Navy should provide independent cost estimate for missile frigate additions, GAO says

The U.S. Navy is working on adding 20 new guided missile frigates to its fleet, but the Government Accountability Office (GAO) has recommended they provide Congress with an independent cost estimate before awarding any contracts.

Currently, the cost is estimated at around $20 billion. GAO believes efforts could be taken to improve lawmakers’ knowledge of the situation, before plans to award the construction contract in July 2020 are finalized. This is emphasized by the fact that the Navy has requested $1.3 billion to build its first ship before it even has what GAO calls a “solid understanding of its design and cost.” Though efforts have been taken to reduce the risk of design and technology problems, others remain.

These efforts — a part of the FFG(X) Guided Missile Frigate program — still have no timeline for completing an independent cost estimate, by the Department of Defense’s (DOD’s) own admission. Nor will that estimate be finalized until the Navy determined which FFG(X) design is likely to receive the contract. The contract itself will be a fixed-price incentive searching for both design and construction — a substantial difference from traditional Navy surface combatant programs, which tend to use higher-risk cost-reimbursement contracts for lead ship construction. They desire a $5 million guaranty, minimum, to correct any potential defects in these ships, but discounted the potential use of a warranty. GAO reports that the Navy offered no analysis to support this or demonstrated why using these warranties is not viable.

In this situation, GAO recommends two things from the Navy. They want an independent cost estimate prepared for Congress prior to awarding the detail design and construction contract, and which shows that the estimate for this contract is consistent with the 2020 budget request for the lead ship. Beyond that, they want the FFG(X) program office to request pricing for warranties for the lead ship and the nine follow-on ship options, as part of the detail design and construction request for proposals. So far, however, DOD has not agreed to update its request for proposal to solicit ship warranty pricing.