A Better Approach To Meeting The Navy’s Long-Range Shipbuilding Requirements

The U.S. Navy has just released its new 5 and 30 year shipbuilding plans which reflect the challenges facing the Navy. The resources available to support shipbuilding are declining even under the Navy’s overly optimistic scenario. Budget pressures are so intense that the Navy proposes reducing the planned acquisition of Virginia-class submarines for FY 2014 from 2 to 1, thereby disrupting a system that has been producing boats below cost and ahead of schedule. There will be long intervals between acquisitions for some classes of ships that will inevitably impact shipyard performance and, consequently, program cost. Finally, the shipbuilding plans will not support the Navy’s goal of establishing and maintaining a Fleet of 313 ships.

As is the case throughout the Department of Defense the Navy is under pressure to save money. This is particularly difficult because modern warships grow ever more complex which means that the cost to build and maintain them goes up. The IT revolution has hit naval shipbuilding like the proverbial tsunami. You can bet that when the new Air and Missile Defense Radar (AMDR) and associated battle management systems are deployed they will be both more capable and more expensive than the systems they replace. It is no surprise that combat systems are becoming more sophisticated, complex and, hence, expensive. But even prosaic items, such as water valves, now have their own sensors and automated control systems. This not only results in more expensive components, but in increased shipbuilding costs as a result of the need to run more cables, reconfigure conduits, machine spaces and even entire compartments and do more testing.

One way of saving money and at the same time achieving stability in the shipbuilding plans is through multiyear procurements. The Navy does this for the Virginia SSN, the DDG-51 destroyer and Littoral Combat Ship. Multi-year procurements allow better planning for procurement of long-lead items, the purchase of materials and components in bulk and better workforce planning. In addition, the Virginia- class is acquired in “blocks” which are a set- number of ships all built the same way and to the same specifications. By buying in “blocks,” the submarine program is able to limit change orders which are the largest single source of cost growth. The House Armed Services Committee recently held hearings at which the subject of buying the next two aircraft carriers, CVN 79 and 80, as partial block buys thereby saving as much as $500 million dollars was discussed. The obvious outlier is the large deck amphibious warfare ship program (LHD and LSDX), which would also benefit from a block acquisition strategy.

The drama of the shipbuilding plan is not limited to the Navy alone. It extends to the entire shipbuilding industrial base. It would make sense to rewrite the shipbuilding program in a way that ensures stable, predictable funding across all classes with block purchases that freeze technology insertion. The best comment on this subject of a sensible funding and acquisition strategy came from a retired executive from the shipbuilding industry. Reviewing the Navy’s new plans, he commented:

The minute variations in the numbers in these plans always strike me as ridiculous. Let’s face it: life would be so much simpler if the Navy and the industrial base could plan on steady-state annual construction of one fifth of a carrier, two submarines, two large surface combatants, two small surface combatants, one large amphib, one large auxiliary and one small auxiliary. The Congress should fund them in four-year batches in the first year of each administration, with no changes allowed.