In recent months the financial requirements of the Armed Services have been under close scrutiny by Congress, and by the public. While we of the Navy may point to the Army’s thirty million dollar “misplaced decimal point”, or to the case of the “lost” tanks, nevertheless an examination of our own spending might prove profitable. This is particularly true in the case of expenditures for the design and procurement of Navy material. This article is not intended to be idle criticism of those responsible for these activities but is written to suggest, in the light of what is standard practice within industry, some approaches to the problem which might yield real economies.
At the outset, it might be well to consider some of the factors which tend to make more expensive material procured on contract or manufactured by the Navy. A strict item- by-item comparison of Navy purchases on the basis of cost to the Navy versus cost to industrial users is not valid for a number of reasons. These include the following:
1. The Navy’s special requirements of durability and dependability.
2. In writing Navy specifications, proper attention has not been given to “designing for production”. This simply means that specifications ^re commonly drawn up which ignore practical manufacturing considerations.
3. The cost of research and development by the manufacturer frequently must be borne by a relatively small quantity of items produced.
4. Many contracts are let as “pilot orders”, for the purpose of educating suppliers to Navy requirements, or to preserve manufacturing “know-hows” in certain industries.
5. When the Navy manufactures in its own shore establishments, it employs labor
operating under Civil Service regulations, supervised in many cases by line officers inexperienced in production work.
6. Many of the officers responsible for procurement and design are not familiar with standard industrial practice in purchasing and design.
There are other factors contributing to the disparity which frequently exists between Navy contract prices and those quoted on similar items of a commercial nature. Those listed above are considered to be the most significant, however, and are most frequently advanced in defending the Navy against accusations of wasteful procurement. Let us examine these to see whether or not the additional expense involved in each is justifiable, or rather, how much of the additional expense may be justified. This examination will be limited to that material which is peculiar to the Navy and will not consider those items covered by the Federal Stock Catalogue, or items of a standard commercial nature.
The Navy’s Special Requirements of Durability and Dependability
A common criticism of Navy procurement is that non-standard material frequently is specified in cases where standard, commercially available products could be used. Much of the “extra” cost of Navy material has thus been attributed to the requirements of durability and dependability demanded by the service to which this material is put. There is no question that many items of equipment, particularly those under the cognizance of the Bureaus of Ordnance and Aeronautics, are subjected to service conditions which have no civilian counterpart. Certain equipment must be rugged enough to sustain any possible combination of extreme heat or cold, shock, corrosive atmospheres, and any other forseeable test of its durability. If it cannot meet the standard of serviceability under these conditions, it is of little use to the Navy. However, in all too many cases, this durability has been incorporated in equipment the use of which depends upon other equipment which is not durable. Also, particularly in the field of Naval Ordnance, durability is stressed to the detriment of convenience of repair and operation. In instances too numerous to mention, Navy specifications closely parallel those common to industry, and yet depart from them just enough to require manufacturers to use non-standard processes, with a resultant increase in cost.
Designing for Production
Once the performance requirements of an item of equipment have been determined, the next step in the process of procuring this equipment is the design of its various integral parts. It is particularly true in the field of design that the Navy has failed to take advantage of economical practices standard in industry. It is an axiom of our economy that mass-production tends to lower unit cost, but this is true only when articles are manufactured using “production” machine tools and methods. To provide for the use of such tools, the designers of equipment should consider the several methods of manufacture which could produce the service characteristics desired and design for the use of mass-production tools. As an example, the designers of certain Naval Ordnance equipment specified that a certain part be manufactured of cast steel. The manufacturer called to the attention of the procurement officer the fact that similar parts were made industrially at lower cost by stamping and forming. All efforts by this officer to secure a design change proved fruitless, however, and the cost to the Navy of this particular contract was correspondingly greater.
It is good manufacturing practice to have the designers of a product work in close cooperation with the tool engineers, who are concerned with planning the actual production. In this way the final design represents a product which not only will function satisfactorily, but which can be produced at a cost low enough to sell on a competitive market. In all too many cases the procurement officer of the Navy manufacturing activity must produce material whose high cost is in part due to lack of consideration by the designer of the fact that the easier a part is to manufacture the less it will cost. During the war great advances were made in the simplification of design of equipment, but there still remains much to be done.
