Crusading Navy Secretary Cancels 300-Ship Fleet

Issue Brief

With all the breaking news last week — martial law in Pakistan, Hillary besieged by pygmies — you may have missed the big announcement coming out of the U.S. Navy. Hard-charging Navy Secretary Donald Winter has brought his crusade for fundamental reform in the shipbuilding industry to its first major milestone, effectively canceling plans for a 300-ship fleet. That’s the likely long-term consequence of his decision to terminate a contract with General Dynamics for a new warship called the Littoral Combat Ship. Unless an aggressive new superpower emerges somewhere in the world to focus the minds of policymakers, the Navy’s inventory of warships will remain well below 300 vessels for the foreseeable future.

Perhaps you heard the news about the contract cancellation but didn’t realize what it meant for the size of the fleet. So let’s review the facts. The size of the Navy has been cut in half since the height of the Reagan defense build-up, from nearly 600 warships to about 280. The fleet will continue shrinking in the future if the service can’t find a way of buying submarines and surface combatants for less than $2 billion a pop, because the number of old warships being retired will outpace the number of new warships being built. At about $400 million per vessel fully loaded, the Littoral Combat Ship is the only program the Navy has in place that can keep up with the pace of retirements to stabilize fleet numbers, and it was supposed to generate about six new warships per year between 2009 and 2016.

But now the Navy Secretary has decided to cancel contracts with both of the companies competing to build the new class of ships, leaving a big hole in shipbuilding plans. The Navy says it is still committed to the program, but judging from the way negotiations went with General Dynamics and rival Lockheed Martin, there’s no way to reconcile the insistence of shipbuilders on limitation of risks with the Navy customer’s insistence on low cost. Having already seen cost increases on initial prototypes of the ship built by the two companies, Secretary Winter decided neither one would be allowed to build a second ship unless it signed up to a fixed-price contract. However, the Navy wasn’t willing to restrain itself from making changes to the ship design after the contracts were signed, so the companies couldn’t know for sure what their costs would be. End result: neither company was willing to accept the Navy’s terms.

Tinkering with programs long after design issues should have been resolved seems to be a Navy tradition. After Lockheed Martin won the competition to develop a new presidential helicopter, the Naval Air Systems Command informed the company that there would be a few changes to the baseline design — over 1,000 of them. Oddly enough, the program then encountered unexpected cost growth. But the helicopter program only involves two dozen airframes whereas the Littoral Combat Ship drives the size of the future fleet, so the Navy’s inability to finalize design specifications is beginning to look self-destructive.

Contractors aren’t blameless in this controversy, but when you survey the sorry history of the Littoral Combat Ship, it’s hard to escape the impression that the Navy acquisition community has a death-wish. First it decides to build next-generation warships in record time at shipyards with little experience in constructing complex surface combatants. Then it tells contractors to start bending metal before shipbuilding rules have been stabilized. And when cost overruns inevitably follow, it tells companies they must sign up to contracts with fixed prices but unlimited risks. It’s no wonder the nation’s new maritime strategy stresses cooperation with foreign navies — at the rate we’re going, those foreign navies are going to own most of the modern warships in the future.