Monday, October 15, 2012

More LCS Spin

I continue to be dismayed, disappointed, and disgusted by the statements that come from Navy leadership.  The latest example is a passionate yet misleading defense by Rear Adm. John Kirby, US Navy Chief of Information (2), in response to a post criticizing the LCS, written by John Sayen, Lt. Col. USMC(Ret), for Time (1).  Links to both posts are available in the footnotes at the end.

The disappointment starts with the Adm. Kirby’s opening statement in which he complains that Mr. Sayen’s criticism is based on “old, misconstrued or simply bad information”.  Certainly, there are a lot of misconceptions floating around about the LCS.  However, the Navy is doing nothing to dispel them.  Accurate, up to date information is hardly forthcoming from the Navy.  What little information the Navy volunteers is just public relations spin.

Following are several of the specifics of Mr. Sayen’s comments and Adm. Kirby’s responses.  Let’s see which party was the more factual.

Mr. Sayen charges that the LCS program has been manipulated by the Navy to make it too big to fail so as to protect the program from possible cancellation.

Adm. Kirby’s response:

“That’s a pretty bold charge…and unfair. He’s basically saying we tried to steamroll the system to get what we want, to get so deep into a program that no lawmaker or leader would dare shut it down.

Actually, selecting both designs was the consequence of trying to encourage competition between the two builders and drive costs down. And we succeeded. We saved $2.9 billion in projected procurement costs, enough to buy five more LCSs, a DDG, and a Mobile Landing Platform.

By awarding two contracts for 10 ships each, we will be able to better analyze the two variants in fleet service, build up fleet numbers faster than expected, and save a bundle. And we always retain the option to down select to one variant should circumstances dictate.

Never did we have anything but the taxpayers’ — and our national — interests foremost in mind.”
 
Kirby’s response actually has little to do with the charge.  As it happens, the Navy has, at best, been guilty of some highly questionable manipulations such as presenting Congress with options at the very last moment so that Congress had no time to render due consideration.  For instance, a Congressional Research Service report (3) states,

“… the timing of the Navy’s announcement nevertheless put Congress in the position of being asked to approve a major proposal for the LCS program—a proposal that would determine the basic shape of the acquisition strategy for the program for many years into the future—with little or no opportunity for formal congressional review and consideration through hearings and committee markup activities.

A shortage of time for formal congressional review and consideration would be a potential oversight issue for Congress for any large weapon acquisition program, but this might have been especially the case for the LCS program, because it was not be the first time that the Navy put Congress in the position of having to make a significant decision about the LCS program with little or no opportunity for formal congressional review and consideration. As discussed in previous CRS reporting on the LCS program, a roughly similar situation occurred in the summer of 2002, after Congress had completed its budget-review hearings on the proposed FY2003 budget, when the Navy submitted a late request for the research and development funding that effectively started the LCS program.”
 
Examination of the Navy’s timing of submissions to Congress does, quite clearly, suggest that the Navy manipulated Congress, essentially forcing them into a corner with little choice but to agree thus creating a program “too big to fail”.

Also, consider Kirby’s statement that the $2.9B savings (a highly suspect claim but let’s go with it for the sake of further discussion!) represent enough to build “five more LCSs, a DDG, and a Mobile Landing Platform”.  The LCS costs around $0.5B each even using the Navy’s convoluted cost accounting methods which translates to $2.5B for five more LCSs.  The last DDG-51 built cost around $1.9B.  I have no idea what a Mobile Landing Platform costs.  The total for the ships Kirby claims could be purchased is around $5B.  Note that Kirby claimed that all the ships could be built from the savings, not that one or the other could.  Kirby’s claim is not only wrong by a wide margin, it’s an out and out lie.

Mr. Sayen stated that the LCS program had experienced cost overruns resulting in a doubling of the price tag per ship.

Adm. Kirby’s response:

“Yes, there has definitely been cost growth. Can’t deny that. The Navy initially established an objective cost of $250 million per ship and a threshold cost of $400 million per ship (seaframe and mission modules included). The first two seaframes of the class, which were both research and development ships of two different variants, cost $537 million (LCS 1) and $653 million (LCS 2), respectively.

But that was then. This is now. We have 20 LCSs under fixed price contracts. The average price for LCS will be below the congressionally mandated cost cap.

And the tenth ship of each production run will beat the cost cap by several tens of millions of dollars. That will allow us to inject added capabilities, if desired or required, without breaking the bank—just as we have done in the Arleigh Burke DDG program for the past 20 years.

