Deconstructing Navy Inc.

By Ensign Daniel S. Stefanus, U.S. Navy

The prevalence of OCS is problematic for safe and effective operations out at sea. The Navy’s hallmark has always been its independence and self-sustainability. But due to the demands and complexities of its high-tech fleet, it cannot provide many of the services it needs, so contracting this work is vital. However, the use of OCS for services seems less essential. Inevitably, some services contractors are necessary, especially husbanding agents in foreign ports in lieu of building or expanding American bases overseas. Domestically, the need for contracting such services is less clear. As we delegate more responsibilities to contractors instead of sailors, we become increasingly dependent on the former for our basic operational capabilities. As the Congressional Research Service outlined, “The military is unable to effectively execute many operations, particularly those that are large-scale and long-term in nature, without extensive operational contract support.” 5

This dependence on OCS could be deadly in times of global crisis. Just as we fear losing our shipbuilding industrial base, so should we dread losing operational autonomy. Relying on external organizations for the sourcing of services and employees is a grave threat to our independence and effectiveness as a global fighting force. These companies often have looser regulations and security than the Navy and could be compromised or cease operations during a national emergency. The possibility of losing these critical services at the time we need them most should be seriously considered during the procurement process. Moreover, when these companies grow in size and importance, they will become increasingly influential on naval policies and operations. Meanwhile, the Navy will become tethered to their capabilities and interests. We must take these factors into account when evaluating the role of OCS in the Navy.

Contracting: Why? Why Not?

In discussing this issue, the three main arguments in favor of contracting are that sailors cannot keep up with technological changes, they cost too much, and they are less flexible and adaptable than contractors. If we were to carry these arguments to their logical conclusions, why have sailors at all? Technology does advance at a rapid clip, but contemporary sailors have in large part been raised in this technological age and understand its concepts. Moreover, we send them to years of schooling over the course of their service, providing them with the tools necessary to adapt and thrive. Doubting their capacity to learn is doubting the Navy’s relevance and future as a global maritime force. A problem could also lie in the multiplicity of systems, difficulty in obtaining replacement parts and materials, and in underfunded, clogged training pipelines. Nevertheless, as frontline warfighters we cannot surrender to the challenges of technology. If a contractor can understand a system, then so can a sailor, especially since many contractors are former sailors. Rather than outsourcing these difficulties, we must embrace them. While technologies change much more rapidly than ship or submarine classes, this does not mean that we cannot train sailors to change with them.

In regards to cost, there are several often overlooked factors. Unlike contractors, sailors are available around the clock and can work on projects without labor-cost overruns since they receive salaries rather than wages. This improves the Navy’s budgeting and forecasting models. Meanwhile, contractors have many hidden costs that defense planners ignore at the Navy’s peril. The Navy’s all-or-nothing pension system encourages technicians, especially chief petty officers, to serve for 20 years. After so many years of military life, being a contractor appeals to many of them as a way to continue the technical work they enjoy without the difficulties of deployments and permanent changes of station. This arrangement means that many contractors often receive both contractor pay and Navy benefits and pensions. The Navy shouldn’t be the contracting firms’ farm team, and should seriously examine this feedback loop.

Furthermore, by using contractors as maintenance men while cutting Fleet elements’ manning to save on manpower costs, we have placed a heavy burden on those remaining sailors—especially when operating away from shore. Overworking them decreases morale and fuels frustration, leading many of them to leave the Navy in favor of lucrative contracting jobs. Nevertheless, the greatest cost of contracting is the degradation of the Fleet’s self-sustainment capabilities. If a cruiser’s SPQ-9B radar suddenly goes down in the middle of an engagement, there is no time to fly out a contractor. Only the ship’s crew can salvage the situation. This is the crucible of battle, and the Navy must always be prepared. An overreliance on contractors only diminishes this capability.

Finally, the issue of flexibility in our age of ever-present asymmetrical conflicts has long been the contractors’ trump card. Even if expensive or inefficient, they provide the surge capabilities and flexibility that the Navy apparently cannot. But not even defense contractors spin on a dime, and implementation is rarely a matter of weeks. It often takes months—if not years, in some cases—for contractors to provide mission-critical services in times of crisis. During this time, sailors could have been trained and mobilized for a given mission. Moreover, these “surge” abilities are often required for significant durations, nullifying the moniker. Surging from crisis to crisis creates a sea of temporary workers without the bedrock of the long-term professionals the Navy needs. Services contractors’ purported flexibility and swift implementation also carry an excessive cost premium that would be much better spent training our own sailors. In this globalized age, having increasingly flexible personnel is worth the investment that we instead expend on disposable contractors.

