The Government Accountability Office (GAO) recently found the cost for the Navy to renovate its dry docks has grown by over 400 percent as part of a decades-long effort to reform and improve the four public shipyards.

“The cost of the Navy’s dry dock projects in the SIOP has, according to Navy estimates, grown by over 400 percent since 2018,” GAO said in a report released May 10 for a Senate Armed Services Committee (SASC) hearing with both the seapower and readiness and management support subcommittees. 

The Shipyard Infrastructure Optimization Program (SIOP) is an effort originally estimated to cost $21 billion and last 20 years to modernize the Navy’s four government-owned shipyards that maintain nuclear-powered vessels. 

“We found that initial cost estimate was unrealistically low. Among other things, that $21 billion price tag did not factor in inflation and did not include the cost to improve underlying utilities,” Diana Maurer, director for Defense Capabilities and Management at GAO, told the subcommittees on May 10.

The GAO recommended the Navy improve its cost estimates to help manage the program and provide Congress information it needs to help make funding decisions.

“And those recommendations are still open. Fast forward to today, the Navy has refined its plan, identified resource needs and enhanced resource engagement. This provides a reasonable framework for eventually improving shipyard infrastructure, but the realities at the shipyards have not significantly changed since our 2019 report,” Maurer said.

She noted in the latest GAO report the office found shipyard realities have “not significantly changed since our 2019 report.”

Norfolk Naval Shipyard in Portsmouth, Va. (Photo: GAO)
Norfolk Naval Shipyard in Portsmouth, Va. (Photo: GAO)

Overall facility conditions at four public yards remain poor and the backlog of facility restoration and modernization projects has grown to about $7 billion.

“Plus the Navy faces some very real time pressure. Ford-class carriers and expanded payload Virginia-class submarines will need dry dock capacity that the Navy currently does not have. It remains to be seen how the Navy will specifically address these problems. Its proposed actions are complex and many years away from being fully implemented,” Maurer added.

The report noted in 2018, the Navy estimated it would need to invest about $4 billion into the dry docks to gain the capacity to perform 67 availabilities it cannot currently support. That includes 14 dry dock projects planned over the full 20-year program span. 

“However, since 2018, the cost of the initial dry dock projects has increased. For example, the Navy’s first three dry dock projects have grown in cost from an estimated $970 million in 2018 to over $5.1 billion in 2022, an increase of more than 400 percent. These dry dock projects are critical to the Navy’s success in implementing the SIOP, as they will provide the capacity for about two-thirds of the 67 unsupported availabilities,” the report said.

Maurer highlighted the estimated cost for the first three dry dock improvement projects has grown from under $1 billion to almost $6 billion. 

“That does not bode well for the future cost of the 11 other planned dry dock projects,” she said.

GAO warned that since the projects are still in the early stages of development, the SIOP Program Office, PMS-555, said additional cost increases may be necessary.

The report also said while the Navy’s original plan for SIOP focused on improving dry docks, facilities and equipment of the shipyards, increasing dry dock costs alone could start to crowd out other improvements. Navy officials told GAO it is possible SIOP may eventually focus exclusively on dry docks given the project costs, which would mean other SIOP improvements like reduced travel time and labor days would not be realized.

“However, the Navy has not yet released an updated cost estimate for the SIOP that would take these increases into account. In a September 2021 report to Congress, the Navy stated that an update to the program’s cost estimate will not be issued until they complete detailed investment plans for each shipyard—about 8 years after publishing the original SIOP and more than a third of the way through its 20-year duration.”

GAO also found the Navy’s effort to complete detailed shipyard investment plans has been delayed by three years, an issue that could further affect the SIOP schedule. 

The report argued full implementation of the SIOP project “would involve funding levels beyond what the Navy has requested for shipyard infrastructure in recent years.”

In the Navy SIOP’s 2018 reporting, the program estimated a cost of about $1 billion annually until it is finished, but GAO said the Navy’s facility investment has been under that level every year since 2007. Still, the Navy’s investment levels have increased since SIOP plans began. 

“We found that funding the original SIOP would equate to an increase of more than 40 percent over the next five years when compared to the Navy’s average over the previous five years. Any cost growth would further increase that gap,” the report said.

Maurer said GAO found the Navy’s estimated date for completing individual shipyard plans has slipped to the end of 2024.

“As a result we don’t yet know the full details of what the Navy will upgrade and optimize, how long that will take, or what it will cost. 

However, Maurer said Navy leaders understand these challenges and are committed to addressing them and “maintaining that top-level support will be vital because this effort will span many administrations and many Congresses.”

During the hearing, chairman of the SASC seapower subcommittee Mazie Hirono (D-Hawaii) asked Jay Stefany, Principal Civilian Deputy Assistant Secretary of the Navy for Research, Development, and Acquisition, if he thinks there is enough funding in the SIOP for current challenges given these issues.

Stefany said the Navy has learned the lesson on dry dock cost estimates after experiencing major cost underestimates for dry dock work at the Portsmouth Naval Shipyard. He said the Navy is making sure designs for dry dock work are much more mature before putting out cost estimates.

He confirmed for the large projects currently planned over the five-year Future Years Defense Program (FYDP) the designs are mature enough for the Navy to be confident there will be no real cost growth. Stefany also said there is enough funding requested across the FYDP to do the work requested in the time given.

Similarly, during a separate May 12 SASC hearing, Secretary of the Navy Carlos Del Toro said the current request is enough to keep SIOP on schedule in FY ‘23.

“I think I’m confident that we’re moving in the right direction. These are extremely complicated programs, as you all know, it’s our largest capital projects and the Department of Navy. And I think that there are going to be more discoveries that will be made. But I don’t think that there’ll be the nature of any increases of the past mistakes that were made previously.”

Del Toro said he has directed acquisition officials “to ensure that we actually do take the necessary time to come up with accurate cost estimations for the projects that we have going on now, and will propose in the future – that takes sometimes additional time to reach those answers. So I’d like to think that we’re actually moving in the right direction with the necessary discipline to make accurate cost estimations.”

When Sen. Jeanne Shaheen (D-N.H.) pressed Del Toro on why the Navy has not fully adopted all recommendations from a 2017 GAO report amid the recent report’s concerns with SIOP planning, he said while he was not in charge then, now they are trying to produce better cost estimates.

“I’m not going to make excuses for the ills of the past. I do know that certainly, since I’ve become secretary, we’re taking this responsibility very seriously. And trying to come up with very accurate cost estimates, and being allowed to be given the time to come up with those cost estimation so that we’re not just flying by the cuff.”