On balance, for the LCS’s size and capability, we believe the Navy — and the taxpayers –are getting one heck of a bargain.”
 
Mr. Sayen was being quite generous with his accusation that the LCS had only doubled in cost.  The original cost estimate was $200M per ship which quickly grew to $250M and then on up to around $600M for the first two.  That’s more like tripling in cost!

Further, the Navy has engaged in out and out fraud regarding the cost of the LCS.  The fixed price contracts for the LCS are for the empty seaframe (the hull) only.  The sensors, weapons, electronics, and most other equipment is being provided as “government supplied equipment” from another account line which has never been made public, as far as I know.  The modules which are essential to the LCS are being paid from yet another account line and range in price from around $30M for the ASuW module which has nothing in it, at the moment, to around $200M for modules closer to the envisioned final products.  Thus, the true cost of the LCS is the seaframe ($500M) plus government supplied equipment ($200M??) plus module ($30M to $200M).  This gives a low end cost of around $730M and on up to $900M for a fully outfitted ship.  And yet the Navy tries to make us believe that the LCS costs only around $400M (the original contracted seaframe cost unadjusted for inflation). 

Also, the “fixed” price contracts aren’t really fixed, at all.  The contracts contain language allowing the contractor to recover some or all of any cost overruns.  This was added because both the contractors and the Navy knew they couldn’t build the LCS for the stated amounts. 

The Navy’s statements about cost border on fraud.

Mr. Sayen notes that the LCS has been rated as not survivable in a hostile environment.

Adm. Kirby’s response:

“Like all warships, LCS is built to fight. It’s built for combat.

Nobody ever said this ship can — and no engineer can ever design a ship to — withstand every conceivable threat on the sea. But the LCS is significantly more capable than the older mine counter measure ships and patrol craft it was designed to replace, and stands up well to the frigates now serving in the fleet.

It is fast, maneuverable, and has low radar, infrared, and magnetic signatures. Its core self-defense suite is designed to defeat a surprise salvo of one or two anti-ship cruise missiles when the ship is operating independently, or leakers that get through fleet area and short-range air defenses when operating with naval task forces.

Its 57mm gun is more than capable of taking out small boats and craft. Its armed helicopter gives the LCS an over-the-horizon attack capability and is lethal against submarines. LCS will stand outside of minefields and sweep them with little danger to its crew—and be able to defend itself while doing so. The ship has extensive automated firefighting systems and can remain afloat after considerable flooding damage.   

We’re more than comfortable that the ship can fight and defend itself in a combat environment, especially when acting in concert with larger multi-mission cruisers and destroyers, exactly as we designed it to do.”
 
The Navy, itself, has stated that the LCS cannot survive in a hostile environment.  Further, a Congressional Research Services report also makes that exact statement.  According to the Navy, the LCS has been designed to survive a hit long enough for the crew to safely abandon ship.

The LCS appears to have been designed to Level 1 standards which is what non-combatants are designed for.  In fact, there is some doubt that the LCS even meets those minimal standards.

Adm. Kirby’s statements are, at best, a case of excessive spin coupled deliberate attempts to mislead.  Most of his response discusses offensive operations rather than survivability. 

Mr. Sayen states that the LCS modules have proven to require many days or weeks to swap out.

Adm. Kirby’s response:

“Each LCS will deploy with the Mission Package (MP) required to accomplish directed missions. If a commander directs a mission package swap, equipment staging and personnel movement will be planned and coordinated in advance.

The physical swap of mission package equipment can occur, as advertised, in less than 96 hours … just like we “originally envisaged.” Getting the ship ready for a new mission may take a little longer. But the fact is this ship is more flexible than any in the fleet.

Consider this: with three crews assigned to every two LCS hulls, the Navy will keep 50% of the entire LCS fleet deployed or ready for tasking. That means up to 27 ships might be “out and about” at any given time, with a mix of anti-submarine, anti-surface, and counter mine mission packages already aboard. With the LCS’s high speed, this force will be able to quickly concentrate in any theater with exactly the right packages needed for the job. When coupled with the ability to change out modules in theater, you have an extremely agile force.”
 
The Navy’s own studies have demonstrated that the LCS’s design goal of rapidly swappable modules won’t be achieved and that swap out times will be on the order of many days to weeks.  This is simple fact as reported in publicly released Navy reports.  Again, Kirby’s response is highly misleading.

