Overview

The John Lewis (TAO-205) class oiler shipbuilding program, previously known as the TAO(X) program, is a program to build a new class of 20 fleet oilers for the Navy. The primary role of Navy fleet oilers is to transfer fuel to Navy surface ships that are operating at sea, so as to extend the operating endurance of these surface ships and their embarked aircraft. The first ship in the TAO-205 program was funded in FY2016 at a cost of $674.2 million. The Navy's proposed FY2017 budget requests $73.1 million in advance procurement (AP) funding for the second ship, which the Navy wants to procure in FY2018. As part of its acquisition strategy for the TAO-205 program, the Navy issued a combined solicitation consisting of separate Requests for Proposals (RFPs) for the detailed design and construction of the first six ships in the TAO-205 class, and for an amphibious assault ship called LHA-8 that the Navy wants to procure in FY2017. The Navy limited bidding in this combined solicitation to two bidders - General Dynamics' National Steel and Shipbuilding Company (GD/NASSCO) and Huntington Ingalls Industries' Ingalls Shipbuilding (HII/Ingalls) - on the grounds that these are the only two shipbuilders that have the capability to build both TAO-205s and LHA-8. On June 30, 2016, the Navy awarded a fixed price incentive block buy contract for the first six TAO-205s to GD/NASSCO, and the contract for LHA-8 to HII/Ingalls. The Navy was granted authority for using a block buy contract for the first six TAO-205s by Section 127 of the FY2016 National Defense Authorization Act (S. 1356/P.L. 114-92 of November 25, 2015). The Navy estimates that the block buy contract will reduce the procurement cost of the second through sixth TAO-205 by an average of about $45 million each, compared to costs under the standard or default DOD approach of annual contracting. Issues for Congress for FY2017 regarding the TAO-205 program include the following: * whether to approve the Navy's plan to procure the second TAO-205 class ship in FY2018 (with advance procurement funding in FY2017), or instead accelerate the procurement of the ship to FY2017 (with all, or at least most, of the ship's procurement cost provided in FY2017); * whether to provide additional advance procurement funding for the TAO-205 program in FY2017 to finance economic order quantity (EOQ) purchases (i.e., up-front batch purchases) of components for the first six TAO-205s, so as to further reduce the cost of the six ships; and * whether to encourage or direct the Navy to build TAO-205s with more ship self-defense equipment than currently planned by the Navy.

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