential changes to eliminate these causes 
for cost growth and to further improve performance on CVN-79 
and -80. As reported to Congress in May of 2013, requirements 
for CVN-70 are locked down, the design model is complete, and 
80 percent of initial drawings released. New technologies on 
CVN-78 are virtually mature on CVN-79. Material is being 
ordered efficiently and on schedule. The shipbuilder has 
leveraged lessons learned, incorporated produceability 
improvements, made significant investments to modernize tooling 
and facilities, and has implemented build sequence changes to 
drive down production cost. And the Navy is implementing a two-
phase delivery plan to allow the basic ship to be constructed 
and tested in the most efficient manner by the shipbuilder 
while enabling select ship systems and compartments to be 
completed in a second phase where the work can be competed, 
accomplished more effectively, and use of skilled installation 
teams.
    The net result of all these actions was the recent award of 
CVN-79 as a fixed-price construction contract that, in 
conjunction with GFE, government furnished equipment, procures 
CVN-79 at or below the congressional cost cap. We're on target 
on CVN-79 and will continue to reduce the costs of future ships 
of the class.
    Mr. Chairman, you've raised questions regarding 
accountability. I am accountable for the decisions I make about 
this ship or any Navy/Marine Corps program for which I am the 
service acquisition executive. But, this simple statement 
doesn't adequately address your concern. The current system is 
challenged to align responsibility, accountability, and 
decision-making for large, complex projects that take years to 
develop and deliver. This program, in particular, has spanned 
four Secretaries of the Navy, six Chiefs of Naval Operations, 
four naval acquisition executives, six defense acquisition 
executives, four program executive officers, four program 
managers, and eight Congresses. Gaps, seams, and course changes 
and decisions have been critical.
    The decision to pursue a transformational approach driving 
three incrementally enhanced ships into one was made for what 
was believed to be the right decision at that time. As the 
acquisition executive, what can be done to stabilize the cost 
on CVN-78 and pursue cost-performance improvements on the 
remainder of the class, I believe is being done. We have much 
further to go in this regard, but I believe we are on the right 
path.
    Going forward, under the Secretary's direction, the CNO, 
the Commandant, and I are changing the way we do business 
within the Department of the Navy to achieve much greater 
clarity of authority, traceability to cost, visibility to 
performance, and therefore, accountability for cost and 
schedule on our major programs. We hope to have the opportunity 
to share these details with you and your staff.
    In sum, your Navy is committed to providing our sailors 
with the capability they need to perform their missions around 
the world, around the clock, every single day of the year. And 
we strive every day to do this in a way that enhances 
affordability while ensuring we maintain a robust industrial 
base to hedge against an uncertain future.
    We look forward to answering your questions, sir.
    [The prepared statement of Mr. Stackley follows:]

   Joint Prepared Statement by Hon. Sean J. Stackley, RADM Donald E. 
       Gaddis, RADM Thomas J. Moore, and RADM Michael C. Manazir
                            i. introduction
    Mr. Chairman, Senator Reed, and distinguished members of the 
committee, thank you for the opportunity to appear before you today to 
address the nation's Aircraft Carrier Program.
    The aircraft carrier is the centerpiece of the Navy's Carrier 
Strike Groups and central to Navy core capabilities of forward 
presence, deterrence, sea control, power projection, maritime security, 
and humanitarian assistance/disaster response. The Navy remains 
committed to maintaining a carrier force, and associated carrier air 
wings, that provide unparalleled responsiveness and flexibility to 
operational commanders across the full range of military options. 
Maintaining the aircraft carrier force structure at the level required 
by the Nation and mandated by law requires a combination of a steady-
state Ford-class procurement plan, recapitalizing the Nimitz-class via 
the Refueling and Complex Overhaul (RCOH) program, maintaining an in-
service aircraft carrier life cycle support program, and operating 
current CVNs for their full 50-year service life as Ford-class CVNs are 
delivered. The Ford-class will be the centerpiece of the carrier strike 
group of the future. Taking advantage of the Nimitz-class hull form, 
the Ford-class features an array of advanced technologies designed to 
improve warfighting capabilities and allow significant manpower 
reductions.
    There is no greater proof of the tangible effects of the modern 
carrier on global events than those that occurred in the past year. The 
George H.W. Bush Strike Group relocated from the Arabian Sea to the 
north Arabian Gulf and was on-station within 30 hours, ready for combat 
operations in Iraq and Syria. Navy and Marine Corps strike fighters 
from the carrier generated 20 to 30 combat sorties each day for 54 days 
to project power against the Islamic State of Iraq and Syria. The Carl 
Vinson Strike Group and Carrier Strike Group One followed, flying 
12,300 sorties, including 2,383 combat missions. Now, the USS Theodore 
Roosevelt with Carrier Strike Group Twelve is forward deployed at the 
Combatant Commander's disposal to combat a brutal enemy.
                   ii. ford-class program background
    In order to provide the increased warfighting capability deemed 
essential for air dominance in the 21st century and to reduce the 
significant cost associated with operating and supporting our naval air 
force, the Navy embarked on a design for a new class of aircraft 
carrier. The Gerald R. Ford (CVN-78) class represents a substantial 
advancement in operational capability, survivability, and the 
flexibility to accommodate future improvements in technology and 
warfighting capability over its service life, with significantly lower 
total ownership cost than the Nimitz-class. Long range planning for the 
eventual replacement of the Nimitz-class began with a mission area 
analysis in 1995 and a subsequent concept exploration phase to evaluate 
a new class of aircraft carrier with four objectives:

      Maintain the critical capabilities of sea based aviation 
as defined by the Navy and approved by the Joint Chiefs. Independent of 
land bases, the carrier must be able to launch and recover aircraft in 
sustained forward combat operations that can simultaneously perform 
three missions: (1) surveillance; (2) battle space dominance; and (3) 
strike.
      Increase flexibility and growth potential to leverage new 
technologies, operate future manned/unmanned aviation systems, counter 
future threats, and take on new missions.
      Improve carrier affordability by reducing total ownership 
cost.
      Improve carrier survivability, vulnerability, 
sustainability and interoperability.

    The subsequent analysis of alternatives examined 75 conceptual 
designs over a three year period, which included a variety of sizes and 
alternative propulsion concepts. A Navy and Office of the Secretary of 
Defense Flag level oversight group met quarterly to guide the effort.
    In June 2000, the Department of Defense (DOD) approved a three-ship 
evolutionary acquisition approach starting with the last Nimitz-class 
carrier (CVN-77) and the next two carriers CVNX1 (later CVN-78) and 
CVNX2 (later CVN-79). This approach recognized the significant risk of 
concurrently developing and integrating new technologies into a new 
ship design incrementally as follows:

      The design focus for the evolutionary CVN-77 was to 
combine information network technology with a new suite of 
multifunction radars from the DDG 1000 program to transform the ship's 
combat systems and the air wing's mission planning process into an 
integrated warfare system.
      The design focus for the evolutionary CVNX1 (future CVN-
78) was a new Hull, Mechanical and Electrical (HM&E) architecture 
within a Nimitz-class hull that included a new reactor plant design, 
increased electrical generating capacity, new zonal electrical 
distribution, and new electrical systems to replace steam auxiliaries 
under a redesigned flight deck employing new Electromagnetic Aircraft 
Launch System (EMALS) catapults together with aircraft ordnance and 
fueling ``pit-stops''. Design goals for achieving reduced manning and 
improved maintainability were also defined.
      The design focus for the evolutionary CVNX2 (future CVN-
79) was a potential ``clean-sheet'' design to ``open the aperture'' for 
capturing new but immature technologies such as the Advanced Arresting 
Gear (AAG) and Advanced Weapons Elevators (AWE) that would be ready in 
time for the third ship in the series; and thereby permit the 
experience gained from design and construction of the first two ships 
(CVN-77 and CVN-78) to be applied to the third ship (CVN-79).

    Early in the last decade, however, a significant push was made 
within DOD for a more transformational approach to delivering 
warfighting capability. As a result, in 2002, DOD altered the program 
acquisition strategy by transitioning to the new aircraft carrier class 
in a single transformational leap vice an incremental three ship 
strategy. Under the revised strategy, CVN-77 reverted back to a 
``modified-repeat'' Nimitz-class design to minimize risk and 
construction costs, while delaying the integrated warfare system to 
CVN-78. Further, due to budget constraints, CVN-78 would start 
construction a year later (in 2007) with a Nimitz-class hull form but 
would entail a major re-design to accommodate all the new technologies 
from the three ship evolutionary technology insertion plan.
    This leap ahead in a single ship was captured in a revised 
Operational Requirements Document (ORD) in 2004, which defined a new 
baseline that is the Ford-class today, with CVN-78 as the lead ship. 
The program entered system development and demonstration, containing 
the shift to a single ship acquisition strategy. The start of CVN-78 
construction was then delayed by an additional year until 2008 due to 
budget constraints. As a result, the traditional serial evolution of 
technology development, ship concept design, detail design, and 
construction - including a total of 23 developmental systems 
incorporating new technologies originally planned across CVN-77, CVNX1, 
CVNX2--were compressed and overlapped within the program baseline for 
the CVN-78. Today, the Navy is confronting the impacts of this 
compression and concurrency, as well as changes to assumptions made in 
the program planning more than a decade ago.
                      iii. ford-class requirements
    The Ford-class requirements and design provide unparalled advances 
in operational availability, flexibility to accommodate high power/
energy warfighting advances, increased sortie generation, and improved 
survivability to match projected threats. The Ford-class' ORD was 
again, re-validated without changes by the Joint Requirements Oversight 
Committee in April 2015. Specifically, the Ford-class provides:

      A Sustained Sortie Generation Rate (SGR) Key Performance 
Parameter (KPP) of 160 sorties per day sustained over a 30 day period, 
and a Surge SGR of 270 sorties per day through a four day period. This 
constitutes a 33 percent improvement over the Nimitz-class and is the 
heart of Ford-class war fighting capability.
      A propulsion plant providing three times the electrical 
generating capacity of a Nimitz-class, 25 percent more energy than 
Nimitz, allowing increased steaming days over the ship's 50-year life, 
a projected 30 percent reduction in propulsion plant maintenance and a 
50 percent reduction in reactor department manning compared to Nimitz.
        The increased electrical generating capacity allows for 
the introduction of advanced capabilities (discussed in detail below) 
such as the EMALS and the Dual Band Radar (DBR), all contributors to 
increased war fighting capability and survivability as well as reduced 
manning and ownership costs.
        The generating capacity also provides flexibility for 
future modernization and the introduction of future technology over the 
ship's 50-year service life.
      Increased Service Life Allowances (SLA) for weight and 
stability as compared to the Nimitz-class current state, enabling 
future modernization and the ability to adapt to new missions over the 
ship's 50-year life cycle.
      Improved survivability, including improvements in the 
hull design, firefighting systems, and weapons stowage.
      A $4 billion reduction per ship in total ownership cost 
over the ship's 50-year life as compared to the Nimitz-class, 
highlighted by a manning reduction of 663 billets. With accompanying 
reductions to the airwing, total billets are reduced by nearly 1,200. 
These savings will begin to accrue on day one and continue throughout 
the entire life of the class.

    Each of these requirements contributed to design and developmental 
challenges that have significantly impacted cost performance on the 
lead ship.

      The increased SGR required a complete redesign of the 
flight deck to provide more space and the development of a ``pit-stop'' 
refueling and re-arming concept to turnaround planes faster after 
returning from a mission. This also included a total redesign of the 
ship's weapons handling complex to allow for the more efficient 
movement of weapons from magazines in the bottom of the ship to the 
flight deck.
      The increased SLA for weight and stability required 
changing several ship characteristics including the design of a new 
capstan, lighter weight anchor and chain, and the use of thinner deck 
plate steel which proved to be a significant manufacturing challenge.
      Survivability and underwater protection drove changes to 
the underwater hull.
      The requirement to reduce total ownership cost impacted 
almost every aspect of the ship design. The lifetime manpower cost for 
a Nimitz-class represents over 40 percent of the total ownership cost 
for the class and was therefore a central focus area for ship 
designers. This included adding sensors, networks and machinery control 
systems to reduce watch standing requirements; major redesign of the 
propulsion plant to cut Reactor Department crew in half; the relocation 
of ship's stores elevators to ease material movement; and a complete 
redesign of the food service complex that reduced the number of galleys 
from four to two.
                         advanced capabilities
    The EMALS system is an electromagnetic catapult designed for use on 
the Ford-class aircraft carrier, which is far superior to the steam 
catapults on the Nimitz-class. The operational advantages are increased 
launch envelopes (that is the ability to launch both heavier and 
lighter aircraft), improved SGRs, reduced mechanical complexity, 
reduced maintenance and reduced carrier manning.
    The AAG system provides the ability to recover current and 
projected carrier based tail-hook equipped air vehicles and replaces 
the MK7 arresting gear system that is manpower intensive and 
approaching its designed structural operating limit. AAG will provide 
expanded operational capabilities, including the ability to safely and 
efficiently recover heavier/faster (higher recovery energy) aircraft 
and light weight unmanned air vehicles. In addition, AAG is designed to 
provide increased system availability in support of the ship's SGR 
requirement, at reduced manpower levels, with reduced maintenance man-
hours, and reduced system installed weight.
    The selection of the DBR for the CVN-78 design was intended to 
create economies of scale by leveraging the planned DDG 1000 production 
line. DBR integrates an X-band Multi-Function Radar (MFR) with an S-
band Volume Search Radar (VSR) to provide a single interface to the 
ship's combat system. However, with the truncation of the DDG 1000 
program from 32 to 3 ships and the subsequent removal of the S-band 
radar from the DDG 1000 baseline, CVN-78 became the only ship with the 
DBR. This resulted in CVN-78 bearing a higher share of the X-band MFR 
development and production costs than originally planned and all 
development and production costs for the S-band VSR.
    The development, integration, and construction efforts required to 
overcome challenges inherent to these required advanced capabilities 
have significantly impacted cost performance on the lead ship.
                      iv. cvn-78 program execution
    Today, the ship's design is effectively complete and CVN-78 
production is 93 percent complete. The Navy and shipbuilder are focused 
on activity necessary to finish construction, complete the test 
program, and deliver the ship.

      Seventy-five percent of compartments have been turned 
over to the crew and the crew has moved aboard and is feeding onboard 
as scheduled.
      More than 60 percent of the overall shipboard testing has 
been completed.
      EMALS shipboard catapult testing commenced on schedule in 
June and remains on schedule with the successful completion of over 100 
``dead-load'' launches completed on the two bow catapults.
      The Initial Light Off of DBR was accomplished in May 
2015.
      Land based AAG performance testing is in progress to 
validate requirements.

    Given the lengthy design, development, and build span associated 
with major warships, there is a certain amount of overlap or 
concurrency that occurs between the development of new systems to be 
delivered with the first ship, the design information for those new 
systems, and actual construction. Since this overlap poses cost and 
schedule risk for the lead ship of the class, program management 
activities are directed at mitigating this overlap to the maximum 
extent practicable.
    In the case of the Ford-class, the incorporation of 23 
developmental systems at various levels of technical maturity 
(including EMALS, AAG, DBR, AWE, new propulsion plant, integrated 
control systems) significantly compounded the inherent challenges 
associated with accomplishing the first new aircraft carrier design in 
40-years. The cumulative impact of this high degree of concurrency 
significantly exceeded the risk attributed to any single new system or 
risk issue and ultimately manifested itself in terms of delay and cost 
growth in each element of program execution; development, design, 
material procurement (government and contractor), and construction. The 
following sections provide a detailed assessment of performance on the 
lead ship in each of these areas; specific actions taken to correct 
performance and control cost on the first-of-class, CVN-78, and the 
more comprehensive approach to improve performance on follow ships of 
the class.
                     cvn-78 design and engineering
    The high degree of concurrency in the development of new CVN-78 
technologies and the ship detailed design while beginning ship 
construction led to major modifications and rework in the ongoing 
design of the ship that continued well past award of the Detail Design 
and Construction (DD&C) contract in 2008. Additionally, testing of new 
technologies was not yet complete and material procurement efforts were 
not all defined. Engineering efficiency deteriorated as efforts 
increased to complete the design and accommodate component design 
changes while new technology testing completed and ship construction 
efforts and material procurement progressed. Design risk that had been 
identified during the 2008 Defense Acquisition Board review, had not 
been adequately retired and the impact of that design risk on 
production cost performance had not been recognized. As a result of a 
complete review of remaining design effort conducted in 2009, the Navy 
requested an increase of $700 million in its fiscal year (FY) 2011 
budget request for completion of CVN-78 non-recurring engineering 
(NRE). Additionally, and perhaps equally important, to reflect the 
defined scope, the CVN-78 design contract was converted from a level of 
effort fixed fee contract to a completion contract with a firm target 
incentive fee contract.
                          cvn-78 construction
    At the time of CVN-78 DD&C contract award in 2008, approximately 
$3.4 billion had been executed on the CVN-78 program to support 
construction preparation efforts including first-of-class engineering, 
planning, long lead time material procurement, and advance 
construction. This work was accomplished largely without a validated 
cost baseline for the entire ship, and therefore without a clear view 
of cost performance. During this early stage of the program, the 
significant concurrency of ship design and development slowed the 
progress of the design, and the concurrent nature of the design led to 
iterative changes to the shipboard configuration that later impacted 
construction performance and delayed material qualification and 
subsequent material deliveries to the ship. Delays in material 
availability ultimately impacted ship pre-outfitting, driving work to 
less efficient work centers in order to sustain overall ship 
construction. Workarounds were necessary at additional expense in order 
to sustain ship construction and avoid much greater downstream delays, 
rework and cost. The net result was that by the time a performance 
baseline was established following DD&C contract award, the ship 
commenced to immediately decline in cost performance and would require 
one-to-two years to stabilize.
    In addition to these impacts, the many unique CVN-78 design 
features posed producibility challenges, significantly greater than 
estimated for the lead ship. For example, CVN-78's requirement for 
additional service life margin for weight and stability (in order to 
provide for modernization over its 50-year life) also created 
construction challenges and eventual rework during lead ship 
construction.

      Thinner, lighter weight steel plate selected as part of 
the design objective to reduce overall ship weight and restore growth 
margin in the ship's life cycle, necessitated the unplanned use of 
temporary bracing to allow handling of modules during assembly. The 
thinner steel plate also required additional work and structural 
reinforcement associated with large heavy component and equipment 
foundations in order to achieve proper fit up.
      Light scantlings also precluded higher outfitting levels 
prior to module erection because of stiffness limits.
      Additional work required to flame straighten thin plates 
that had been deformed by the cutting and welding process also 
contributed to inefficiencies.

    These issues have been retired for CVN-79 and follow ships through 
exacting management of the ship's displacement margin and producibility 
improvements.
    The CVN-78 design contains 10.3 million feet of total electrical 
power cable as compared to 8.7 million feet for CVN-77, reflecting the 
transition from all steam auxiliary systems on Nimitz-class to 
electrical auxiliary systems on Ford-class, providing major life cycle 
cost benefits for the Ford-class. The increase in linear feet, coupled 
with the increased effort to handle, bend and secure the 13.8 kilovolt 
(kV) cables, resulted in significant increases in electrician labor 
from previous construction efforts. This increase, while incorporated 
into the budget for CVN-78, required more electrical trade personnel 
than any other project ever completed at Huntington Ingalls Industries-
Newport News Shipbuilding (HII-NNS) and greater than 25 percent 
increase from CVN-77. The CVN-78 design also contains four million feet 
of blown fiber optic cable as compared to 1.6 million feet for CVN-77. 
A 150 percent increase in fiber optics represents a significant 
increase in complexity of networked systems and required personnel to 
install and test compared to previous construction efforts.
    Shipbuilder actions to resolve first-of-class issues retired much 
of the schedule risks to launch, but at an unstable cost. First-of-
class construction and material delays led the Navy to revise the 
launch date in March 2013 from July 2013 to November 2013. 
Nevertheless, the four-month delay in launch allowed increased 
outfitting and ship construction that were most economically done prior 
to ship launch, such as completion of blasting and coating operations 
for all tanks and voids, installation of the six DBR arrays, and 
increased installations of cable piping, ventilation, electrical boxes, 
bulkheads and equipment foundations. As a result, CVN-78 launched at 70 
percent complete and 77,000 tons displacement--the highest levels yet 
achieved in aircraft carrier construction. This high state of 
completion at launch enabled improved outfitting, compartment 
completion, an efficient transition into the shipboard test program, 
and the on-time completion of key milestones such as crew move aboard.
    With the advent of the shipboard test program, first time 
energization and grooming of new systems have required more time than 
originally planned. As a result, the Navy expects the sea trial 
schedule to be delayed about six to eight weeks. The exact impact on 
ship delivery will be determined based on the results of these trials. 
The Navy expects no schedule delays to CVN-78 operational testing and 
deployability due to the sea trials delay and is managing schedule 
delays within the $12.887 billion cost cap.
    Additionally, at delivery, AAG will not have completed its 
shipboard test program. The program has not been able to fully mitigate 
the effect of a two-year delay in AAG equipment deliveries to the ship. 
All AAG equipment has been delivered to the ship and will be fully 
installed on CVN-78 at delivery. The AAG shipboard test and 
certification program will complete in time to support aircraft launch 
and recovery operations in summer 2016.
                  government furnished equipment (gfe)
    Twelve of the 23 developmental systems introduced on CVN-78 are 
government furnished. In 2006, the Navy identified 10 of these new 
systems, including EMALS, AAG, and DBR, as critical technologies which 
posed the highest ship integration risk. A 27 month comprehensive test 
program, reportedly the most integrated and complex shipbuilding test 
program to date, was developed to address the integration of these 
technologies. This test program has proven to be highly effective at 
identifying design deficiencies and proving the performance of these 
equipments, but has been unable to mitigate the concurrent nature of 
the development efforts resulting in delays and cost growth to certain 
systems and equipments.
    EMALS is arguably the most revolutionary of all new technology in 
the Ford-class. There was a lack of knowledge regarding the scope of 
challenges associated with developing and integrating this advanced 
system into CVN-78 at the time of contract award. In 2008, the Under 
Secretary of Defense (Acquisition, Technology, and Logistics) 
(USD(AT&L)), directed an independent Defense Support Team (DST) to 
assess the development of EMALS and its ability to support the CVN-78 
schedule. The Navy expanded the scope of the DST and imposed ``Nunn-
McCurdy-like'' criteria on the assessment. In February 2009, the DST 
recommended that the Navy continue with the development of EMALS for 
CVN-78 and future carriers and address findings of the DST to reduce 
schedule risk. In June 2009, after full deliberation by the 
requirements and acquisition chains of command, the Navy determined it 
would address the DST findings and continue with EMALS.
    The basic installation and shipboard test schedule for EMALS at 
contract award was assumed to be comparable to legacy steam systems. As 
system development completed, however, it became clear that EMALS 
required a much more extensive shipboard test program than originally 
envisioned, adding further cost to the test program. This would be 
compounded as design changes were discovered during testing at the 
System Functional Demonstration site at Lakehurst, NJ, resulting in 
delayed completion of land based testing and subsequent delays to 
delivery of certain equipment to the shipyard.
    The original AAG procurement strategy was based on a 2002 cost 
estimate that included forward fit on the Ford-class and backfit on the 
Nimitz-class (five ship sets). At the time of the AAG production 
contract award (2009), not only had the scope of the required system 
grown [from Technology Development Readiness Review in 2003 to the 
Critical Design Review in 2007], but the production quantity had been 
truncated, resulting in procurement of only a single ship set at a 
time. This reduction in quantity, when combined with escalation from 
2002 to the 2009 contract award, accounts for the majority of the 
associated AAG procurement cost growth.
    AAG is based on proven land-based arresting gear systems and had a 
Technology Readiness Level of ``6'' in 2011. Despite having been 
demonstrated in a relevant environment, AAG suffered major component 
failures (including the water twister, purchase cable drum, and cable 
shock absorber) after the Critical Design Review while testing at 
Lakehurst. Like EMALS, delays in the land based test program and 
subsequent incorporation of test results into AAG hardware have 
resulted in significant delays in delivery of this equipment to the 
shipbuilder. The Navy completed an AAG ``Nunn-McCurdy-like'' focused 
review in 2011 in order to re-evaluate component re-design, test 
progress, and projected component delivery relative to shipbuilder need 
dates. This review scrutinized continued delays in testing, which 
significantly increased programmatic risk resulting from the 
concurrency of development, testing, and ship integration.
    The first-of-a-kind reactor plant GFE did however deliver on budget 
and schedule and resulted in saving several million dollars in 
construction costs. This effort included a first-of-a-kind early core 
load that eliminated several months of shipyard controlling path 
construction effort; manufacture of the largest naval reactors and 
steam generators to date; and other innovations that deliver a 30 
percent reduction in maintenance requirements and a level of 
simplification and automation supporting reactor department crewing 
requirements.
        parallel shipyard workload effect on cvn-78 construction
    Compounding these issues, HII-NNS had several other large projects 
on-going at construction start. Throughout the Gerald R. Ford (CVN-78) 
construction span, USS Enterprise (CVN-65), USS Carl Vinson (CVN-70), 
USS George H. W. Bush (CVN-77), and USS Theodore Roosevelt (CVN-71) 
were undergoing construction or overhaul, and Virginia-class submarines 
were also undergoing various stages of construction. The competition 
for key resources on the delivery of the aforementioned platforms, 
particularly in the critical early construction phases for CVN-78 
between 2008 and 2009, added risk.
                    v. cvn-78 cost control measures
    The Navy, in coordination with the shipbuilder and major component 
providers, implemented a series of actions and initiatives in the 
management and oversight of CVN-78 that crossed the full span of 
contracting, design, material procurement, GFE, production planning, 
production management and oversight. The Secretary of the Navy directed 
a detailed review of the CVN-78 program build plan to improve end-to-
end aircraft carrier design, material procurement, production planning, 
build and test, the results of which are providing benefit across all 
carriers. These corrective measures include:

      CVN-78 design was converted from a `level of effort, 
fixed fee' contract to a completion contract with a firm target and 
incentive fee. Shipbuilder cost performance has been on-target or 
better since this contract change.
      CVN-78 construction fee was reduced, consistent with 
contract provisions. However, the shipbuilder remains incentivized by 
the contract shareline to improve upon current cost performance.
      Contract design changes are under strict control; 
authorized only for safety, damage control, and mission-degrading 
deficiencies.
      Following a detailed ``Nunn-McCurdy-like'' review in 
2008-2009, the Navy converted the EMALS and AAG production contract to 
a firm, fixed price contract, capping cost growth to each system.
      In 2011, Naval Sea Systems Command completed a review of 
carrier specifications with the shipbuilder, removing or improving upon 
overly burdensome or unneeded specifications that impose unnecessary 
cost on the program. Periodic reviews continue.

    Much of the impact to cost performance was attributable to 
shipbuilder and government material cost overruns. The Navy and 
shipbuilder have made significant improvements upon material ordering 
and delivery to the shipyard to mitigate the significant impact of 
material delays on production performance.
    These actions include:

      The Navy and shipbuilder instituted optimal material 
procurement strategies and best practices (structuring procurements to 
achieve quantity discounts, dual-sourcing to improve schedule 
performance and leveraging competitive opportunities) from outside 
supply chain management experts.
      The shipbuilder assigned engineering and material 
sourcing personnel to each of their key vendors to expedite component 
qualifications and delivery to the shipyard.
      The shipbuilder inventoried all excess material procured 
on CVN-78 for transfer to CVN-79.
      The Program Executive Officer (Carriers) has conducted 
quarterly Flag-level GFE summits to drive cost reduction opportunities 
and ensure on-time delivery of required equipment and design 
information to the shipbuilder.

