How To Slash The Time And Money Needed To Build Warships—Without Cutting Capabilities

The federal fiscal year beginning October 1 marks an unfortunate anniversary for the U.S. Navy. It will be the 20th consecutive year that the number of warships in the U.S. fleet is fewer than 300.

Virtually every official assessment of how many warships the Navy needs to do its job identifies a number well above 300. For instance, Chief of Naval Operations Michael Gilday stated in February of this year that “we need a naval force of over 500 ships.”

However, the shipbuilding plan that Admiral Gilday submitted to Congress for 2023 would reduce the size of the fleet further in order to bolster near-term readiness. Gilday proposed to eliminate 24 aging vessels from the active fleet while funding new construction of nine warships.

The Navy’s plan thus envisions further shrinkage in the fleet from 297 today to perhaps 280 at the decade’s end. Meanwhile, the number of warships in China’s fleet would grow to exceed 400.

When you consider that China’s fleet will likely remain concentrated in its immediate neighborhood while the U.S. Navy will be scattered around the globe, this would seem to portend a significant warfighting advantage for Beijing in the Western Pacific.

Not surprisingly, Congress rebuffed the Navy’s proposals and looks poised to retain some ships targeted for decommissioning while buying new ships at a faster pace.

Nonetheless, the Navy’s persistent inability to increase the size of the fleet suggests that current practices cannot deliver the capability and capacity needed without a huge, and improbable, increase in budgets.

Over the long run, programs to develop unmanned (robotic) warships may be able to fill the gap. In the near term, though, there are some simple steps that the Navy and Congress can take to get more bang for their buck from shipbuilding programs.

Here are several basic lessons about naval shipbuilding gleaned from industry executives that could bolster the productivity of dollars dedicated to warship construction.

Naval shipbuilding is complicated. The United States builds the most technologically sophisticated warships in the world. Unlike the serial production of commercial vessels that occurs in places like South Korea, each U.S. warship is designed to satisfy unique operational requirements and specifications. The ships are thus exceedingly complex.

For instance, a single amphibious assault ship contains 4.7 million parts provided by over 700 companies located in 42 states. A DDG-51 destroyer of the kind currently being built contains 33 miles of pipes and 360 miles of cables. Assembly of such vessels requires diverse, highly specialized skills that must be applied in proper sequence to achieve efficient outcomes.

Predictability minimizes risks. It takes years of planning to construct such warships. Unless the Navy’s future needs are laid out well in advance and funded at predictable intervals, time and money will inevitably be wasted. For example, in order to build the complement of amphibious warships the Marine Corps requires to lift its forces in combat, the Navy needs to fund a new amphibious assault vessel every four years and a new amphibious docking ship every two years.

At the moment, the Navy is planning an interval of 9-10 years between construction of the larger assault ships and termination of docking ship construction with no successor class in sight. This is the precise opposite approach to the stability needed if the service is to construct warships at the lowest possible cost. Although the goal is to save money in the near term, over time such stop-and-start practices actually waste billions of dollars.

The industry is its people. One way that money gets wasted is by squandering specialized skills resident in the shipbuilding workforce. When ship construction does not unfold predictably, skills may be under-utilized and workers may be laid off. It costs money to maintain a workforce that is being under-used, and it costs more money to find additional skilled workers when the pace of construction picks up.

This problem is more pronounced among suppliers than at the yards where final assembly occurs, because a big yard can shift trades between ships whereas a supplier may have no alternative project to which highly specialized skills can be applied. Suppliers may also lack the financial resources to keep under-utilized workers employed, meaning that at some future point new workers will have to be trained and certified—typically a lengthy process.

Supply constraints must be managed. The U.S. has not been a significant player in the construction of large commercial vessels for many years. That means the supplier network for naval construction is relatively small and heavily dependent on government work. Executives at one large shipbuilder told me that 80% of their suppliers are sole-source, meaning there is no qualified second source if the current supplier of a part falters.

Because the components incorporated into U.S. warship are complex and highly specialized, it can take years for them to be delivered once an order is placed. The lead-time for a gas turbine engine is three years. But placing orders expeditiously is nearly impossible when Navy plans change from year to year, and no supplier is likely to begin work on a costly piece of equipment until contracts are awarded and funding is obligated.

Repetition bolsters efficiency. Asia’s shipbuilders achieve high levels of efficiency on commercial vessels by building the same design over and over again. That is not the way the U.S. Navy buys warships. It routinely changes design features in response to emerging operational concerns.

You can’t fault warfighters for addressing threats, but the Navy’s issuance of change orders seldom seems to take into account the impact such changes will have on the industrial base. Work processes, demands on suppliers, and shipyard schedules will all be affected, driving up costs.

Capital investments save money. Naval shipbuilding can be performed faster and more precisely when shipyards and suppliers invest in cutting-edge technology. For instance, the nation’s largest conventional shipyard has recently invested $850 million in new plant and equipment, including 3D computer-aided design tools and robotic cutting systems. Digital engineering is gradually transforming the way U.S. warships are built.

However, companies are discouraged from making sizable up-front investments in their capital equipment and workforce when they can’t predict what the Navy will be buying from year to year. Stability and transparency are necessary to assess the utility of proposed investments.

If there is a moral to this story, it is that uncertainty is the enemy of efficiency. The convoluted process by which naval shipbuilding is funded and the Navy’s frequent changes in direction undermine the efficiency of the shipbuilding industry by adding time and cost at each step in the process. By bundling construction of vessels in multi-year, multi-ship contracts, the government can save billions of dollars to accelerate the pace at which much-needed warships are built.

My understanding of shipbuilding processes has been aided by conversations with managers at General Dynamics
GD
and HII, both of which contribute to my think tank.