Adm. Kirby concludes his response to Mr. Sayen:

“I thank Mr. Sayen for his interest. I really do. And I hope we can have a conversation with him moving forward. I don’t mind the criticism. I just want the opportunity to help inform it. 

I don’t expect the LCS debate to cease anytime soon. As I said, I welcome it. It’s healthy for us and for the country. But I do expect the criticism to be based on facts — current, relevant facts.”
 
Well, Adm. Kirby, you could start by “informing” the discussion with factually correct information, yourself.   Mr. Sayen’s comments were generally on the money and your responses were factually-challenged and deliberately misleading.  The Navy complains about the people criticizing their programs and yet fails to offer useful and accurate information, preferring instead to spin and lie even in the face of their own comments to the contrary.



(2)Navy Live: http://navylive.dodlive.mil/2012/10/10/lcs-lets-talk-facts/, Rear Adm. John Kirby, US Navy Chief of Information, 10-Oct-12

(3)Congressional Research Service, Navy Littoral Combat Ship (LCS) Program:
Background, Issues, and Options for Congress, Ronald O'Rourke, April 6, 2012, p.61

9 comments:

  1. Just a side point, submissions of budgets are controlled by DoD, not the Navy. They decide when to submit the request, not the Navy. And the failure to downslelect appears to have more to do with politics than than Navy decisions, since ordering twenty under a fixed price agreement (something that was requested from the contractors) from the same yard would have derived even greater savings, at least until the next flight.

    On Cost, your numbers don't work because you use the wrong data. The Navy uses the marginal cost of the ships since it is buying more. So, its not how much 1 DDG costs to restart production, it is how much one more costs in series production (roughly 1 Billion) while you are already buying two, its not how much one LCS costs today, but how much one more costs after 10 are built (probably $300 million or so), and its not one MLP costs, its how much one more cost ($500 million, give or take) when you are buying two already. No R&D, no design changes, no startup costs, no training development, no PRECOM factory training (assumption is normal Navy pipeline training is up and running), etc. Just basic ship costs. No more a lie than your using, I am sure intentionally on your part, all first of class cost estimates to calculate everything.

    On swaps. you need to go back and actually read what the Navy said in swap studies and also what ADM Kirby said. There is no question you can swap the modules in 96hrs (this is 4 days by the way). That is not even in contention (its just moving modules and plugging stuff in). What takes longer is getting the modules to the ship, integrating the crew and new Helo and Mission Module detachments as well as training for the new mission. That takes longer, and by the way what the Admiral says, although he didn't go into great detail.

    And finally, your statements are not designed to mislead?
    He said LCS is replacing MCM and PCs and is much more capable, is that a lie or designed to mislead?
    He said "Its core self-defense suite is designed to defeat a surprise salvo of one or two anti-ship cruise missiles when the ship is operating independently, or leakers that get through fleet area and short-range air defenses when operating with naval task forces."
    Is that a lie or misstatement of the facts?

    "The Navy, itself, has stated that the LCS cannot survive in a hostile environment"
    Of course what you left out was the by itself caveat. They say the same thing about LPD-17, and MCMs, and PCs, and FFG-7s, all the USNS ships and numerous other ships. But then, as the statement clearly shows, its not supposed to fight by itself.

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  2. I must have touched a nerve, there! You're clearly a true believer and you're calling me out. Nothing wrong with that.

    Regarding costs, here's my sources.

    For the DDG-51, a Jan 12 GAO report about the DDG program states that DDG 113-115 are budgeted for a total of $5.8B ($1.93B each). It further states that a total of $17.5B has been budgeted for 10 DDGs ($1.75B each). These are Navy budget estimates. Given that the Navy has grossly underestimated every ship budget it's done since I can remember, I took the $1.93B figure and very charitably rounded it down to the $1.9B figure I stated in the post. The real number will be more like $2.5B, I would guess. Hence, the documented cost for an additional DDG is nowhere near the $1B you cite while scolding me.

    You cite $300M for an additional LCS. Seriously? Even the fixed price contract for the series production seaframes (hull only) is significantly more than that, at around $450M, if I recall correctly. Further, the Mar 2012 GAO report, GAO-12-400SP p.107, cites a LCS unit cost (includes R&D) of $597M each. Even without R&D, the same report cites a unit cost of $560M each. $300M?? And again, I remind you that that is the cost for only the empty seaframe. GAO states this in the report. So, you can see that the $500M seaframe cost I cited was even below the documented costs.