    The CVN-78 build plan, consistent with the Nimitz-class, had 
focused foremost on completion of structural and critical path work to 
support launching the ship on-schedule. Achieving the program's cost 
improvement targets required that CVN-78 increase its level of 
completion at launch, from 60 percent to 70 percent. To achieve this 
and drive greater focus on system completion:

      The Navy fostered a collaborative build process review by 
the shipbuilder with other Tier 1 private shipyards in order to 
benchmark its performance and identify fundamental changes that are 
yielding marked improvement.
      The shipbuilder established specific launch metrics by 
system and increased staffing for waterfront engineering and material 
expediters to support meeting those metrics. This ultimately delayed 
launch, but drove up pre-outfitting to the highest levels for CVN new 
construction which has helped stabilize cost and improve test program 
and compartment completion performance relative to CVN-77.
      The shipbuilder linked all of these processes within a 
detailed integrated master schedule that has provided greater 
visibility to performance and greater ability to control cost and 
schedule performance across the shipbuilding disciplines.

    These initiatives, which summarize a more detailed list of actions 
being implemented and tracked as a result of the end-to-end review, 
were accompanied by important management changes.

      In 2011, the Navy assigned a second tour Flag Officer 
with considerable carrier operations, construction, and program 
management experience as the new Program Executive Officer (PEO).
      The new PEO established a separate Program Office, PMS 
379, to focus exclusively on CVN-79 and CVN-80, which enables the lead 
ship Program Office, PMS 378, to focus on cost control, schedule 
performance and the delivery of CVN-78.
      In 2012, the shipbuilder assigned a new Vice President in 
charge of CVN-78, a new Vice President in charge of material management 
and purchasing, and a number of new general ship foremen to strengthen 
CVN-78 performance.
      The new PEO and shipyard president began conducting bi-
weekly launch readiness reviews focused on cost performance, critical 
path issues and accomplishment of the targets for launch completion. 
These bi-weekly reviews will continue through delivery.
      Assistant Secretary of the Navy (Research, Development, 
and Acquisition) (ASN (RD&A)) conducts quarterly reviews of program 
progress and performance with the PEO and shipbuilder to ensure that 
all that can be done to improve on cost performance is being done.

    The series of actions taken by the Navy and the shipbuilder are 
achieving the desired effect of arresting cost growth, establishing 
stability, and have resulted in no changes in the Government's estimate 
at completion over the past four years. The Department of the Navy is 
continuing efforts to identify cost reductions, drive improved cost and 
schedule performance, and manage change. The Navy has established a 
rigorous process with the shipbuilder that analyzes each contract 
change request to approve only those change categories allowed within 
the 2010 ASN(RD&A) change order management guidance. This guidance only 
allows changes for safety, contractual defects, testing and trial 
deficiencies, statutory and regulatory changes that are accompanied by 
funding and value engineering change proposals with instant contract 
savings. While the historical average for contractual change level is 
approximately 10 percent of the construction cost for the lead ship of 
a new class, CVN-78 has maintained a change order budget of less than 
four percent to date despite the high degree of concurrent design and 
development.
    Finally, the Navy has identified certain areas of the ship whose 
completion is not required for delivery, such as berthing spaces for 
the aviation detachment, and has removed this work from the 
shipbuilder's contract. This deferred work will be completed within the 
ship's budgeted end cost and is included within the $12,887 million 
cost estimate. By performing this deferred work in the post-delivery 
period using CVN-78 end cost funding, it can be competed and 
accomplished at lower cost and risk to the overall ship delivery 
schedule.
                 vi. cvn-78 test and evaluation status
                             emals and aag
    The Navy established extensive land based test facilities in 
Lakehurst, NJ, to test and qualify EMALS and AAG software and hardware 
in order to reduce risk prior to the shipboard test program. As part of 
EMALS land based testing, the Navy team has conducted approximately 
5,000 ``no load'' and more than 3,400 ``dead-load'' launches to date, 
at speeds of up to 180 knots--the highest end speed required to launch 
aircraft currently in the system's envelope. The Navy has also 
supported two phases of Aircraft Compatibility Testing (ACT), which 
began in December 2010 and successfully completed in April 2014. During 
ACT, various carrier situations were replicated in order to demonstrate 
EMALS' launch-critical reliability. A total of 452 manned launches were 
conducted with the following aircraft: F/A-18C Hornet; F/A-18E Super 
Hornet; T-45C Goshawk; C-2A Greyhound; E-2D Advanced Hawkeye; and EA-
18G Growler. First shipboard flight operations are scheduled for summer 
2016.
    CVN-78 began EMALS shipboard testing in August 2014. Catapult 
``dead-load'' testing began in June 2015 and will continue into 
November 2015. The testing checks system functionality as well as 
establishes each catapult's individual performance characteristics. The 
ship's test data will be compared to land based test data, and 
following adjustments, will become the basis for the first manned F/A-
18E aircraft launches off the ship next year. To date, the shipbuilder 
has met all shipboard test milestones and the system is performing well 
including the recent completion of 109 ``deadload'' launches from the 
bow catapults. Waist catapult testing will commence in October 2015 and 
the EMALS shipboard test program will conclude in November 2015.
    Extensive land based AAG testing conducted at the Jet Car Track 
Site (JCTS) in Lakehurst, NJ, identified technical issues. The 
resultant AAG hardware re-designs are now complete, with every design 
change tested at the JCTS prior to implementation into the shipboard 
hardware. All AAG hardware has been delivered to CVN-78. The AAG system 
began shipboard testing in July 2015 and is projected to complete in 
time to support first scheduled flight operations in summer 2016. 
Current testing is focused on fine tuning the software control system, 
particularly for degraded mode arrestments. As of August 2015, the Navy 
team has executed 1,046 ``deadload'' arrestments with 663 conducted 
using the re-designed Water Twisters. The Navy is working to commission 
the Runway Aircraft Landing Site and conduct the first manned aircraft 
arrestment later this fall. Completion of the initial F/A-18E/F land 
based testing is on track to support flight operations on the CVN-78. 
The Navy is planning to have the remainder of the airwing available to 
support flight operations at the conclusion of the Post Shakedown 
Availability in 2017.
                       cvn-78 test and evaluation
    The Navy's shipbuilding and modernization efforts include test and 
evaluation to ensure the Navy provides the Fleet complete ships which 
are free from either contractor or government responsible deficiencies 
and which are capable of executing the platform's primary missions. The 
Navy applies an integrated test approach that incorporates 
collaborative planning and execution of both Developmental Test (DT) 
and Operational Test (OT) phases and events. This approach fully 
supports independent analysis, evaluation, and reporting by the 
developmental and operational test and evaluation communities in order 
to deliver the most combat capable platform to the Fleet.
    The CVN-78 DT program leverages factory, shipbuilder and GFE 
provided land based testing, pre-delivery shipboard shipbuilder 
testing, Board of Inspection and Survey (INSURV) inspections, and at 
sea integration testing conducted on CVN-78 and the Self Defense Test 
Ship (SDTS). The CVN-78 DT program includes five phases of 
Developmental Test/Integrated Test to reduce risk to the program before 
entering the OT phase. The last phase continues through 2017 and 
includes activities such as Aircraft Compatibility Testing (ACT), 
Combat Systems Shipboard Qualification Test (CSSQT) and overall 
readiness assessment for Initial Operational Test and Evaluation 
(IOT&E).
    Examples where the Navy has reduced risk through the use of 
developmental testing include: completing more than 90 percent of 
software testing in a land based facility for the new Machinery Control 
and Monitoring System (MCMS) prior to shipboard installation; land 
based testing of next generation HM&E systems; land based testing of 
the DBR at Naval Surface Warfare Center (Wallops Island) to include 
integrated testing of the combat system with the ship's Air Traffic 
Control and Ship Self Defense Systems; and land based C4I System 
integration to test intersystem communications prior to shipboard 
installation. Additionally, cybersecurity testing follows a robust 
certification and accreditation process where systems are scanned for 
vulnerabilities prior to granting them an authority to operate.
    The Navy has developed a sound Operational Test and Evaluation 
(OT&E) program with an executable schedule and maintains frequent 
communication and collaboration with Director Operational Test and 
Evaluation (DOT&E) and Commander Operational Test and Evaluation Force, 
as they ensure that planned OT&E is adequate to confirm operational 
effectiveness and suitability of the Ford-class carrier in combat. To 
improve upon the Live-Fire Test and Evaluation strategy, the Navy has 
refined its schedule to include additional time for OT, and added the 
Total Ship Survivability Test (TSST) into the most recent Test and 
Evaluation Master Plan (TEMP) submittal to provide evaluators with 
demonstrations of recoverability from secondary damage, damage 
containment, and restoration. The most recent TEMP submittal improves 
integrated platform-level developmental testing, reducing the 
likelihood that platform-level problems will be discovered during 
IOT&E.
    The Navy applies rigorous systems engineering processes that start 
with deriving the reliability requirement based on the operational 
availability requirement, allocating reliability requirements at the 
subsystem and component level and, conducts testing, failure analyses, 
and corrective actions at these levels to engineer reliability into the 
systems. This rigorous process is also conducted at the system level as 
in the cases of EMALS, AAG, DBR and AWE. Working with DOT&E, the Navy 
incorporated the requirement for a Reliability Growth Program in TEMP 
Revision C and the recent System Engineering Plan revision. Reliability 
Growth Curves are an effective tool to plan, illustrate, and report the 
progress of obtaining testing or operating time information to 
demonstrate statistical confidence that design reliability requirements 
have been met.
    The Navy's Reliability Growth test program is designed to find 
reliability problems through testing and correct those issues through a 
detailed root cause analysis and corrective action process. For EMALS 
and AAG, reliability growth will be accomplished via the specific tests 
targeting reliability growth and through other integration and 
qualification activities such as System Integration Laboratory testing, 
environmental qualification testing, commissioning, functional 
demonstration testing, and environmental stress screening. For DBR, 
previous empirical testing has been collected on reliability 
performance. This data will not be included in this reliability growth 
planning strategy, but it is important to note these periods of testing 
(e.g., land based DBR testing at Wallops Island, VA) as some 
improvements to DBR reliability have been made as a consequence.
    Today, EMALS reliability is tracking slightly better than its 
December 2014 reliability growth plan and AAG has begun reliability 
growth tracking in land based performance testing. DBR has begun 
reliability tracking at Wallops Island and will continue through post-
delivery testing onboard CVN-78. AWE reliability data tracking begins 
at ship delivery and will continue through post-delivery testing. All 
systems are expected to demonstrate suitable reliability to support 
IOT&E in 2018.
    The Navy has developed EMALS and AAG training required to support 
the CVN-78 crew that will operate these systems. The comprehensive 
training program includes multiple hands-on training sessions. The CVN-
78 crew has completed five EMALS training sessions, is currently 
performing hands on validation and verification of EMALS maintenance 
procedures and has commenced AAG classroom training. Incorporating the 
crew into the development of the training products has proven 
invaluable to the quality of the training received.
    The Full Ship Shock Trial (FSST) is conducted to validate the 
integrated shock worthiness of the ship. The Navy's original 2004 CVN-
78 TEMP included a FSST on CVN-78 prior to the ships first deployment 
which was based on CVN-78 delivering in 2013 and USS John F. Kennedy 
(CV 67) decommissioning in 2018. CVN-78's earlier delivery date (2013 
vice current 2016) and projected force structure in 2004 provided a 
window to complete the FSST without operational impacts to the Navy 
prior to deploying the ship. Subsequently, the CVN-78 delivery date was 
moved to March 2016 primarily as a result of budget decisions that 
shifted the start of construction two years later, and the Navy 
ultimately decommissioned CV 67 ten years earlier than planned (in 2008 
vice 2018). The Navy is currently planning to conduct CVN-78 FSST in 
2019.
        vii. cvn-79 construction performance and class approach
    The CVN-79 cost cap was established in 2006 and adjusted by the 
Secretary of the Navy in 2013, primarily to address inflation between 
2006 and 2013 plus $325 million of the allowed increase for non-
recurring engineering to incorporate design improvements for the CVN-78 
Class construction.
    The Navy and the shipbuilder conducted an extensive affordability 
review of carrier construction and made significant changes to deliver 
CVN-79 at the lowest possible cost. These changes are focused on 
eliminating the largest impacts to cost performance identified during 
the construction of CVN-78 as well as furthering improvements in future 
carrier construction. The Navy outlined cost savings initiatives in its 
Report to Congress in May, 2013, and is executing according to plan.
    Stability in requirements, design, schedule, and budget, are 
essential to controlling and improving CVN-79 cost, and therefore is of 
highest priority for the program. Requirements for CVN-79 were ``locked 
down'' prior to the commencement of CVN-79 construction. The technical 
baseline and allocated budget for these requirements were agreed to by 
the Chief of Naval Operations and ASN(RD&A) and further changes to the 
baseline require their approval, which ensures design stability and 
increases effectiveness during production. At the time of construction 
contract award, CVN-79 has 100 percent of the design product model 
complete (compared to 65 percent for CVN-78) and 80 percent of initial 
drawings released. Further, CVN-79 construction benefits from the 
maturation of virtually all new technologies inserted on CVN-78. In the 
case of EMALS and AAG, the system design and procurement costs are 
understood, and CVN-79 leverages CVN-78 lessons learned.
           improvements in material availability and pricing
    A completed Ford-class design enabled the shipbuilder to fully 
understand the ``whole ship'' bill of materials for CVN-79 construction 
and to more effectively manage the procurement of those materials with 
the knowledge of material lead times and qualified sources accrued from 
CVN-78 construction. The shipbuilder is able to order ship-set 
quantities of material, with attendant cost benefits, and to ensure 
CVN-79 material will arrive on time to support construction need. 
Extensive improvements have been put in place for CVN-79 material 
procurement to drive both cost reductions associated with more 
efficient procurement strategies and production labor improvements 
associated with improved material availability. Improved material 
availability is also a critical enabler to many construction efficiency 
improvements in CVN-79.
    The shipbuilder has developed an entirely new material procurement 
and management strategy for CVN-79. This new strategy consists of eight 
separate initiatives:

      Define the ``whole ship'' bill of material--This allows 
the shipbuilder to most economically procure material items from sub 
vendors. Reduced material costs will be realized and procurement effort 
is reduced--with an estimated 30 percent reduction in total number of 
purchase order lines as compared with CVN-78.
      Establish a ``ship view'' of equipment by supplier to 
help incentivize suppliers and correlate supplier priorities based on 
construction progress and need--Some sub-vendors produce multiple types 
of components in different geographic locations. Grouping orders by 
component type and sub vendor subdivision and location helps the 
shipbuilder define and communicate material priorities to the sub 
vendor across his enterprise, thereby improving material availability 
and reducing cost. This also reduces shipbuilder procurement support 
effort.
      Optimize supplier production for cost avoidance--The 
shipbuilder identified key components that needed to be purchased 
earlier than just-in-time construction need, allowing suppliers to 
level load their production lines and avoid incurring fees for 
accelerated production.
      Investigate multi-ship material buys to leverage economic 
order quantity pricing--The shipbuilder is investigating opportunities 
to procure parts common to multiple ship programs (e.g. CVN-79, 
Virginia-class submarines, Nimitz-class RCOH) in a grouped manner to 
leverage better pricing for all programs.
      Improve material ordering schedule--Development of, and 
management to a comprehensive material procurement plan that considers 
construction sequencing, timing, and most recent experience with vendor 
procurement lead time to schedule a bundled or combined procurement to 
ensure material is available at the first instance of use.
      Solicit and implement vendor cost reduction initiatives--
The shipbuilder has worked with its suppliers to identify cost 
reduction ideas that may simplify material production and reduce 
procurement cost. An example is encouraging vendors to recommend 
changes to ship specification requirements to achieve technical 
equivalency at reduced cost.
      Increase competition in subcontracting--Competition is 
pursued at the subcontractor level. Components that were competitively 
awarded for CVN-78 construction are evaluated for re-competition in 
CVN-79 subcontracts. This approach includes competing new components 
that are introduced due to obsolescence or cost reduction actions as 
appropriate.
      Procure commodity equipment directly from the original 
equipment manufacturer--The shipbuilder can bulk order commodity 
equipment for a lower price than an individual sub vendor due to a 
larger order quantity. The shipbuilder would then provide the commodity 
material back to the sub vendor to assemble into the finished product 
at a lower cost.

    The shipbuilder has undertaken these initiatives in a multi-faceted 
approach with the objective of driving material cost down, and material 
availability up to support an optimized construction schedule, within 
the constraints of the funding available for each fiscal year. As a 
comparison, at the time of DD&C contract award for CVN-78, 44 percent 
of the direct-buy material was on contract with material availability 
at 83 percent. At the time of CVN-79 DD&C contract award, 95 percent of 
the direct buy material was on contract with material availability at 
97 percent. Accordingly, with higher CVN-79 material availability, the 
Navy and the shipbuilder provide a stable and predictable timing of 
material need, maintain an efficient construction sequence, increase 
pre-outfitting in the shops vice outfitting on the ship, and ultimately 
avoid costly construction and engineering re-work.
    The Navy has also employed outside supply chain management experts 
to help develop additional optimal contractor furnished material 
procurement strategies. Furthermore, the Navy has increased its 
oversight of contractor furnished material procurement, ensuring that 
it is competed (where competition is available); that it is fixed 
priced; that commodities are bundled to leverage economic order 
quantities; and that the vendor base capacity and schedule for receipt 
supports the optimal build plan being developed for production of CVN-
79. The increased oversight has included Program Office visits to 
several key vendors to ensure a deeper, first hand understanding of 
cost drivers and issues.
    significant changes to build strategy and shipbuilding processes
    The shipbuilder and the Navy have performed a comprehensive review 
of the build strategy and processes used in construction of CVN-78 
Class aircraft carriers as well as consulted with other Navy 
shipbuilders on best practices. As a result, the shipbuilder has 
identified and implemented a number of changes in the way they build 
aircraft carriers, with a dedicated focus on executing construction 
activities where they can most efficiently be performed. The CVN-79 
build sequence installs 20 percent more parts in shop, and 30 percent 
more parts on the final assembly platen, as compared to CVN-78. This 
work will result in an increase in pre-outfitting and work being pulled 
to earlier stages in the construction process where it is most 
efficiently accomplished.
    As part of this strategy, the shipbuilder is also expanding shop 
construction of complex assemblies. These are assemblies of piping, 
valves, pumps, etc., that would previously have been `stick built' on 
the final assembly platen or on the ship. Building these assemblies in 
a shop environment, which is far more efficient, allows shop testing 
and painting currently being done on the platen or ship to be done in 
the shop environment, ultimately optimizing the eventual transportation 
of the complex assembly to the ship. The ship design has been reviewed 
by deck plate foremen who built CVN-78 to identify candidates for this 
complex assembly process. Over 1,800 assemblies have been identified 
which can be shop built, thus shifting hundreds of thousands of man-
hours of work into more efficient shop construction areas.
    An additional element of the strategy of moving more work into the 
shops is the expanded use of digital data from the product model for 
production. This allows for automated blast etching of locations of 
outfitting items in the shop, rather than the old practice of manually 
laying out the location of each individual item on the platen or in the 
dry-dock, using step ladders, tape measures, and paper drawings. To 
date, this has allowed for digitally locating and marking over 27,000 
electrical stud locations, over 32,000 insulation stud locations, and 
the locations of thousands of other outfitting items which can then be 
installed simply and cost effectively in the shop. Pre-outfitting of 
these bulkheads and decks in the shops provides for much earlier 
starting points for subsequent assembly and outfitting being performed 
on the final assembly platen, thus enabling more work to be brought 
earlier in the build sequence
Design Changes for Greater Producibility
    In conjunction with the Navy and the shipbuilder's comprehensive 
review of the build strategy and processes used in construction of CVN-
78 Class aircraft carriers, a number of design changes were identified 
that would result in more affordable construction. Some of these design 
changes were derived from lessons learned in the construction of CVN-78 
and others seek to further simplify the construction process and drive 
cost down.
    The introduction of several advancements in construction tooling is 
yielding improved productivity in the construction trades. Examples 
include weld machines that operate more autonomously, pipe bending 
machines precisely controlled through digital data, a plate cutting and 
beveling machine with the capability to accommodate plate nearly twice 
as thick, and adaptable construction jigs and fixtures.
    Additionally, the shipbuilder has created new superlifts, combining 
several units, lowering the number of units that need to be 
independently erected into the dry-dock, helping to alleviate demands 
on the gantry dry-dock crane and decreasing the number of times welders 
have to work in a constrained environment to weld construction units 
into the ship. Larger superlifts allow for more pre-outfitting on the 
final assembly platen, and shops, prior to ship erection, thereby 
increasing ship construction efficiency. To date, the shipbuilder has 
decreased the number of erectable units from CVN-78 by approximately 9 
percent.
Facility Additions and Upgrades
    In addition to the major focus discussed above, the shipbuilder 
continues to implement capital improvements to facilities that serve to 
reduce risk and improve productivity. Some initiatives include:

      The shipbuilder is installing large weather covers on the 
buffer zone and final assembly platen, as well as building a multi-bay 
unit outfitting hall that will increase the amount of covered workspace 
for the construction of CVN-79 and follow ships. This supports build 
strategy changes that move significant outfitting work from the ship to 
the final assembly platen. A recent improvement was made where the 
shipbuilder tripled the amount of space available for blast and coat of 
assembly units by building two additional blast and coat facilities.
      The shipbuilder has added a dry-dock elevator to allow 
easier access to dry-dock number 12. This addition was done toward the 
later stages of CVN-78 dry-dock construction and therefore had limited 
benefit for CVN-78, but is expected to increase the efficiency of 
movement of material into the dry-dock for CVN-79 and alleviate the 
bottleneck imposed by the limited number of lifting cranes. The 
shipbuilder is also building portable utility platforms to provide 
greater ease of access and support equipment for work being 
accomplished on the final assembly platen.
Two Phased Delivery
    To enhance CVN-79 build efficiency and affordability, the Navy is 
implementing a two-phase delivery plan. The two-phase strategy will 
allow the basic ship to be constructed and tested in the most efficient 
manner by the shipbuilder (Phase I) while enabling select ship systems 
and compartments to be completed in Phase II, where the work can be 
completed more affordably through competition or the use of skilled 
installation teams.
    No previous Nimitz or Ford-class construction program has utilized 
a two-phase delivery strategy from the start. CVN-79's circumstances 
are unique in that a single-phased ship construction would deliver the 
ship two years prior to when required as the numerical-relief for USS 
Nimitz. The two-phase delivery strategy for CVN-79 capitalizes on this 
schedule flexibility to deliver the ship at the lowest cost and enables 
the Navy to procure and install at the latest date possible shipboard 
electronic systems which otherwise would be subject to obsolescence 
prior to CVN-79's first deployment in 2027. This approach also supports 
the installation of the Enterprise Air Surveillance Radar (EASR) suite, 
a common enterprise radar solution selected for both capability and 
affordability in lieu of the DBR. The substitution of the EASR suite 
alone saves $180 million in GFE costs compared to CVN-78. Both Phase I 
and Phase II are funded within the CVN-79 budgeted end cost and are 
included within both the $11,498 million cost estimate and cost cap.
    The net result of all these actions was the recent award of the 
CVN-79 construction contract that in conjunction with GFE procures CVN-
79 at or below the $11,498 million Congressional cost cap. This 
contract includes a steeper shareline and a lower ceiling price than 
prior CVN fixed price contracts and is reflective of a shared 
understanding by the Navy and the shipbuilder of the costs and risks 
associated with building CVN-79. Importantly, this is just one step in 
an ongoing process that will continue to reduce the costs of future 
ships of the class.
                     viii. cvn-80 and follow ships
    The CVN-80 planning and construction will continue to leverage 
class lessons learned in the effort to achieve cost and risk reduction 
for remaining Ford-class ships. The CVN-80 strategy seeks to improve on 
CVN-79 efforts to frontload as much work as possible to the earliest 
phases of construction, where work is both predictable and more cost 
efficient. A key element in achieving continued cost reduction on CVN-
80 is to provide stability in funding and construction schedules. The 
CVN-80 contract award for long lead material procurement and 
construction planning is scheduled to award November 2015 and requires 
the first year of advance procurement funding. A continuing resolution 
extending beyond November 2015 will delay the CVN-80 contract award and 
consequently delay material procurements, workload and layout planning, 
material tracking, an integrated master schedule, work packages, and 
other activities necessary to prepare for construction start in fiscal 
year 2018.
    The naval nuclear component vendor industrial base is a highly 
specialized supply base with over 95 percent of contract value with 
single or sole source vendors. Naval Reactors actively manages this 
industrial base to minimize costs and deliver high quality products. In 
addition to material and labor costs, nuclear security and safety 
requirements are specific drivers in this specialized industrial base 
that Naval Reactors continuously engages with suppliers on. As a result 
of this comprehensive engagement, Naval Reactors is actively managing 
costs for these components, driving down inflation, workload and 
material cost impacts, across this highly specialized industrial base 
to minimize costs for CVN-80 and follow ships.
    As part of the Navy's approach to drive affordability into CVN 
construction, a research and development funding stream is being 
pursued to accomplish design for affordability efforts similar to the 
ongoing efforts on the Virginia-class submarine program to help sustain 
the identification, development and implementation of cost savings 
initiatives on CVN-80 and follow ships. These would consist of a broad 
range of system and technology alternatives and continued producibility 
improvements.
                             ix. conclusion
    Aircraft carriers are central to the Nation's defense strategy, 
which calls for forward presence; the ability to simultaneously deter 
potential adversaries and assure our allies; and capacity to project 
power at sea and ashore.
    While delivery of the first-of-class Ford has involved challenges, 
those challenges are being addressed and this aircraft carrier class 
will provide great value to our Nation with unprecedented and greatly 
needed warfighting capability at overall lower total ownership cost 
than a Nimitz-class CVN. The Navy has taken major steps to stem the 
tide of increasing costs and drive affordability into carrier 
acquisition. When Ford delivers, she will be able to meet operational 
challenges and those projected into the future at a savings of $4 
billion per ship ($80 million per ship per year). These national assets 
are equally capable of providing our other core capabilities of sea 
control, maritime security, and humanitarian assistance and disaster 
relief. Our nuclear powered carriers will continue to provide our 
nation the ability to rapidly and decisively respond globally to crises 
for decades to come.

    Chairman McCain. Thank you.
    Dr. Gilmore.

