The Navy's Program Executive Office for Ships (PEO/S) is sharpening its shipbuilding management strategy through a top-level appraisal of Navy and shipyard practices to meet higher expectations from Navy and DOD leadership and Congress. The office head, Rear Admiral Bill Landay, noted this is in part a response to criticism leveled two years ago by the three about cost overruns in the Littoral Combat Ship program, which led to termination of two LCS prototypes before the program was reorganized.
Landay points out that PEO/S works with some 25 to 30 shipyards nationwide: Tier 1 yards build surface combatants and amphibious assault ships, Tier 2 builds smaller ships, and Tier 3 yards build even smaller special-use craft. Currently the Navy is building 20 major surface combatants in seven yards and about 190 small boats and craft, a total that will rise to about 250 by late 2010.
The PEO says that rethinking the fundamentals of shipbuilding aims at three big areas: first, "getting the program right up front"; second, program execution; and third, affordability.
Getting the program right up front, Landay says, means stable requirements, technology maturity, and a PEO structure staffed properly to oversee complex ship programs. "Stable requirements isn't just taking requirements from the OPNAV staff and executing them. It means using the Navy's gate [acquisition governance] process [a senior-level review of requirements and acquisition plans] to look for sweet spots and tradeoffs."
He noted that the joint high-speed vessel (JHSV) acquisition is succeeding because the office sought requirement changes to achieve major reductions in risk and cost.
Technology must provide needed capabilities at acceptable risk levels and reasonable cost. The right program structure means the proper mix of expertise and experience. Landay says that in the past nine months the office added 67 senior acquisition professionals to manage day-to-day programs while watching for long-term challenges and risks—which, he adds, wasn't done well on the LCS.
Landay says that proper program execution means relying more on the Supervisors of Shipbuilding. To improve production efficiency, he has directed the office's two supervisors—one at Bath, Maine, and the other at Gulf Coast, Mississippi—to send representatives to shipyards nationwide to maximize the sharing of best shipbuilding practices.
A critical practice, he notes, is the proper sequencing of the construction process. Yards that work to boost completion of complex work in the pre-outfitting and outfitting stages successfully deliver ships on budget and schedule. Delaying installation and integration of systems until the assembly of modules and final in-water construction raises costs and risks schedule slips.
The PEO pointed out that other factors affecting program execution are higher labor costs later in construction, which show that manpower-intensive tasks are being delayed. The solution, he says, is to work with yards to reorganize schedules to complete work earlier. Launch readiness can be improved by relying more on inspections by Boards of Inspection and Survey (INSURVs), which conduct pre-delivery inspections and recommend for or against Navy acceptance of new ships. More discrepancies in INSURVs reveal problems in yard management.
Affordability, always critical, is getting extra attention. Landay said that the Navy's Transport Auxiliary Cargo Ammunition (T-AKE) ship program has reduced costs by some $55 million, and LCS has cut costs by $25 million per ship through affordability-improvement initiatives. The office also is paying special attention to the cost of labor, materials, and overhead.
An especially critical priority is total ownership cost. Landay says the Navy can build ships relatively cheaply but inadvertently transfer costs to the operating fleet—the owners—in higher maintenance and support costs. The PEO/NAVSEA "Team Ships" strategy, headed by Rear Admiral Jim McManamon, Deputy Commander for Surface Warfare, is "working hard to drive those [total ownership] costs up front so we can attack them."