No discussion of designers’ specifications would be complete without mention of dimensional tolerance. This term simply means the limits of accuracy within which parts must be manufactured. For instance, in blueprints of metal parts, dimensions commonly are given with a plus and/or minus tolerance in thousandths of an inch. Ordinary metalworking machine tools are capable of producing on a mass-production basis parts accurate to within a few thousandths of an inch. However, all dimensions in many Navy blueprints are specified to a very close tolerance. There is no argument against requiring extreme accuracy of dimension of surfaces which must be assembled to other surfaces, for example, but to require that parts whose dimensions are not critical should be held to the same degree of accuracy seems uneconomical. For instance, among the surfaces which have been manufactured under Navy contract to plus or minus a few thousandths of an inch accuracy are hand grips, foot pedal treads, stress-relieving fillets, and even the contours of toilet seats. American industry is capable of producing material to almost unbelievable dimensional accuracy—but as the accuracy increases, so does the cost of production. Extreme precision is well worth the price in fire-control mechanisms, for instance, but it is hard to justify the same degree of precision in a surface which “fits air,” as the machinist says, and is not a critical part in the equipment. Closer adherence to good industrial practice on the part of the Navy’s designers certainly would result in worthwhile savings.
Cost of Research and Development Must Be Borne by a Small Quantity of Items
This is an aspect of Navy procurement and manufacturing which has few counterparts in industry, where mass-production is the rule. It is particularly desirable that all equipment placed in service shall have the “bugs” eliminated beforehand. To obtain this condition, considerable research and development is necessary, and is a legitimate expense. The Navy absorbs some of this expense by using the facilities and personnel of the Operational Development Force, but much of it is of necessity included in the contracts awarded to suppliers. This expense is perfectly justifiable, however, since the research and development is absolutely necessary, and in many cases service-testing a few pilot models will result in worthwhile improvements in the production model.
It is at this stage, also, that the Navy frequently is asked by the manufacturer to change specifications with a view toward ease of production. In all too many cases these requests are summarily rejected, without regard to the fact that the manufacturer’s tool engineers are frequently the first qualified production men who have considered the specifications from the point of view of the application of production principles to design. So while everyone agrees that research and development costs are a legitimate burden, it is possible that all the information available is not being utilized to best advantage.
Many Contracts Are Let as “Pilot Orders”
In discussing the contracts described above, it must be remembered that the Navy expects the material thus produced to be more expensive. Such contracts should provide the Navy with a number of qualified manufacturers as a source of supply of critical items. They are entirely consistent with the common industrial practice of buying from several suppliers to avoid undue dependence upon any individual supplier. The additional expense of “pilot orders” would seem to be justifiable, because such forethought enables the Navy to procure such items more quickly in case of emergency, and may simplify procurement in any case.
In some instances, however, the Navy has not received full value in the letting of such contracts. In one case, a supplier had been awarded a “pilot order” for a detonator assembly. As soon as the Navy order had been filled, the supplier was allowed to cease all manufacture of the specified nature and to dismantle and sell the production equipment. It would seem that a review of this type of contract might enable the Navy to receive more value per dollar expended.
Production in Navy Manufacturing Establishments
Some of the material required by the Navy is not purchased but is produced in Navy manufacturing establishments. Operating with Civil Service personnel under the supervision of a naval officer, the cost of maintaining these establishments is usually well above that of running an industrial plant of a similar nature. This is particularly evident when it is considered that some of the cost of commercially produced articles may be recovered by the government in the form of taxes. These Navy manufacturing establishments, however, may be considered as necessary to operate in order to maintain a skilled labor force and certain facilities as insurance against an emergency. Some of the cost of this operation may be charged against such insurance, but these expenditures deserve a little closer scrutiny, particularly in regard to some practices of the Civil Service.
