BATH – Stung by cost overruns, the Navy is looking to return to a past when it controlled the shipbuilding process from beginning to end.
The change follows a period when the Navy told shipyards what it wanted the ships to do and then let them deliver rather than getting mired in design details.
But that approach failed to control costs in construction of the speedy Littoral Combat Ship for close-to-shore operations and in the design of the stealthy DDG-1000 destroyer, the successor to the mainstay Arleigh Burke destroyers built at Bath Iron Works and at Northrop Grumman Corp.’s Ingalls shipyard in Mississippi.
The growing cost of warships in recent years has led the Navy to reduce its orders, and the resulting loss of economies of scale has driven costs of individual warships even higher. That spiral has left everyone unhappy, including the Navy, members of Congress, defense contractors – and shipbuilders who fear for their jobs.
The Navy recently took the unusual step of punishing Lockheed Martin for cost overruns on the smaller vessel – the Littoral Combat Ship – by canceling the second of its two ships. Lockheed’s first ship had grown from $275 million to an $350 million to $375 million.
Construction hasn’t begun on the new destroyer, but its cost already has ballooned from early estimates of about $2 billion for the lead ship to more than $3 billion apiece for the first two, according to Ron O’Rourke of the Congressional Research Service. As the ship has grown bigger, more complicated and more expensive, the Navy scaled back the number to be built to just seven.
The Navy’s fleet, meanwhile, has shrunk to 276 ships, down from nearly 600 during President Reagan’s defense buildup. The Navy, which blames the cost of ships in part for the low orders that cut back the fleet, has a goal of 313 ships.
“The Navy obviously needs to do something. The plan we’ve been on has resulted in a shrinking, aging Navy,” said Winslow Wheeler, military analyst for the Center for Defense Information, a Washington-based think tank.
Some say cost overruns are inevitable as the Navy launches new classes of warships.
Unlike other defense contractors like aircraft makers and tank builders, shipbuilders don’t have the luxury of building prototypes. The first warship of a new class is the prototype of sorts and thus prone to unexpected problems during design and construction.
But the Navy isn’t letting shipyards off the hook.
Starting in the spring, Navy Secretary Donald Winter has been making the case for what he describes as “tough love” for the shipbuilding industry.
“The Navy must reassert its control over the entire shipbuilding acquisition process. The Navy owns the fleet, and the Navy is the customer. Sometimes one has the impression that this tiny distinction has been forgotten,” Winter wrote in an essay last month. He declined to elaborate on his comments to The Associated Press.
The tough talk follows a lean period for the shipbuilding industry. The six shipyards that build the Navy’s largest ships – aircraft carriers, amphibious assault ships, cruisers, destroyers and submarines – have lost 24,000 jobs since 1991.
Earnings in the shipbuilding divisions of General Dynamics Corp., Bath’s parent company, and Northrop Grumman, parent of Mississippi’s Ingalls shipyard, have lagged compared to their aerospace divisions, according to analysts.
At Bath Iron Works, things appear fine on the outside. Two 510-foot destroyers are berthed in the Kennebec River: The Sampson has been delivered to the Navy, while outfitting continues on the Sterett. Another destroyer, the Stockdale, is taking shape nearby.
The clanging and grinding of metal and sparks from welders in the shipyard’s buildings indicate steady work on the massive jigsaw puzzle pieces that’ll eventually be put together to create another three destroyers in the next few years.
But the shipyard now has 5,800 workers, down from a peak of 12,000 during the Reagan years. Workers fear that the slow but steady trend of pink slips will continue until the Navy gets serious about rebuilding its aging fleet.
Bath shipbuilders are competitive, but morale has suffered because there’s so little additional work in the pipeline, said Mike Keenan, president of Local S6 of the Machinists union, which represents 3,300 shipyard workers.
The shipyard is scrambling to fill a potential gap in work as the Arleigh Burke program wraps up and the DDG-1000 ramps up between 2008 and 2010. It is considering bidding on smaller Coast Guard cutters and a ship called the “joint high speed vessel” for the Army and Marines.
“This pier should be lined with (more) ships,” Keenan said. “If they want competition, they got it. The men and women of Bath Iron Works have no problem competing against anybody. The problem is when you have nothing to compete for.”
Critics say the Navy should shoulder some of the blame for escalating costs for asking for too many bells and whistles on its ships. Also, shipbuilders account for only a portion of a ship’s cost. Much of it is devoted to high-tech weapons systems made elsewhere.
The Littoral Combat Ship, 55 of which are to be built, was rushed under an expedited process using smaller shipyards. The Navy wants a ship that’s capable of operating in shallow, coastal waters to meet emerging threats, including modern-day pirates and terrorists.
Loren Thompson, a defense analyst with the Lexington Institute, said it made no sense to order ships and set prices without a final blueprint, which is what happened as shipbuilders moved quickly to build a ship that the Navy wanted fast.
The Navy wants defense contractors to be efficient like the commercial sector, but that process wouldn’t have flown in the commercial sector, Thompson said.
“Toyota wouldn’t do that,” he said.
Paul Nisbet, an analyst at JSA Research Inc. in Newport, R.I., said the Navy and the shipyards collaborate in setting up contracts they can’t live with. Shipyards make low bids to win, and the Navy wants low bids to get through Congress, he said.
“It’s all part of politics,” he said.
The Navy agrees that it’s not without blame, and has decided to take more control over the shipbuilding process. It doesn’t plan to create preliminary contract designs, as it did before the first Arleigh Burke warship was launched in 1989, but to be involved in every step from design through construction.
Eager for more work, Bath Iron Works will work with the Navy regardless of whether there’s a hands-on or hands-off philosophy, said Kendell Pease, vice president for government relations and communications for Bath’s parent, General Dynamics.
“We’ll build ships whichever way the Navy wants us to. And the more ships, the better,” he said. “Just keep the ships coming.”