 STATEMENT OF HON. J. MICHAEL GILMORE, DIRECTOR OF OPERATIONAL 
           TEST AND EVALUATION, DEPARTMENT OF DEFENSE

    Dr. Gilmore. Mr. Chairman, Senator Reed, members of the 
committee, I'll briefly summarize my written statement.
    Whether the projected quantum improvements and combat 
effectiveness and reductions in total ownership costs that will 
be realized that are associated with the new systems being 
incorporated in CVN-78 are not now known, the Navy indicates 
the reliability of the electromagnetic aircraft launch system, 
or EMALS, advanced arresting gear, AAG, and dual-band radar, 
DBR, will support initial operational test and evaluation in 
first deployment.
    The most recent definitive data I have indicate the 
reliability of EMALS is below the Navy's goal by more than a 
factor of ten. The reliability of the DBR and redesigned AAG 
are unknown. We only have engineering estimates or reliability, 
very little test data.
    Prior to its redesign, AAG reliability was a factor of 800 
below its goal. Data providing a first indication of the 
reliability of the redesigned AAG will be available later this 
year as a result of ongoing testing.
    In the case of EMALS, the Navy notes that reliability is 
above the December 2014 reliability growth curve. However, as a 
consequence of poor performance and tests, that growth curve 
was rebaselined to well below the reliability goal, and, 
consequently, the data we have indicate EMALS was not on a path 
to meet its goal.
    What the effects on combat effectiveness of shortfalls, if 
any, in the ultimate reliability of these systems could be will 
not be known until developmental and operational tests that are 
conducting post-delivery. In particular, the specific nature of 
the failures encountered and their difficulty of repair will be 
important to understand. In that regard, the Navy has recently 
indicated that the EMALS installation on CVN-78 is such that 
failures in selected EMALS components could result in multiple 
catapults being down for extended periods. This is because 
there is no ability to read--to readily electrically isolate 
components permitting, as in current fleet operations, 
maintenance on nonoperating catapults while flight operations 
are performed on operating catapults. The reliability of these 
systems will also be a key determinant of whether projected 
life-cycle cost savings for the Ford-class will actually be 
realized.
    The schedule of activities for CVN-78 subsequent to its 
delivery, including the timing for and number of independent 
steaming exercises, is determined primarily by the Navy's 
certification, safety, and training requirements. Operational 
testing and strike combat operations, which cannot be 
accomplished until carrier air wing qualifications are 
complete, will be conducted as part of the Ford's joint task 
force exercise, which is an integral part of the Navy's planned 
training evolution for the ship and her crew. The plan is to 
test systems realistically as early as possible, to provide 
feedback to the program office, and to combine training and 
testing. Nonetheless, the current test schedule remains, in my 
view, aggressive, with concurrent ship-based and land-based 
developmental testing, and with some developmental testing, 
including very important first-time integration testing, 
continuing past the start of operational testing.
    In August, the Deputy Secretary of Defense directed the 
Navy to conduct a full-ship shock trial on CVN-78 before the 
ship's first deployment. Historical experience indicates 
clearly this is a key means to identify and mitigate mission-
critical failures before the ship and her crew deploy into 
harm's way.
    Finally, CVN-78 was designed to reduce manning, thereby 
limiting total ownership costs. However, recent Navy 
assessments raise concerns about manning issues on CVN-78 that 
would only be exacerbated by any shortfalls realized in the 
reliability of EMALS, AAG, and DBR. In particular, the Navy's 
Manning Wargame 3 states front-end analyses have not been 
finalized to capture the true maintenance and operational 
workload associated with the carrier's new and unique systems, 
and that won't be possible until we know more about what the 
reliability will actually be and what their maintainability 
will actually be.
    Thank you.
    [The prepared statement of Dr. Gilmore follows:]

              Prepared Statement by Dr. J. Michael Gilmore
    Chairman McCain, Ranking Member Reed, and distinguished members of 
the Committee, thank you for the opportunity to discuss my assessment 
of USS Gerald R. Ford (CVN-78). The Navy intends to deliver CVN-78 
early in calendar year 2016, and to begin initial operational test and 
evaluation (IOT&E) in late calendar year 2017. However, the Navy is in 
the process of developing a new schedule, so some dates may change. 
Based on the current schedule, between now and the beginning of IOT&E, 
the CVN-78 program is proceeding on an aggressive schedule to finish 
development, testing, troubleshooting, and correction of deficiencies 
for a number of new, complex systems critical to the warfighting 
capabilities of the ship. Low or unknown reliability and performance of 
the Advanced Arresting Gear (AAG), the Electromagnetic Aircraft Launch 
System (EMALS), the Dual Band Radar (DBR), and the Advanced Weapons 
Elevators (AWE) are significant risks to a successful IOT&E and first 
deployment, as well as to achieving the life-cycle cost reductions the 
Navy has estimated will accrue for the Ford-class carriers. The 
maturity of these systems is generally not at the level that would be 
desired at this stage in the program; for example, the CVN-78 test 
program is revealing problems with the DBR typical of discoveries in 
early developmental testing. Nonetheless, AAG, EMALS, DBR, and AWE 
equipment is being installed on CVN-78, and in some cases, is 
undergoing shipboard checkout. Consequently, any significant issues 
that testing discovers before CVN-78's schedule-driven IOT&E and 
deployment will be difficult, or perhaps impossible, to address.
    Resolving the uncertainties in the reliability and performance of 
these systems is critical to CVN-78's primary function of conducting 
combat operations. CVN-78 has design features intended to enhance its 
ability to launch, recover, and service aircraft. EMALS and AAG are key 
systems planned to provide new capabilities for launching and 
recovering aircraft that are heavier and lighter than typically 
operated on Nimitz-class carriers. DBR is intended to enhance radar 
coverage on CVN-78 in support of air traffic control and ship self-
defense. DBR is planned to reduce some of the known sensor limitations 
on Nimitz-class carriers that utilize legacy radars. The data currently 
available to my office indicate EMALS is unlikely to achieve the Navy's 
reliability requirements. (The Navy indicates EMALS reliability is 
above its current growth curve, which is true; however, that growth 
curve was revised in 2013, based on poor demonstrated performance, to 
achieve EMALS reliability on CVN-78 a factor of 15 below the Navy's 
goal.) I have no current data regarding DBR or AWE reliability, and 
data regarding the reliability of the re-designed AAG are also not 
available. (Poor AAG reliability in developmental testing led to the 
need to re-design components of that system.) In addition, performance 
problems with these systems are continuing to be discovered. If the 
current schedule for conducting the ship's IOT&E and first deployment 
remain unchanged, reliability and performance shortfalls could degrade 
CVN-78's ability to conduct flight operations.
    Due to known problems with current aircraft carrier combat systems, 
there is significant risk CVN-78 will not achieve its self-defense 
requirements. Although the CVN-78 design incorporates several combat 
system improvements relative to the Nimitz-class, these improvements 
(if achieved) are unlikely to correct all of the known shortfalls. 
Testing on other ships with similar combat systems has highlighted 
deficiencies in weapon employment timelines, sensor coverage, system 
track management, and deficiencies with the recommended engagement 
tactics. Most of these limitations are likely to affect CVN-78 and I 
continue to view this as a significant risk to the CVN-78's ability to 
defend itself against attacks by the challenging anti-ship cruise 
missile and other threats proliferating worldwide.
    The Navy's previous decision to renege on its original commitment 
to conduct the Full Ship Shock Trial (FSST) on CVN-78 before her first 
deployment would have put CVN-78 at risk in combat operations. This 
decision was reversed in August 2015 by the Deputy Secretary of 
Defense. Historically, FSSTs for new ship classes have identified for 
the first time numerous mission-critical failures the Navy had to 
address to ensure the new ships were survivable in combat. We can 
expect that CVN-78's FSST results will have significant and substantial 
implications on future carriers in the Ford-class and any subsequent 
new class of carriers.
    I also have concerns with manning and berthing on CVN-78. The Navy 
designed CVN-78 to have reduced manning to reduce life-cycle costs, but 
Navy analyses of manning on CVN-78 have identified problems in manning 
and berthing. These problems are similar to those seen on other recent 
ship classes such as DDG 1000 and the Littoral Combat Ship (LCS).
                                  aag
    AAG has undergone testing at the Navy's land-based test site in 
Lakehurst, New Jersey. Planned testing over the last few years has 
experienced delays to address problems discovered during testing. 
Testing has uncovered deficiencies in major components and in software 
that have contributed to several redesigns of the system since 2007. In 
July 2013, the AAG program office provided estimates of AAG reliability 
in the shipboard configuration. \1\ At that time, the program estimated 
AAG reliability to be approximately 20 Mean Cycles Between Operational 
Mission Failure (MCBOMF) in the shipboard configuration. \2\ \3\ That 
estimates was well below the Navy's goal of 16,500 MCBOMF. \4\ Unless 
resolved, AAG's low reliability will diminish CVN-78's ability to 
conduct flight operations and will reduce the number of sorties per day 
that CVN-78 can support. In particular, a typical day of flight 
operations requires 100 arrested landings. If the reliability of the 
re-designed AAG is not substantially better than prior test results, 
CVN-78 likely will not be able to complete a normal day of flight 
operations and may need to frequently divert aircraft to other 
airfields due to non-availability of arresting gear.
---------------------------------------------------------------------------
    \1\ Testing at Lakehurst uses a system similar, but not identical, 
to the CVN-78 configuration. The AAG program used data from Lakehurst 
to estimate AAG reliability onboard CVN-78 in the shipboard 
configuration.
    \2\  The AAG estimate is based on reliability block diagrams, which 
model the overall system based on individual component analysis.
    \3\  A cycle represents the recovery of one aircraft.
    \4\ The Navy goal is for the AAG installation on CVN-78. An 
operational mission failure is a failure that reduces the number of 
available AAG engines below two. The Navy's original plan installed 
four AAG engines on CVN-78; however, it is currently expected that only 
three engines will be installed on CVN-78.
---------------------------------------------------------------------------
    Prior test data indicate clearly that absent significant changes in 
its design, AAG reliability is unlikely to achieve its goal. \5\ MIL-
STD-189C states that the ratio of initial reliability of a system to 
its reliability goal must be greater than or equal to 0.30. \6\ It also 
notes that failure to achieve a sufficiently high initial reliability 
in the past has resulted in an unacceptably high percentage of the 
Department's developmental systems failing to meet their reliability 
thresholds in the IOT&E. Based on this, AAG reliability should be above 
4,950 MCBOMF at this point in the development to have a reasonable 
chance of achieving the goal of 16,500 MCBOMF.
---------------------------------------------------------------------------
    \5\ This concern has been noted in my December 2013, Operational 
Assessment of USS Gerald R. Ford (CVN-78) Report and my fiscal year 
2013 and fiscal year 2014 Annual Reports.
    \6\ MIL-STD-189C, Department of Defense Handbook for Reliability 
Growth Management,'' dated 14 June 2011.
---------------------------------------------------------------------------
    In a December 2014 briefing to my office, the AAG program 
acknowledged that the AAG design at that time did not meet service life 
requirements, and decided to redesign the water twister, one of three 
major components of AAG. \7\ The redesigned water twister was installed 
at the Jet Car Track Site (JCTS) at Lakehurst earlier this year. The 
AAG program started performance testing in July to validate the new 
design. \8\ The program does not expect to have a statistically 
significant number of test events for assessing performance or 
reliability until later this year. Consequently, I do not now have 
performance or reliability data on the new design, which is intalled on 
CVN-78. If any major issues are discovered during upcoming testing, it 
will be difficult if not impossible to incorporate any changes onto 
CVN-78.
---------------------------------------------------------------------------
    \7\ AAG includes three brakes for recovering aircraft, the water 
twister, a brake derived from the B-52 landing gear brake, and a motor-
generator. The three separate brakes provide redundancy within the AAG 
system to ensure the safe recovery of aircraft.
    \8\ In JCTS testing, AAG arrests jet-propelled vehicles that travel 
down a railway with different loads and speeds. The AAG arrests these 
vehicles to test performance before transitioning to manned aircraft.
---------------------------------------------------------------------------
    The AAG program office also notes there is schedule risk in 
developing the Aircraft Recovery Bulletins (ARB) for CVN-78. The ARBs 
provide standardized operating procedures and technical guidance, and 
are required to conduct AAG flight operations. The schedule, which the 
program office considers to be at risk, has the first ARB delivered in 
June 2016, which addresses F/A-18E/F aircraft. Subsequent ARBs will 
cover the other aircraft in the CVN-78 air wing with the final ARB 
scheduled for April 2017. This is shortly before the CVN-78 IOT&E is 
scheduled to start in September 2017. Consequently, a delay of even a 
few months will affect IOT&E.
                                 emals
    EMALS is more mature than AAG. Over the years, technical issues 
with the EMALS power interface and conversion systems and other 
deficiencies have slowed progress. However, testing at the Navy's land-
based test site in Lakehurst has demonstrated performance across the 
system's envelope. Testing at Lakehurst has examined EMALS performance 
launching F/A-18, C-2, E-2D, F-35C, and T-45 aircraft. EMALS equipment 
is installed on CVN-78 and has begun shipyard testing, which includes 
dead load testing, to check out the installed equipment. \9\
---------------------------------------------------------------------------
    \9\ Dead loads are large, wheeled steel vehicles used to simulate 
the weight of actual aircraft.
---------------------------------------------------------------------------
    While EMALS is more mature than AAG, EMALS reliability remains a 
concern. In its last report to my office in December 2014, the EMALS 
program office estimated EMALS reliability to be approximately 340 Mean 
Cycles Between Critical Failure (MCBCF) in the shipboard configuration. 
\10\ \11\ \12\ This is well below the Navy goal of 4,166 MCBCF in the 
shipboard configuration, although it is above a revised reliability 
growth curve developed by the Navy in 2013 indicating achievement on 
CVN-78 of EMALS reliability a factor of 15 below the Navy's goal; that 
revision was necessary to generate a defensible growth curve consistent 
with the system's low demonstrated reliability. Following MIL-STD-189C, 
EMALS reliability should be above 1,250 MCBCF at this point in the 
development to have a reasonable chance of achieving the Navy's 
reliability goal. As with AAG, I am concerned about EMALS reliability 
and the potential effect on CVN-78 flight operations.
---------------------------------------------------------------------------
    \10\ The EMALS estimate is based on reliability block diagrams, 
which model the overall system based on individual component analysis.
    \11\ A critical failure is a failure that brings the number of 
available catapults below three.
    \12\ The EMALS land-based configuration has one catapult versus the 
four planned for CVN-78, and it does not include the shared electrical 
power configuration intended for use on the ship.
---------------------------------------------------------------------------
    In addition, the EMALS program is still discovering problems during 
testing. For example, the program discovered last year that EMALS 
launches of F/A-18E/F and EA-18G aircraft will overstress aircraft 
attachment points for wing-mounted 480-gallon external fuel tanks. 
Until the problem is rectified, these aircraft cannot employ external 
fuel tanks, which all but eliminates the organic tanking capability of 
the carrier strike group as well as normal flight operations. I agree 
with the Navy's assessment that the problem can be resolved; 
nonetheless, it is a concern that these types of problems are being 
discovered so close to the ship's delivery. Because EMALS equipment is 
installed on CVN-78, if upcoming testing uncovers additional problems, 
it will be difficult to incorporate changes onto CVN-78.
                                  awe
    The eleven AWEs on CVN-78 move ordnance and other supplies between 
the magazines, the hanger, the weapons handling areas, and the flight 
deck. The AWEs on CVN-78 are a new design. They are high capacity rope-
less elevators each utilizing four Linear Synchronous Motors (LSMs). To 
date, only engineering analyses of AWE reliability are available, which 
do not include significant test data. The early evidence from testing 
on CVN-78 in the shipyard raises concerns. Developmental testing on 
CVN-78 AWEs has required substantial contractor support suggesting that 
the system has poor reliability. If the AWEs on CVN-78 are unreliable, 
it will degrade the ship's ability to conduct combat operations.
                                  dbr
    DBR is composed of two radars, the Volume Search Radar (VSR) and 
the Multi-Function Radar (MFR). The DBR is currently undergoing land-
based testing at Wallops Island, Virginia using a configuration that is 
similar to the CVN-78 shipboard configuration. However, engineering 
development hardware is being used in some areas instead of production 
hardware, shore based power and cooling are used rather than shipboard 
power and cooling, and the radars each have one face versus the three 
faces each on CVN-78. \13\ Consequently, some DBR capabilities cannot 
be tested in a live environment until testing occurs onboard CVN-78 
including, for example, the radar's ability maintain track on a target 
as the target transitions from one radar face to another.
---------------------------------------------------------------------------
    \13\ The VSR and MFR operate in different frequency bands. VSR has 
three radar faces and MFR has three radar faces, for a total of six 
faces.
---------------------------------------------------------------------------
    The ongoing developmental testing at Wallops Island is in the 
problem discovery phase. Tests in the past year have revealed 
significant issues with tracking and supporting intercept missiles in 
flight, excessive numbers of clutter/false tracks, and track continuity 
issues. Since DBR provides CVN-78 with its ability to support air 
traffic control, it is noteworthy that some of the problems, such as 
close range clutter and dropping aircraft tracks that are in holding/
marshalling patterns, critically degrade air traffic control 
functionality. The program is working on fixes to the problems 
identified so far; but, because testing is in the early stages, the 
program has had limited opportunity to verify the efficacy of the 
fixes.
    The Navy is concerned about the amount of testing that remains to 
be completed as the DBR is integrated with the rest of the CVN-78 
combat system. Consequently, the Navy has developed a plan to extend 
testing at Wallops Island. Under the Navy's previous plans, the MFR at 
Wallops Island was to be moved to the Self-

Defense Test Ship (SDTS) in June of this year to conduct self-defense 
testing. The Navy's new plan leaves MFR at Wallops Island for 
approximately another year, providing valuable time to conduct DBR and 
combat system integration testing. While the new plan will have ripple 
effects on other testing efforts, I agree that it is necessary to 
extend testing at Wallops.
    Unfortunately, the new plan will not relieve CVN-78's aggressive 
test and deployment schedule. Under the CVN-78's current program 
schedule, the ship will not complete its Combat System Ship 
Qualification Trial (CSSQT) until December 2017, which is after IOT&E 
begins. It is during the CSSQT that CVN-78 will fire its first missiles 
in self-defense scenarios and the ship's crew will first demonstrate 
combat system safety and crew proficiency. To have this key event 
ending after IOT&E begins, raises the likelihood that additional 
problems will be discovered during IOT&E or that problems discovered 
during the CSSQT affect self-defense testing during the IOT&E.
    I also note that only engineering analyses of DBR reliability are 
currently available, which do not include significant test data. 
Although the Wallops Island land-based test site is not fully 
production representative, some reliability data are expected to be 
collected during testing that is currently ongoing. To date, some 
reliability problems have been observed at Wallops Island, for example 
with low voltage power supplies and with Transmit/Receive Integrated 
Multichannel Modules (T/RIMM) that form the radar antenna. The Navy has 
developed some fixes, for example, for the low voltage power supplies, 
but the problems with the T/RIMM modules, in particular, are a 
significant concern that, while progress is being made, are not fully 
resolved. Similar to EMALS and AAG, DBR equipment has been installed on 
CVN-78. Therefore, it will be difficult to correct performance or 
reliability problems that are discovered in upcoming testing of DBR, 
which is a critical system for both air traffic control and ship self-
defense.
                      sortie generation rate (sgr)
    One of CVN-78's Key Performance Parameters is Sortie Generation 
Rate (SGR), but for a variety of reasons, CVN-78 is unlikely to achieve 
the required SGR. SGR measures the number of aircraft that CVN-78 can 
launch and recover each day. The Navy designed CVN-78 to have a higher 
SGR than the Nimitz-class carriers. CVN-78 has features intended to 
provide this enhanced capability that include a slightly larger flight 
deck, dedicated weapons handling areas, and increased aircraft 
refueling stations. CVN-78 requirements specify an SGR of 160 sorties 
per day during sustained operations (12-hour flight day) and 270 
sorties per day (24-hour flight day) during surge operations. In 
comparison, Nimitz-class has demonstrated an SGR of 120 sorties per day 
in sustained operations and 240 sorties for surge.
    As described above, I have concerns related to the performance and 
reliability of AAG, EMALS, AWE, and DBR. These systems are critical to 
CVN-78 flight operations and are being tested for the first time in 
their shipboard configurations after they have been installed in CVN-
78. I assess the poor or unknown reliability of these critical systems 
and the performance issues outlined above, which clearly have the 
potential to diminish CVN-78's SGR, as the most significant risk to 
CVN-78's successful completion of IOT&E.
    In addition, there are also problems with the SGR requirements 
themselves because they are based on unrealistic assumptions. The SGR 
requirements are defined through a 35-day wartime scenario known as the 
Design Reference Mission (DRM). \14\ The DRM and the CVN-78 program 
office SGR assessments assume fair weather and unlimited visibility and 
that aircraft emergencies, failures of shipboard equipment, ship 
maneuvers (e.g., to avoid land), and manning shortfalls will not affect 
flight operations. These assumptions are unrealistic and CVN-78 is 
unlikely to meet the SGR requirements in an operational environment 
where these factors do affect flight operations.
---------------------------------------------------------------------------
    \14\ The Navy released the current version of the DRM, version 6.0, 
on 4 March 2015. Version 6.0 incorporates a handful of changes, 
including a transition from an air wing with a mix of Joint Strike 
Fighters and F/A-18s to an all F/A-18 air wing (plus E-2s and other 
aircraft).
---------------------------------------------------------------------------
                       combat system performance
    Due to known problems with current aircraft carrier combat systems, 
there is a substantial risk CVN-78 will not achieve its self-defense 
requirements. Although the CVN-78 design incorporates several combat 
system improvements relative to the Nimitz-class, these improvements 
are unlikely to address all of the known shortfalls. In past reports, I 
have noted that the ``CVN-68 class continues to have several problems 
that hinder it from successfully conducting ship self-defense. Specific 
problems include deficiencies in weapon employment timelines, sensor 
coverage, system track management, NATO Evolved Sea Sparrow Missile 
performance, as well as deficiencies with the recommended engagement 
tactics.'' \15\ Most of these limitations are likely to affect CVN-78 
and I continue to view these limitations as a significant risk to CVN-
78's ability to defend itself.
---------------------------------------------------------------------------
    \15\ My unclassified conclusions are reported in the fiscal year 
2011 through fiscal year 2014 Annual Reports, and classified 
conclusions are documented in the March 2011 and the November 2012 Ship 
Self-Defense Operational Mission Capability Assessment Reports.
---------------------------------------------------------------------------
    The CVN-78 combat system for self-defense is derived from the 
combat system on current carriers and amphibious ships. The combat 
system is used for self-defense against cruise missiles, small boats, 
and other threats. The combat systems on aircraft carriers and 
amphibious ships integrates several legacy shipboard systems, as well 
as several major acquisition programs including Ship Self-Defense 
System (SSDS), Rolling Airframe Missile (RAM), Evolved Sea Sparrow 
Missile (ESSM), Cooperative Engagement Capability (CEC), and Surface 
Electronic Warfare Improvement Program (SEWIP). On CVN-78, this 
integration effort includes DBR. While the integration of sensor and 
weapon systems with the command and decision system enhances a ship's 
self-defense capability relative to the use of non-integrated combat 
systems, the Navy has not successfully demonstrated the ability to 
effectively complete the self-defense mission against the types of 
threats and threat scenarios for which the overall system was designed. 
These problems affect CVN-78, as well as other Navy ships.
    The combat system improvements incorporated for CVN-78 should 
reduce some of the sensor coverage problems historically seen on 
carriers, but other shortfalls in combat system integration and weapon 
limitations will remain. The most significant improvements involve 
upgrades to the sensors. The Navy will replace several legacy sensors 
used on Nimitz-class carriers with the new DBR. \16\ In addition, CVN-
78 will receive a new SEWIP electronic warfare system, which is an 
upgrade from the current SLQ-32 passive radio frequency sensor. These 
changes should improve sensor coverage, which has been a deficiency on 
Nimitz-class carriers. To confirm these improvements, however, 
realistic operational testing on CVN-78 and on the Self-Defense Test 
Ship (SDTS) is required. (SDTS testing is required to examine CVN-78's 
ability to defend itself in scenarios that are unsafe to conduct on 
manned ships.)
---------------------------------------------------------------------------
    \16\ Legacy sensors on Nimitz-class carriers include SPS-48, SPS-
49, SPQ-9, and Mk 9 tracking illuminator.
---------------------------------------------------------------------------
    Some have argued that the self-defense limitations of aircraft 
carriers are not important because destroyers and cruisers escort 
carriers in combat and will handle these threats, but this argument 
ignores the fact that the CVN-78 self-defense requirements assume that 
these escorts are present. For example, the CVN-78 requirements to 
defend itself against enemy cruise missile attacks assume that the 
escorts will defeat most of an incoming raid and that only a portion of 
the raid, that will nonetheless be a challenge to defeat, will leak 
through to the CVN-78's self-defense systems. The Navy's most recent 
classified analysis examined a variety of tactical scenarios and 
confirmed the need for CVN-78 to be able to defend itself against 
cruise missiles that leak through the escorts. \17\
---------------------------------------------------------------------------
    \17\ Surface Ship Theater Air and Missile Defense Assessment 
(SSTAMDA) Study Report (U), 9 July 2008, N86/8S177518
---------------------------------------------------------------------------
    In addition to the historic problems with carrier combat systems 
mentioned earlier, there are other known limitations with the CVN-78 
combat system design. These limitations include disconnects between the 
CVN-78 requirements and current tactics for surface threats; 
performance limitations against surface swarm attacks; known 
limitations involving torpedoes and the Nixie torpedo decoy; and 
concerns with mine warfare and degaussing. While these problems affect 
many of the Navy's surface combatants, they represent risks to CVN-78's 
self-defense capabilities.
                    program schedule and test risks
    Some have expressed concerns that the CVN-78 post-delivery program 
is too lengthy and comprises an excessive number of independent 
steaming events (ISEs) and other activities. In fact, the program of 
testing and other activities leading up to the ship's deployment is 
determined almost entirely by the Navy's own safety and training 
requirements. In particular, the program schedule and number of ISEs 
subsequent to the ship's delivery are not driven by a mandate from 
testers to obtain hundreds of thousands of cycles on arresting or 
launch equipment, which was never expected to occur prior to the ship's 
deployment, as all involved in the program have known for many years. 
The program schedule is driven by the need to complete numerous 
training events, Aircraft Recovery Bulletins (ARBs, which provide 
standardized operating procedures and technical guidance for the 
arresting gear and are required by the Navy to conduct flight 
operations), and carrier flight qualifications. For example, under the 
Navy's own plans, CVN-78 will not complete air-wing carrier 
qualifications with all of the aircraft types expected on CVN-78, until 
the 29th ISE. Completion of the ARBs necessary to conduct air-wing 
qualifications has been delayed by the poor reliability and subsequent 
re-design of the AAG. Carrier strike operational testing, which cannot 
be conducted until the air-wing has finished workups and completed 
carrier air-wing qualification, will be conducted as part of the CVN-
78's Joint Task Force Exercise (JFTX), which is an integral part of the 
Navy's planned training evolution for the ship and her crew. This plan 
was developed to enable cost-effective testing of CVN-78's new 
capabilities at the earliest possible times by using data from the 
Navy's already-planned exercises. The common theme of the test plan is 
to test systems as early as possible to provide early feedback to the 
program office, and to combine training and testing.
    Nonetheless, CVN-78 currently has a post-delivery schedule driven 
by the ship's deployment date and leaves little time to fix problems 
discovered in developmental testing before IOT&E begins. The aggressive 
schedule has pushed significant portions of developmental testing 
beyond the start of the first phase of IOT&E. Developmental Test/
Integrated Test-5 (DT/IT-5), a major system integration test period, 
overlaps the beginning of IOT&E. Major at-sea combat system 
developmental tests, such as Combat System Shipboard Developmental Test 
events, also are scheduled to occur after IOT&E begins. \18\ This 
aggressive schedule increases the likelihood that problems will be 
discovered during CVN-78's IOT&E that could delay the successful 
completion of testing, and may delay CVN-78's first deployment.
---------------------------------------------------------------------------
    \18\ Combat System Shipboard Developmental Test (CS SBDT) #9 and 
#10 occur after IOT&E begins.
---------------------------------------------------------------------------
                      full ship shock trial (fsst)
    CVN-78 survivability will be assessed as part of CVN-78's Live Fire 
Test and Evaluation (LFT&E) program, which includes a Full Ship Shock 
Trial (FSST). Historically, FSSTs for each ship class have identified 
previously unknown mission-critical failures that the Navy had to 
address to ensure that the ships would be survivable in combat. I have 
documented these issues in classified memoranda. \19\
---------------------------------------------------------------------------
    \19\ August 2012 memorandum, Value of Conducting Full Ship Shock 
Trials (FSST) (U) and 5 May 2014 memorandum, GERALD R. FORD Class CVN-
78 Full Ship Shock Trial (FSST).
---------------------------------------------------------------------------
    In combat, even momentary interruptions of critical systems can be 
catastrophic when those systems are crucial to defending against 
incoming threats. This is why the Navy has historically required 
mission-essential systems to remain functional before, during, and 
after shock. The Navy's shock qualification specification states that a 
momentary malfunction is acceptable only if it is automatically self-
correcting and only if no consequent derangement, mal-operation, or 
compromise of mission essential capability is caused by the momentary 
malfunction. Thus, arguments made by some that deferring the shock 
trial presents acceptable risk because the trial will find problems 
that crews can fix miss the point--unanticipated failures requiring 
minutes, let alone hours or days to fix are unacceptable in combat, by 
the Navy's own admission. The Deputy Secretary of Defense directed in 
August 2015 that the FSST be conducted on CVN-78 prior to her maiden 
deployment. The FSST will provide critical information regarding CVN-
78's ability to survive and continue to conduct combat operations after 
absorbing hits from enemy weapons: understanding these vulnerabilities 
is essential. Discoveries made by conducting the FSST on CVN-78 will 
enable timely modification of future ships of the Ford-class to assure 
their survivability.
    Some have indicated that shock trials are expected on new ships, 
but have yet to be done on the first ship of the class, which is 
incorrect. History shows that shock trials have regularly been 
conducted on first-of-class ships including PGH 1, LCC 19, DD 963, CV 
59, LHA 1, FFG 7, DDG 993, LSD 41, MCM 1, LHD 1, and MHC 1. However, on 
occasion, various circumstances have caused some shock trials not to be 
conducted on the first-of-class, with the primary reason being to 
ensure testing is conducted on the most representative ship of the 
class. For example, FSSTs will not be conducted on the first-of-class 
Littoral Combat Ships (LCSs) because numerous significant design 
changes are being incorporated in later ships. Nonetheless, the 
preference is to perform the FSST on the first-of-class ship, so as to 
identify and mitigate mission-critical failures as soon as possible.
    Some have argued component-level testing and modeling and 
simulation are sufficient to identify and correct shock-related 
problems on fully-integrated ships. If that were the case, no mission 
critical failures should ever occur during FSSTs, which are conducted 
at less than the design-level of shock; however, mission-critical 
failures are always observed. For CVN-78, the FSST is particularly 
important given the large number of critical systems that have 
undemonstrated shock survivability. These systems include AAG, EMALS, 
DBR, the 13.8 kilovolt Electrical Generation and Distribution Systems, 
AWE, a new reactor plant design, and a new island design and location 
with a unique shock environment.
    It is noteworthy that the conduct of an FSST on CVN-78 prior to her 
first deployment had been a part of the program of record since 2004; 
therefore, the Navy has had ample time to plan for this event. 
Nonetheless, a number of claims have been and are being made regarding 
the potential delay in CVN-78's deployment caused by conducting the 
FSST prior to the ship's first deployment. These claims span months to 
years; however, only the former is consistent with the Navy's conduct 
of the FSST on CVN-71, USS Theodore Roosevelt. Commissioned in October 
1986, CVN-71 was underway most of January and February 1987 conducting 
crew and flight operations as part of shakedown. From March to July 
1987, CVN-71 underwent a post-shakedown availability. The month of 
August was used to prepare for the FSST, which was conducted during the 
period spanning August 31, 1987 to September 21, 1987. Upon completing 
the FSST, CVN-71 returned to Norfolk Naval Station for a two-week 
period to remove specialized trial equipment and to complete repairs to 
systems essential to flight operations. After completing those mission-
critical repairs, CVN-71 returned to sea to conduct fleet carrier 
qualifications. From November 1987 to January 1988, the ship underwent 
a restricted availability to complete all post-FSST and other repairs. 
CVN-71 was then underway for most of the remainder of 1988, conducting 
independent steaming exercises and other activities, departing on its 
first deployment on December 30, 1988. The effect of conducting the 
FSST on CVN-71's availability for operations following the shock trial 
was two weeks to conduct mission-critical repairs, and the total time 
required to prepare for, conduct, and recover fully from the FSST was 
about five months, including the restricted availability.
                                manning
    I recommend that manning and berthing be reexamined for the CVN-78-
class so that lessons learned can be incorporated into CVN-79. To 
reduce total ownership costs, the CVN-78 manning requirement is 500 
billets below the Nimitz-class. \20\ This manning requirement focuses 
on the ship's company and does not include the carrier air wing or 
embarked staffs. To achieve reduced manning, the Navy has relied upon 
technologies that have not been fully developed, tested, or fielded and 
emerging Navy-wide policies for moving workload to shore support. 
Similar assumptions were applied to the DDG 1000 and LCS programs. For 
those ship classes,the Navy has increased the size of the crews beyond 
the original estimates. On LCS, for example, this led to significant 
berthing changes. Similar manning growth could occur for CVN-78 with 
related berthing issues.
---------------------------------------------------------------------------
    \20\ Nimitz is allocated 3,291 billets in the 2002 CVN-68 Draft 
Ship's Manning Document. The CVN-78 manning threshold is 2,791 billets.
---------------------------------------------------------------------------
    In its manpower analyses, the Navy has highlighted several 
concerns: \21\
---------------------------------------------------------------------------
    \21\ The Navy holds regular CVN-78 manpower assessments. The last, 
USS Gerald R. Ford (CVN-78) War Game III, was held 28 July - 01 August 
2014.

