New York Times
April 25, 2008
By Philip Taubman
With the crack of a Champagne bottle against its bow, the newly minted Navy warship, bedecked with bunting, slid sideways into the Menominee River in Wisconsin with a titanic splash.
Moments before the launching on Sept. 23, 2006, Adm. Mike Mullen, the chief of naval operations, told the festive crowd of shipbuilders, politicians and Navy brass assembled at the Marinette Marine shipyard, “Just a little more than three years ago, she was just an idea; now Freedom stands before us.”
Not quite. The ship — the first of a new class of versatile, high-speed combat vessels designed to operate in coastal waters — was indeed bobbing in the river, just four months after the promised launching date. But it was far from finished. In fact, the ship floats there still, work continuing day and night.
A project heralded as the dawning of an innovative, low-cost era in Navy shipbuilding has turned into a case study of how not to build a combat ship. The bill for the ship, being built by Lockheed Martin, has soared to $531 million, more than double the original, and by some calculations could be $100 million more. With an alternate General Dynamics prototype similarly struggling at an Alabama shipyard, the Navy last year temporarily suspended the entire program.
The program’s tribulations speak to what military experts say are profound shortcomings in the Pentagon’s acquisitions system. Even as spending on new projects has risen to its highest point since the Reagan years, being over budget and behind schedule have become the norm: a recent Government Accountability Office audit found that 95 projects — warships, helicopters and satellites — were delayed 21 months on average and cost 26 percent more than initially projected, a bill of $295 billion.
In a narrow sense, the troubled birth of the coastal ships was rooted in the Navy’s misbegotten faith in a feat of maritime alchemy: building a hardened warship by adapting the design of a high-speed commercial ferry. As Representative Gene Taylor, the Mississippi Democrat who leads the House Armed Services Subcommittee on Seapower and Expeditionary Forces, put it, “Thinking these ships could be built to commercial specs was a dumb move.”
Behind the numbers in the Accountability Office study, experts say, is a dynamic of mutually re-enforcing deficiencies: ever-changing Pentagon design requirements; unrealistic cost estimates and production schedules abetted by companies eager to win contracts, and a fondness for commercial technologies that often, as with the ferry concept, prove unsuitable for specialized military projects.
At the same time, a policy of letting contractors take the lead in managing weapons programs has coincided with an acute shortage of government engineers trained to oversee these increasingly complex enterprises.
The coastal ships — called littoral combat ships — are especially important to the Navy, which has struggled to retain a central role in American military operations after the cold war. In part, they are a response to the Navy’s own Sept. 11 moment, which came in October 2000, when two terrorists in a bomb-laden rubber dinghy rammed the destroyer Cole, killing 17 sailors and wounding 39 more.
An examination of the littoral combat ships by The New York Times, including interviews with many of the principal Navy and industry officials involved, found that the project was hobbled from the outset by the Navy’s zeal to build the ships as fast and inexpensively as possible and the contractors’ desire — driven by competitive pressures — to stay on schedule, even as the ferry designs proved impractical and construction problems multiplied.
In their haste to get the ships into the water, the Navy and contractors redesigned and built them at the same time — akin to building an office tower while reworking the blueprints. To meet its deadline, Lockheed abandoned the normal sequence of shipbuilding steps: instead of largely finishing sections and then assembling the ship, much of the work was left to be done after the ship was welded together. That slowed construction and vastly drove up costs.
“It’s not good to be building as you’re designing,” said Vice Adm. Paul E. Sullivan, commander of the Navy branch that supervises shipbuilding.
A Lockheed executive vice president, Christopher E. Kubasik, said, “We have acknowledged all along our shared responsibility for challenges encountered in the design and construction of the littoral combat ship, which are similar to those typically experienced with first-in-class vessels, including the competing LCS design.” Mr. Kubasik said the company was working toward “realistic cost goals for subsequent ships.” General Dynamics declined to comment.
Despite the problems, the Navy secretary, Donald C. Winter, and other top Navy officials say they remain committed to building 55 of the ships, once a steady, fixed-price production run can be assured. Even at about $500 million apiece, Navy officials add, the coastal ships would be a bargain compared with most Navy combat vessels.
Still, throughout the military-industrial world, the program is seen as a cautionary tale, especially for a Navy whose 30-year shipbuilding strategy calls for building scores of warships — including aircraft carriers, destroyers and submarines — to bolster an aging fleet.
“The littoral combat ship is an imaginative answer to emerging military requirements, but it has the most fouled-up acquisition strategy I have ever seen in a major military program,” said Loren Thompson, a military analyst at the Lexington Institute, a policy research center. A New Mantra
Traditionally the Navy had disdained small combat ships as a major component of the fleet. But strategists came to fear that the “David and Goliath” phenomenon underlined by the attack on the Cole, what they call asymmetric warfare, would only grow in the years ahead.
