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Navy Acquisition Chief: CVN-78 cost growth based on risk

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Speaking before an audience at the Atlantic Council in Washington DC on 7 January 2014, Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley elucidated the principal reason why the CVN-78 has experienced cost growth (its large number of high risk components) and explained how the Service is closely monitoring program costs with a view to holding the line on the CVN-78's 2011 cost cap and on reducing the cost of the emerging CVN-79 and CVN-80.  

Said Mr. Stackley:

"Let me just give you facts.  The Navy identified where the cost on the CVN-78 was going when the ship was about 20% complete.  We could see where this was going.  Originally, the program was going to be this thing called the CVN21.  It was going to be the next carrier program after the Nimitz Class, it was going to be an incremental three-carrier development of capabilities, so we were going to step our way up to this thing called the CVN21 over three platforms. 

It was decided about fifteen years ago that that was not transformational enough -- I worry about the word “transformational” – it was not transformational enough.  So instead we were directed: you’re going to do this in one step, called the CVN-78.  So we had significant developmental efforts that were going to be combined, rather than incrementally, onto a single new platform, the CVN-78.  All new reactor plant.  All new electrical power distribution.  Ten million feet of cable to deal with some very unique systems.  Electromagnetic aircraft launching.  Advanced arresting gear.  Dual band radar.  Increased survivability.  Technologies that would allow us to reduce the crew, ship and air det by 1200 people per carrier.  $4-$5 billion dollars savings per carrier, over its life cycle.  Significant leap forward in terms of technologies, but also in terms of risk, all being brought to bear on a single carrier, the CVN-78.  So when the ship is about 20-25% done, we are starting to see a lots of those risks turn into costs.  Costs -- not just cost risk, but cost forecast -- and we notified the Congress.

In August 2011, we put down here’s what our cost estimate is for completing the aircraft carrier.  It had a cost cap, so it would require Congress to give us relief in terms of that new cost estimate.  Our number hasn’t changed since August of 2011.  It has not changed.  Now does that mean there’s not pressure?  Does that mean that there isn’t risk?  Absolutely there is, and we are managing it every day.  We are plodding, daily, determinately, to deal with those smaller problems to solve the larger problems.  Every single day.  We’ve got the team that’s suited for it, Government and industry.  That’s the CVN-78.  I wrote the number down.  $12.887 billion in August of 2011.  I sent that by letter to the Hill.  Every single month I send them a monthly report on how we are doing.  It is going to be hard, right up until the very end, but we are gonna get it done.  That the CVN-78.

The CVN-79 also has a cost cap -- $11.498 billion dollars.  Does it have cost pressure on it?  Certainly.  We haven’t finished the first ship, so clearly the second ship is gonna have risk until you’ve actually completed the first one.  What are we doing about that?  We are going about that in a big way.  The CNO and I sit down with the Program Executive Officer and the sponsor on a monthly basis, going over spreadsheets about four feet long, line item by line item, small font, in terms of the cost of every element that adds up to that aircraft carrier to drive cost out, to drive accountability in, so that today we are not accepting an $11.498 billion dollar cost estimate for that carrier.  We are driving that number down to ensure that, in execution, as thing happen, if things happen that affect its costs, we have plenty of headroom not just to stay below that cost cap but to keep the costs down and in more affordable region for that aircraft carrier.  In CVN-80 we will do better yet."