      CVN-78's manning must be supported at the 100 percent 
level, although that is not the Navy's standard practice on other ships 
and the ability of the Navy's personnel and training systems to provide 
100 percent manning is unclear;
      CVN-78 is extremely sensitive to manpower fluctuations, 
and in several areas a shortfall of one or two crew members creates 
unsustainable workloads;
      Current Navy constructs for training will not work for 
new and unique CVN-78 systems;
      Berthing shortfalls for Chief Petty Officers (CPO) exist;
      Officer berthing is very tight and must be managed 
closely;
      Berthing during some training evolutions that require a 
significant number of evaluators and ship riders onboard CVN-78 is 
inadequate; \22\
---------------------------------------------------------------------------
    \22\ Inadequate berthing is identified as an issue for the 
Composite Training Exercise (COMPTUEX) integrated phase.
---------------------------------------------------------------------------
      Who is in charge of managing and maintaining CVN-78's 
network is not defined, a network which is much more complex than 
historically seen on Navy ships;
      Workload estimates for AAG, EMALS, and DBR are not well-
understood.

    In addressing these concerns on CVN-78, some changes are relatively 
easy, others are more difficult. Addressing the CVN-78's atypical 
requirement for 100 percent manning and the training shortfalls for 
CVN-78 unique equipment will likely require changes to the Navy support 
structure. With respect to increasing the ship berthing, typical 
berthing areas on CVN-78 have berthing racks that are two bunks high; 
it is relatively easy to replace two-high racks with three-high racks. 
This has been done on other ships such as LCS. However, it is 
relatively hard to provide additional showers and water closets. This 
requires identifying additional areas for showers and water closets and 
significant work for plumbing. Since habitability is a major concern 
for Navy ships and because these factors will inevitably have an effect 
on CVN-78 habitability, the Navy should reexamine manning and berthing 
for CVN-79.
                                summary
    There are significant risks to the successful completion of the 
CVN-78 IOT&E and the ship's subsequent deployment due to known 
performance problems and the low or unknown reliability of key systems. 
For AAG, EMALS, AWE and DBR, systems that are essential to the primary 
missions of the ship, these problems, if uncorrected, are likely to 
affect CVN-78's ability to conduct effective flight operations and to 
defend itself in combat.
    The CVN-78 test schedule leaves little or no time to fix problems 
discovered in developmental testing before IOT&E begins that could 
cause program delays. In the current program schedule, major 
developmental test events overlap IOT&E. This overlap increases the 
likelihood problems will be discovered during CVN-78's IOT&E, with the 
attendant risk to the successful completion of that testing and to the 
ship's first deployment.
    The inevitable lessons we will learn from the CVN-78 FSST will have 
significant implications for CVN-78 combat operations, as well as for 
the construction of future carriers incorporating the ship's advanced 
systems; therefore, the FSST should be conducted on CVN-78 as soon as 
it is feasible to do so.

    Chairman McCain. Mr. Francis.

STATEMENT OF PAUL L. FRANCIS, MANAGING DIRECTOR OF ACQUISITION 
 AND SOURCING MANAGEMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Francis. Thank you, Mr. Chairman, Mr. Reed, members of 
the committee. And I appreciate the opportunity to talk about 
the carrier program this morning.
    Let me start with the CVN-78. My bottom line on the CVN-78 
is ``same story, different program.'' In 2007, we reported that 
costs were likely to be underestimated by 22 percent on the 
construction of the ship and that the three main technologies--
EMALS, AAG, and DBR--were immature, likely to slip to the 
right, and out of schedule margin. And we said the Navy would 
be faced with the decision to either push the ship to the right 
or push the technologies to the right.
    Fast forward to today, 2015, cost increases are 22 percent. 
The three key technologies--I'm going to hold the slide up--
but, they've slipped about 5 years. So, the decisions made to 
keep the ship construction schedule pretty much intact but let 
the technologies slip. So, that's probably hard to see. But, 
the top chart--we have circles here. Three, four, five, and 
six, those are the three key technologies in the beginning of 
the shipboard testing. So, the original plan on the top was 
clearly ``fly before buy.'' Where we are today is, those three 
technologies and shipboard testing have all slid past ship 
launch. So, that's ``buy before fly.''
      
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
          
    So, my view at this point is, ship costs are going to 
continue to increase, full capability of the ship has been 
deferred, and right now we're looking at getting less for more. 
Now, why would I say that? I remember 25 years ago, I was 
interviewing the second Under Secretary of Defense for AT&L, 
John Betti. And he told me, ``You know, cost estimates in the 
Department of Defense, it's not like they're impossible to be 
achieved, but they do count on hitting seven home runs in the 
bottom of the ninth.'' So, I apologize for the sports analogy, 
but it's not mine.
    So, let's look at the home runs that the CVN-78 has to hit. 
And you can kind of see them bunched up here. We have to do a 
land-based testing, ship-based testing, integrated testing, 
IOT&E, all the time we're trying to complete construction. So, 
it's a big lift.
    Let's go to the CVN-79. What are its home runs? Right now 
the CVN-79's cost estimate depends on reducing construction 
labor hours by 18 percent, 9.3 million labor hours. Never been 
done before. Twice of whatever's been done in the past. The 
dual-band radar has been removed. It'll be replaced with a 
radar that's to be determined. And upgrades that were planned 
for the ship have been postponed. And so, I think that's 
wringing a lot out of the program already. It's already, with 
all these changes, at cap, and we're 7 years from delivery. 
Again, I think cost increases are likely, regardless of what's 
reported against the cost cap.
    So, I'd like to put the carrier in a little context here 
against acquisition. And, I think, Mr. Chairman, you brought 
this up, as did Mr. Reed. The CVN-78 program is a typical 
acquisition outcome. You know, 22-percent increase in cost, 
schedule delays are actually pretty typical for acquisitions. 
And, Mr. Chairman, I've testified before you a number of times 
on different things, but we can think of worse examples: JSF 
[Joint Strike Fighter], FCS [Future Combat Systems], F-22, LCS 
[Littoral Combat Ship]. So, I think what's different here is, 
this program--we knew all along this was going to be the case. 
We shouldn't be surprised by anything that's happened here, 
because we saw it coming. So, it's not an ``I told you so'' 
moment. It's ``We all knew it.''
    And so, you ask yourself why does something like this 
happen? Best practices are pretty well known, and we can go 
through them. So, mature technologies before you put them on 
the program. Wasn't done here. Go with a realistic cost 
estimate, and budget to it. We've always gone with the lowest 
cost estimate, the Navy's estimate. And we still are. And ``fly 
before buy.'' It wasn't done here.
    So, you ask yourself, Why don't we do these things? And my 
belief is, it's the prevailing acquisition culture. It's the 
collective pressures that the different participants bring upon 
the process that create incentives for programs to overstate 
what they think they can do, to understate technical risk, to 
understate cost, and to understate schedule. That's how you get 
funding, that's how you get programs approved.
    So, I'd just like to say, Where does this leave us today? 
And I'll say I know it's popular today to talk about the 
acquisition process being broken, but I think it's in a happy 
equilibrium. Well, maybe not so happy, but it's in equilibrium. 
It's been this way for 50 years. And I think it's going to stay 
this way until the incentives change. And, as the Chairman 
said, I've had--been in this job for 40 years. I haven't given 
up hope yet. And I believe that Congress is the game-changer 
here. I think Congress can change the incentives by reclaiming 
its oversight role, which I think has been diminished over the 
years. So, what do I mean by that? I'll cite three things:
    First is, your most important oversight tool is the initial 
funding you provide to a program. But, you give that tool up 
pretty early. So, if I'm a program today and I'm at milestone 
B, Congress had to approve my funding 2 years ago. Information 
was less, optimism fills the void. There's a cardinal rule in 
acquisition that says, ``Don't take money off the table.'' So, 
once you've approved my funding, 2 years later you've actually 
made the milestone B decision for me.
    Second thing is, I know the committee has many, many heavy 
responsibilities, but one of your responsibilities is, you're 
the appeals court for the services. So, if OSD says something a 
service disagrees with--and I'm speaking broadly--if Mike 
Gilmore's shop says something that the--they don't agree with, 
if the CAPE [Office of Cost Assessment and Program Evaluation] 
estimate they don't like, if it's a GAO recommendation they 
don't like, the services come up here. You're the appeals 
court. And they try to strike a deal. And they get those deals.
    And then, finally, a movement in the Department--and, I 
think, particularly with the Navy--is the bundle-up programs in 
multiyear procurements, block buys, and option program--or 
option contracts. So, not only do you give up your funding--
initial funding power, you can't touch the program afterwards, 
because it's all locked down in a block contract.
    So, I guess my appeal to you today is, let's not think of 
the CVN-78 program as the story, per se, but let's think about 
it as an object lesson in acquisition process and acquisition 
culture, and what the Congress can do about it, not just 
telling what the Department can do, but how you might do 
differently. Because I really think what you do with money 
sends messages as to what is acceptable.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Francis follows:]
      