“We needed to figure out how to asymmetric the asymmetric guys,” recalled Adm. Vern Clark, who championed the ships as chief of naval operations from 2000 to 2005.
To Navy planners, a ship designed for coastal combat could neutralize hostile submarines, surface warships, mines and terrorist speedboats, clearing the way for other combat ships to operate in offshore waters and support combat ashore. The Navy first publicly declared its intention to build the ship on Nov. 1, 2001. In those days, the Pentagon’s defining procurement mantra was “Faster, Better, Cheaper.” From the first, the coastal ships’ defining characteristic was speed.
The first model was to be delivered no more than six years after conceptual planning began, half the normal time. Construction was to take two years, instead of the usual four or five.
The Navy also wanted ships that could travel fast, better than 40 knots. And they needed to be easily outfitted with different weapons and surveillance systems. A removable package of mine-sweeping equipment, for instance, could be replaced with a package of special-operations gear used by a Seal team.
Each ship would carry an uncommonly small crew, about 40 sailors.
Compared with a $2 billion destroyer or a $7 billion to $9 billion aircraft carrier, the new ships would be produced at the cut rate of $220 million apiece, not including weapons packages.
In short, the accelerated, cost-conscious acquisition plan — promoted as a new shipbuilding paradigm to help the Navy rebuild the fleet — appeared to be exactly the kind of transformational thinking that Defense Secretary Donald H. Rumsfeld and his top civilian aides favored as they moved into the Pentagon in 2001. It was quickly approved. A Plan, Then It Changes
Another idea that had taken hold was that the Pentagon should break free from cumbersome, gold-plated acquisition programs by taking advantage of commercially available technologies.
With that in mind, Lockheed and General Dynamics proposed different high-speed ferry models as the template, and in 2004, the Navy selected the two companies to compete for the business. The model for the Freedom was a ferry built in Italy. An Australian ferry was the model for the General Dynamics prototype, named Independence.
Lockheed had virtually no shipbuilding experience. But in keeping with a Pentagon policy that called for letting big military contractors run complex projects with minimal government supervision, the Navy made the companies primarily responsible for all phases of development — from concept studies to detailed design and construction.
In theory, the contractors’ business and technological acumen would save taxpayer dollars. But the Navy agreed to reimburse the companies for cost overruns rather than setting a fixed price, leaving little incentive to hold down costs.
To compensate for its lack of experience, Lockheed joined with the naval architecture firm of Gibbs & Cox and two shipyards, Marinette Marine, and Bollinger in Louisiana.
The Lockheed proposal called for a steel single-hull ship 378 feet long and 57 feet wide. It would have a spacious flight deck and space for two helicopters, a stern ramp and side door near the waterline for launching and recovering small boats, and large interior compartments that could be quickly reconfigured for different weapons systems. But as Lockheed and the Navy were completing contract negotiations in 2004, the rules changed drastically. Commercial ferry standards, the Navy determined, would not do.
The underlying principle behind the decision, Admiral Sullivan said, was that the new ships had to be able to “hang tough in a storm and take some battle damage and still survive long enough” for the crew to be rescued.
A military expert said the Navy had badly miscalculated.
“They were eager to take advantage of commercial practices and the lower cost of buying off the shelf, but they did a lousy job of understanding the war-fighting requirements,” said the military expert, who asked not be named because he was involved with the program. “It was like, ‘You mean you want to put wheels on that car?’”
Adm. Gary Roughead, the current chief of naval operations, said: “We had thought that the commercial variant would not be that far away from what we needed. I’ll tell you, that was underestimated.”
At the same time, the Navy realized the time had come to modernize its shipbuilding code. The resulting Naval Vessel Rules in many ways trumped the idea that the new ships could draw extensively on commercial ferry designs.
The new rules called for a water-mist fire extinguishing system instead of the commercial sprinkler system normally found on a ferry, forcing the shipyard to order new pipes, high-pressure nozzles and other equipment. Other revised requirements included heavy-duty power cables and reinforced crew compartments.
Ultimately, there were nearly 600 significant engineering changes affecting nearly all parts of the ship, according to the Navy.
The Navy and Lockheed agree that the Navy described the new rules as they were being developed, and that it increased the budget to accommodate some design changes. Even so, both parties acknowledge they badly underestimated the consequences.
“Once the rules were issued, it took us a year to fully understand how they would impact the project,” said Craig R. Quigley, a Lockheed spokesman.
By then, early 2005, the ship was already under construction at Marinette. The Setbacks Begin
Building a ship requires precision sequencing, as sections are built and outfitted in large manufacturing halls, then moved to a towering building where they are welded together to create a ship.
This system allows workers ample space, light and access to heavy construction tools as they build each section, called a ship module, and outfit it with pipes, cables, insulation and other equipment, and apply coats of paint.
Getting the modules as complete as possible before assembly is critical because it becomes far more difficult to work in the cramped quarters of a ship. Marinette’s general manager, Richard T. McCreary, said it costs roughly six times more to outfit a module aboard a ship than standing free.
