Navy Chief to Shipbuilders: You Suck

The Secretary of the Navy is pissed. And that is really good news.

Let me explain: For years, defense contractors have been building fewer and fewer warships, at higher and higher prices, with delay piled on top of delay. Partially, it has been the fault of the ship-building companies. Partially, it has been the fault of an ever-changing cast of Navy officials, whose ability to ride herd over these giant construction efforts has slowly atrophied.

All of this was business as usual, more or less, until about four months ago. That's when it turned out that costs for the Littoral Combat Ship had jumped from $220 million to as much as $410 million. The LCS wasn't just another Naval vessel. The 400-foot, reconfigurable ship was supposed to be the cornerstone of the future fleet -- making up 55 of a planned 313 ships. Price was one of the biggest reasons why. Based on commercial ferry designs and built from largely off-the-shelf parts, the LCS was meant to be put together in a hurry, and on the cheap. So when the price went up, something very unusual happened: Heads rolled. The program manager was canned. The admiral in charge of ship-building was reassigned. Work on the ship was suspended.

Then, last week, "Navy Secretary Donald Winter left a ballroom full of defense contractors speechless last week when he put the shipbuilding industry on notice,"* Inside Defense* reports. "In a blunt post-lunch speech at the Navy League's annual conference in Washington, Winter said the current shipbuilding program is 'simply not meeting our expectations.' He slammed industry for not investing in U.S. shipyards and called for his department to reassert control over acquisition programs."

Here's Inside Defense's summary of the talk, but it's worthing reading it all:

The Navy has unfortunately eroded its expertise in shipbuilding and systems engineering and developed a bad habit of relying too much on contractors, he said.
In addition, the Pentagon has a limited understanding of how business operates, how it responds to competition, and how it is affected by
Wall Street’s expectations... Further, there is little competition in the shipbuilding market, so the Navy does not benefit much from competition, he said.
Also, naval officials have unrealistically hoped commercial solutions would address unique, complex naval requirements.

"The Navy owns the fleet, and the Navy is the customer," Winter, a former Northrop Grumman executive, added. "Sometimes, one has the impression that this tiny distinction has been forgotten."

One good reminder: get rid of shipbuilders' crazy "cost-plus"
contracts, which let the contractors spend and spend, with no penalty.
Instead, Defense News noted, Winter said that "fixed-price incentive contracts should be used 'for all but lead ships.'"

Rep. Gene Taylor, the new head of the House's Seapower subcommittee, went even further in a recent interview:

The blank check they were getting, the cost-plus contracts, the overruns, the wasted money, the wasted time, are not going to be accepted. The biggest contractors, it's fair to say, do a lot things for our nation;
if we don't have enough leverage in one area to get their attention...
[we should] get their attention in other areas. Don't think... that the work you're doing in missiles is safe if you're going to turn around and abuse us in ships.

Those are fighting words, in the ordinarily genteel world of defense contracting. More, please.