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
      
    Chairman McCain. Well, thank you, Mr. Francis.
    Have you seen some of the changes we've made in acquisition 
in the defense bill that we passed through the Senate?
    Mr. Francis. I have, Mr. Chairman.
    Chairman McCain. Is those steps in the right direction?
    Mr. Francis. I think they're in the right direction, in 
many cases, for the Department, but I think, as you said in 
your opening statement, to the extent the Department comes in 
with a bad business case, if you still approve it and fund it, 
you're sanctioning it. So, with all of those improvements in 
acquisition reform legislation, that has to be coupled with 
what you do on programs. And I think a couple of good ``no's'' 
would be healthy.
    Chairman McCain. I think Senator Reed and I realize that 
we're just beginning in acquisition reform. And we will 
continue to make it our highest priority.
    Secretary McFarland or Secretary Stackley, is there 
anything you disagree with that Mr. Francis said?
    Mr. Stackley. Mr. Chairman, I was paying close attention 
and taking notes, and if I were changing places with Paul, 
looking at this from his perspective, I think I'd write a very 
similar summary, with some edits that I don't want to quibble 
over right here. But, I think his summation of some of the 
systemic issues, I think they are--I think he is correct, on 
spot. And what I would suggest is that we are making some 
systemic changes on our side, and you, likewise, with the 
Congress, to try to address these issues. And I don't give up 
on them.
    Chairman McCain. Secretary McFarland?
    Ms. McFarland. Chairman, Ranking Member, I agree with much 
of what Paul said. In fact, I haven't spent 40 years, but I've 
been spending at least 30-plus years being both a program 
manager and a tester in most of the functions that are 
performed inside of acquisition. And the challenge is the 
culture, and it is the people. It's the workforce, itself. I 
think the Department is very grateful for other committee and 
for the Congress for providing defense acquisition workforce 
development funds to help. But, inside of this culture, there 
needs to be a constructive change to how we work together as a 
team to provide these products.
    Mr. Stackley. Sir, I'm going to buy back one moment on 
that, too. Paul hit a very--he hit the word ``incentives.'' And 
the context that he uses that, I would make it much broader. If 
you look at the complexity of our acquisition system from end 
to end, starting with Congress, right down to the program 
manager and industry, the incentives across the board are not 
all aligned to the same outcomes. And as long as that is true, 
we've got forces pulling in opposite directions that are 
impacting program execution.
    Chairman McCain. But, I would like to direct the witness's 
attention to probably one of the most egregious aspect of these 
cost overruns. And, of course, that's the advanced arresting 
gear, which, from an original estimate of $143 million is now 
estimate of $1 billion. It grows so much that 2 years ago, 
this--just this aspect of the carrier had grown so much, it hit 
the threshold to become a major defense acquisition program. 
And it continues, as we mentioned, to go up.
    I understand the Navy has assessed how their contractor has 
performed on this program is consistently substandard. It's 
having significant difficulties meeting cost and schedule 
targets. Yet, we ask the contractor and the Department's 
contract management officials, they characterize this type of 
performance, to my staff, as typical or average.
    Secretary Stackley, do you agree with the characteristic 
that a cost growth of 600 percent is typical or average?
    Mr. Stackley. Absolutely not, Mr. Chairman.
    Chairman McCain. Secretary McFarland, on page 3 of your 
statement, you said--acknowledging that the AAG problems have 
had the largest effect on construction, you stated, ``These 
engineering design problems are now in the past.'' Now, that's 
in your statement. And yet, I have in front of me a Defense 
Contract Management Agency evaluation of the AAG contract 
performance from just this past month that directly contradicts 
your statement, and, in fact, expect additional delays due to 
issues that have not yet been resolved. Now, I understand you 
oversee the Defense Contract Management Agency. Tell me that--
what's the disconnect here between you and the people that are 
making this estimate about the AAG? And can you assure this 
committee that this cost increase has stopped?
    Ms. McFarland. Chairman, I do not believe that the cost has 
stopped. I do believe that the majority of the engineering 
aspects of this program, in terms of technological risks and 
development, have been retired. There is still testing to be 
completed. There are still opportunities for risk to be 
realized as part of that effort. And I do believe that there 
will be activities in front of us. It's essentially that we 
have in front of us a program that has sunk a lot of effort 
into getting to where it is. And to go backward with the 
opportunities that this system has, operationally, to provide 
for the carrier does not make a good business case.
    Chairman McCain. Thank you.
    Would you--I would just point out that, recently, the 
manufacturers of the new tanker experienced cost overrun. They 
absorbed that cost overrun within that corporation. I wonder if 
maybe we should make that a standard procedure here in defense 
contracting. I think it should be a subject of a lot of 
consideration.
    Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    And first, Dr. Gilmore, you urged that shock trials be 
conducted on the CVN-78. And those are not going to be done on 
the CVN-78, they're going to be postponed to the next ship in 
the class, the -79. Senator McCain and I wrote to the Navy, 
basically accepting your advice and your opinion. Why is it so 
important that these shock trials begin on CVN-78, not 
deferred, in your view?
    Mr. Francis. Well, first of all, the--as I mentioned in my 
testimony, the Deputy Secretary decided to direct that the 
shock trial be done on the -78 before its first deployment last 
month. He made that decision.
    It's important because history has shown clearly--the 
history of shock trials has shown clearly that they are the 
only way to discover mission-critical failures. There has 
been--there has been some claim that component-level shock 
qualification testing, which, by the way, had not been funded 
for the Ford-class--it had been defunded; now the Navy says it 
will do it--and modeling and simulation are sufficient. But, if 
those things were sufficient, we should never see any mission-
critical failures when we do shock trials, which are conducted 
at less-than-design level of shock. But, we always do. And I 
think it was Captain Hontz who sent the committee a letter--he 
was the CO [Commanding Officer] of the Princeton when it was 
hit by a mine in the Persian Gulf--indicating his experience 
with shock trials and how they provided the key information 
that enabled his ship to survive and function in the Gulf after 
being hit.
    So, the history is clear that you will not know about 
mission-critical failures unless you do the shock trial. And I 
can assume, and I know, that the history that we presented to 
the Deputy Secretary and the Secretary figured in that 
decision.
    Senator Reed. Very good.
    Just for the record, Secretary Stackley, we are--you're on 
board--no pun intended--with the shock trials for the CVN-78.
    Mr. Stackley. Sir, we're moving out. Dr. Gilmore made 
reference to the component testing. The component testing was 
being lined up with a potential CVN-79 full-ship shock trial. 
We're moving that back to the left to support CVN-78.
    Senator Reed. Thank you.
    Let me follow up, Secretary Stackley, with the--the issue 
of off-ramps. Particularly when this was decided, in 2002, that 
it would be a transformative technology and risks went 
significantly higher--in other cases, you have used off-ramps. 
I know, in--with the DDG-1000, you were able to select a 
different type of motor when the desired, or at least the 
breakthrough, technology didn't materialize. What's your 
position with respect to the CVN-78 and -79 EMALS and others? 
Do you have a backup, or are we just going to follow this down 
to the point at which it can't work, and then--one of the 
points I think Senator McCain has made very useful is that if 
we have a system that cannot accommodate every type of aircraft 
the Navy flies for all of our carriers, then we are diminishing 
our force projection.
    Mr. Stackley. Yes, sir. Let me--your touching on the off-
ramps is striking a chord here. The amount of risk that was 
stacked up on CVN-78 without adequate off-ramps put us in a--
just in an untenable position when we ran into issues. I made 
reference to this Nunn-McCurdy-like review that we did on EMALS 
and AAG in the 2009 timeframe. That was with concern, cost and 
technical, regarding the program's performance. And, at that 
point in time, we had--the ship was off and running, in terms 
of production. And so, when we look at a potential off-ramp 
then, it would have caused a significant halt in production, 
delay, complete redesign of many of the ship's systems to bring 
steam back up to the flight deck to go to an alternative. So, 
there was no tenable off-ramp in that regard. And much of our 
focus then became, Will the system work? Are we confident the 
system will work? Can we cap the cost? And that ended up 
leading to a decision--and, frankly, with the CNO chairing that 
decision board--that we're going to press on, because of the 
trades in cost, one path or the other, the impact on schedule, 
the impact on performance if we were to, to that point in time, 
take an off-ramp that we had not planned.
    Going back in time, if--you know, if we had the ability, we 
could have, in fact, laid in an off-ramp in the early design 
stages of the CVN-78, in the event that we determined EMALS or 
AAG was not mature enough.
    I think this was a manifestation of what became a highly 
concurrent, highly compressed timeframe for development, 
design, production, and also decisionmaking that precluded 
that. Your example of the DDG-1000 going from what was going to 
be the permanent magnet motor, which was higher risk, it failed 
in test, we had a backup ready, in terms of the advanced 
induction motor to replace the PMM [Permanent Magnet Motor], 
and that--that has proven very successful, in terms of its 
completion of development, installation, and test on that 
program.
    Senator Reed. Just very quickly, going forward now----
    Mr. Stackley. Going forward. Yes, sir.
    Senator Reed.--one of the lessons of this very expensive 
exercise is that, when you're doing transformative technology, 
very high-risk technology, will you always make it routine to 
have an off-ramp?
    Mr. Stackley. Yes, sir. We--our assessment of technical 
risk--if we have a high-risk system that we're bringing to a 
production program, we've got to keep a hand on what are our 
alternatives, at least to a certain decision point where the 
confidence is compelling to go forward. You----
    Senator Reed. Thank you very much.
    Mr. Stackley. You specifically asked about EMALS and AAG, 
going forward.
    Senator Reed. Yeah
    Mr. Stackley. Sir, we have absolute confidence in EMALS at 
this point. We have conducted thousands of cycles on that 
system. We have gone through what we refer to as high-cycle 
fatigue testing, highly accelerate lifetime testing. We've got 
a system at Lakehurst that, in fact, is demonstrating the 
performance that we need.
    AAG is behind where it needs to be. All the data that Dr. 
Gilmore referred to, in terms of reliability, that's not 
because it's poorly designed, that's because we're behind where 
we need to be, in terms of time to demonstrate reliability--
test, fix, test, fix. So, we have that--a merge between 
development and production. Going forward, in terms of an off-
ramp, first question that--every AAG meeting I have, I start 
with, ``Is the system going to work?"--to make sure there's no 
doubt, no question, or, if there is, that we're addressing it.
    The Chairman described how there was a plan to backfit AAG 
on all the Nimitz-class carriers. And that's proven to be not 
affordable. That's not affordable as much because of the impact 
of a carrier than the cost of the AAG system, itself. But, if 
we had to, we could.
    Senator Reed. Thank you.
    Chairman McCain. How many years have we been seeing that? 
It's a remarkable record.
    Senator Ernst.
    Senator Ernst. Thank you, Mr. Chair.
    Secretary McFarland, gentlemen, thanks for being with us 
today.
    Secretary Stackley, ``test, fix, test, fix.'' How long are 
we going to continue to do that?
    Mr. Stackley. Ma'am, when it comes to--every developmental 
system--we are still doing test and fix on the DDG-51 Aegis 
weapon system that's been in the fleet for 30 years. So, 
there's going to be a continual test-and-fix as you bring in 
upgrades and added performance improvements. On the specific 
systems that we're delivering to the CVN-78, we'll be in a 
test-and-fix mode right through operational testing. We'll 
identify some further issues in operational testing, just like 
we do with every major weapon system that we bring to the 
fleet. And we'll continue to fix those.
    Today, test-and-fix primarily--primarily is software- 
related--software, not hardware.
    Senator Ernst. And where is this carrier right now?
    Mr. Stackley. CVN-78 is about 95 percent complete at the 
piers at Newport News Shipbuilding in Hampton Roads.
    Senator Ernst. It's sitting in a shipyard, correct?
    Mr. Stackley. Yes. Yes, ma'am.
    Senator Ernst. Okay. Well, Iowa, we don't have shipyards. 
The only time it matters to the folks back home, for me, is 
when they are actually out there operating. Now, across the 
military services, I have been told the 90 percent solution on 
time is better than the 100-percent solution too late. And at 
some point, this is going to be too late. And we are rapidly 
approaching that.
    Now, you have been the Assistant Secretary of the Navy for 
Research, Development, and Acquisition since 2008. And that was 
the same year the CVN-78 procurement was authorized. Have you 
ever received adverse action by the Navy or DOD due to the 
delays and the $2.4 billion in program cost growth?
    Mr. Stackley. No, ma'am.
    Senator Ernst. Has anybody within your chain, your 
structure, have they ever received adverse action for this?
    Mr. Stackley. In the chain, yes, ma'am.
    Senator Ernst. And can you describe those actions to me, 
please?
    Mr. Stackley. There was a program manager associated with 
the aircraft launch and recovery equipment who was relieved of 
his responsibilities.
    Senator Ernst. And at what level was he? Can you give me a 
rank, please?
    Mr. Stackley. Program manager, a captain in the United 
States Navy.
    Senator Ernst. Okay.
    And, Secretary McFarland also, have you received adverse 
action?
    Ms. McFarland. No, ma'am.
    Senator Ernst. Has anybody within your structure been----
    Ms. McFarland. Not to my knowledge.
    Senator Ernst.--reprimanded? Not to your knowledge.
    Folks, this is--I can tell you, a lot of folks have been 
let go for a lot less. I--and you can tell, I am extremely 
frustrated with the cost overruns, not being on time. There's 
no excuse. You can talk about all the gee- whiz gadgets that 
you want. That's fantastic. But, I will tell you that this is 
affecting all of the other services, as well.
    I still serve in the National Guard. You know, I'm a 
ground-pounder. Great. Good for me. We are losing in the 
National Guard, with this new NDAA, 8,200 National Guard 
soldiers. We're being cut 1100 dual-status technicians. We're 
losing 800 Active, Guard, and Reserve members. We're being cut 
forces. And at some point, this is going to hit the Navy, too. 
If we keep spending money on gee-whiz gadgets that are sitting 
in a shipyard, someday you may not have the sailors to get that 
thing out of port. It's affecting everyone. And our taxpayers 
are going to hold everyone accountable for this. Everyone.
    I am really upset, because I have been working very hard--
early hours, early months of my work here in the Senate, in 
this committee and on Homeland Security--trying to restore the 
program management process. And I had a bill pass unanimously 
out of HSGAC [the Homeland Security and Government Affairs 
Committee] on the program management. And I tried to get 
something into the NDAA, specifically for the Department of 
Defense. But, unfortunately, it didn't survive the conference. 
And I'm baffled--I am baffled why we're not focusing on program 
management and cost overruns. This is an epidemic, and we've 
got to do something about it.
    I'm sorry I'm on a soapbox, but you can tell that I'm 
upset. The folks back home are upset. And it doesn't do us any 
good unless it's actually out there, providing protections for 
the United States. And if we keep sitting on it, not moving 
forward in a timely manner, it doesn't do us any good.
    So, I'd like to hear a response. Just when are we going to 
get this done?
    Anybody. Anybody, please.
    Mr. Stackley. Let me specifically address CVN-78, in terms 
of when she will deliver to the Navy. The CVN-78, at one point 
in time, was going to be a 2006 procurement. It was delayed to 
2007, delayed to 2008, for budget purposes. As was described 
earlier, she was tied to being--to maintaining an 11-carrier 
Navy. Today, we're at 10 carriers. The requirement is for 11.
    Since the ship was put under construction, there was a 4-
month delay to launching the ship. And that was associated with 
getting completion levels to a higher level to ensure that we 
could control the costs going forward on the program. Since 
that time, there was a 6- to 8-week delay, that we announced a 
couple of weeks ago, which is tagged to ensuring that we 
maintain the discipline and cost in executing the balance of 
the test program. We have not moved the delivery date. We have 
changed the trials date. So, today we are still targeting an 
April, could go into May, delivery date for CVN-78. All of that 
lines up to get the ship on its scheduled deployment in 2019.
    Senator Ernst. I appreciate the response. I hope everybody 
understands my frustration, as well as the other members on the 
committee. This has got to be corrected, and somebody needs to 
be held accountable.
    Thank you, Mr. Chairman.
    Mr. Francis. Senator Ernst, I--may I make a comment?
    Senator Ernst. Absolutely.
    Mr. Francis. I think your concerns about, you know, the 
budget are well founded, and how those bills are going to be 
paid. I think, if you look at the CBO's [the Congressional 
Budget Office] analysis of the Navy's shipbuilding plan, if 
it's executed as it's currently planned, the Navy will need a 
30-percent bigger budget than it's historically gotten. So, 
that's on the Navy side.
    On the Air Force side, we have the tanker, we have the JSF, 
and the Long-Range Strike is coming. And, at the same time, the 
Army is shrinking.
    So, those bills are going to have to be paid somewhere. And 
then, if they're higher than even we think now, we're going to 
be in real trouble.
    And on the program managers, I remember we were at a 
hearing a few months ago, and you had asked me a question about 
that. One thing I wanted to bring up which I didn't then is, we 
really put program managers in terrible positions. So, when we 
create business cases where a program's underestimated and 
there isn't enough schedule to get things done, and 
technology's immature, we put a program manager in that 
position. And they have to do two things. They have to manage 
the program and impart discipline; at the same time, they have 
to defend the program. So, what we do with our program managers 
is not what industry does, and we grind really good people up. 
It's a wonder they take the jobs.
    Senator Ernst. Exactly. Thank you so much. I appreciate it.
    Admiral Manazir. Senator Ernst, may I make an operational 
comment?
    Senator Ernst. Yes, absolutely, Admiral.
    Admiral Manazir. Captain John Meier and his crew have moved 
aboard Ford. They're in the galley aboard Ford. They're 
operating almost 50 percent of the systems, and the crew is 
extraordinarily happy with the ship at this point. Secretary 
Stackley has already outlined the retirement of risk in the 
timeline, and we'll have to do that, but the warfighter does 
need this ship. And we're pleased with the fact that the crew 
likes the capability that we're delivering there, and the 
statement referred to that capability. Yes, ma'am, absolutely, 
costs more and is taking longer, but we will have that ship 
delivered with that higher capability by the time it deploys. 
And I'd just like to note for the record that the crew is very 
happy with the technology we're delivering to the warfighter.
    Senator Ernst. And thank you, Admiral.
    I'll make a closing comment. I have gone way over my time, 
but I will tell you, $2.4 billion is a lot of up-armor that 
could help the guys on the ground, as well. We could have saved 
a lot of arms, a lot of legs, a lot of lives if we had had that 
money allocated in our budget, as well.
    Thank you.
    Senator Reed [presiding]. Thank you.
    On behalf of the Chairman, let me recognize Senator 
Manchin.
    Senator Manchin. Thank you, Mr. Chairman.
    Let me just say that it's just that it's unbelievable to 
sit here and listen to this. And I'm reminded--in a 1961 
farewell speech of then-President Eisenhower, ``In the councils 
of government, we must guard against the acquisition of 
unwarranted influence, whether sought or unsought, by the 
military industrial complex.''
    Mr. Francis, I don't know how--I'd like to know how you're 
able to do this job and be--keep from being so frustrated, 
seeing the recommendations, seeing the forecast that you've put 
out in all these years, and knowing that the deficiencies will 
happen. So, what I would ask--Has anyone followed those people 
who have left? I think someone mentioned, here, how many of--
people that were in charge, whether it be from the Secretary on 
down--how many have left during the process of some of these 
acquisitions, and where they had--where they have gone to work 
afterwards?
    Mr. Francis. I don't know if--that there's a comprehensive 
study. I think----
    Senator Manchin. Back home, we always say, ``Follow the 
money,'' and you can usually figure out what the problem is.
    Mr. Francis. Yes. I think there's a fair amount of, you 
know, government personnel retiring and moving to industry.
    Senator Manchin. Do they move to the same industry that--
basically, that they were in charge of overseeing?
    Mr. Francis. Well, there are laws about conflict of 
interest, and they apply to different levels. So, they have to 
abide by that. But, many of them do eventually do that.
    Senator Manchin. What I'm understanding, in listening to 
the testimony, sir, that there's no repercussion whatsoever. I 
think this--the last statement was made, Mr.--Secretary 
Stackley--nobody at a higher level has ever been reprimanded, 
relieved, or whatever, for incompetency, but someone at a lower 
level has been. One person was mentioned. You know, in the 
private--back home in West Virginia, if we build a home and it 
goes over budget, and then let's say later on they build 
another home, you would learn from the first one. You know. And 
the definition of ``insanity'' is continue to do the same thing 
and think you'll get a different result. You would think that 
sooner or later we would learn.
    Mr. Francis. Well, I think Sean made a very good point when 
he went through why these programs take so long. The leadership 
changes, at every level, so many times that, you know, we're 
starting over again. And the people who are in the position now 
don't remember what happened then.
    I'll also say, I don't think this is a case of bad actors. 
I think these are people trying to act rationally in the 
environment----
    Senator Manchin. I'm not accusing anybody----
    Mr. Francis. Yeah.
    Senator Manchin.--of being----
    Mr. Francis. Yeah
    Senator Manchin.--intentionally a bad actor. I'm accusing 
probably the system, the way it's evolved over the years.
    President Eisenhower saw something coming. There is 
something that got his attention for him to make this statement 
in his farewell speech. And, being a military person, if we had 
operated in World War II, probably, he was thinking, the way he 
saw the evolution of the industrial complex, military, God help 
us in World War II, probably what--I'm saying something stoked 
his interest to say, ``We've got a problem. Be careful.'' And 
you're telling me this has evolved for 50 years.
    Mr. Francis. Yes.
    Senator Manchin. So, he had tremendous vision back then, 
knowing that we were going down a slippery path.
    I'm just saying--I was looking at what Russia--I mean, what 
China's able to do. And if you look at how they're able to 
advance and jump in very quickly. I'm sure there's other--
they've had other ways of acquiring the information they're 
getting, and we have suspicion about that. But, still yet, 
there is a process, a move that they're able to do things in a 
much quicker timeframe.
    What would--what recommendation would you make to us as--of 
all of us here, and people that make decisions, and people that 
maybe can change the law or create laws that would help us or 
prevent this from continuing? GAO, we pay no attention to you 
all. It's a shame. There should be a law that, when GAO 
basically makes a recommendation, we should at least owe it to 
the American people to give you an answer back why we accepted 
your recommendation or why we don't accept your recommendation. 
It's very simple. And myself and a--former Senator Coburn tried 
to get that done. Someone has to answer to what you're seeing 
and we're not doing. What's your recommendation for us to fix 
this system?
    Mr. Francis. I actually don't think it's a matter of law or 
regulation or telling the Department to do anything. I think 
it's--when you're making--your biggest opportunity is when 
you're approving a new program and you really have to 
scrutinize that program for what principles it embodies. So, if 
you really believe in ``mature technologies before you put them 
in a program,'' if you really believe in ``fly before buy,'' if 
you really believe in ``realistic estimating and scheduling,'' 
and a program comes up that doesn't measure up, you've got to 
say no.
    Senator Manchin. Mr. Francis, if I may--and I'm reading--
"The GAO found"--this is in 2007; you mentioned this--"the 
Ford-class aircraft carrier's lead ship began construction with 
an unrealistic business case.''
    Mr. Francis. Yes.
    Senator Manchin. You identified that. Didn't anybody here, 
or whoever was there at the time, did they talk to you? Did you 
give them that information, what you saw in evaluation?
    Mr. Francis. Wow. I'll tell--yes, in terms of the report. 
But, I believe this is the first hearing on the carrier where 
outside witnesses have been invited. I think that's right.
    Senator Manchin. Well, I thank the Chairman for that, 
because he's had some great hearings for us learn a little bit 
more about. I just--sir, I--I mean, I appreciate all your 
services.
    Ladies and gentlemen, we've got to change. $18 trillion of 
debt and the way we're climbing, and our military is under-
funded from the standpoint--or less--or lack of direction.
    But, Mr. Francis, thank you. And I'd love to meet with you 
later on, sir.
    Mr. Francis. I'd like that.
    Senator Manchin. Thank you.
    Chairman McCain [presiding]. I thank the Senator from West 
Virginia for his involvement and his commitment on this issue.
    Senator Tillis.
    Senator Tillis. Thank you, Mr. Chair.
    Mr. Francis, I think you opened up your statement by saying 
``the same story, different program.'' And you also commented, 
in your opening statement, about the--this committee and the 
Senate--or Congress as a whole, playing a more aggressive 
oversight role than we have over recent years. So, can you give 
me some sense of how much of that is going forward with new 
programs, how much of that should be applied retroactively to 
this subject or any of the other major projects that we have. 
What are your recommendations to this committee for what, 
specifically, we should do, say, in the next committee meeting 
or over the course of the year?
    Mr. Francis. I would say, right now we're kind of in a 
period where there aren't as many big, new programs coming down 
the pike. And that's really your opportunity. I don't know how 
much you can do on a program that's already through the 
milestone and under contract without making more of a mess of 
it.
    Senator Tillis. Well, what--maybe just going back, I think 
you used the analogy of seven home runs in the bottom of the 
ninth with respect to this graphic, here. To what extent do we 
need to go back and say, ``We know"--I think maybe the Twins 
did it to the Tigers this season, but it's very uncommon. It 
was widely reported, as a result. So, what do we need to do, 
with respect to this timeline, about being realistic that we're 
going to have a timeline that we're going to achieve? What do 
we need to do here to at least just not come back and have the 
same frustrations that Senator Ernst has about--we see it, we 
know it's not likely to happen; therefore, what should we be 
doing to set realistic expectations about what's already in the 
pipeline?
    Mr. Francis. So, for something like this, I would say--and 
I think the Navy has moved the schedule out a little bit so far 
on integration testing--I think you have to make it okay for 
the Navy to come up and say, ``We need to move this schedule, 
and it's going to cost more.'' That has to be okay. And right 
now we sort of play this--we're on eggshells, because, you 
know, the Navy might not want to come in and say that, because 
they're going to take a beating over increased cost. So, we 
kind of play----
    Senator Tillis. Not wait until it happens.
    Mr. Francis. Wait until it happens.
    Senator Tillis. Yeah. And I will tell you, as somebody 
who's been in long--you know, has been responsible for long-
term, complex projects, that's when people lose their jobs. I 
think that the thing that we ought to put on the table now is, 
if you come back and you explain to us why you're going to miss 
your dates, that becomes our problem, it becomes senior 
leadership's problem in the Department. If you wait, and 
ultimately realize or come to us and actually say, ``Well, you 
know, we were wrong,'' then somebody else needs to lose their 
job. It's a matter of whose problem it is. I can--and I'm not 
citing any one person, but it seems like it's obvious that 
we're going to have to pull a rabbit out of the hat to achieve 
these dates. Somebody owns the responsibility to speak honestly 
about that and set the right expectations. And if they don't, 
then they need to own it. And I think--I don't think you 
disagree with me.
    Mr. Francis. No.
    Senator Tillis. I think, going forward, because you said 
it's the same story, different program, we do need to come up 
with some sort of findings of fact before we approve future 
programs so that we can really have people own this, going 
forward, instead of having it, as Senator Manchin said, be the 
insanity that seems to be driving a lot of these large, complex 
programs.
    For the admirals, I'm going to ask you just a general 
question. First off, with respect to China, I know we spend a 
lot of time trying to take the edge off of our quantitative 
disadvantage with, say, a country like China that's churning 
out a lot of ships by the qualitative advantage. But, as 
Admiral Harris said, quantity has a quality of its own. At some 
point, we just--our capabilities may end up being matched by 
the sheer quantity that some of our potential adversaries are 
building up.
    What was so important, in terms of some of the unproven 
capabilities that are going onto these ships--what sort of leap 
in capabilities justified the cost overruns and the--and the 
basis of the discussion we're having today? And I'll open it up 
to any of the admirals. And, in advance, thank you for your 
service.
    Admiral Manazir. Senator, as the Director of Air Warfare, 
I'm responsible for stability of requirements that go into our 
acquisition programs. When you have stable requirements, you 
control cost, or at least that's one aspect of controlling 
costs. When we developed the Ford-class carrier, starting in 
the mid-'90s, with a--actually before that--a look at the 
future of aircraft carriers, we don't look at only one country, 
sir, we look around the world at potential conflicts. And we 
take the conflicts from relatively low-end conflict, like 
you're seeing in the north Arabian Gulf, with the carriers that 
are operating over the top of northern Iraq and Syria, and we 
look at higher-end conflicts against countries who can, through 
technology, attempt to match our capabilities. We do campaign 
modeling. We actually have names for them, like Thunder and 
Storm, and they are joint campaign models using U.S. Air Force, 
U.S. Navy, U.S. Army, and other military assets to effect that 
campaign.
    As has already been stated by Secretary Stackley, the 
United States Navy nuclear-powered, the largest place of an 
aircraft carrier is a chess piece in our Navy. Those chess 
pieces are a critical factor on the campaign plans that we 
bring forward. When we looked at the future and the way that 
the threats around the world were going, we devised the Ford-
class, with 33-percent greater sortie generation capability, 
with enhanced technology and an electric capacity, and, with 
the EMALS and AAG, an ability to increase getting airplanes on 
and off the ship, and other technologies around the ship. That 
campaign model, sir, looking at threats around the world, is 
what delivered the requirements base that resulted in the Ford 
design you see today. When we stabilize those requirements, 
sir, that is one aspect of stabilizing the cost and schedule.
    Admiral Moore. Sir, if I may, from a pure acquisition 
standpoint, the other reason from--that we built the Ford-class 
is, the Nimitz-class was starting to reach the end of its 
useful service life. Technology does change. We have to keep up 
with that technology. But, the other thing is that the Nimitz-
class was built in an era where people were relatively 
inexpensive. And so, from a total life-cycle cost perspective, 
the Nimitz-class is very expensive. People make up 40 percent 
of the cost of that ship over its 50-year service life. So, it 
was pretty clear, as we went forward, not only did we need the 
warfighting capability, but we had to drive long-term 
affordability into the ship over the 50 years, and the most 
important thing we could do in that respect was to get people 
off the ship. That required a complete redesign of the ship. 
Some of the things you're seeing with the new technology--EMALS 
and AAG, for instance--not only do they provide operational 
capability, but they also provide a significant reduction in 
the people on the ship.
    So, we're going to take 663 sailors off of Ford, compared 
to Nimitz, about 1,200, when you compare the air wing. The net 
result is, over 50 years, the cost to buy that ship, own it, 
operate it, and maintain it would be about $4 billion less than 
a Nimitz-class carrier today.
    Chairman McCain. Well, I must say, all those things that 
both admirals pointed out are undeniably accurate, but those 
numbers there are totally unacceptable. And I hope you realize 
that.
    I'd like to point out that Senator Kaine has been more 
involved in this situation in regard to this carrier than any 
member of this committee. He has been very constructive. He's 
been incredibly helpful in informing this committee. And he is 
a strong advocate for the men and women who are doing great 
work in the construction of this--of these aircraft carriers in 
arguably one of the finest shipyards in the world.
    Senator Kaine.
    Senator Kaine. Thank you, Mr. Chair. And thanks for your 
comments about the shipyard. I'm proud to represent the 
thousands of shipbuilders who manufacture the largest and most 
complicated items on the Planet Earth, nuclear aircraft 
carriers and subs, many from North Carolina and Virginia, who 
work at the shipyard. And they didn't make the decision about 
putting all the new technologies on the first in class of the 
Ford-class. They also didn't develop the weapon systems that 
have--and the AAG and EMALS systems that have been complicated. 
Those were developed elsewhere, and they're working to install 
them. But, I've been on the ship many times, and seen the work 
that's underway. I saw the core inserted into the ship one day. 
I've seen the Navy take control of the ship in recent months, 
and they are very excited about it. But, a couple of items:
    Cost overruns. And I agree that there's very systemic 
issues that are demonstrated that we need to tackle them. Cost 
overruns, I would say that a lot of this is less an overrun 
than poor cost estimation. And I think you unpack what cost 
overruns are: poor cost estimation.
    Before 2010, when the Navy was talking about their cost 
estimate on this project, to this committee and others, 
repeatedly the Navy said that their confidence level in the 
cost estimate was less than 50 percent, or even, in some cases, 
less than 40 percent. Isn't that correct?
    Mr. Stackley. Yes, sir.
    Senator Kaine. And I gather that that was because first in 
class and the addition of all these untried technological 
systems, as mandated by a previous SECDEF [Secretary of 
Defense], that was one of the reasons that the confidence level 
was low. Is that right?
    Mr. Stackley. Yes, sir.
    Senator Kaine. Now, let me talk about first-in-class 
history, because, Mr. Francis, you talked about, you know, this 
is a similar problem, but just a new example. I think it was 
Eric Labs who did the CBO study this summer, where he basically 
looked at Navy acquisition programs. And he looked at first in 
class over a variety of programs. And he basically concluded, I 
think, that, as a general matter, first-in-class acquisitions 
in shipbuilding tend to be 30 or 40 percent higher than the 
estimate that the Navy has begun with. Isn't that essentially 
true?
    Mr. Francis. Yes, Senator. I think in my statement we have 
listed the most recent, the first in class, and the average 
cost increase is 28 percent. So----
    Senator Kaine. So, I'm not going to defend 23 percent as 
a--as better than an average, but, to put it in context, this 
isn't that unusual. But, maybe the thing that is more important 
is what happens after first in class. So, first in class on the 
Ticonderoga-class cruiser, there was a lot of problems, ``An 
obese $1 billion walrus of the high seas with potentially 
dangerous stability problems.'' That was the assessment of the 
first-in-class by Defense Week in 1982. That program ended up 
being significantly improved as it moved along. The Arleigh 
Burke destroyer, it was called ``the Navy's billion-dollar hole 
in the water, another example of the Navy driving itself to the 
poorhouse in a Cadillac.'' That was the Washington Post in 
1986. But, generally, that acquisition program significantly 
improved after the first in class.
    One that I really love from our shipyard is the Virginia-
class submarine that's done in tandem between the shipyard in 
Newport News and Electric Boat. That's turned into a very 
successful acquisition program. But, wouldn't you agree the 
first-in-class of that had some significant challenge and cost 
overruns or cost estimation problems? Have I basically given 
the history correct on these three, the Ticonderoga, the 
Arleigh Burke, and the Virginia-class?
    Mr. Stackley. Sir, you're absolutely correct.
    One important thing to keep sight of is, in each case, 
unlike other major weapon systems programs, there is not a 
prototype----
    Senator Kaine. Right.
    Mr. Stackley.--ship.
    Senator Kaine. Right.
    Mr. Stackley. The lead ship is the prototype. It is the 
first opportunity you get to bring these complex systems 
together, integrate, test. And there are uncertainties, 
unknowables, and risks that get brought to that ship, in 
production, when it is most costly to find and fix those 
issues.
    Senator Kaine. I love the ``try it and buy it.'' For some 
weapon systems, that's really what you do. You prototype it and 
try it and then you buy it. But, for a ship of this size, the 
prototype is the actual. And that's why you often see 
difference between first-in-class and the subsequent history.
    You talked, Secretary Stackley, about the changing in the 
contracting mechanism between -78 as a cost-plus to -79 as a 
fixed cost. And I'm assuming -80 will be fixed-cost, as well.
    Mr. Stackley. Yes, sir. Both -79 and -80 will be fixed-
price contracts.
    Senator Kaine. And then, finally, on just the--Senator 
Tillis asked the question about the O&S savings. Actually, for 
as much we talk about the cost of constructing, actually the 
cost of operating is even larger on platforms such as this, 
because they have such a long life. And I gather that one of 
the main design features of this is to put in physical design 
to dramatically reduce the number of sailors and then drop the 
personnel cost by about $4 billion. Now, I credit--it was 
either Dr. Gilmore or Mr. Francis who said yes, there's a 
projected savings in personnel cost, but we haven't achieved it 
yet. We--you know, we have to see whether that's accurate. 
There may be some challenges that would reduce that. But, I do 
know that those--bringing down the number of personnel is one 
of the main advances over the Nimitz design that's part of this 
Ford-class. And obviously, I think the committee should stay 
very much on y'all. We should all stay on it to make sure that 
that's actually achieved.
    I strongly support the Chair's acquisition reform strategy. 
What we did in this year's NDAA was important. But, I think, 
Mr. Chair, I certainly see that as just a downpayment on what 
we will be doing, going forward. And I think it's important 
that we do it.
    Mr. Francis. Senator Kaine, can I make a----
    Senator Kaine. Please.
    Mr. Francis.--a couple of comments?
    Senator Kaine. Please.
    Mr. Francis. First, on the contract for the CVN-79. The 
current contract is fixed price. That covers about 45 percent 
of the construction cost. Fifty-five percent has already been 
paid for under a cost-plus contract. So, just keep that in 
mind.
    And then, I think you're exactly right on--the first- of-
class of any weapon system, we seem to have a lot of trouble 
with. And then, later on, we kind of get comfortable with the 
fact that we've worked out the problems and everything looks 
good. And it creates a little complacency. So, I think a 
challenge for us, if we're repeatedly having trouble with first 
article--and it's not just Navy--what is it we can do, in terms 
of estimating and risk analysis, so we're not making those same 
estimating errors every time?
    Senator Kaine. Good point.
    Ms. McFarland. Could I add to that, Senator? I think it's 
important this committee has actually received from the 
Director of CAPE a information package that showed that, since 
the implementation of WSARA [Weapon System Acquisition Reform 
Act of 2008], that the cost estimating techniques were improved 
because we were given access to information and data right 
directly from contractors. And it shows that the disparate 
distance between the service cost positions and the independent 
cost positions has gone at a median from over 6 percent to less 
than 2 percent and 3 percent, which is in the margin of error.
    So, over the last period of time, what the Senate points 
out is exactly what needs to be done to improve our future 
understanding of how costs are gone.
    Chairman McCain. But, isn't it also true that the delays in 
CVN-78 have had a significant effect on the cost of CVN-79?
    Ms. McFarland. Go ahead.
    Mr. Stackley. Yes, sir, there's--the program plan for the 
carrier, CVN-78, -79, and -80 has been stretched out, 
programatically and budgetarily. So, as I described earlier, 78 
was originally going to be an '06 carrier that became '07, 
then'08. In the 2008 NDAA, the Navy was authorized to procure 
the -78, -79, and -80 on 4-year centers, which was consistent 
with 12-carrier Navy. The decision was subsequently made by the 
Department of Defense that we're going to stretch that out to 
5-year centers, so now the CVN-79, which was going to be an 
earlier carrier, is not put under contract until 2013 budget, 
and then the -80 was bumped further. So, the program has been 
stretched out, and that's brought, frankly, more cost to the 
program just associated with costs that run with time.
    Chairman McCain. Senator Ayotte.
    Senator Ayotte. Thank you, Chairman.
    I want to thank all of you.
    I just wanted to say that I think one of the challenges--
Mr. Francis, you referenced this in your testimony--is, here we 
sit here today, billions of dollars of overrun, and people are 
very frustrated by it. And you cited also that the JSF program, 
the F-22, the Littoral Combat Ship, they were actually worse, 
and that this is a typical acquisition outcome.
    So, here's the challenge. We've got to change this dynamic, 
because we've had the leaders of all of our military rightly 
come in here and testify about the impact of sequestration and 
the fact that we're going to diminish the size of our fleet, 
that we need more ships, more attack submarines, more ground 
troops, obviously more fighters and making sure that we also 
have the training, of course, for our men and women in uniform. 
And then my constituents look at these billions of dollars of 
overruns that have been multiple examples of it, and look at us 
and say, ``Why aren't you dealing with that? If we're going to 
give you more money, then we need you to deal with that.'' So, 
all of us who care very deeply about making sure that we do 
what needs to be done to defend this great Nation, this is an 
issue that we've--it's got to go from being the bottom priority 
to a top priority.
    So, one question I'd ask all of you, whoever is the best--
Secretary Stackley, Secretary McFarland, if you're--Mr. 
Francis--who is best to answer this--you mentioned aligning 
responsibility, accountability, and decisionmaking. How are we 
rewarding good acquisition behavior within the Pentagon? In 
other words, if you are doing a good job, how are you rewarded? 
And, in turn, I think one of the questions you're hearing from 
all of us is, How are those being held accountable, not just at 
the captain level that we've heard about today, but at the 
highest levels that this has to be a priority for all of us if 
we want to make sure that our men and women in uniform have 
what they need and that we can make this case to the American 
people about how important this is?
    So, whoever is best to field that. But, I think that's the 
big question here. We're clearly not aligned in accountability 
priority and how we're rewarding the people who are doing a 
good job and also holding accountable the people who aren't 
doing a good job. And I'm sure that's demoralizing to the 
people who are doing a good job.
    Ms. McFarland. Senator, I think your points are very well 
made. I'm not sure we reward our program managers very well. I 
think the only thing that I could see from my experience is, 
you promote them.
    In terms of holding folks accountable, when we see a clear 
connection between what they did and their outcome, we do 
retire them or move them, both civilian and military. Beyond 
that, the incentive structure that you're referring to is not 
clear, and it's not adequate, and it ties to what the earlier--
Chairman and the Ranking Member talked about is, where those 
decisions are made. And what Paul talked about, in terms of, 
How is it that the culture and how the decisions are directed 
into a program manager relates to their ability to perform.
    Senator Ayotte. Well, one thing I would say is that also, 
as leaders, if you've got someone you've got to let go at the 
captain level, the leader needs to be held accountable also, 
because any one of us, if our team does something, we're 
ultimately responsible, right, as the leaders? And I think that 
coming from the top is so critical of making this a priority.
    I had a specific question also about what Senator McCain 
referenced, Mr. Francis mentioning the KC-46 program and how 
the contractors absorb the cost overruns. Wouldn't it make 
sense for all major defense acquisition production programs to 
be designed so that the contractor absorbs the cost overruns 
for production?
    Ms. McFarland. If I could, Senator.
    Senator Ayotte. Yes.
    Ms. McFarland. I think it's important to understand the 
risks. Sometimes the threat drives us to take risks because we 
need to. And when the risks aren't clear, that cost-sharing 
between us and the contractor has to be considered. When we ask 
for a fixed-price contract when the risks are high, the 
contractor, in order to get their corporate headquarters to 
agree upon working in that contract, they add that risk related 
to costs.
    Senator Ayotte. So, I understand that issue with regard to 
R&D [research and development], but what I'm talking about is 
production costs.
    Ms. McFarland. I agree with you in production.
    Senator Ayotte. So, are we doing that consistently across 
the board on production?
    Ms. McFarland. We took a look at our contracts across all 
the enterprise, across the services, and, indeed, yes.
    Mr. Stackley. Let me make one point regarding that. And we 
talk about shipbuilding, the lead shipping of prototype. 
Historically, the lead ship of a new class has been a cost-plus 
ship, with the follow ships being production. Over the last--
frankly, since I've been in this office, we've been trying to 
drive down the number of cost-plus ships in our program. And 
today, across the Department of the Navy, we have two cost-plus 
ships in production, one of those is the CVN-78.
    Senator Ayotte. My time is up, but I also will submit a 
question for the record that concerns me. As we looked at the 
CVN-78 cost growth, I'd like to understand, as we look at the 
Ohio-class submarine replacement program, what lessons we've 
learned from this so that we don't go down the same road with 
the Ohio-class, which is obviously very important to our 
Nation. So, I'll submit that for the record.
    [The information referred to follows:]

