INTERVIEW-Delaying next carrier would further boost cost-US Navy

Published: Tuesday,  9 Jul 2013 |  5:29  PM ET

WASHINGTON, July 9 (Reuters) – Delaying work by Huntington Ingalls Industries Inc on the USS Kennedy, the second Ford-class aircraft carrier, would likely add $600 million a year to the cost of the new warship, the U.S. Navy’s top acquisition official told Reuters.

Assistant Navy Secretary Sean Stackley acknowledged cost overruns and technical problems on the first ship in the class, which is due to be finished in early 2016. But he said it did not make sense to delay awarding a contract for the second ship, as proposed in a Government Accountability Office (GAO) draft report last month.

“The greatest degree of learning occurs between the first and the second ship, and you don’t want to lose that, or it will simply drive cost into the program…,” Stackley said in an interview on Monday. Interrupting production would make the process far less efficient, he added.

The draft GAO report called the Navy’s estimate for the cost of the second ship “overly optimistic” and urged it to delay awarding a detailed design and construction contract, now planned for September, until more land-based testing of the ship’s radar and other systems was completed.

It also recommended that the Navy revisit its cost estimate to factor in actual costs and labor hours on the first ship.

The U.S. Navy budget shows the USS Kennedy is expected to cost $11.34 billion, up from $8.1 billion, a 23.4 percent increase since fiscal 2008, according to a recent report by the Congressional Research Service, another federal research agency. The Navy has asked Congress for a cost cap of $11.49 billion for the USS Kennedy.

The lead ship, the USS Ford, is expected to cost $12.83 billion, up 22.3 percent from fiscal 2008, the Navy said, although it has asked Congress to raise the cost cap for the program to $12.89 billion.

The Navy says it has sought to rein in costs, mindful that every dollar spent on overruns sucks money from its overall shipbuilding budget just as it is scrambling to replace aging ships.

Stackley said the Navy was negotiating with Huntington Ingalls to lower the costs of the USS Ford, which were driven higher when the company had problems securing parts, the vessel’s design was incomplete and a critical system for launching and recovering aircraft had to be reworked.

New features on the Ford-class carriers had raised procurement costs, Stackley said, but would make the ships more affordable to operate. For instance, the ships require 1,200 fewer crew members than the 6,000 needed on current carriers.

Risks remain for the lead ship during the final two years of its construction, he said.

Stackley said studies looking at delays in earlier aircraft carrier programs from the 1990s through 2010 showed an impact of about $600 million per year.

The Navy had learned lessons from construction of the first ship, he said, noting that the ship’s design was more complete, and parts procurement should be easier.

The Navy was also asking Huntington Ingalls to ensure that components were completed earlier in construction than on the first ship, Stackley said.

A spokeswoman for the company, Beci Brenton, said, “The mature and stable design will allow for improved material availability, and we are working with the Navy and our suppliers to identify ideas that would make future carriers more affordable.”

Stackley said the Navy had responded to the GAO report, but gave no details. One congressional aide said the final report, including the Navy’s response, could be released next week.

The Navy plans to launch the USS Ford in November, when it will be around 70 percent complete, with delivery planned in March 2016, Stackley said.

(Reporting by Andrea Shalal-Esa; Editing by Leslie Gevirtz)