US Carrier Contract Award Delayed

A composite photo illustration representing the Ford-class aircraft carrier, USS John F. Kennedy (CVN 79). (Navy)

Sep. 13, 2013 - By CHRISTOPHER P. CAVAS – Defense News

WASHINGTON — Negotiations continue between the US Navy and shipbuilders Huntington Ingalls Industries (HII) over the primary construction contract for the next aircraft carrier, even as the goal of a September contract award will pass with no action.

Sources said neither side sees a serious impediment to eventual agreement, and each agreed a Navy decision to continue support for preparation work will give negotiators more time to reach an accord.

“This decision was not impacted or driven by sequestration,” said Cmdr. Thurraya Kent, a Navy spokeswoman at the Pentagon. The delay “is to avoid any production break, continue negotiations, and keep the ship’s delivery date unchanged.”

The ship is the future John F. Kennedy (CVN 79), second ship in the new Gerald R. Ford-class of carriers. Like all previous nuclear carriers, the ship will be built at HII’s Newport News Shipbuilding yard in Virginia. Kennedy is scheduled to be delivered in September 2022.

The Navy estimates the carrier will cost $11.3 billion to build.

While the detailed design and construction contract had been scheduled to be awarded this month, the shipbuilder has received at least a dozen significant contracts or contract modifications for the ship since January 2009. The most recent contract announcement was made on May 6, when the company received a $60.8 million modification to buy long-lead items and continue preparation work. That work is expected to be completed by October 2015.

Delays in awarding significant ship construction contracts are not unknown. The final contract award for the DDG 1001 destroyer, for example, was delayed in 2011 while the Navy and General Dynamics continued negotiations, but also worked together to ensure progress continued on the ship, being built at Bath Iron Works in Bath, Maine.

Several sources felt it would not be unusual for CVN 79 contract negotiations to continue into the spring.

The carrier program came under intense criticism this month from the Government Accountability Office (GAO), which issued a highly critical report on Sept. 5.

Ironically, the government rejected a GAO recommendation to delay award of the detail, design and construction contract.

“Remaining technical and design risks with the lead ship could interfere with the Navy’s ability to achieve its desired cost savings for CVN 79,” the GAO said in the report. “These uncertainties also affect the soundness of the Navy’s current CVN 79 cost estimate, which is optimistic. These factors, when coupled with the existing sole source environment for aircraft carrier construction, may compromise the government’s negotiating position for CVN 79.”

Michele Mackin, who led the GAO carrier study effort, noted the delay is “interesting for us because we just recommended that they delay the award and they disagreed. And now, two weeks later, they delay it.”

A delay in the contract, Mackin said, would help in the understanding of the impact of several key systems still under development.

“There are still pretty significant unknowns with the electromagnetic aircraft launch system and the advanced arresting gear and other developmental technologies,” she said. “We think the government would be in a better negotiating position, with better insight and more knowledge about the test results of the developmental systems.

“This is a sole-source contract, and the government is not necessarily in the best position,” she added, “so the more they know about the costs of the lead ship the more information they’ll have to negotiate the second ship.

“The current contract they have expires in October 2015, so there’s time.”

Here is the Navy’s full statement on the contract delay:

“The Navy continues to negotiate with Huntington Ingalls Industries - Newport News Shipbuilding (HII-NNS) for award of the Detail Design and Construction (DD&C) contract of JOHN F. KENNEDY CVN 79. Until these negotiations conclude, the Navy intends to extend the current Construction Preparation Contract to authorize planning, material procurement, and discrete work that are aligned with the ship’s optimal build plan. Extension of the Construction Preparation contract avoids a costly production break.

“Negotiations on the DD&C contract will allow HII and the Navy to account for construction process improvements and other cost reduction opportunities which were outlined in the Navy’s May 2013 Report to Congress on CVN 79. Extension of the Construction Preparation contract will not impact the ship’s funding profile, ship’s delivery date, or the cost cap. ENTERPRISE (CVN 80) [the third unit in the CVN 78 class] is not affected by this decision.

“JOHN F. KENNEDY began Advanced Construction in December 2010 and was named by [Navy] Secretary [Ray] Mabus in May 2011. The ship will be the second aircraft carrier of the GERALD R. FORD class and is scheduled to deliver in Fiscal Year 2022. CVN 79 is the numerical replacement for USS NIMITZ (CVN 68) in the Navy’s force structure.”

Huntington Ingalls issued this statement:

“This action demonstrates the importance of continuing early unit construction and procurement of material for CVN 79 to the current plan of record while we jointly work to get a Detailed Design and Construction (DD&C) contract in place.

“This extension will help ensure that the fragile supplier base and our shipbuilders remain working, minimizing delay to ship delivery and associated cost increases.

“This extension also provides time for the Navy and industry team to implement lessons learned from CVN 78 construction, implement further construction process improvements, identify any government requirement reductions, and increase the maturity of government technologies in order to stay within a challenging budget.”