    The Navy recognizes the critical national importance of the Ohio 
Replacement (OR) program and is taking proactive steps to ensure that 
the program is successfully executed. Program measures include tight 
control over requirements, high degree of design completion prior to 
construction, maximum practical critical technology reuse, aggressive 
design for affordability program, detailed risk management program, 
extensive employment of engineering development models to retire risk, 
and continuous active review of program cost to enable timely course 
correction, if required. This will provide the Navy, the Department of 
Defense and the Nation confidence in long-term successful program 
execution.
    The OR program commenced with significant effort to establish the 
right warfighting requirements for the program. In June 2015 the Chief 
of Naval Operations approved OR's Capabilities Development Document 
(CDD) defining the authoritative, measurable, and testable capabilities 
needed to perform the mission and in August 2015 the Joint Requirements 
Oversight Council validated OR's CDD. The program completed the Navy's 
Gate 4 in November 2015 to confirm that the proper requirements have 
been established for the technical baseline for steady design maturity. 
The OR program has instituted formal and rigorous change control to 
manage the program's technical baseline and ensure the requirements are 
maintained and controlled at the appropriate level.
    Maximizing design maturity at the start of platform construction is 
a critical lesson learned from other shipbuilding programs. Increased 
design maturity will limit many of the complications that negatively 
impact both cost and schedule resulting from simultaneous design and 
production. To illustrate the effect of design maturity (i.e., drawings 
released to the shipbuilder) on various programs, the lead Seawolf-
class submarine achieved design maturity of 6 percent, and the lead 
Virginia-class submarine reached approximately 43 percent at 
construction start. The target design maturity for OR is 83 percent at 
start of construction.
    Technical maturity is another major focus area for the OR program 
and will reuse many of the proven technologies from both the Virginia 
and Ohio-class programs. It will also re-host the Trident D5 Strategic 
Weapon System, limiting the potential impact that immature 
transformational technologies could have on the program. The reuse of 
proven technologies mitigates technical risk and ensures a credible and 
survivable sea-based strategic deterrent.
    To ensure maximum cost and schedule savings, the OR program has 
initiated prototyping and pre-construction testing of key systems. 
These efforts are critical to address potential technical risks and 
include the Strategic Weapons System Ashore in Cape Canaveral, Launcher 
Test Facility at China Lake, and the Compatibility Test Facility in 
Philadelphia for propulsion system testing. Manufacturing risk 
reduction prototyping, including the Missile Tube and its outfitting, 
Quad Pack of Missile Tubes and Missile Tube Module (MTM), is also in 
process.
    The OR program will also leverage Virginia's extensive experience 
with modular construction. The Virginia program successfully improved 
schedule through modifying construction plans by using super-lifts, 
reducing 10 modules into 4. OR will implement a six super-module build 
plan based off the Virginia program to significantly reduce 
construction schedule and costs. The government, design yard, and 
shipbuilder are working together conducting detailed construction 
planning efforts to determine the optimal build sequence. The program 
is also continuing to identify opportunities to further acquisition 
efficiency, reduce schedule risk, and improve program affordability.
    Credible detailed cost estimates are critical to the OR program's 
success to achieve the appropriate cost targets. The program 
established an initial lead ship cost estimate and affordability 
targets for follow-on ships in December 2010 in support of the 
Milestone A. An updated cost estimate, largely based on actual data 
from the Ohio and Virginia-class programs, will be done to support the 
program's Milestone B decision in August 2016. The updated cost 
estimate will incorporate all cost reduction initiatives to date and 
adjust affordability targets if necessary.
    The Navy is committed to recapitalize the nation's sea-based 
strategic deterrent by ensuring the right requirements are established 
and implemented, design maturity is maximized and the technical 
baseline is strictly managed. The program's incorporation of mature and 
proven technologies, prototyping initiatives, and focus on 
affordability, are integral to successful execution. These efforts will 
ensure the OR program is successful, assure our Nation's strategic 
deterrence and ensure best value for the American taxpayers.

    Senator Ayotte. Thank you all.
    Mr. Francis. Senator, can I jump in on the time you don't 
have left?
    [Laughter.]
    Senator Ayotte. Of course. With the Chairman's latitude. 
How's that?
    Mr. Francis. Thank you.
    I--on--you're right, on production contracts. They should 
be fixed price. But, there are still times--ships aside, there 
are still some contracts that are cost-plus going into low-rate 
production. And you do have to match the risks you're taking 
with the contract. So, a good contract can't save a bad 
program. So, if the risks are high, I don't necessarily fault 
the contract type. I raise the question, Why are we going into 
production if we're not done with development yet?
    Senator Ayotte. Well, if it's a bad program, we shouldn't 
be investing in it in the first place. Isn't that the 
fundamental question?
    Mr. Francis. Yes. Or if it's just not ready to take the 
next step.
    And then, on your first point, on program managers and 
people held accountable, I think it's a really good 
philosophical question about: Accountable for what? What 
constitutes success? So, if I'm a program manager and I'm 
trying to get my program through the next milestone, and I do 
that, and then there's a cost increase, what am I going to be 
rated on? Getting it through the next milestone or the cost 
increase? And it's going to be the former. If you can support 
the program and get it moving, that's your--that's what you're 
mainly accountable for.
    Senator Ayotte. Well, that's a problem----
    Mr. Francis. Yes.
    Senator Ayotte.--because if it costs you a lot more and 
you're putting it through, but you get it on time, that's not 
meeting your target. And so, people need to be held accountable 
for both. Otherwise, this is where we end up, with the billions 
of dollars in overruns.
    Thank you.
    Chairman McCain. Senator Hirono.
    Senator Hirono. Thank you, Mr. Chairman.
    I know that the Department has--undertaking headquarters 
reductions, and Congress has reiterated the need to look at 
reducing headquarters positions for efficiencies and other 
savings. And, while we all want to reduce waste and 
inefficiency, I would urge the Department to look at possible 
headquarters reduction targets on a case-by-case basis and to 
make informed decisions, keeping in mind that cuts today can 
come back to cost much more in the long term than we get in the 
short-term savings.
    The acquisition workforce is vital to ensuring that our 
acquisition programs, such as the Ford-class carrier, are 
managed and lead to successful outcomes so that our men and 
women in uniform are given the tools that they need to 
effectively carry out their missions. We have to ensure that we 
are able to recruit and retain a quality acquisition workforce 
if we are to be successful in defense acquisitions. And if we 
have acquisition teams that are understaffed, undertrained, or 
too inexperienced, we cannot expect to have good results in our 
acquisition programs.
    As described in Secretary McFarland's testimony today, we 
cut the DOD acquisition workforce by roughly 57 percent during 
economy drives of the late 1990s and early 2000s. I believe 
that these deep reductions contributed directly to a large 
number of the problems that DOD has had in major acquisition 
programs over other last two decades. And I agree that Congress 
has an important oversight role to play on acquisitions. 
However, at the start, I want to know that our acquisition 
workforce can perform and that we can rely on the analyses and 
processes of our acquisition team before a program is 
recommended.
    Therefore, when we look to implement mandatory cuts to 
headquarters, we should be--we should consider the potential 
long-term effects on our acquisition programs among, of course, 
other programs.
    So, for Secretary McFarland, what is your assessment of the 
health of the acquisition workforce----
    Ms. McFarland. Senator----
    Senator Hirono.--especially as we deal with these very 
complicated acquisitions that we are--such as the Ford-class?
    Ms. McFarland. Senator, first, thank you. This is such a 
human endeavor. That is the principal understanding of the 
underlying problems that we have inside of acquisition, is to 
ensure that our workforce is appropriately trained and 
experienced to do these jobs.
    In 1986, we had 622,000 core acquisition people. By the 
timeframe of this program, in -78 was conceived, in '96 through 
2002, we had reduced that workforce to less than 300,000 
people.
    This committee and Congress in general has provided us the 
Defense Acquisition Workforce Development Fund that has allowed 
us to regrow, retrain, and reeducate about 8- to 10,000 people 
to bring abroad since then. That has been a critical 
improvement to where we are. The majority of our workforce is 
imminent to retirement. The workforce that we do have is 
predominantly younger and not necessarily in age, but rather in 
experience. And this program and these capabilities that we're 
discussing were inherently bred by people that may not have the 
adequate acquisition experience or understanding of the 
business case that needed to be executed here.
    So, I would say that we're very fragile right now, is the 
best way I could say it. These people are working very hard, 
they're very loyal, they're patriotic people, they don't get 
very well paid, they get a lot of abuse in the press. There is 
also an opportunity to forget what they have done that is done 
well, like the JLTV [Joint Light Tactical Vehicle] program 
that's actually been put together under the principles of WSARA 
and the better buying-power initiatives. And I can really 
commend the services--the Navy, the Marine Corps, and the 
Army--for that program and others that are doing much better by 
having that disciplined approach.
    The only way we're going to protect our future is to invest 
and protect that core capability.
    Senator Hirono. Secretary Stackley, would you like to 
comment also?
    Mr. Stackley. Ma'am, I think I'll add just one comment.
    Back in May of 2014, Chairman McCain and Senator Levin 
signed out a letter soliciting inputs from a number of 
individuals and organizations regarding, What do we need to do 
to improve this acquisition system? And I was fortunate enough 
to have the opportunity to respond. After giving it much 
thought, first and foremost my concern and conclusion was: 
programs that succeed succeed because you've got a highly 
talented, experienced team in place, that is able to overcome 
work through, in, and around this very dense, difficult system 
that we've got and, at the same time, master the technical 
details and programmatic oversight to deliver complex weapon 
systems; programs that fail quite often fail because of not 
having the same attributes, in terms of the acquisition 
workforce team. And so, first and foremost, we've got to give 
us the tools to attract, train, and retain those professionals 
to get the job done.
    Senator Hirono. I emphasize how important it is to have an 
acquisition team that we can rely upon, because these are very 
complicated systems and programs, and it would be very 
difficult for Congress to be the first line, in terms of 
analyzing the efficacies and the reliability, et cetera, of 
these programs, so I expect our acquisition people to do that. 
And therefore, you know, thank you very much.
    Mr. Chairman.
    Chairman McCain. At Secretary Carter's hearing for 
confirmation, I showed a chart, $40 billion that was spent on 
programs that never became reality. That is not an acceptable 
system or situation. We value the men and women who work in 
this business, but these problems are of such magnitude, in the 
view of most members of this committee, that we can't lose 
sight of the fact that the system is badly broken.
    Senator Sullivan.
    Senator Sullivan. Thank you, Mr. Chair. And thank you for 
your leadership on this issue, in terms of oversight. 
Critically important function of this committee.
    You know, I'm not sure the question has been asked, but 
maybe I'll just ask it. Pretty simple. Secretary Stackley, 
Secretary McFarland, who is responsible? Who's responsible? 
Who's kind of raised their hand and said, ``This cost overrun 
is my responsibility. I accept it"?
    Mr. Stackley. Sir, I will tell you that, today, I'm 
responsible. You see the gentlemen here at the table that are 
responsible for elements of the program that all come together 
to the--for the carrier. But, as the service acquisition 
executive, as I stated in my opening remarks, I assume 
responsibility for this program and the decisions that I have 
the opportunity to make as we execute.
    Senator Sullivan. Secretary McFarland?
    Ms. McFarland. Sir, the Navy is responsible----
    Senator Sullivan. No, no, I'm not talking about an 
organization. That's very amorphous. I'm talking about people, 
individuals.
    Ms. McFarland. Sir, I believe we could have done much 
better in preparing and advocating for the right aspects of 
this program to be conducted at the beginning and throughout 
its execution.
    Senator Sullivan. So, who's responsible, in your view?
    Ms. McFarland. The Department. Not a good answer, not 
something that----
    Senator Sullivan. No, it's a ridiculous answer. Okay?
    Ms. McFarland. Yes, sir.
    Senator Sullivan. So, who--in your view, who is 
responsible? Part of the issue here is that the responsibility 
seems to be placed in a----
    I mean, Secretary Stackley, I appreciate your statement. 
Right? That's up front.
    Secretary McFarland, I'm just asking the same question to 
you. Who is responsible? I'm talking about individuals. That's 
how we fix it. We can't blame it on ``the Navy.''
    Ms. McFarland. Sir, I will take absolute responsibility for 
not having done the correct things, in terms of helping this 
program along.
    Senator Sullivan. So, who's responsible?
    Ms. McFarland. Then I would say myself, sir.
    Senator Sullivan. Okay.
    Admiral Moore, Admiral Gaddis, I--you know, looking at your 
bios, very impressive, in terms of your military careers. When 
you get assigned to be the billet of a program manager, as a 
senior flag officer in the United States Navy, is that 
something that, when that happened, you celebrated? Is that 
something you were, like, ``Oh, geez"? I mean, how is your job, 
as uniformed military officers, viewed in the Navy? And is that 
part of the issue, here?
    Admiral Moore. Well, other than I got to spend my 16th
    consecutive year in Washington, D.C., if I had taken a job, 
yeah--no, it's----
    Senator Sullivan. I feel for you.
    Admiral Moore.--it's an honor. I--you know, when----
    Senator Sullivan. But, I mean, is that a career enhancer, 
to successfully complete a tour that's obviously filled with 
landmines, or is that something you try to avoid? What I'm 
getting at is, Do we have our most ambitious, top-rated 
officers trying to get these jobs, or are they trying to avoid 
them? And is that part of a problem?
    Admiral Moore. Sir, I believe, you know, this is the best 
job in the Navy. I was honored to be asked by Secretary 
Stackley to take the job. I think most of us sitting at--or 
anybody sitting at this table at our level will tell you that 
we want the challenges and we're not going to shy away from the 
responsibilities that go with the job. I'm ultimately 
accountable for this program with Secretary Stackley. I accept 
that responsibility. I want the tough jobs. I was glad to take 
it. I think we've made strides on -78. We're--nobody is happy 
with the cost overruns we've had on -78. I think we've done 
significantly better on -79, and I think we're on a good path, 
going forward.
    But, to the--to your basic question, good people want these 
jobs. They're tough jobs, and I think you're going to continue 
to get the right people in these jobs, going forward.
    Senator Sullivan. So, I--and I know you see the frustration 
from the committee. I think Senator Ernst did a very good job 
of articulating that, in terms of--you know, we talk about 
dollar costs, but what we're really talking about is 
opportunity costs with regard to the defense of our Nation. So, 
just one of these cost overruns on one of these carriers could 
fund a brigade combat team in the Army for 10 years. That's a 
really important issue. And the Army wants to cut 40,000 troops 
right now. And so, strategically, it just doesn't seem to make 
sense.
    Let me ask a quick question, following up on Senator 
Ayotte's comments. Do we need--do you need statutory authority 
to have the responsibility of cost overruns be borne by the 
contractor and not the American taxpayer, or can you do that 
now, presently?
    Admiral Moore. Sir, we have the authority, when we contract 
with the contractors, to put contracts in place that hold them 
accountable.
    Senator Sullivan. And so, you--we're making that, from a 
production standpoint, regular part of our contracting work 
right now?
    Admiral Moore. Yes, sir, absolutely.
    Senator Sullivan. Thank you, Mr. Chairman.
    Chairman McCain. Senator King.
    Senator King. Mr. Chairman, first I want to thank you for 
your interest in this topic. I think it's one of the most 
important responsibilities that we have. And--but, I do think, 
in terms of the--today's discussion, that there needs to be 
some context.
    I suspect the first Macintosh computer cost a million 
dollars, in terms of the work. I've read about the work that 
they went through to develop that computer. But, then they made 
them by the thousands or millions, and they went down to--the 
price went down to $1,000. I think one of the problems here--
Mr. Francis, you identified it, and I think this is where we 
really need to focus our attention--is that we're dealing with 
first-in-class products. We're dealing with new products. And 
you mentioned two terms, ``fly before you buy'' and ``mature 
technologies.'' And I understand that. But, the problem is, 
we're building a product, here, that's supposed to have a 50-
year life. And if we build it with ``fully mature'' and ``fly 
before you buy'' technologies, it's going to be obsolete the 
day it enters the water. And we're talking about a qualitative 
technological edge.
    So, I really think we--and as Senator Kaine pointed out, 
we're essentially building prototypes. There's no way to do a 
prototype--that first Macintosh, you know, was a prototype that 
we could sit on this desk, but a build--you can't build a 
prototype of a--of an aircraft carrier.
    So, I think the problem--and you identified it, Mr. 
Francis--how do we deal with the first-in-class issue? And 
maybe it's more realistic estimates at the beginning. Maybe 
it's more realistic estimates of the time. But, it--to simply 
say there's an overrun here, as Senator Kaine pointed out, if 
the estimates in the beginning had been more realistic, there 
would be no overrun, it would have been what was estimated.
    So, Mr. Francis, how do we deal with this--it's a risk-and-
cost balance, it seems to me. And, in order to build the 
highest technology, most advanced weapon system, we're going to 
have to take risks, in terms of being sure that that technology 
is the most advanced possible when that ship launches. Talk to 
me about what you identified, I think, properly. This isn't an 
overall procurement problem of the--all of the military, but 
the fact that it seems to happen in every branch, on every 
weapon system, when--the first--whether it's the F-35 or this 
or other ships or other weapon systems--tanks, you name it--how 
do we deal with this first-in-class issue?
    Mr. Francis. Well, Senator, I think there's a way to take 
risks, so we need to take them. Our position has been, let's 
take more risks in science and technology before we get into 
acquisition. That takes money. And we're kind of stingy about 
money before we get into a program.
    Senator King. Would it be accurate to say that some of 
these ships are--that some of these systems--this is an R&D 
project. This----
    Mr. Francis. Yes.
    Senator King.--is R&D on the hoof.
    Mr. Francis. Yes. And so--we talked earlier about off-
ramps. I think Sean talked about them. If you're going to take 
a risk, I think we should say--let's say we're taking a risk, 
and we've got an off-ramp, so if this doesn't work out, we've 
got a Plan B. We tend not to do that. We tend to bet that this 
is going to come out just the way we say.
    And if you look at the original plan for the CVN-78, these 
systems were going to get wrung out in land-based testing 
before they got on the ship, but we were too optimistic about 
the schedule for that--taking that risk. So, they slid onto the 
ship.
    So, myself, personally, I don't--I'm not terribly concerned 
about the types of problems we're having on those systems. It's 
when and where we're discovering them. That's the problem. So, 
I think there's a way to take risk, to take it more 
intelligently.
    Again, I come back to the acquisition culture. The culture 
here is to say there is no risk, that we can do it for low 
cost. If you come in and say it's going to cost 13 billion, 
maybe you'll get told no. And so, you can't put that on the 
table. So, somehow our culture has to change so we can say, 
``It's okay to take a risk, and here's how we're going to do 
it.''
    Senator King. And, of course, one of the problems here is 
that we're talking about a class of ships--we're building three 
of them. So, you don't have 50 or 60 to spread those, 
essentially, R&D costs over. The DDG-51, I think, is an example 
of that. It's now cheaper than it was when it was first--in 
real dollars--than it was--I believe, than it was back in 1986. 
It had a whole lot of problems, and now it's the mainstay of 
the Navy.
    So, we--I think we--again, I think this is a very important 
subject. I don't mean to sugar-coat it. And I think we need to 
focus on it. But, I think we need to understand the context 
somewhat and really focus on the real problem, which seems to 
be, How do we deal with the quantitative risk? I spent 2 hours, 
not long ago, in a classified briefing on the new bomber. Same 
kinds of issues, and trying to hammer about, How do we do the 
contracts? Who takes the risk?--whether it's the contractor or 
the government. And--but, this is a tough problem when you're 
talking about trying to build the most technically advanced 
weapon system in the world. And Senator Manchin mentioned the 
Chinese. They're doing pretty well by stealing our intellectual 
property, he alleged. I alleged.
    [Laughter.]
    Senator King. But, you know, that's one way to shorten--
short-circuit the R&D. But, I hope you all--and, Madam 
Secretary and Secretary Stackley, you've done a lot of thinking 
about this. I think it would be very helpful to present us with 
some thinking about how we deal with the first-in-class 
problem, because that's what we're talking about, across the 
government.
    Admiral?
    Admiral Manazir. Senator King, if I can offer--this is more 
complex, from the technology risk perspective, than just 
whitewashing first-of-class. And that is, What technologies do 
you choose to put into the first-of-class? Secretary Stackley 
and others have said in their statements the original plan with 
CVN-77 had part of it, CVNX-1 had part of it, CVNX-2 had part 
of it, all pushed into one class. We talked about--I think 
Ranking Member Reed talked about the Enterprise Air 
Surveillance Radar Project that we're putting in the CVN-79 to 
replace the dual-band radar. That's a management of risk, 
because that radar is a non-developmental solution. We have 
created requirement sets that looks at what industry has now to 
reduce the risk of technology and development on time and 
schedule. The P-8 program--brand new antisubmarine warfare 
aircraft was put on a COTS commercial system. That's the Boeing 
737 aircraft. We reduced the risk of integration into an 
airframe by using something that was already proven, and we're 
realizing that risk. Several of our weapons programs, we use 
the back-end motor with a brand new seeker on the front. Very, 
very capable. When the seeker is good, we do the back-end motor 
later on.
    So, the type of risk that you take on, sir, in the first-
of-class is key. If we choose to do a full developmental first-
of-class, like the Joint Strike Fighter, that is a 
revolutionary weapon system that is better than any aircraft in 
the world. There's a lot of risk there, sir, and we're 
realizing that risk now. We've talked about the Ford. That was 
revolutionary between the Nimitz and the Ford.
    So, I would submit, sir, that Mr. Francis's comments are 
exactly on the mark. We have to look clearly at the risks that 
we have. If your first-in-class is revolutionary, and you don't 
do the things that you're talking about for technology, you're 
going to have a cost-delivery mismatch that you're going to 
have to deal with later on, sir. And we look at that risk.
    Senator King. Well----
    Mr. Stackley. If I may just add, because Senator Ayotte 
brought up the Ohio. You're asking a very--you're just spot-on 
questioned an issue that we wrestle with continuously. Ohio is 
the next big thing coming our way in the Department of the 
Navy, in terms of a first-of-class. We're talking about a 
program that will be providing reliable, secure, certain sea-
based strategic deterrence until the 2080s. So, how do you 
design and develop the capabilities that are going to go on 
that boat on the front end, deliver on schedule so that she can 
be on deployment, as scheduled, in 2031, certainly, and then, 
throughout its life, remain that secure sea-based strategic 
deterrent.
    Senator King. Still be an effective weapon 50 years from 
now.
    Mr. Stackley. Yes, sir. So, we're not going to go big-bang. 
We've been working this. We look at, What do we need to do on 
the Ohio replacement that we don't already do on the Ohio? 
Well, right now we have a very effective high- performing 
strategic program, in terms of the weapon system, itself. We're 
not going to develop a new weapon system. We're going to port 
over the existing weapon system, in its current state of 
technology at the right time, onto the Ohio replacement hull.
    The Virginia-class, very effective combat systems, sensors, 
communication platform. We're going to port over that 
technologies onto the Ohio replacement hull. The advances that 
we need to make are in terms of stealth and survivability of 
the Ohio replacement hull for the next half-century. And that's 
where our focus is, in terms of development and design. And the 
way we're going about this is, we are challenging the 
requirements. You've got to get the requirements right, up 
front. And getting them right doesn't just mean, What does the 
operator need? But, what are the--what is technically feasible? 
What are the risks that you carry in there? When you identify 
those, make sure that you've got a development program that 
works those risks so everybody understands, as you're making 
progress before you're cutting steel, and then have the off-
ramps that we discussed. And so, in fact, we've got that laid 
out. That's a 2019 boat that we're sitting here today doing 
those developments, managing--2021, excuse me--2019 advanced 
procurement--that we're managing closely today, and then 
assessing the risk each step along the way, visibly, for the 
Congress, for the Department of Defense, with industry, to 
ensure that each step along the way, we have--we're making the 
right decisions, and we don't find ourselves where we are 
today, with delay and the cost growth that we're seeing on CVN-
78.
    Chairman McCain. Admiral, when--your time is expired--when 
you use the Joint Strike Fighter as a success story, sir, you 
have lost the connection between the military and this 
committee. The most expensive, longest cost--largest cost 
overrun, first trillion-dollar weapon system in history, and 
you're using that as a success story? Sir, you have lost 
connection with the members of this committee and those of us 
who have been involved in this fiasco for a decade.
    Mr. Francis, you've got to respond to some of this. We are 
now being painted pictures, everything is fine.
    Mr. Francis. I think that this is the byproduct, again, of 
culture and the long timeline. So, when programs get through 
their problems, we fall back on, ``Wow, but so much better than 
what we have.'' But, we've forgotten the cost and the 
opportunity cost it took to get there. So, I think we could 
agree that the system produces tremendous weapon systems, but 
they cost way more and they take much longer. And we're giving 
things up along the way, but we don't know what those things 
are. And that's not a pattern we want to repeat. We want to get 
it right the first time.
    Chairman McCain. Senator Cotton.
    Admiral Manazir. Mr. Chairman, just for the record, sir, I 
did not intend to use the Joint Strike Fighter as a success 
story, sir, as much as illustrate that innovative technology, 
such as Secretary Stackley said, is a challenge, sir. So----
    Chairman McCain. Innovative technologies in Silicon Valley 
reduce costs. Innovative technologies, apparently, in the 
Department of Defense increase costs.
    Senator Cotton.
    Senator Cotton. Thank you.
    I know that we've gone over a lot of the details of this 
program, so I won't rehash those, but I do, in the spirit of 
inquiry and problem-solving, moving ahead in the future, have a 
couple of simple questions that I want to ask.
    Mr. Francis, I'll start with you. Has the Navy ever 
delivered a ship under budget and on time?
    Mr. Francis. I don't know if I can answer that for history. 
I want to say, in the recent ones that we've looked at, that 
hasn't happened. But, probably Mr. Stackley has better data on 
that.
    Senator Cotton. You----
    Mr. Francis. The ones we've looked at, I haven't seen it.
    Mr. Stackley. Yes, sir. First off, you said ``a ship.'' And 
the answer is, absolutely yes, we do it consistently. I think 
what you wanted to get at is a lead ship, since we've spent so 
much of our time discussing lead ships. And the answer, again, 
is yes, we have. And that's when we have been very measured, in 
terms of the risk that we've carried into those lead ships. 
And, as we look forward, I--talking about the higher importing 
over technologies--when we look at the lead ships coming our 
way right now, the first one is going to be the TAO(X) [the 
oiler replacement shipbuilding program], which is in the 2016 
budget. We're going to leverage existing technologies and 
design to minimize the risk on that. And that'll be a fixed-
price program.
    The next one after that is going to be the next amphib 
program, what we refer to as the LX(R). We have made the 
decision to mitigate--minimize those risks to ensure that we 
deliver the capability that the warfighter needs at a cost we 
can both afford and rely upon when it delivers. We're going to 
reuse the LPD-17 hull form, which is technology and capability 
that we understand and supports the mission, and then we're 
just going to deal with those changes to the mission that are 
necessary for the changes to that platform's requirements.
    Senator Cotton. So, those are ships in the future, though, 
retrospectively. What is the lead ship that----
    Mr. Stackley. The----
    Senator Cotton.--the Navy delivered under budget and on 
time?
    Mr. Stackley. I don't want to oversimplify this, but the 
last lead ship that we delivered was the Mobile Landing 
Platform. That delivered on schedule, under budget.
    Senator Cotton. Okay.
    Secretary McFarland, do you have anything to add to this 
question?
    Ms. McFarland. No, sir.
    I would add one thing different, though. I think the 
underlying premise, in terms of what we're having as a 
discussion, doesn't go specific to the ship for the first-in-
class, but to that culture that we discussed earlier.
    Senator Cotton. And to be clear, I'm asking this not just 
about the Ford-class carrier, but all these major capital 
investments that, in particular, our Navy and our Air Force 
have to make. If the Air Force were in front of me, I'd ask 
them the same thing about airplanes. But, you know, we have to 
replace our ballistic missile submarines, and Air Force is on 
the verge of replacing its long-range strike bomber.
    So, the reason I asked the question is, I want to know if 
we've done it in the past, even if it's been rarer than over-
budget and delayed programs, what are the features or the best 
practices or the cultural conditions that allowed a program to 
be delivered on time and under budget?
    Ms. McFarland. Senator, I would like to bring forward a 
list of programs that have come in on schedule and performance. 
And also, in terms of the culture, I think that was adequately 
discussed by the Chairman and Ranking Member, and I think the 
table here. There are thing is that can be done to improve 
things, like bureaucracy and things like overhead.
    I think the other piece that you're getting at, in terms 
of, What have we learned?--one of the attributes of our new 
implementation of WSARA and the better buying powers is taking 
lessons that come from GAO, from the DOD IG [Inspector 
General], from DOT&E, and incorporate it in very stepwise and 
disciplined into the system to work to see these improvements 
inculturated into our workforce for the long term. We've seen, 
as part of the performance of the acquisition systems reports 
that we started 3 years ago, a moderate improvement, a decrease 
of the Nunn-McCurdys, an increase of performance of our 
contracting, although we can improve an incentive. We have been 
trying to measure what we do, and find those faults, whether 
they trace to acquisition reform, policies, statute, 
regulation, to work, as we had done, with Congress for these 
upcoming NDAAs and legislation. We believe we need to get to 
the heart of the matter, which is the data that points us to 
what we can do to improve.
    Senator Cotton. Mr. Francis, do you have any----
    Mr. Francis. Yes, Senator. One of the classic cases of a 
success story is the F-16 fighter. And I know that's--it's old, 
but the story--the lessons are still applicable. So, that was a 
low-cost alternative to the F-15. So, the requirements were 
kept low. We had five international partners, and they all had 
to agree to any requirements changes, which had the effect of 
keeping the requirements down. And we had a contractor at the 
time that was in very difficult financial straits, so they 
couldn't underbid and hope to get well later So, that 
combination of things had the effect of changing the culture 
for that program.
    There are some other examples. I'm trying to think of--the 
Shadow UAV [unmanned aerial vehicle] that the Army developed 
also went quite well. And again, in that case, it--we had both 
the head of requirements in the Army and the head of 
acquisition actually drove that program and kept it in check.
    So, I--I'm--my experience suggests that the success stories 
have been the byproduct of exceptional circumstances and not 
the result of normal circumstances. So, the takeaway here is 
how to replicate that, how to make those circumstances, that 
culture, normal for most acquisitions.
    Senator Cotton. Would the uniformed officers have anything 
to add?
    Admiral Gaddis. Yes, sir. I was PMA-265. I was the Hornet, 
Super Hornet, and Growler program manager. And, at my change of 
command, I said that I thought Super Hornet was the most 
successful program in the history of DOD.
    Two years later, I found that I was wrong, because the 18G 
Growler beat the E/F Super Hornet. And I would argue that 
that's normal acquisition, and what you see is an aberration.
    That, over there, is an aberration. I have a $47 billion 
portfolio with those platforms, and it includes E2D Advanced 
Hawkeye, it includes the next-generation Jammer. Very 
successful programs. That, right there, is the unfolding of one 
agonizing technical discovery after another. And at its root, 
since Senator McCain asked that question, is--we didn't do it--
an adequate TD [technical development]. In fact, let me give 
you some examples. EMALS--we did a risk- reduction effort 
before signing the production contract, and we spent $322 
billion. WSARA Act is passed in 2009. For next-generation 
Jammer, before we go to milestone B, the Department of Defense 
will have spent $622 million for tech- mat development and tech 
development for next-generation Jammer. What that means is, 
you're going to have a solid technical baseline and a solid 
technical--or cost estimate going into milestone B. I feel 
pretty confident about those--execution of those programs.
    AAG, we spent a $29 million. We could have discovered--
everything that we discovered then we could have discovered it 
a lot sooner. But, we're at a point in the program where we're 
beating back all the discovery, we're beating back all the 
design changes, we're into test. And, as Secretary Stackley 
said before, we're now into software and tweaking the software. 
But, that's where we're at with AAG.
    I wish we had done TD like we did next-generation Jammer as 
a result of WSARA Act and what we did with EMALS. We just 
didn't do it. And in 2004, by the way, normal acquisition, we 
did propose that. We did propose a 5-year component advanced 
development program followed by a 5-year development program. 
And it was deemed as too costly and too lengthy. Well, here we 
are. We should have done that in the first place, but the 
leadership said no, because we were into transformation pushing 
technology to the left. But, that's the consequences of those 
decisions that were made back in 2004, which, by the way, is 
all documented in the 2004 acquisition strategy.
    Thank you.
    Senator Cotton. Well, thank you, Admiral Gaddis, for that 
perspective.
    I would, if you could, follow up on providing examples of 
where systems have succeeded. They've been a success story, 
they come in under budget, they come on time. The headline 
grabbers are the lines, like this one or like the Joint Strike 
Fighter, that don't do that. But, I do think that we have a lot 
of lessons to learn, not just on oversight of current or past 
products, but what's going to happen in the future for the 
platforms and the weapon systems that our sailors, soldiers, 
and airmen, marines, need to fight and win our wars for the 
future. So, that would be very helpful for me and for the rest 
of this committee, I'm sure.
    Thank you very much.
    [The information referred to follows:]