    As I stated, I have no idea what a Mobile Landing Platform costs. You stated $500M which, despite your other costs being way off, I will generously accept at face value.

    As I've just documented, the cost for the ships Adm. Kirby claims can be built with the dubious savings come nowhere near his claim. Charitably, he's badly misinformed. Realistically, he's deliberately misleading bordering on fraud and lying.

    Regarding the LCS module swapping, Defense News website reported on 14-Jul-12 that, "... instead of taking just days to make the switch, it's now apparent it could take weeks." You suggest that I go back and re-read the report(s). The Perez report has not been released to the public and only a very few outside the Navy have had any access to it. Sadly, I'm not one of them. Are you? If so, could you send me a copy? Failing that, I've got to stick with the Defense News report since they've apparently had access to it.

    You state that I left out the "by itself" caveat. I did not. Here is a quote from p.141 of the DOTE 2011 Annual Report,

    "LCS is not expected to be survivable in a hostile combat environment. This assessment is based primarily on a
    review of LCS design requirements, which do not require the
    inclusion of the survivability features necessary to conduct
    sustained operations in its expected combat environment."

    You can debate what you think "survivable" means but the DOT&E's (the govt organization that conducts the official testing and eval of military projects) official assessment is quite clear. Suggesting that we can call the LCS survivable in a hostile evironment because we'll only operate it alongside an Aegis ship is disingenuous at best, deliberately mis-leading, more likely, and directly contradicts the DOT&E assessment.

    If, after reading this and the documentation I've cited, you still think I'm wrong, feel free to reply but do so with your sources. If they contradict mine, I'll gladly work with you to understand the discrepancies.

    That's enough for now. You signed on anonymously, which is perfectly fine, but I have to ask, though, in all seriousness are you from Adm. Kirby's office?

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    1. Nope, just happen to know how people figure these things. And I only post anonymously as I don't need to remember another profile.

      Again, not to question your sources, they are accurate but not completely relevant. You need to go back to econ 101 and review what marginal costs are. Lets look at the DDG. $5.8B for three, $17.5B for 10 over 5 years. OK, so for the projected two per year, that works out to $1.67B each for the last 7 but that isn't totally accurate. The question is what would one more cost. What if you bought 3 one year instead of 2. That would be significantly less because you would save on all three of the ships that year (even more if you only awarded the contract to one yard!). So instead of being $3.3B for two, it would be maybe $4.3B for three because of more efficient production , better utilization of workforce, two assigned to the cheaper yard (sorry BIW), etc. That is marginal costs, and that is how it worked out in the 90s for DDG construction. Buying three reduced the marginal cost of the third to roughly half the cost of the first one. Which is why whatever the shipbuilding question was in the 90s, the answer was buy 3 DDGs a year.

      Anyway, that is how the ADM comes up with his figure (and it is a perfectly valid way of calculating the costs of programs but I doubt any of the figures show up anywhere since it is a hypothetical arguement). The marginal cost of buying 5 more LCS is significanly lower than the unit cost of buying say 2 a year. But we aren't buying five more across the FYDP, we just could.

      Of course, the same dynamic works for the LCS initial buy! Buying 20 of the winning LCS would be signifigently cheaper still, averaged per unit, than buying ten of each type. You get more efficient utilization of the winning yard, a cheaper cost to begin with, greater learning curve, more economical purchases, etc. not to mention greatly reduced lifecycle costs. Of course you put the loser (sorry Austal) out of the LCS business which is bad for jobs. So while the admiral is correct when he says buying both is cheaper, what he leaves out is it would be even cheaper still (purchase and lifecycle costs) to buy 20 of one type under a fixed price contract (at least for the first flight), something that wasn't even considered! In any event, both were under the target cost (sea frame only), but one was cheaper than the other. So I will stick by my $300million for the marginal cost of the ship (seaframe only).

      Again, the admiral is talking about marginal costs, not what is currently contracted for (at least not that we can see as it is never broke out that way). We only see what is, not what would or could have been. What would 9 DDGs cost? Signifcanlty more per unit than 10. But how much, I don't know because I am buying 10. How much would 6 LCS cost? I don't know, we contracted for 4. Is it in someways spin, absolutely, as we don't know what an alternate FYDP would cost. Would I have liked to just see what the unit costs where without the hyperbola? Sure, but he wasn't lying, just illustrating the Navy's argument. Is there a counter-argument? Sure, but it isn't up to the Admiral to make it.

