GAO Report on Navy Shipbuilding

This is how gets reported when the GAO states the obvious.

Navy shipbuilding has more technical risk, is costlier and is less efficient than commercial shipbuilding, said the report by the Government Accountability Office. These problems are caused by Navy officials’ willingness to go forward with projects when requirements aren’t locked down, key technology isn’t ready and construction isn’t disciplined.

“[C]ost, schedule, and performance risk in the program resides primarily with the government,” the GAO inspectors wrote. “This risk often translates into cost growth and schedule delays, as lingering technology immaturity destabilizes design development for the ship, and subsequent design changes produce inefficient work sequencing and rework during construction.”

This is not surprising at all. I got sent this link the other day, check it out. This is the breakdown of NAVSEA employees by year.

2001 44,418
2002 45,912
2003 46,612
2004 35,614
2005 34,436
2006 34,205
2007 22,278
2008 22,445

You can access the GAO report here. It isn't kind.

Delivering ships on time and within budget are imperatives in commercial shipbuilding. To ensure design and construction of a ship can be executed as planned, commercial shipbuilders and buyers do not move forward until critical knowledge is attained. Before a contract is signed, a full understanding of the effort needed to design and construct the ship is reached, enabling the shipbuilder to sign a contract that fixes the price, delivery date, and ship performance parameters. To minimize risk, buyers and shipbuilders reuse previous designs to the extent possible and attain an in-depth understanding of new technologies included in the ship design. Before construction begins, shipbuilders complete key design phases that correspond with the completion of a three-dimensional product model. Final information on the systems that will be installed on the ship is needed to allow design work to proceed. During construction, buyers maintain a presence in the shipyard and at key suppliers to ensure the ship meets quality expectations and is delivered on schedule.

Navy programs often do not employ these best practices. Ambitious requirements are set and substantial investments made in technology development, but often the Navy does not afford sufficient time to fully mature technology. New designs often make little use of prior ship designs. As a result, a full understanding of the effort needed to execute a program is rarely achieved at the time a design and construction contract is negotiated. This in turn leads the Navy and its shipbuilders to rely on cost-reimbursable contracts (rather than fixed-price contracts) that largely leave the Navy responsible for cost growth. Complete information on the systems that will be installed on the ship may not be available, leading to changes that ripple through the design as knowledge grows. Starting construction without a stable design is a common practice and the resulting volatility leads to costly out-of-sequence work and rework. These inefficient practices cause Navy ships to cost more than they otherwise should, reducing the number of ships that can be bought under constrained budgets. The Navy’s in-house capability to oversee design and construction has eroded, and it has been slow to build capacity to support new programs. Congress has recently encouraged greater technology maturity and design stability at key points, but required reporting does not directly address completion of a three-dimensional product model.

Differences in commercial and Navy practices reflect the incentives of their divergent business models. Commercial shipbuilding is structured on shared priorities between buyer and shipbuilder, a healthy industrial base, and maintaining in-house expertise. The need to sustain profitability incentivizes disciplined practices in the commercial model. In Navy shipbuilding, the buyer favors the introduction of new technologies on lead ships—often at the expense of other competing demands—including fleet size. This focus—along with low volume, a relative lack of shipyard competition, and insufficient expertise—contributes to high-risk practices in Navy programs. Further, the consequences of delayed deliveries and cost growth are not as severe in Navy programs because of the use of cost-reimbursable contracts.

These are the GAO recommendations.

GAO suggests Congress consider refining required reporting to include additional design stability metrics. GAO is also making recommendations to the Secretary of Defense aimed at improving shipbuilding programs by balancing requirements and resources early, retiring technical risk and stabilizing design at key points, moving to fixed-price contracts for lead ships, evaluating in-house management capability, and assessing if the desired fleet size sufficiently constrains the cost and technical content of new ships. The Department of Defense agreed with five recommendations and partially agreed with two. GAO believes all recommendations remain valid.

Given that the NAVSEA workforce is now half the size it was just 8 years ago, it will take awhile to fix problems in shipbuilding.