                F/A-18E/F & EA-18G ACQUISITION PROGRAMS

    Arguably the Navy's most successful acquisition when it was 
procured, the F/A-18E/F Super Hornet is a tremendous success 
story that was followed by an even greater success story, the 
EA-18G Growler. Understanding the success of these 
acquisitions requires a look at the history of the platforms, 
and knowing the process/organizational construct used by the 
program office to achieve success. Several highlights from this 
success are listed here. Leveraging technology from the legacy 
F/A-18A-D platform produced a ``worksharing'' capability on the 
F/A-18E/F Program that programs like the F/A-22 and F-35 did 
not have the luxury of using. ``Worksharing'' was also an 
advantage for the Growler as the EA-18G combined the best of 
two proven weapons systems, that of the F/A-18E/F and the 
repackaged Improved Capability (ICAP) III (from the EA-6B) into 
the Super Hornet envelope, thus creating the Growler. The 
Integrated Test Team (ITT) and Integrated Product Team (IPT) 
structure implemented by the program office was groundbreaking 
in fostering the interoperability of government employees and 
contractors. Lessons learned from the cancelation of the A-12 
Program enabled managers and contractors to make better 
decisions. An additional very important reason for the success 
of both of these acquisition programs was the ability of the 
program office to obtain the best people from both Government 
and industry. For the most part, these people remained on the 
program throughout the entire development and test periods up 
to Initial Operating Capability.
    A key lesson learned that was incorporated on both programs 
was the building in of schedule margins to account for 
unplanned or unknown complications during development and test 
efforts. While only minimal amounts of these margins were used 
to solve unknowns, the remaining time was capitalized by 
closing out minor test issues and resulted in the program being 
better postured for success in operational testing.

                               F/A-18E/F

    The F/A-18 E/F Super Hornet acquisition program was an 
unparalleled success. The aircraft emerged from Engineering, 
and Manufacturing Development (E&MD) meeting all of its 
performance requirements on cost, on schedule and 400 pounds 
under weight. All of this was verified in Operational Testing, 
the final exam, passing with flying colors and receiving the 
highest possible endorsement.
    The forward fuselage was essentially unchanged from the F/
A-18C/D Hornet, but the remainder of the aircraft shares little 
with earlier F/A-18C/D models. The fuselage was stretched by 34 
inches to make room for fuel and future avionics upgrades and 
increased the wing area by 25 percent. However, the Super 
Hornet has 42 percent fewer structural parts than the original 
Hornet design, which means fewer maintenance requirements than 
the legacy aircraft. The F/A-18E/F added two additional wing 
weapons stations, a higher capacity hydraulic system, 
environmental control system improvements and a new engine - 
the F414, which included innovative blisk technology in the 
first three compressor stages. These enhancements allowed for 
increased range, on station time, weapons carriage and 
bringback capability. The process of acquiring new weapon 
platforms requires substantial time and money in development, 
testing, and production. The Navy's F/A-18E/F illustrates the 
difficulties and successes of this process.
    The plans to develop this aircraft began in the early 
1980s. The Navy considered several options to meet this 
requirement. Taking lessons from the cancelled A-12 program, 
program managers and contractors ultimately decided to modify 
the existing F/A-18C/D design.
    The program office established a system for closely 
monitoring the contractor's cost and schedule performance. The 
program office sought to work closely with the contractors and 
did so by setting up a routine of daily phone calls between the 
Navy program manager and contractor counterparts. The extensive 
use of Earned Value Management (EVM) throughout the development 
program provided the government/contractor team with near real-
time data. EVM updates were presented to the senior leadership 
team on a weekly basis. This practice allowed for timely 
adjustments in program execution.
    The technology requirements for the aircraft were 
deliberately crafted to control technological risk and 
constrain costs. The Navy directed McDonnell Douglas (now 
Boeing) to undertake further risk-reduction studies throughout 
the early 1990's, resulting in the rejection of some of the 
more radical contractor design modification proposals. This 
produced a formal request to modify the F/A-18C/D variant 
versus a new program start. Although the new F/A-18E/F design 
entailed major airframe modifications, the Navy intended to 
incorporate existing F/A-18C/D avionics and a derivative of the 
existing engine. While all new, the airframe design for the F/
A-18E/F was aerodynamically similar to the F/A-18C/D.
    The F/A-18E/F Program employed a key acquisition reform 
concept later formalized as Cost as an Independent Variable 
(CAIV). By early 1992, senior Navy leadership had made it clear 
that the F/A-18E/F Program would not proceed unless the cost 
estimates for the development program and for average unit 
flyaway costs remained under strict ceilings dictated by likely 
funding realities. The F/A-18E/F program developed a 
``worksharing'' agreement based on F/A-18A-D development and 
production. McDonnell Douglas was the prime contractor, and 
Northrop (now Northrop Grumman) was a major subcontractor on 
the effort. The F/A-18E/F contractor team of McDonnell Douglas 
and Northrop had substantial involvement on the F/A-18A-D. Both 
contractors had knowledgeable design teams in place and drew 
heavily from existing suppliers and industrial base. This 
workshare arrangement allowed the contractors to concentrate on 
their specialties from the predecessor program and to use their 
existing subcontractor industrial base. Similar to the F/A-18A-
D, Northrop remained responsible for the aft fuselage section 
of the aircraft while the ultimate responsibility to integrate 
the entire weapon system rested on McDonnell Douglas.
    While the F/A-18E/F Program was not free from serious 
technological and programmatic challenges, it progressed 
closely in accordance with its original schedule estimates. One 
reason was that the program office adopted a variety of new 
acquisition reform strategies that promoted program stability 
and close cooperation between the Navy program office and the 
contractor team.
    One such strategy was the use of Integrated Product Teams 
(IPT) that formed the Integrated Test Team (ITT). The ITT 
concept was one of the key enablers in breaking through 
organizational barriers that had traditionally plagued past 
developmental efforts. Using the ITT/IPT concept, the team 
moved away from functional ``stovepipes'' toward a product 
orientation approach, which fully integrated functional areas, 
including both government and industry sides. The F/A-18E/F 
Program took the use of ITT/IPTs to a higher level by assigning 
government and industry co-leads for each team. The co-leads 
were interchangeable with each other and were authorized to 
officially accept the team's work, regardless of whether they 
were government or contractor employees. To emphasize and 
legitimize this construct, the co-leads jointly briefed at 
every program event including major milestones such as 
Preliminary Design Reviews and Critical Design Reviews. Many 
observers believe effective use of the ITT/IPT approach was one 
of the most important management initiatives promoting 
stability and effective management of programmatic and 
technological challenges throughout the F/A-18E/F development 
and test effort.
    Numerous technical challenges were identified during 
developmental flight testing, but none led to major 
restructuring of the program or significant cost growth. The 
first F/A-18E/F test aircraft flew in November 1995, 32 days 
ahead of schedule. The second test aircraft flew one month 
later. The formal developmental flight test program began early 
the following year at the Naval Air Station (NAS) Patuxent 
River, Maryland. One problem that attracted considerable public 
attention was the ``wing drop'' problem, discovered in 1996. 
During certain maneuvers, one wing of the aircraft would 
unexpectedly stall or dip, causing the aircraft to roll. The 
Navy and contractors worked together closely to develop and 
implement fixes. This type of problem is not uncommon during 
the development of a new airframe.
    Other technical and performance areas that caused some 
controversy during development included combat range and 
survivability. Most of these problems were either successfully 
resolved or dealt with by other adjustments. Thus, with more 
limited technical objectives, tighter management controls, and 
continuing success in maintaining cost and schedule 
performance, the F/A-18E/F progressed through E&MD with minimal 
interruptions.

                            EA-18G GROWLER

    Considering the benefits gained from the ``worksharing'' 
concept, the same concept can be applied to the EA-18G aircraft 
using much of the F/A-18E/F airframe. The predecessors of 
Hornet/Super Hornet and Growler and their commonalities 
provided the groundwork for reduced development, procurement 
and support costs, and overlap in training and logistics 
infrastructure. The U.S. Navy awarded a 5-year system 
development and demonstration (SDD) contract in December 2003. 
A contract for the first four production aircraft was signed in 
July 2006.
    Over the course of development and production, momentum was 
gained as multiple partners joined forces to share technology. 
In 2005, Boeing's work with EA-18G paralleled that of Northrop 
Grumman's work on the EA-6B Prowler ICAP-III and the two 
companies coordinated to join forces and moved the program 
forward as an Electronic Attack platform. The EA-18G positively 
benefitted from a significant amount of pre-SDD (System Design 
and Development) work that Boeing had done in their St. Louis 
simulation facility to evaluate the operational impacts of 
moving to a two-person aircrew from the Prowler's four-person 
layout. This new crew concept was one of the higher risk 
program areas and the efforts to resolve issues were supported 
by government developmental and operational test engineers 
working alongside their industry counterparts. Boeing and the 
government team also collaborated on pre-SDD efforts to define 
the optimum shape for the ALQ-218 wingtip pods and the effects 
of carriage of ALQ-99 pods on underwing weapons stations.
    NGC was responsible for development of the Airborne 
Electronic Attack (AEA) suite. Via an Associate Contracting 
Agreement, Boeing and NGC worked together to integrate the 
ICAP-III capabilities into the Growler AEA weapons system. 
Continuing with the joint government/industry philosophy, there 
was a large amount of government presence and oversight from 
both hardware and software engineering and test personnel 
throughout the integration.
    The EA-18G ITT was organized somewhat differently than what 
was in place for the F/A-18E/F Program. While the Super Hornet 
ITT was primarily sited at NAS Patuxent River, Maryland, the 
Growler ITT had a large presence at China Lake and Pt. Mugu, 
California. This geographic spread was dictated by the software 
intensive development effort and the need to utilize 
facilities, capabilities and ranges on both coasts near-
simultaneously.
    The Growler aircraft's first test flight was successfully 
completed in August 2006. This was followed by delivery of the 
first two test aircraft to the U.S. Navy in September and 
November 2006. The first production aircraft was delivered to 
the U.S. Navy in September 2007. The first operational aircraft 
was delivered to NAS Whidbey Island in June 2008 and 
operational evaluation began in October 2008 onboard the USS 
John C. Stennis (CVN-74) aircraft carrier.
    In 2009, the Operational Evaluation Report was released and 
stated that the EA-18G ``demonstrated the ability to conduct 
representative missions covering all seven of the mission areas 
defined for the EA-18G utilizing all four typical mission 
profiles.'' The only exception to operational effectiveness was 
for those requiring a full escort mission profile against an 
active air defense system. This exception was due to the 
excessive amount of time the displays exhibited when providing 
data for situational awareness and the AEA suite's lengthy 
response time for making reactive jamming assignments. 
Performance deficiencies of the legacy ALQ-99 jamming pods also 
contributed to the noted exception.
    In 2010, before the deficiencies were resolved the EA-18G 
was approved for full rate production. The aircraft was found 
to be operationally ready and Boeing would later state that a 
majority of the deficiencies were resolved through a previously 
planned software update.
    A 2012 Aviation Week Program Excellence Initiative cited 
coordination across programs, immediate mitigation of 
production delays and prioritized subcontract workloads and 
deliveries as the framework which allowed for successful 
contract delivery.

    Senator Reed [presiding]. Thank you, Senator Cardin.
    On behalf of the Chairman, let me recognize Senator Kaine. 
He has one question.
    Senator Kaine. Thank you. Thank you, Mr. Chair.
    And super questions by Senator Cotton.
    In this program, going back to a point I asked earlier--and 
I'm--I want to get your opinions on the role we should play in, 
sort of, oversight. In this program, the cost estimates before 
2010 were coming with a confidence factor of less than 50 
percent or, in one instances, less than 40 percent. If we're 
being asked to make a decision about a significant acquisition, 
and we're given a cost estimate, but the Navy, or whatever the 
service branch, says, ``And our confidence on this cost is less 
than 50,'' to me that suggests probably some questionable 
confidence on cost, but also even on operational risk, because 
the reason you have a question about cost often then connects 
to an operational uncertainty, as well. Should we just say, 
``Come back to us when you're at 75, or come back to us when 
you're at 60?'' If there's that much uncertainty about a cost 
estimate, should we, basically, push you to do more work before 
we give a green light?
    Mr. Stackley. Sir, I spend a lot of time with the cost 
estimators and a lot of time with the program managers, and I 
explained the cost estimate is not the answer. The cost 
estimate is information. And you hit on two things: the cost 
estimate and the percent confidence. In fact, the estimators 
come up with a range of things that could influence the final 
cost. What I want the program management team and the cost 
estimators to do is, in that, understand what are the risks. If 
today the confidence is 40 percent, what are the risks that we 
have to drive out of the program to get it up to the level that 
we're ready to put budget down on, ready to go to contract, 
ready to cut steel. And so, it's not just the cost estimate, 
it's the next two or three layers below that that the 
estimators are pointing at that identify the risks that we need 
to retire, just like we're been discussing here, all the parts 
of the carrier program, that we need to retire before we go to 
contract, before we go to Congress and say, ``We need 
authorization and appropriation to go forward on this major 
program.''
    Mr. Francis. Senator Kaine, I would say, for you, you have 
to start your work earlier. So, when you come up to a 
milestone, and the cost estimate's done, and the program's 
acquisition strategy is laid out, there's very little you can 
do. But, I think, with Congress and this committee, by getting 
invested in programs earlier, say 3 years before that 
milestone, you create the expectation that you want that to 
come in at a high confidence level, you want the risks 
identified, and you're willing to either, one, pay for the risk 
reduction, like Admiral Gaddis talked about, or you're willing 
to offload some of the requirements to bring the system down. 
But, the work would have to start earlier to position it for 
success.
    Senator Reed. Well, thank you very much.
    Thank you for your extraordinarily interesting and 
insightful testimony, and for your service to the Nation.
    On behalf of Chairman McCain, I'll adjourn the hearing.
    Thank you.
    [Whereupon, at 11:41 a.m., the hearing was adjourned.]

    [Questions for the record with answers supplied follow:]

               Questions Submitted by Senator John McCain
                    follow-on ships and the cost cap
    1. Senator McCain. Will you deliver CVN-79 within the cost cap? 
Please elaborate on your response.
    Secretary McFarland. The Navy is committed to building the John F. 
Kennedy (CVN-79) at the lowest possible cost and under the $11.498 
billion Congressional Cost Cap. The CVN-79 Detail Design and 
Construction contract is a fixed-price incentive type contract and 
offers the Navy the most favorable cost sharing arrangement on any CVN 
construction contract to date. The combination of target fee, 
sharelines, and ceiling price are a testament to both the Navy's and 
the shipbuilder's confidence in the producibility of this design and 
ability to meet the cost target for the ship. This contract is the 
result of a dedicated effort over the past three years by the Navy and 
shipbuilder team to drive affordability into the Ford-class and 
commitment to delivering the ship within the $11.498 billion 
Congressional Cost Cap. Importantly, this is also just the first step 
in continuing to reduce the costs of future ships of the class.
    Secretary Stackley. Yes, the Navy will deliver John F. Kennedy 
(CVN-79) within the Congressional cost cap.
    Applying CVN-78 lessons learned, the Navy has significantly reduced 
the CVN-78 baseline cost and eliminated technical risks for follow-on 
ships. To deliver CVN-79 at the lowest possible cost, the Navy 
conducted an extensive affordability review of carrier construction, 
enacting significant changes focused on eliminating the largest impacts 
to cost performance (as identified during CVN-78 construction) and 
furthering improvements in future carrier construction. The Navy 
outlined these cost savings initiatives in its May 2013 Report to 
Congress and execution is proceeding as planned.
    Additionally, the Navy and shipbuilder have applied numerous cost 
reducing design changes based upon CVN-78 lessons learned. These 
include the introduction of tooling advancements such as more 
autonomous welding machines, adaptable construction jigs/fixtures, and 
pipe bending machines that yield construction productivity 
improvements. The shipbuilder has also created new superlifts to lower 
the number of units independently erected in the drydock, alleviating 
gantry drydock crane demand and improving welding flexibility. Larger 
superlifts have enabled greater pre-outfitting in the shop and on the 
final assembly platen prior to ship erection, increasing construction 
efficiency and comparatively decreasing the number of costly erectable 
units by approximately nine percent.
    Overall design completion and stability enabled the shipbuilder to 
fully understand the CVN-79 ``whole ship'' bill of materials and more 
effectively manage procurement using knowledge of CVN-78 construction 
material lead times and qualified sources. As a result, the shipbuilder 
has capitalized on ship-set material quantity orders and attendant cost 
benefits to ensure timely delivery. These efforts have reduced material 
cost and increased material availability in support of an optimized 
construction schedule. At the time of the CVN-78 Detail Design and 
Construction (DD&C) contract award, 44 percent of direct-buy material 
was contracted with 83 percent material availability. Comparatively, 
the same CVN-79 milestone yielded 95 percent contracted direct-buy 
material with 97 percent material availability. Higher material 
availability enables the Navy and shipbuilder to provide stable, 
predictable material requirements; maintain efficient construction 
sequencing; increase pre-outfitting earlier in the construction 
process; and avoid costly construction and engineering re-work.
    The Navy has also implemented a two-phase delivery plan to deliver 
CVN-79 at the lowest possible cost. The two-phase strategy will allow 
the basic ship to be constructed and tested in the most efficient 
manner by the shipbuilder (Phase I) while enabling select ship systems 
and compartments to be completed in Phase II, where the work can be 
completed more affordably through competition or the use of skilled 
installation teams. Likewise, the strategy allows the Navy to procure 
and install at the latest possible date, shipboard electronic systems 
that otherwise would be subject to obsolescence prior to the first CVN-
79 deployment in 2027. Additionally, the two-phase acquisition strategy 
allows the Navy to install the Enterprise Air Surveillance Radar 
(EASR), a more cost effective radar than Dual Band Radar (DBR), on CVN-
79 in the Phase II availability. The substitution of the EASR suite 
alone is projected to save $180 million in government furnished 
equipment cost compared to the DBR installed on CVN-78.
    The Navy's current estimate to deliver CVN-79, as reported in 
quarterly Reports to Congress, is $11,498 million. Strict cost control 
measures across all aspects of the program and further enhanced 
oversight of Government Furnished Equipment (GFE) are being used to 
lower the Navy's $11,498 million estimate. This governance process 
includes Program Executive Officer (PEO) approval prior to release of 
GFE funds and routine reviews with the Chief of Naval Operations (CNO) 
and Assistant Secretary of the Navy (Research Development and 
Acquisition).
    The Navy will deliver the John F. Kennedy (CVN-79) within the 
Congressional cost cap and continues to investigate other sources of 
potential savings. The aforementioned actions have driven down and 
stabilized CVN-79 construction cost and will allow Ford-class follow-on 
ships to project world leading capability with improved affordability 
and reduced total ownership cost into the 22nd Century.
               performance of the advanced arresting gear
    2. Senator McCain. Who made the decision to proceed with 
simultaneous design and production of the AAG even though problems with 
the water twister were discovered late in the development process? Who, 
if anyone, was held accountable for incurring the additional risk?
    Admiral Gaddis. Authorization to conduct concurrent development and 
production of AAG was provided by then Assistant Secretary of the Navy 
for Research, Development, and Acquisition (ASN RDA) with the Milestone 
B Acquisition Decision Memorandum (ADM) signed on February 10, 2005. 
The Milestone B ADM authorized not only the start of the development of 
AAG as an ACAT II program, but also authorized the procurement of five 
low rate initial production systems. At that time, the risk of 
concurrent development and production was assessed as low, and was 
authorized in order to meet shipyard installation schedules as 
delineated in the Acquisition Strategy of 2004. The ASN RDA decision to 
execute the firm fixed price production contract of AAG in support of 
CVN-78 in 2009 was made after the AAG Critical Design Review. Since 
then, AAG has been the subject of multiple Navy reviews across all 
levels of Navy leadership.
    The water twister failure occurred at the Jet Car Track Site in 
February 2012. The risk presented by future component failures and re-
designs that occurred, was unknown at the time of production contract 
award in 2009. These failures are largely attributable to inadequate 
risk-reduction activities associated with AAG design. Unlike EMALS, 
which invested over $300 million in full scale development, AAG only 
invested $23 million toward risk-reduction prior to engineering and 
manufacturing development.

