NGC Footing the Bill for LHD 8 Makin Island Ship Fix
USS Makin Island [LHD-8] was built in Pascagoula, MS, as the last ship of America’s Wasp Class amphibious assault carriers. The keel was laid in February 2004, but all of the changes from the LHD-1 Wasp Class meant that about 67% of the previous line drawings, and 75% of the test procedures, needed to be modified for Makin Island. Then Hurricane Katrina hit the in-progress ship. The labor pool also took a hit, with up to 1/3 of the Gulf Coast personnel leaving the area and the company. The pool of electrical professionals was especially hard hit, and 55-60% of the LHD 8′s final labor force was under the 4-5 year threshold to be considered experienced workers.
Even so, Katrina hit back in August 2005. Which is why Northrop Grumman was surprised at the slowness of its integration and testing progress during final construction in 2008, as part of the ship’s preparation for sea trials. That led to a comprehensive review and audit – and a bill of $320-360 million to fix the ship, which was footed by Northrop Grumman:
While many of its characteristics are similar to its sister ships, there are some major differences. For one thing, USS Makin Island is a no-steam, all electric ship, including electric propulsion, all driven by 2 GE LM2500+ gas turbines and 6 diesel-electric generators. Other features include central machinery control using fiber optics, upgraded communications systems including tele-medicine, structural modifications required to host and service the MV-22 Osprey tilt-rotor aircraft, and self-defense improvements including the SSDS Mk 2 Mod 3A unified combat system controlling Phalanx Block 1B guns, RIM-116B RAM short-range missiles, and RIM-162 Evolved Sea Sparrow missiles.
So, what happened? Was it the technology? In part, yes, but that was not the main issue. In their April 15/08 teleconference, Northrop Grumman executives noted that all development programs have quality issues, but the quality systems that are supposed to catch them early were not run properly, and missed the problems.
As one example, the Makin Island’s new machinery control system is connected by fiber optic cables, allowing it to be monitored and run centrally. Its failure to work was puzzling, since high reliability was supposed to be one of its virtues. Northrop Grumman’s program review and detailed physical audit of the ship identified the problem: due to the poor quality of the installation work, the fiber optic cables had been crushed in a number of areas.
Northrop Grumman shipbuilding says that this need for substantial rework is present throughout the ship, especially in electrical cable installations of all types.
Quality is only free when it catches problems early – its absence until the late hours, on the other hand, is almost always very costly. As anyone who has remodeled a home knows, electrical system problems are especially bad news at a late stage, because ripping up existing work is often required in order to fix the problem. Since the contract is fixed-price, incentive-fee, there will be no incentive, and the cost of fixing the problems fall on Northrop Grumman.
The components of the $320+ million additional charge for LHD 8 stem from 3 main sources:
- Labor. This is the biggest component of the increase. The ship will continue to employ 1,500 craftspeople for an additional 6 months, out of Pascagoula’s 19,000 or so. This adds direct level-of-effort costs, and also means that these employees must be replaced on other new ships that would have used them once they were done.
- The 2nd cost source is the material required for rework.
- The 3rd source of the charges involves reduction in accounting “intangible values” related to the shipyard when it was bought from Litton.
In terms of financial impact on Northrop Grumman, Hurricane Katrina’s impact had used up more than 1/2 the remaining shared risk reserve on the fixed-price, incentive-fee contract, leaving smaller margins to absorb problems of this nature. By June 2007, in fact, Northrop Grumman was already booking the program at break-even. It is also fair to note, however, that the firm has received some specific compensation in response to Katrina.
The exact amount of the expected charge will be finalized later, and will be disclosed when Northrop Grumman issues its Q1 2008 results later in April 2008. It will leave the entire LHD 8 program in a net loss position, but the expected charge does not impact the company’s previously announced 2012 financial targets, delivered at its February 2008 investment conference.