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    2. I'm with you on the lack of desire to remember another username/password! Feel free to leave a username in the text of your comments. You won't have to remember it and I'll know when I'm talking to you. Up to you. Not required by any means!

      As you say, your description of the allocation of costs is Budget 101. However, and this is the big point, without any actual published incremental costs you/me/the Adm are just making up numbers if we're going to "claim" incremental costs. With no numbers, we could just claim that the first DDG costs $17B and every one after that costs only one dollar. That's ridiculous, of course, but it illustrates that there is no counter-argument to made up numbers.

      Let's look a bit closer at the LCS costs. The total budgeted amount is $32.9B for 55 ships for an average cost of $597M each. Your assumption of $300M each in incremental cost is a total of $15.9B for the 53 follow on LCSs after the first two "prototypes". The difference between that and the total budgeted amount is $17B which must, then, according to your incremental cost argument, be the cost for the first two prototypes. That's what you're claiming - $17B for the first two LCS. Clearly, not. I know, you'll claim that the costs are spread over more than just the first two. Well, it doesn't matter how far you want to spread $17B, the number isn't even remotely realistic. Your "guessed" incremental cost is obviously way off. Think about it. After you reach quantities of 55, as in the LCS acquistion, the up front costs have pretty well become negligible.

      Unless you can cite actual incremental costs, the only reliable figures are the ones I've cited.

      Remember what the point of my post was (that the Navy is engaged in misleading information) and what Adm. Kirby called for in his criticism of Mr. Sayen - informed discussion based on facts. If the Navy thinks the published cost figures are "wrong" then they have only to publish a breakout of the costs so that we can all see the true incremental costs. If they opt not to do so, then they can hardly complain about "misleading" numbers.

      You say you know what the Adm. is thinking. Unless you've discussed this issue with him and truly know for certain, is there even the remotest, million to one chance that he isn't thinking about incremental costs and that he's just plain wrong? Let's be honest and acknowledge that even if the Adm. is talking about incremental costs (there's absolutely no evidence that that's really what he means - he doesn't even hint at that), he is, by your own admission, almost certainly making up numbers just as you have.

      I think I've pretty well demonstrated that the Admiral's comments are, themselves, wrong and misleading.

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  3. Another problem with two different sea frames for LCS is that it will increase the cost of operating them throughout their lifetime. They will need different tech, training and personnel pipeline support. Any upgrades or modernizations will have to be designed for two different hull types.

    I get the feeling (no facts) that they Navy wanted the LCS 2 type but they can't build those in the Great Lakes since they won't fit through the locks so in order to keep both shipyards involved they split the order. If the Navy had wanted the LCS 1 type they could have used both shipyards.

    Also any word on the module status. Looks like we might have 22 LCS with no modules or with interim modules of questionable value.

    But I bet it looked real good on the PowerPoint slides when this was first proposed

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  4. Admiral Kirby says the LCS is better protected and defended than the mine-hunters and patrol ships it replaces. It should - it has nearly ten times the displacement of the Cyclone class and triple that of the Avengers. The Cyclone has a 25mm and Stingers; the Avenger .50 cal.

    To me that's comparing apples to pumpkins.

    But compare the LCS to the Perry. The Perry has a bigger gun, a launcher for SM-1s and Harpoons as originally built, a CIWS, torpedo tubes, integrated ASW suite, and a hangar for two SH-60s.

    And the FFGs had all this since the 1980's. Some of it needs updating, but the basic design and systems are sound. What is the schedule for the MCM package for the LCS? The ASW one? Even the ASuW has a glaring hole on the foredeck where the missile was supposed to go.

    In the near term the Avengers cannot be retired if a vestigial USN MCM capability is to be maintained. Period.

    And as I have said before, the Perry looks like a cruiser to the LCS where battle damage is concerned.

    WireguidedMarine

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  5. As an outsider looking in can I get away with asking what may be a dumb question? Why aren't you just building frigates? They've been around for a while; they do a good job; they don't cost the earth. Your navy seems to be trying to reinvent the wheel.

    And why does the LCS need to be so fast? It seems like the only thing it's going to use that turn of speed for is to clear off at the first sign of trouble.

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    1. See the next post. Thanks for the idea for a post!

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  6. Thought you might find this interesting what is in this article. LCS is Level 1+; CG and DDG are built to level III. Even amphibs and some support ships are built to a higher level!

    http://news.usni.org/news-analysis/news/navy-responds-pentagon-lcs-survivability-claims


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