Normally, the Marinette yard prefers to get modules 85 percent to 90 percent completed before they are transported to the ship erection building. In the case of the Freedom, with its repeated design alterations, better than half of the 39 sections fell well short of that goal.
The risks seemed obvious, yet neither the Navy nor the shipyard was willing to reconsider the timetable.
Rear Adm. Charles S. Hamilton II, one of the Navy officers with lead responsibility for the project, said he had given Navy officials several opportunities to slow down the project.
“The clear signal from all quarters was, ‘Hamilton, I want that ship in the water, and I want it out there now,’” he recalled in an interview.
Admiral Hamilton left the Navy last year. He now works at Booz Allen Hamilton, the consulting firm.
At Lockheed, executives say they feared that slowing down construction would put them at a disadvantage in their battle to win the contract over General Dynamics.
Yet if the project was troubled, the Navy’s oversight at Marinette was less than robust. Because of staffing reductions, the Navy office responsible for supervising shipbuilding initially dispatched no one full time to Wisconsin. Even after a team arrived, it failed to appreciate the severity of problems.
“We had very junior people on site,” Admiral Sullivan said.
Construction was also hampered by steel shortages: the lower levels of the hull required the same low-alloy steel the Pentagon was buying to strengthen the armor on Humvees in Iraq.
The most wrenching setback came in autumn 2005, when a key gear for the propulsion system was cut incorrectly, forcing a 27-week delay in ship construction. Rick Kennedy, a spokesman for G.E. Aviation, the General Electric division that produced the gear, said a machinist had misread a drawing; G.E. absorbed the additional cost.
Shipbuilders usually start with the engine space, which contains the most machinery, then build around it. Because of the gear problem, Mr. McCreary said, “We did just the opposite.”
Joe North, who manages the project for Lockheed, said in an interview at the shipyard that he initially thought the yard could work around the problems, that design work would eventually catch up with construction.
Looking back, Mr. North said, “it was death by a thousand cuts.” ‘It Got Oversold’
With work nearly finished and the Menominee River ice gone, Lockheed plans to take the Freedom to sea trials in Lake Michigan this spring and hopes to deliver it to the Navy late this year.
The competing General Dynamics ship, an aluminum trimaran considerably bigger than the Lockheed model, is to be launched on Saturday in Alabama. Even though General Dynamics had more time to digest the Navy’s design changes before starting construction, its ship ran into many of the same problems and delays as Lockheed’s. The price tag also more than doubled.
Last year, the Navy temporarily put the entire program on hold when it terminated contracts for more ships because it could not reach agreement with the two companies on a fixed price.
While the financial gap was not great, Navy and industry officials said, the Navy, hammered by Congress for its handling of the project, wanted to demonstrate its determination to hold down the price for future ships. Congress has set a spending cap of $460 million per ship, excluding weapons packages.
Once the Navy evaluates the two prototypes, it can select one or order a mixed fleet. While it could opt for a different approach, military experts say that seems unlikely, given the need for the new ships and the money and effort already expended.
The Navy recently restarted the program, inviting the two companies to submit fixed-price proposals for three additional ships. Lockheed, still hoping to win the entire prize, said the problems encountered with the Freedom would not be repeated, now that the company has a finished design.
“It will be great, the next time around,” said Mr. North, the program manager. “Lead ships are truly hard.”
Navy and industry officials say blame for the program’s rocky early history has to be shared.
“It’s easy to lay all the blame at the foot of the government, and the Navy was naïve, but the companies bear some of the responsibility,” said a senior industry official who asked not to be identified because of his involvement in the project. “They were playing the game to get the contract, not owning up about all the issues until well into the game, hoping to make some recovery downstream.”
Mr. McCreary, the Marinette general manager, said that while the shipyard might not have fully mastered the Navy’s accounting system, it had given the Navy frequent progress reports showing problems mounting.
Mr. Winter, the Navy secretary, complained that the Navy bureaucracy had failed to alert him to rising costs. The Pentagon, he said, was bedazzled by the idea of saving money and time with commercial technologies.
“It got oversold,” he said. “The concept was just abused.”
He lamented the Pentagon’s eroding expertise in systems engineering — managing complex new projects to ensure that goals are achievable and affordable — and faulted the notion that industry could best manage ambitious development projects.
“Quite frankly, industry is not good at doing this,” he said.
Recently, Mr. Winter said, he instituted new procedures to ensure tighter supervision of all shipbuilding projects. He says he is confident that the coastal-ships program will produce a fleet of fine, affordable vessels. But as he contemplates the Navy’s long-range rebuilding plans, he says he stands behind a scorching critique that he delivered at a convention in Washington last year:
“If we do not figure out how to establish credibility in our shipbuilding programs and plans, and restore confidence in our ability to deliver on our commitments, we cannot expect Congress or the nation to provide us with the resources we so urgently need.”