Case Study 10: From Columbia Class Submarine, GAO-19-497, April 8, 2019

The Navy has identified the Columbia class submarine program as its top acquisition priority. It plans to invest over $100 billion to develop and purchase 12 nuclear-powered ballistic missile submarines to replace aging Ohio class submarines by 2031. The Navy’s goal was to complete a significant amount of the Columbia class submarine’s design—83 percent—before lead submarine construction began in October 2020. The Navy established this goal based on lessons learned from another submarine program in an effort to help mitigate its aggressive construction schedule. The shipbuilder had to use a new design tool to complete an increasingly higher volume of complex design products. The shipbuilder hired additional designers to improve its design progress. The Navy also planned to start advance construction of components in each major section of the submarine, beginning in fiscal year 2019, when less of the design would be complete.

Navy cost estimators identified labor costs as a primary source of cost risk, but the Navy’s $115 billion procurement cost estimate was not reliable partly because it was based on overly optimistic assumptions about the labor hours needed to construct the submarines. The Navy anticipated that it would need 12 million labor hours to directly construct the lead submarine. This represented 17 percent fewer labor hours than what was needed for the lead Virginia class submarine, when adjusted for weight differences. To develop this estimate, Navy estimators relied heavily on historical labor hour data from the construction of the lead Virginia class submarine and cost data from the Ohio class submarine program for unique ballistic submarine components, such as missiles. However, the labor hour estimate was overly optimistic—with assumptions on construction efficiencies that were either unsubstantiated or unprecedented compared to Virginia class and other shipbuilding historical data.

Compared to the Navy’s estimate, Columbia’s estimated touch labor hours, as calculated by other organizations, were more conservative. For example, the Congressional Budget Office questioned the Navy’s assumption that ballistic submarines are less expensive to build than attack submarines, after accounting for weight differences. They estimated that for the overall class, including the lead and follow-on submarines, the Navy would more likely realize an 8 percent reduction rather than the 19 percent reduction estimated by the Navy. If the program’s optimistic assumptions were not realized, the program may have required more funding than originally planned to construct the Columbia class.

The Navy told GAO it would continue to update its lead submarine cost estimate, but an independent assessment of the estimate would not be complete in time to inform the Navy’s 2021 budget request to Congress to purchase the lead submarine. Without these reviews, the cost estimate—and, consequently, the budget—may have been unrealistic. A reliable cost estimate is especially important for a program of this size and complexity to help ensure that its budget is sufficient to execute the program as planned.

In addition, the Navy was using the congressionally-authorized National Sea-Based Deterrence Fund to construct the Columbia class. The Fund allowed the Navy to purchase material and start construction early on multiple submarines prior to receiving congressional authorization and funding for submarine construction. The Navy anticipated achieving savings through use of the Fund, such as buying certain components early and in bulk, but did not include the savings in its cost estimate. The Navy may have overestimated its savings as higher than those historically achieved by other such programs. Without an updated cost estimate and cost risk analysis, including a realistic estimate of savings, the fiscal year 2021 budget request may not have reflected funding needed to construct the submarine.

GAO reported these findings on April 8, 2019 in Columbia Class Submarine: Overly Optimistic Cost Estimate Will Likely Lead to Budget Increases, GAO-19-497.