Researcher Maiya Clark at the Heritage Foundation joined me on the Acquisition Talk podcast to discuss her recent paper on the Navy’s public shipyards as well as other industrial base matters. She finds that the four remaining public shipyards, which service the Navy’s entire nuclear fleet, are all over 100 years old. They are not designed to maintain larger ships like the Ford-class carriers or Block 5 of the Virginia-class submarines.
As a result of under-investment in capital, maintenance delays have been on the rise. Though delays have trended back in the right direction, exceptional procedures like 45% overtime on an on-going basis cannot last forever. During the episode, we discuss:
- The Navy’s Shipyard Infrastructure Optimization Plan (SIOP)
- How a fault line can claim one shipyard in Puget Sound
- What’s wrong with Buy American proposals
- A research agenda for defense supply chains
- The viability of Trusted Capital Marketplace
Podcast annotations
One major issue concerning the public shipyards is whether they can service a growing fleet. While the Navy’s ship count reached a nadir of 275, Congress was receptive to a plan for 355 ships. More recent discussions have the figure north of 500. Much of that expansion is in non-nuclear surface and unmanned vessels. But it still raises the question about shipyard maintenance capacity.
The Navy’s SIOP capital investment plan of $21 billion over 20 years will recover most of the expected maintenance delays for today’s fleet. Yet this has been underfunded in the past, and will be difficult to get fully funded in the foreseeable future.
In a lot of cases it’s addressing future problems that are coming down the line that aren’t here yet. And when you have a project that’s over a long term like that, and the payoff isn’t immediate, the political payoff of getting it done is probably not even in your tenure, it’s hard to get motivated.
Another thing on the money side that the GAO pointed out is the cost estimates in the SIOP are notional, in large part because what the plan is going to cost is based on what the Navy finds in doing the modeling process. They don’t know until they’ve made the models what they’re going to be doing… But right off the bat the SIOP cost estimate didn’t account for inflation.
Accounting for inflation (really, cost escalation of expected labor and material growth rates normalized back into a base year using economy-wide inflation) is pretty basic work. But Maiya points to a real chicken-or-the-egg problem: A program can’t get underway until it has a lifecycle cost estimate, but it cannot know the cost estimate until it gets sufficient funding to model and experiment.
Even if the Navy could expand ship production to 355 ships or beyond, it isn’t clear how they could be maintained without a more ambitious infrastructure plan than the SIOP. The Navy may find itself with the same readiness metrics debate going on in the tactical aircraft world.
If the Navy’s best plan for the shipyards is to bring them up to the requirements of the current fleet, that it itself says is too small, they’ll have to think of an even bigger plan to expand maintenance capacity. That will probably involve recovering capacity that was lost in the post-Cold War era of BRAC, base closures and shipyard closures. There were 4 shipyards closed in the 1990s and early 2000s.
Hard trade-offs
I see two interpretations force structure size vs. readiness trade-off. First, over-production of major weapons that cannot be sustained in peacetime is a risk-management proposition. Production lead times are very long. In times of emergency, it is easier to surge operations and support capacity than it is industrial production capacity.
Countering that view, it is likely that many existing weapon systems will be found vulnerable to new systems and CONOPS. Having more outdated and outclassed systems could be a recipe for disaster. Such was the stance the US Army found itself in prior to WWII. For example, General Hap Arnold said using B-18s against Germany was “suicide.”
In that second view, RDT&E can be seen has having even longer lead times than production, as as a consequence resulting in higher payoffs. Yet a major element of that strategy must be the ability to nimbly scale up production and sustainment of new systems in short order. This is made possible by ever-decreasing marginal costs of higher software/data content, and in production due to new techniques like advanced manufacturing.
A problem there is that future war will probably start out below the threshold of conflict, or through peripheral countries. The US will need a standing force structure to deter or meet that threat. In other words, maintain a near-term force structure at the expense of longer-term capabilities. That’s a hard status quo to flip, especially with political demands for a high OPTEMPO.
Supply Chain
Maiya’s silver lining for Covid-19:
Covid-19 has, in some ways, been a blessing for the Department of Defense — dare I say it — just in that it revealed a lot of these supply chain issues. Supply chain illumination is a tough issue. They often don’t know where they have a fragile supplier down in the 6th or 7th tier of a major program. Then Covid-19 happens and all of a sudden they know this supplier… is an issue because they can’t make that part and a whole program is delayed. That’s a painful process but that’s a learning process.
Here she is on Buy American rules which aim to increase the percentage from 50% to 75% in a year, and then another 5% increase each year after that until it reaches 100% (which includes some key allies like UK, Italy, etc.):
Keep in mind how vastly complex it is. Then when we consider something like a Buy American amendment, it doesn’t seem to take that into account. In my mind, Buy American policies like that need to be targeted to specific vulnerabilities rather than making sweeping statements across the defense industry.
And here’s her take on growing the organic (DoD in-house) industrial base:
I think the free market is what allows us to have a strong national defense… We never want to be cavalier about increasing the government’s role when the private sector can do a good job.
Thanks Maiya!
I’d like to thank Maiya Clark for joining me on the Acquisition Talk podcast. Check out her reports at the Heritage website, including “U.S. Navy Shipyards Desperately Need Revitalization and a Rethink” and “How Pentagon’s “Trusted Capital” Program Can Secure Financing for Defense Industrial Base“. Listen to her on the Midrats podcast, and watch her event with Rep. Rob Whittman and the GAO’s Diana Maurer.
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