Building A Bigger Navy Means Buying Ships In Bulk

While experts may differ as to the overall composition of the Fleet, they are nearly unanimous in their judgment that the Navy is too small to meet its current missions with the current number of ships.

A first step towards this goal was the passage of the appropriately named Reform and Rebuild: National Defense Authorization Act for Fiscal Year 2018 (NDAA). Possibly the most significant feature of the 2018 NDAA is its statement of national policy with respect to the desired size of the U.S. Navy. While experts may differ as to the overall composition of the Fleet, they are nearly unanimous in their judgment that the Navy is too small to meet its current missions with the current number of ships. This means that the Navy also fails to meet the requirement set by the NSS for a military adequate to meet the global threats and challenges the nation confronts today.

The key words in the SHIPS Act are “as soon as practicable.” It takes years to build a warship. It also takes lots of money. Then there is the ability of the industrial base, including shipyards of course but also all the mid-sized and smaller companies, to expand to meet the demand for more warships. The Navy plans to spend billions to upgrade the four public shipyards to improve their ability to both build additional warships and improve maintenance activities. Finally, of course, there is the size and quality of the workforce that builds the ships and their systems. Ensuring a continuing, predictable flow of work allows shipbuilders and their suppliers to better manage and train their workforces.

One proven way of speeding up the procurement of new warships while simultaneously lowering their cost is to buy them in bulk. The Navy currently purchases several of its most important platforms in groups, either as multiyear procurements or block buys. The central feature of both is that, unlike traditional annual acquisitions, they allow the Department of Defense to contract for more than one year’s worth of a platform or product.

The longest-running and most successful example of this approach is for the Virginia-class nuclear-powered fast attack submarine (SSN) which is now on its third multiyear procurement. This approach has allowed the two shipyards building the Virginias, Huntington Ingalls, and General Dynamics Electric Boat, to buy materials and parts in quantity, allocate their workforces more efficiently, get better prices from subcontractors and invest in process improvements. As a result, the price per SSN was cut by $400 million and the average delivery time reduced by six months.

The Navy is preparing to issue its second multiyear procurement for the DDG-51 Arleigh Burke-class destroyer. The first DDG-51 multiyear contract was designed to be flexible regarding the total number of destroyers procured, allowing for changes in shipbuilding funds. This approach also encourages the two competing shipyards, General Dynamics Bath Iron Works and Huntington Ingalls, to improve their efficiency and lower costs with the prize being additional work. The second multiyear, for as many as ten advanced Flight III Arleigh Burkes, is expected to yield savings of up to $1.8 billion.

The Littoral Combat Ship (LCS) also is being procured using block buy contracting. The Navy procured the majority of its LCSs under two block buy contracts. This approach produced significant cost savings despite the fact that the two designs are entirely different as are some of the major systems.

The Navy is investing in a new generation of aircraft carriers, the USS Enterprise CVN-80 Ford class. Achieving the goal of a 12 aircraft carrier force as part of a 355 ship Navy means shortening the interval between the start of construction, currently five years, as well as finding ways of reducing their cost.

The acquisition strategy that has been successfully employed to procure surface combatants and submarines could also be applied to buying aircraft carriers. The Navy bought the first two Ford-class carriers, CVNs 78 and 79, as single ships. Initiating a block buy procurement for the next several ships could help reduce the interval between construction starts, shorten the overall length of time to complete construction and save money.

The Navy is considering asking Congress for authority to buy the next two Fords as a block. The only shipyard in the nation that can build nuclear-powered aircraft carriers, Huntington Ingalls, believes that it could save $1.5 billion on a three-ship block buy, as well as shorten the average construction time by up to two years.

Recently, 130 members of the House of Representatives sent a letter to Defense Secretary James Mattis supporting a block buy of two Ford-class aircraft carriers in fiscal year 2019. One signer, Representative Bradley Byrne (R-AL), opined that “If we are going to build a 355 ship Navy then we need to be smart and innovative in how we procure new vessels. An obvious step in the right direction would be a block buy of the Ford-class aircraft carrier.” A bipartisan group of 17 U.S. Senators sent a similar letter to Secretary Mattis last month.

There is no silver bullet solution to the problem of building a Navy of sufficient capacity and capability to support the goal of peace through strength. Using proven acquisition approaches such as block buys or multiyear contracts, even for massive vessels such as Ford-class CVNs, must be part of the solution.

Daniel Gouré, Ph.D., is a vice president at the public-policy research think tank Lexington Institute. Goure has a background in the public sector and U.S. federal government, most recently serving as a member of the 2001 Department of Defense Transition Team. You can follow him on Twitter at @dgoure and the Lexington Institute @LexNextDC. Read his full bio here.