Navy struggles to get multiyear funds for Va.-class submarines.

• Author: Fein, Geoff S.

A General Accounting Office report is questioning whether unrealistic cost estimates, inflation adjustments and competition among other Navy programs will offset any savings from multiyear procurement for the Virginia-class submarine program.

The report, released on June 23, raised concern about the Navy's request for advance funding for the submarine program.

The Navy is seeking advanced funding for seven Virginia-class submarines from fiscal years 2004 through 2008. The Navy has sought congressional approval of a multiyear procurement of $390 million in fiscal years 2004 and 2005 and $190 million in 2006. Navy officials claim this will allow the program to reduce needed funding in future years.

But savings could be eroded if the program's costs increase or substantial design changes are needed. And competition among Navy programs could also affect long-term savings, the report stated.

GAO points out the Navy cut $270 million in research, development, test and evaluation funds from fiscal years 2004 through 2007, and an additional $40 million per submarine in technology insertion funds for the same time period. The cuts were made to "help fund higher Navy priorities," the report states.

The cuts will impact such efforts as continued development of an information assurance solution for the sonar and combat control networks, correction of high priority deficiencies noted in the operational assessment of the non-propulsion electronics systems, and evaluating causes and developing fixes for acoustic performance deficiencies. Technology insertion also will be delayed for several years, GAO said.

In addition, procurement savings over several years could be eroded as the Navy continues to cut funding due to "defense-wide inflation adjustments," the report said. The Navy has already cut $600 million from the Virginia-class procurement account and $2 million a year in RDT&E funding from 2004 to 2009.

According to GAO, the "program's costs estimates have not proven realistic." Using the Navy's own documents, GAO said costs on the submarine have "exceeded baseline estimates by 24 percent." That included the potential savings from multiyear procurement funding which has yet to be authorized. Without the savings, cost overruns would have been 31 percent, GAO said.

Program officials revised the baseline estimate in April 2003. Contract negotiations for the acquisition of additional ships raised further questions about the realism of the Navy's cost...