A number of personnel changes have been made in the program, and LHD 8 Makin Island is now expected to be delivered in the second quarter of 2009.
Northrop Grumman executives said in their teleconference that audits had been done on other ships under construction, and assured listeners that LHD 8′s quality problems were not present on other ships. The expensive lesson in quality processes and risk management, on the other hand, will be present in many of the company’s future ships and other defense programs.
Updates & Outcomes
“On an average day, the Makin Island uses 15,000 gallons of fuel, versus 35,000 to 40,000 gallons on an older steam ship of its type, said Capt. James Landers, commanding officer… the crew has had two years to test out their first-of-its-kind ship… About 70 percent of the time, they can use the electric motors, saving on gas… While the Marines are on the ground, the ship is usually puttering around in a small space at slow speed – the perfect scenario for the electric motor… The upside, aside from the fuel savings, is a cleaner, cooler, software-driven engine room… and fewer sailors needed to tend it… The downside is… it takes awhile to get parts. Also there aren’t too many piers across the world where the Makin Island will be able to plug in, because of the high voltage of its system compared with other warships. Also, the ship is software dependent, so as one crew member put it, you have to worry about what you can’t see that might go wrong…”
The US Navy notes that USS Makin Island is the flag ship for Amphibious Squadron 5 and the 11th Marine Expeditionary Unit (MEU). The 3-ship ARG is made up of LHD 8, and the amphibious assault ships USS Pearl Harbor [LSD 52] and USS New Orleans [LPD 18]. USS Makin Island also carries Marine Light Attack Helicopter Squadron 367 (HMLA-367), whose 4 AH-1Z and 3 UH-1Y helicopters represent the 1st operational deployment of the new AH-1Z Viper attack helicopter.
Aug 30/10: In early August 2010, Makin Island crew members doing maintenance discover damage to the turning gear of the ship’s main reduction gear. The turning gear is an additional gear used to boost efficiency of a ship’s main reduction gear, and is usually engaged when the ship is getting underway or returning to port. Members of ship’s company and teams from the Southwest Regional Maintenance Center in San Diego are doing the repairs aboard the ship, and final contract trials will have to wait until that’s done.
Final contract trials usually come 6 months after the Navy accepts a ship from the builder, and had been scheduled for mid-August 2010. The trials end up taking place in September, and in October 2010 the ship visits San Francisco for Fleet Week. Gannet’s Navy Times.
Oct 24/09: USS Makin Island is accepted by the US Navy, in a ceremony at Naval Air Station North Island, Coronado near San Diego, CA. US Navy.
March 20/09: Northrop Grumman announces that the amphibious assault ship Makin Island [LHD 8] has performed all required sea trial evolutions for the U.S. Navy’s Board of Inspection and Survey (INSURV), during trials in the Gulf of Mexico. Passing its INSURV clears the way for Navy acceptance of the ship; Makin Island is scheduled for commissioning at its San Diego homeport in October 2009.
Dec 13/08: Tim Colton of Maritime Business Strategies reports:
“LHD 8 just returned from a week at sea and sources say that she performed well, despite horrible weather, with periods of 20-foot waves. Both the propulsion system and the electrical distribution system broke down during one period of heavy weather but were quickly fixed and the ship achieved her designed top speed, even though fully ballasted down. It’s always nice to hear some good news about an Ingalls-built ship: there are still a lot of good shipbuilders there.”
Nov 26/08: Gannett’s Navy Times reports that a new schedule has been set. It calls for builders’ trials to begin in late January 2009, with official delivery to the US Navy moved from mid-November 2008 to May 15/09. The Makin Island’s new commissioning date is set for Oct 24/09 in San Diego, where the ship will make its homeport.
Additional Readings & Sources
- Northrop Grumman – Northrop Grumman Announces Schedule Extension and Charge On Shipbuilding Program
- Northrop Grumman (April 15/08) – Northrop Grumman Conference Call [Windows Media]