A roughly $4 billion effort by San Diego-based General Dynamics-NASSCO to build six critically needed Navy fueling ships is running at least $85.2 million over budget and has fallen a year or more behind schedule, says a new report by the Congressional Research Service.
The nonpartisan agency attributes the problem to everything from the flooding of a dry dock at NASSCO, which affected the yard’s ability to build ships, to unspecified performance issues, inflation and the pandemic.
The cost overrun is about $5 million higher than the one contained in a General Accounting Office review last year and comes as the Navy is struggling to obtain enough money from Congress to achieve its long-term goal of increasing the number of manned ships to 355 from 296.
In the near term, the service wants to retire several ships to save money. Its latest budget request, for the fiscal year 2023, actually anticipates the fleet shrinking by 12 ships.
The Navy also is struggling to maintain its fuel supply chain. Pollution problems recently led the Navy to announce that it is shutting down its aging, leak-prone Red Hill fuel depot in Hawaii, which has long been used by West Coast-based warships traveling between the mainland and the western Pacific, Indian Ocean and Middle East. Last year, about 14,000 gallons of jet fuel bled into the water supply in the Honolulu area, displacing thousands of service members and their families.
NASSCO is a crucial contractor, not only for the Navy but the commercial market. It’s well-known for repairing a wide variety of warships and for designing and building Navy support and auxiliary vessels as well as commercial cargo carriers and oil tankers. Some work flows its way, in part, because NASSCO is the last major shipbuilder left on the West Coast.
The shipyard was contracted to build the first six John Lewis-class Navy oilers, a new type of vessel that transfers fuel and other essentials to ships operating at sea. The class, which ultimately could number 20 vessels, is named after the late Congressman and civil rights leader John Lewis, who died in 2020.
The company built and launched the first two ships, John Lewis and Harvey Milk. But the CRS report says the cost of the John Lewis rose to $759.4 million, a jump of $85.2 million. And the GAO report suggests overruns occurred on the Milk.
Construction schedules also are way off at the yard.
“The Navy stated in July 2021 that the delivery date for (John Lewis) has been delayed from June 2021 to March 2022 due to the (dry) dock incident, late deliver of outfitting materials, and a need to repair or carry out rework on other parts of the ship,” the CRS report says.
Newly constructed ships undergo a long period of testing before they are formally delivered to the Navy and readied for operational use. The process can take years.
NASSCO said Thursday the John Lewis has yet to be delivered. It’s unclear when the transition will occur.
The CRS said that the official delivery dates of the Harvey Milk and the four other ships — Earl Warren, Robert F. Kennedy, Lucy Stone and Sojourner Truth — have been delayed by 12 to 15 months.
The Warren will be christened and launched this fall. The Kennedy is now under construction.
NASSCO said in a statement Thursday the company, which has about 3,500 workers, “has and continues to promote its ability to build ships on schedule and in many cases under budget.
“However, the T-AO Class has been under construction during one of the most difficult pandemics of our generation and we are proud of the dedication our highly skilled workforce has shown over the last 2.5 years navigating the challenges COVID-19 has consistently presented.”
Cost overruns and delays are not unusual.
The aircraft carrier Gerald R. Ford was originally projected to cost about $10.5 billion. The final price tag will be at least $13.3 billion. The development of the ship — which incorporates several never-before-used technologies — is years behind schedule and it has yet to go on its first deployment.
The Navy is just beginning work on the first of its new Constellation-class frigates. But the projected cost has already skyrocketed. The Congressional Budget Office said in late 2020 that the first 10 frigates will cost at least $12.3 billion, roughly 40 percent more than an earlier Navy estimate.
Such increases represent a major funding problem for the Navy, which wants to greatly expand and diversify its fleet. The plan calls for building fewer large ships, more smaller ones, and relying on a significant number of unmanned vessels.
Navy officials say this “distributed” fleet would better enable the service to operate around the world, particularly in situations involving potential conflict with Russia, China and North Korea.
Creating such a fleet would cost from $25.3 billion to $32.7 billion a year for a period of 30 years.
The budget requests are already so tight that the Navy and Pentagon have yet to decide whether it will underwrite a seventh Lewis-class ship this year. NASSCO is expected to be the lead contractor when the ship is constructed.
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