The Secretary of the Navy told senators on Wednesday that the service will probably not have a full clean audit for up to five to six years and that splitting the new guided-missile frigate (FFG(X)) into two or three winners is not off the table yet.
Last month, the DoD’s Offices of the Inspector General and Comptroller revealed the Pentagon failed its first audit since only five of the 21 individual targeted areas won a passing grade (Defense Daily, Nov. 16).
Secretary of the Navy Richard Spencer told a joint hearing of the Senate Armed Services subcommittees on seapower and readiness and management support that he has said since his confirmation that the service was unlikely to get a clean audit for several years.
“I don’t think we’ll get a clean opinion [audit] for another five to six years, but that’s not the issue. It’s the learning process along the way that is critical,” Spencer said.
He cited examples of what the service learned through the audit, like that the Navy has over 700 distribution points for parts.
“You know Amazon does this globally with 25 centers. Do we have something to learn there? We certainly do.”
The secretary noted in the commercial sector they use an auditing standard called SAS 70 (Statement on Auditing Standards No. 70: Service Organizations), “which were the standards you would provide your services and goods to a client.”
However, the Navy was seemingly not aware of or did not ask for service at that standard.
“From this evolution we’re going to turn around and say when you hold assets for us, when you do anything for us, will you do them at the same generally accepted accounting standards as SAS 70, it’s there. We’re taking advantage of it.”
Spencer also noted the Navy is telling program managers to not consider the audit as a financial invasion, but a tool for managers to learn how their organization is working and how used resources are providing returns.
Separately, Senator Angus King (I- Maine) pushed for the Navy to consider splitting the FFG(X) award into two or three winners, rather than the single award it is planning.
Spencer said this is an interesting concept, but the service has to weigh its attention to the industrial base keeping hands trained and busy while also balancing that with a flow of new ships into the fleet.
The Navy wants to avoid a large spike in delivered ships because they can get crowded in the maintenance cycles. Once they get into regular maintenance cycles then they would get due for maintenance within two to four years, Spencer said.
However, the secretary said “it’s not off the table because nothing has been awarded yet. But we will look at how best we can balance with how we get resourced. And if we have the resources to bring expedition, granted, we will do that.”
The Navy previously said it plans to award a construction contract to a single winner in FY ’20 to purchase 20 frigates.
Last month, the Navy’s top acquisition official James Geurts told senators he and the Chief of Naval Operations have validated the FFG(X) requirements and expects to have a draft request for proposals (RFP) ready for industry by this spring followed by a final RFP by the end of FY ’19 (Defense Daily, Nov. 29).
Also at the hearing John Pendleton, director for defense capabilities and management at the Government Accountability Office (GAO), said the office has a review of the Navy’s plan to modernize public shipyards underway.
Earlier this year, the Navy submitted its first shipyard infrastructure optimization plan, which looks at how the four public shipyards will be upgraded and improved over 21 years at an expected cost of about $21 billion.
Prompted by Senator Mazie Hirono (D-Hawaii), Pendleton said the GAO’s review of the plan is underway and expects to submit a report by May or June of 2019.