    3. Senator McCain. Why was the AAG program not designated as a 
program of special interest, given its criticality to meeting approved 
carrier requirements? Who made that decision?
    Secretary Stackley. The original cost and schedule estimates for 
AAG did not support designation as a program of special interest during 
ASN(RD&A)'s Milestone B decision in 2005. However, the oversight of AAG 
has been similar to that of a special interest program since 2009 
because of delays in the land based test program, cost increases, and 
its association with the CVN-78 program. This level of oversight 
included a ``Nunn-McCurdy-like'' focused review which evaluated 
component re-design, test progress, and projected component delivery 
relative to shipbuilder need dates. The review also scrutinized 
continued delays in testing and the associated programmatic risk of 
performing concurrent development, test, and ship integration events. 
As a result, increased oversight has continued through today.

    4. Senator McCain. It's my understanding that AT&L has decided to 
designate AAG as an MDAP category 1C, in which the Navy retains 
decision authority for the program, vs. 1D, where AT&L takes over. 
Given the Navy's track record managing this program to date, are you 
confident this is the right decision? Please elaborate on your 
response.
    Secretary McFarland. Yes. The development problems that led to the 
Advanced Arresting Gear (AAG) program migrating up to a Major Defense 
Acquisition Program (MDAP) have been appropriately addressed. USD(AT&L) 
decided to designate the AAG program as an MDAP category IC program 
because the program has demonstrated the requisite design maturity. 
USD(AT&L) maintains oversight of the AAG program through the Defense 
Acquisition Executive Summary (DAES) process and will continue to 
monitor the program during annual Defense Acquisition Board (DAB) 
reviews of the CVN-78 program.
               gaps in carrier fleet arresting capability
    5. Senator McCain. At what point did the Navy decide not to backfit 
Nimitz-class aircraft carriers and why was this decision made?
    Admiral Moore and Admiral Gaddis. The Navy has not implemented the 
backfit plan due to challenges in design development, system maturation 
and cost that drove the proposed Nimitz-class backfit opportunities out 
of sync with planned ship maintenance cycles. The initial AAG backfit 
installation requirement was planned to be accomplished within the time 
constraints of an Aircraft Carrier Docking Planned Incremental 
Availability (DPIA). Upon further analysis, and in advance of the 2009 
AAG production contract award, the Navy determined that backfit could 
not be accomplished within the constraints of a DPIA period and 
required a mid-life Refueling and Complex Overhaul (RCOH) schedule to 
complete the task, thus eliminating CVN-68-71 since these hulls had 
already completed or were already in RCOH. In 2010, due to system 
immaturity and the unknown cost of procurement and installation, the 
backfit installation in USS Abraham Lincoln (CVN-72) was considered too 
high a risk to ship schedule and delivery and was not incorporated into 
the RCOH modernization plan. In the summer of 2012, the backfit for USS 
George Washington (CVN-73) RCOH was not incorporated for the same 
reason. Backfit options for the Nimitz-class is currently under review 
as part of an on-going study expected to complete in October 2016.

    6. Senator McCain. What are the Navy's updated plans to address 
limitations to the Nimitz-class arresting capability that led it to be 
part of the AAG business case to begin with, and what costs do we 
expect to see for this?
    Admiral Manazir and Admiral Gaddis. The service began an Analysis 
of Alternatives study in August 2015, with the goal of providing 
potential arresting gear solutions that could be acted upon in POM 19. 
This study is looking for both materiel and non-materiel solutions to 
address the capability concerns within the MK-7 system. Estimated costs 
will be included when the study is completed.
                     transformational technologies
    7. Senator McCain. In executing the Ford-class program, describe 
the major decision milestones were there and the extent to which the 
Navy and OSD jointly made key decisions? Specifically describe the Navy 
and OSD decision-making process when it was clear (1) there was 
significant cost growth in construction of CVN-78, (2) that EMALS was 
not developing at the expected pace, and (3) that development cost of 
AAG had grown so much that it had become a Major program.
    Secretary McFarland. OSD and Navy jointly executed the Defense 
Acquisition System with a series of major milestone reviews that 
resulted in decision memoranda as follows:

      A Milestone 0 Acquisition Decision Memorandum (ADM) dated 
March 29, 1996, based on a review held on March 28, 1996, that approved 
entry into concept exploration including the guidance for conducting an 
analysis of alternatives, the exit criteria for Milestone I, and the 
documentation requirements for Milestone I.
      A Milestone I ADM dated June 15, 2000, based on a review 
held on May 31, 2000, that approved program initiation for the CVNX 
program, including the Phase I exit criteria.
      A Milestone B ADM dated April 26, 2004, based on a review 
held on April 2, 2004, that approved funding for the construction 
preparation contract for the lead ship, the Acquisition Program 
Baseline, and the exit criteria for Milestone B.

    In addition, the Navy provided additional status and sought OSD 
approval through the Defense Acquisition Board (DAB) at the following 
decisions:

      An ADM dated August 6, 2008, based on a review held on 
July 23, 2008, that approved entry into the production phase and 
obligation of funding for the lead ship, CVN-78, and entry into the 
construction preparation phase for the second ship, CVN-79.
      An ADM dated June 3, 2015, based on a review held on 
April 28, 2015, that approved entry into the detail design and 
construction phase for the second ship, CVN-79, proceeding with advance 
procurement for the third ship, CVN-80, and the entrance criteria for 
the fiscal year 2017 program review for construction of CVN-80.

    OSD used the Defense Acquisition Executive Summary (DAES) process 
to formally monitor progress of the program between these decision 
meetings. The program briefed USD(AT&L) on program progress in October 
2009, August 2010, April 2012, June 2013, and March 2014. During each 
of these meetings, cost growth issues in the construction of CVN-78 
were presented and OSD and the Navy jointly agreed on the way ahead for 
the program. As CVN-78 construction costs continued to grow, the 
ASN(RDA) implemented regular monthly meetings with the shipbuilder to 
evaluate progress of CVN-78. OSD representatives attended these 
meetings. DAES reports and OSD reviews will continue as the program 
proceeds through CVN-79 and CVN-80 construction. USD(AT&L) will also 
conduct annual reviews of the CVN-78 program by the Defense Acquisition 
Board.
    EMALS development issues were being monitored by OSD in a similar 
manner, as EMALS was an integral part of the CVN-78 program. Approval 
of the CVN-78 Class Milestone B was contingent on award of the EMALS 
System Development and Demonstration contract. When EMALS development 
became an issue in August 2008, USD(AT&L) directed an independent OSD 
review of its development. The OSD review concluded that:

      The critical EMALS component technologies were developed 
and demonstrated.
      The principal challenge involved full-system and ship 
integration in a program with concurrent system acquisition, testing 
and ship construction.
      Changes and configuration management would be critical as 
EMALS continued development.
      The design for reliability and reliability growth 
remained to be demonstrated.
      The current high-level Navy and contractor management 
focus must be sustained and that program leadership was key to the 
success of EMALS development.
      Navy should implement eight key findings to reduce 
schedule risk. [Navy did implement all eight key findings.]
      EMALS development should continue.

    In accordance with Section 221 of the National Defense 
Authorization Act for Fiscal Year 2012, EMALS was designated as a major 
subprogram of the CVN-78 program on August 24, 2012. The revised CVN-78 
APB established the EMALS subprogram baseline. Since that time, EMALS 
cost, schedule and performance status have been reported in all 
subsequent DAES reports and Selected Acquisition Reports.
    AAG was originally an Acquisition Category II program with ASN(RDA) 
as the Milestone Decision Authority (MDA). AAG development was also 
monitored as a key aspect of the CVN-78 program in each program review 
described above. The AAG development and cost issues were recognized 
well ahead of the Navy formally notifying OSD that the development cost 
of AAG had crossed the threshold as an MDAP. Once AAG became an MDAP, 
OSD reviewed options for continued oversight of the program and decided 
to keep AAG as a separate MDAP rather than making it a sub-program of 
the already large and complex CVN-78 program. This decision avoided 
introducing programmatic inefficiencies and maintained formal oversight 
of AAG.
    Secretary Stackley. Oversight and decision making for the CVN-78 
Class aircraft carrier program reside within the Office of the 
Secretary of Defense (OSD) and the Navy. Milestone decisions and 
monthly Defense Acquisition Executive Summary (DAES), Selected 
Acquisition Reports (SARs), as part of annual budget submissions, and 
Defense Acquisition Board (DAB) reviews enable OSD to oversee while the 
Navy manages the CVN-78 Class acquisition. The Navy, with OSD 
attendance, further manages the CVN-78 Class with quarterly program 
reviews and annual Navy Gate reviews, which cover program cost, 
schedule, and performance, as well as periodic Naval Sea Systems 
Command (NAVSEA) and Naval Air Systems Command (NAVAIR) reviews.
    The Navy is responsible to ensure the CVN-78 Class program meets 
milestone entrance criteria and readiness to proceed into the next 
acquisition phase of the program. The Under Secretary of Defense for 
Acquisition, Technology, and Logistics (USD(AT&L)), the Milestone 
Decision Authority (MDA), ensures entrance criteria is met and 
authorizes entry of the CVN-78 Class program into each phase of the 
acquisition process. USD(AT&L) and the Navy coordinated the CVN-78 
Class strategies and oversight, including acquisition phase content, 
the timing and scope of decision reviews, and decision thresholds. The 
CVN-78 Class program initiated at Milestone 0 in March 1996, received 
Milestone 1 approval in June 2000, and Milestone B approval in April 
2004. The CVN-78 Class received USD(AT&L) approval to proceed into CVN-
78 Detail Design and Construction (DD&C) in July 2008 and CVN-79 (DD&C) 
and CVN-80 advance procurement in June 2015. Upon completion of each 
milestone, the Navy and OSD update the acquisition program baseline.
    Development of EMALS has been integral to the overall development 
of CVN-78. Approval of the CVN-78 Class Milestone B was contingent on 
award of the EMALS development contract. The CVN-78 Class Milestone B 
Acquisition Program Baseline included costs for EMALS based on known 
and projected risks. In 2008 when EMALS development became an issue, 
USD(AT&L) directed an independent Defense Support Team (DST) to assess 
the development of EMALS and the program's ability to support the CVN-
78 schedule. The Navy expanded the scope of the DST and imposed ``Nunn-
McCurdy-like'' criteria on this assessment due to major increases in 
EMALS design and procurement costs and schedule delays. In February 
2009, the DST recommended that the Navy continue with the development 
of EMALS for CVN-78 and future carriers and address findings of the DST 
to reduce schedule risk since no viable alternative to EMALS was 
available. In June 2009, after full deliberation by the requirements 
and acquisition chains of command, the Navy decided to continue with 
EMALS for the CVN-78-class and take actions to address the DST 
findings. To enhance cost visibility and comply with the fiscal year 
(FY) 2012 National Defense Authorization Act (NDAA), USD(AT&L) 
designated EMALS as a major CVN-78 subprogram. Since that time, EMALS 
cost, schedule and performance status have been reported in all 
subsequent DAES reports and SARs.
    AAG was originally an Acquisition Category (ACAT) II program. Over 
the past 10 years, the AAG program experienced Research, Development, 
Test and Evaluation (RDT&E) cost growth, largely associated with the 
2002 decision to accelerate AAG from CVN-79 to CVN-78 and the 
subsequent underestimate of the development required and design changes 
identified in land-based testing subsequent to the Critical Design 
Review. System re-design led to schedule delays and further cost 
increases. The Navy completed an AAG ``Nunn-McCurdy-like'' focused 
review in 2011 to reevaluate component redesign, test progress, and 
projected component delivery relative to shipbuilder need dates. The 
magnitude of the RDT&E cost increase required to complete system 
development exceeded the ACAT 1 threshold in 2014. To increase 
oversight and visibility of AAG progress and issues, rather than making 
it a sub-program to the CVN-78 program, USD(AT&L) reclassified the AAG 
program to an ACAT 1C program in July 2015. Subsequent to the 
reclassification, AAG will submit an initial selected SAR and begin 
DAES reporting.

    8. Senator McCain. It took almost 2 years after breaking the MDAP 
threshold for AAG to be elevated to the Under Secretary of Defense for 
Acquisition. When did you each become aware of the nature and extent of 
cost growth and schedule delay on AAG, such that it was approaching 
MDAP status?
    Secretary Stackley, Admiral Moore and Admiral Gaddis. In April 
2011, two schedule deviations from the 2009 AAG Acquisition Program 
Baseline (APB) were reported by the Program Manager in a Program 
Deviation Report (PDR): (1) the threshold for the conclusion of testing 
at the Jet Car Test Site (JCTS) was breached, and (2) the conclusion of 
testing at the Runway Arrested Landing Site (RALS) threshold would also 
be breached. JCTS testing delays were caused by issues experienced 
during System Development and Demonstration (SDD) hardware integration 
and commissioning due to hardware non-conformances and test incidents/
failures. The Program Manager reported in the same PDR that the 
potential existed for a cost breach to occur as a direct result of the 
JCTS and RALS testing delays and was directed to identify measures to 
be taken to address the testing delays and to offset the cost risks. 
The magnitude of the cost growth was unknown at that time. Throughout 
2012 and 2013, the program continued to experience schedule delays, 
while also working on cost containment.
    Following the Water Twister failure in February 2012, an extensive, 
seven-month technical re-baseline of the program was completed in 
November 2013. At that time, estimated expenditures were projected to 
approach the MDAP level in 2015. With the extent of the recovery 
actions not immediately understood, the Navy considered multiple 
courses of action, including deferring scope to a future integrated 
test and evaluation period. Following completion of the Over Target 
Baseline/Over Target Schedule process and an updated Estimate At 
Completion in 2014, ASN(RD&A) concluded on February 27, 2015, that AAG 
had defaulted to a stand-alone ACAT I program. The ACAT 
reclassification request followed from the Program Office on March 12, 
2015.

    9. Senator McCain. Do you believe that AAG should be designated a 
sub-program--as EMALS was, in order to facilitate better oversight? 
Please elaborate on your response.
    Secretary McFarland. No. USD(AT&L) could have designated AAG as a 
sub-program of the CVN-78 program when AAG migrated up to the MDAP 
level, and this was an option considered at the time. It was rejected 
in favor of keeping the AAG program as a separate MDAP from CVN-78 
because combining the two complex programs would have induced 
programmatic inefficiencies and reduced visibility.
                         cost growth on cvn-79
    10. Senator McCain. Can you explain why CVN-79 experienced a $3.1 
billion increase, a 38 percent growth in the estimated cost, to account 
for changes in inflation assumptions, when inflation (as measured by 
the Consumer Price Index) was 82 percent per year from 2007 to 2014?
    Secretary Stackley. The CVN-79 cost estimate has not increased $3.1 
billion because of inflation. The $3.1 billion increase is the portion 
of the CVN-78 Class follow ship cost cap adjustment in the fiscal year 
(FY) 2014 National Defense Authorization Act (NDAA) due to economic 
inflation.
    The FY 2007 NDAA established the Gerald R Ford-class lead and 
follow ship cost caps and allowable adjustments. The follow ship cost 
cap, based on the lead ship less nonrecurring design/engineering (NRE) 
costs, was set at $8.1 billion in fiscal year 2006 dollars; however, 
this figure did not account for the inflation that would occur between 
2006 and the 2013 CVN-79 procurement. The FY 2014 NDAA revised the FY 
2007 NDAA cost cap by $3,073 million to account for post-September 2006 
economic inflation and changes in the phasing of funding, and by $325 
million for NRE, bringing the cost cap total to $11,498 million. 
Further detail is provided below.
    Inflation: Of the $3,073 million economic adjustment to the follow 
ship cost cap, $2,535 million is associated with the adjustment from 
the original fiscal year 2006 dollars to fiscal year 2013 dollars (the 
authorization year for CVN-79) and updates to the annual inflation 
rates. During the aforementioned timeframe, the inflation rate averaged 
3.96 percent per year based on the Navy process for assessing and 
forecasting shipbuilding inflation. This rate differs from the national 
average of 2 percent associated with the behavior of the U.S. economy 
because U.S. naval shipbuilding is a very small and specialized 
subcomponent of the economy. The nuclear shipbuilding market structure 
is constrained by the effects of a single or limited source procurement 
supplier base and limited access to the low-cost foreign sources from 
which other segments of the U.S. economy benefit. The Navy develops 
specialized cost escalation indices for shipbuilding programs.
    Funding Phase Changes: Of the $3,073 million economic adjustment to 
the follow ship cost cap, $538 million is associated with changes in 
how the follow ship funding and outlays are phased as compared to the 
lead ship at the time the cost cap was established. The changes in the 
CVN-79 funding profile are a result of shifting the ship from a fiscal 
year 2012 start and fiscal year 2019 delivery to a fiscal year 2013 
start and fiscal year 2024 delivery, which incurred an attendant 
inflationary impact.
    These adjustments created a total economic inflation adjustment of 
$3,073 million in the follow ship cost cap and are not reflective of a 
$3.1 billion increase in the cost estimate for CVN-79.
                               __________
              Questions Submitted by Senator Roger Wicker
                 tools needed for improved performance
    From my visits to Electric Boat and my recent visit with Senator 
Kaine to Newport News, I've learned that the Virginia-class submarine 
program is one of the navy's highest performing ship programs.

    11. Senator Wicker. What lessons from the Virginia-class program 
can we apply to the USS John F Kennedy and follow-on ships in the 
carrier program? Following on to the cost reduction initiatives and 
lessons of the Virginia-class program, is a multi-ship procurement an 
efficient cost reduction option for carriers? Please explain.
    Secretary Stackley. Lessons learned from the Virginia-class program 
and CVN-78, the lead ship of the Gerald R Ford-class, are being 
incorporated into the John F Kennedy (CVN-79) construction and 
subsequent follow-on ships in the aircraft carrier program. The Navy is 
using a complete and mature design along with a full bill of materials 
for stable construction. The Navy and shipbuilder have identified 
critical components, qualified supply vendors, and an optimal material 
procurement strategy to reduce material cost. A strong specification 
has been developed with early technical baseline lockdown and the Navy 
has enacted a rigorous change control process, mitigating costly 
changes during construction. The Navy is implementing design 
improvements and design for affordability initiatives to optimize and 
simplify ship's construction. The Navy and shipbuilder have optimized 
the CVN-79 build plan, including moving work earlier into fabrication 
shops in the overall construction to reduce the construction schedule 
and associated costs. Finally, the Navy is reducing developmental 
systems and concurrent integration risk as critical technologies mature 
on CVN-78 to reduce cost, technical, and schedule risk.
    Based on Nimitz-class procurement experience, two-ship buys have 
resulted in the least procurement costs and man-hours. For example, 
procurement of CVN-72 and CVN-73 together reduced the man-hours for 
these ships to the lowest of any Nimitz-class construction. Two-ship 
buys create major perturbations in the overall Navy shipbuilding 
account. Therefore, other actions to achieve similar benefits are being 
pursued by Navy for the CVN-78-class.
    The Navy is investigating multi-ship material buys to leverage 
economic pricing. The Navy and shipbuilders are investigating 
opportunities to procure parts common to multiple ship programs (e.g. 
CVN-79, CVN-80, Virginia-class submarines, Ohio Replacement submarines, 
Nimitz-class Refueling and Complex Overhaul) in a grouped manner to 
leverage better pricing for all programs.

    12. Senator Wicker. What are the lessons learned from the USS 
Gerald R. Ford and other first-in-class ships that could help inform 
future acquisition reform plans?
    Secretary McFarland. In our efforts to keep CVN-79 within the 
current cost cap, we are working to avoid the first-of-class problems 
that led to the cost growth on CVN-78. The lessons learned from the 
CVN-78 experience were tied to these primary factors:

      Concurrency of development and construction. In June 
2000, the DOD approved three ship evolutionary path recognized the 
significant risk of concurrency and sought to limit it by transitioning 
new technologies over the three ships, CVN-77, CVN-78, and CVN-79. In 
2002, DOD leadership directed a transformational leap, inserting all 
technology developments into the CVN-78 lead ship. This led to a major 
redesign to accommodate all new technologies in that ship, compressing 
the technology development period while accepting the high risk of 
concurrency. The original government cost estimates for major sub-
systems including the Electromagnetic Aircraft Launch System (EMALS) 
and the Advanced Arresting Gear (AAG), and the application of the DDG 
1000 developed Dual Band Radar (DBR), which became a first-of-class 
installation when it was removed from DDG 1000 as a cost reduction 
measure, became unachievable as development issues emerged. Cost 
increases in ship construction mounted as the shipbuilder had to make 
allowances in the construction sequence to contend with late design 
products and work-arounds for late delivery of some components.
      Late material deliveries. The original shipbuilder 
construction cost estimate was based on a design and build schedule 
predicated on the on-time arrival of both government and shipbuilder-
ordered material and technical information to support the design and 
construction schedule. Late deliveries were also attributed to 
insufficient vendor capacity and late material procurements.
      Unplanned and unbudgeted work. Changes in the hull 
structural design to regain service life weight margin resulted in the 
use of thinner steel plating in many areas more than was used in the 
Nimitz-class hull structure. The shipbuilder required unplanned 
temporary bracing to complete construction of these structural units.

    As we look across lessons learned from other shipbuilding programs, 
those lessons can be rolled up into the following major elements that 
should inform future shipbuilding acquisition planning:

      Before the shipbuilding program begins, ensure there is a 
balance between the program requirements, such as schedule, warfighting 
capabilities, and threat demands; the technology demands; and the 
expected cost.
      Use the process of ``should cost'' versus ``will cost'' 
to drive down cost during program execution. Do not assign ``cost 
challenges'' to the program managers, expecting them to manage their 
way out of the challenges from the start.
      Before beginning the detail design and construction phase 
of the lead ship, ensure that:
       o  All critical technologies were developed into prototypes and 
then successfully demonstrated in an appropriate environment.
       o  The technical risks are identified and a management plan is 
in place.
       o  There are no gaps remaining in the design requirements.
       o  The technical information for vendor supplied material needed 
to support the design is on hand.
       o  The detail design tools are adequate and proven to support 
the development of the product model.
       o  The shipbuilder fully understands the technical 
specifications that will guide the design and construction of the ship.
      Before starting construction of the lead ship, ensure 
that:
       o  The ship design is stable.
       o  The product model is completed to support work package 
development as the optimized build schedule demands.
       o  The build processes are proven.
       o  The material delivery dates remain supportive of the build 
plan.
                     advanced arresting gear (aag)
    On the topic of delays associated with the AAG, I share Chairman 
McCain's overall concerns about the cost and schedule risks associated 
with concurrency - which is when program testing and evaluation runs 
concurrently with the beginning of production.

    13. Senator Wicker. Is it correct to say that as of right now AAG 
is on track to support a delivery timeline consistent with Navy 
expectations?
    Admiral Gaddis and Admiral Manazir. Navy expectations are that AAG 
installation will be complete at ship delivery, and that shipboard 
testing will complete in time to support scheduled flight operations in 
the fall of 2016. AAG is on track to meet these expectations.

    14. Senator Wicker. What steps has the Navy taken thus far to 
further reduce risk associated with program concurrency?
    Admiral Gaddis and Admiral Manazir. The Navy established extensive 
land based test facilities in order to test and qualify AAG software 
and hardware as a risk-reduction mechanism prior to commencing the 
shipboard test program. We have retired the majority of our concurrency 
risks within re-designed hardware that has been tested at the Jet Car 
Track Site prior to delivery and installation on CVN-78. Those 
components that were not available prior to installation have been 
tested and will be incorporated into the hardware installed on the ship 
via a Field Change Work Package process. The configuration baseline for 
CVN-79 incorporates all AAG improvements to date.

    15. Senator Wicker. I understand that General Atomics' AAG contract 
is a firm fixed-price contract.
    Can you elaborate on the benefits for the Navy of pursuing firm 
fixed-price contracts?
    Secretary Stackley. Firm-fixed-price contracts apply most 
appropriately where the costs and requirements are well understood, 
well defined and stable. Well defined and stable requirements allow 
industry to more accurately understand Department of the Navy (DoN) 
requirements and produce cost-effective proposals. Performing to a 
stable plan (stable requirements, designs and budgets) translates into 
predictable, reliable performance, unit cost reduction, improved 
material purchasing and workforce planning, retention of skilled labor 
and the ability for industry to invest in facility improvements 
resulting in more efficient production and a more affordable program, 
all of which are beneficial to the DoN. Further, firm-fixed-price 
contracts are most appropriate when technical, business and economic 
risks can be reasonably identified with predictable costs included in 
the price. DoN programs are committed to competition and the basic 
principles to get the requirements right, perform to a stable plan and 
make every dollar count, including use of firm-fixed-price contracts 
where appropriate.

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