In discussing economies which might be effected, it is important to remember that over a period of years various pressure groups have succeeded in incorporating in Civil Service Regulations a body of directives which increase the cost of Navy manufacturing. Whatever their merits, these directives have in the past served to increase the cost of production, and the situation shows little sign of improvement. Until quite recently, for example, no funds could be used to make time studies of production jobs. These studies are absolutely essential to any incentive or piece-work system of wages, and yet in another section of the same mass of directives it was required that piece-work rates should be used where practicable. Thus the Navy has “started from scratch” in incentive wage setting, and it will be years before any satisfactory system of incentive pay is installed. The incentive system is widely used in industry to reduce labor costs. And while a great many Civil Service production workers are competent, conscientious men, there is much less strict accountability to the man actually responsible for the plant operation than is the case in industry. This situation is particularly incongruous when it is remembered that the officers responsible for production are themselves held to strict accountability for manufacturing done in the establishments.
Officers Responsible for Design and Procurement Are Not Familiar with Industrial Standards
In accordance with the Navy’s practice of rotation of duty, the officers responsible for procurement of specialized equipment within the various bureaus are usually without experience or training in industrial purchasing. There is no intent here to discuss the merits of current officer assignment policy. However, these men are responsible for the expenditure of millions of dollars, and in awarding contracts to civilian manufacturers it would seem advantageous for the Navy to select for these particular billets- officers with some industrial knowledge or experience. It is a common complaint of procurement officers that they are called upon to make decisions on the basis of specifications which they themselves do not fully understand. Another aspect of this problem is that the Civil Service professional employees, upon whom these officers rely for advice, often are scientists, not production men, and can offer little help.
An obvious solution is to train officers for this type of duty, and then to detail them properly. It must be clearly understood that this criticism applies only to the procurement of special equipment. The Navy generally is considered to be far in advance of other government agencies in its methods of routine supply. The Bureau of Supplies and Accounts has incorporated in its procedure extremely advanced methods of stock control and purchasing of standard items. But in the procurement of special equipment made particularly for the Navy, ignorance is expensive. In this type of procurement, the officer responsible frequently is unable to judge whether or not the bids he receives are reasonable. While American industry has produced billions of dollars’ worth of excellent equipment for the Navy, it is by no means altruistic, and has shown no reluctance in “loading” questionable charges onto Navy contracts. If procurement officers were systematically trained, or if the services of a competent tool engineer or production specialist were available to them, it is certain that economies could be effected. At present, these officers are in many cases in the unenviable position of depending upon the contractor for technical information concerning the Navy’s own specifications.
What has been said concerning lack of observance of purchasing practices common to industry is just as applicable to the field of design. This subject has been covered to a certain extent in other discussions, but further mention here is not out of order. Officers passing judgment on the design of an item of equipment quite properly are most concerned with its service characteristics. It is certain, however, that much Navy equipment could be redesigned to retain this serviceability and still be a great deal less expensive to produce. It is unreasonable to expect such “producible” design to originate with officers and scientists unfamiliar with practical manufacturing considerations. Again, an obvious solution would seem to be to train officer personnel, or to hire qualified civilians. Industry has found that the salaries of tool designers and Industrial Engineers are investments which pay dividends in the reduction of manufacturing expense. The Navy might well expect similar savings.
Summary
The factors discussed in the preceding parts of this article have been considered primarily from the point of view of cost. The Navy operates on a specified amount of money each year, and it is to the Navy’s advantage to make optimum use of every dollar spent. The amount of money expended in the procurement and manufacture of equipment represents a considerable portion of the budget. Savings in this area would be reflected in an increase in the funds available for other uses. The writer believes that an increased awareness of standards and practices common in industry should lead to real economies, with no loss in quality or serviceability.
In conclusion, it should be pointed out that there are many other possible applications of Industrial Engineering to the Navy. During the war much was accomplished by applying certain industrial practices to Navy training methods, personnel accounting, simplification of equipment, materials handling, instrumentation, CIC layout, and to numerous other areas. The naval officers concerned demonstrated ability to decide just which industrial practices were suitable for Navy use, and to exploit these to good advantage. It is reasonable to suppose that similar consideration of industrial practices in manufacturing and procurement of material would yield comparable results.