Take Back the Navy

If we are to maintain our preeminence in the maritime domain, we must scale back Navy Inc. and return to a self-sustaining, independent force by implementing bold reforms such as the following:

Break the chief-to-contractor exodus. If the Navy contracted less, thereby reducing contractors’ demand for chiefs, or revised its retirement system, these seasoned technicians might stay in the Navy well past 20 years. However, the chief-to-contractor transition has become too attractive to pass up. This brain drain is an enormous hidden cost of contracting, one that should be taken into account in all sailor-versus-contractor cost-benefit analyses. While we do not want to lose these invaluable skill sets, we should not make it more lucrative to be a retired chief/contractor than to stay in the Navy. We should not be paying contractors more than we pay our sailors or subsidizing their firms’ bottom lines through our health and pension benefits.

Increase manning. Self-sustainability means keeping organic repair abilities at the command level. This requires phasing out contractors while returning fleet elements back to full manning. By returning commands to proper manning, they could accomplish more, and more quickly, which would lead to higher job satisfaction and less defection to the civilian sector. This also relates to the issue of keeping up with technological changes: As sailors are stretched increasingly thin, they do not have time to study new manuals and publications in their free time. More manning using resources previously outlaid to OCS would allow sailors more time to work on their systems and stay on top of the technological changes that invigorate our Navy and keep it the most powerful and capable force in the world.

Streamline training and increase specialization. Were we to streamline our systems, instructions, and trainings using resources previously outlaid to contractors, the skill deficit between contractors and sailors would significantly diminish. This could be accomplished through increased specialization, which would be possible thanks to additional manning. The overly diversified sailor, while helpful in general, cannot keep up with the intricacies of scores of systems. Instead, by focusing sailors’ duties more deeply and narrowly, we can have all-star technical experts. Moreover, in billeting we must keep sailors in-rate more often. General administration and out-of-rate shore tours squander precious Fleet knowledge. We should recruit more yeomen and other supporting rates to fill those billets, and keep technicians in technical or instructor billets so they remain current on their systems and trends. Far too many sailors come back from shore tours having lost their technical expertise.

Expand career intermission and corporate fellowship opportunities. The Navy should promote the Career Intermission Pilot Program more, allowing sailors to take a pause in their careers so they can undertake new experiences that will positively impact the service. It would be especially advantageous to encourage sailors to get business experience outside of the Navy. An exponential increase in Navy-corporate fellowships or joint positions would also be a boon to all involved. Why should an out-of-rate shore tour doing general administration count as service, whereas spending a year at Home Depot’s operations department and returning to spread wisdom is out of the question? Sailors need to see how other large organizations operate. The current O-5 and O-6-centric corporate fellowship programs are much too small. An O-3 who has finished his or her sea tour would be a choice nexus for the intellectual clash of Navy methods learned in their division officer tour and the corporate methods they’d learn during the fellowship. From there these O-3s could go forth and spread their balanced ideas and perspectives from the bottom up. Similar programs could be created for hard-charging E-5s and E-6s. Corporations love being associated with the military, and many would eagerly create these symbiotic partnerships.

Speed up supply chains by increasing open purchases and spare parts. The Navy’s attempt at a just-in-time delivery system does not work as efficiently as is necessary in a world of constant asymmetrical threats. Many ships currently have vital parts on order with several years until delivery. This leads some commands to submit a casualty report for parts out of desperation because they believe that otherwise they will never receive them. Meanwhile, services contractors boast much faster supply chains and seemingly endless spare parts and test equipment. Sailors often request contractor technical assistance solely to get access to their spares and test equipment. Increasing these assets on board and at local depots would significantly enhance sailors’ ability to conduct troubleshooting and repairs. More open purchases would also ameliorate costs, supply backlogs, and delays by allowing same-day acquisitions by the parties actually doing the repairs.

Increase accessibility and knowledge of the supply chain system. If sailors are to function as well as contractors, they must have a supply system that matches the contractors’ in quality and efficiency. To do this we must simplify the system and make it more approachable. Our current system is a byzantine labyrinth navigable only by the most deft supply officers and chiefs. Its chaotic ways, and the perception that Big Navy’s coffers are endless, lead sailors to spend Navy dollars wantonly. Psychologically speaking, if sailors think they are tapping into Big Navy’s endless pool of money rather than their ship’s much smaller parts-acquisition budget, they would spend more profligately. Ownership decreases excess, and no sailor wants to undermine his or her command’s ability to finance its projects. By making sailors realize that excessive parts acquisitions and inadequate maintenance hurt the command’s finances, they will care more and reduce profligacy. To raise awareness of the supply system, we should introduce a rigorous supply and finance-training module at every A school and commissioning source. Mitigating sequestration’s negative effects on our operational capabilities will be the biggest challenge our Navy has faced since the end of the Cold War. Therefore, not educating our deck-plate leaders about naval finance and supply is inviting disaster.

Navy Inc. has been a misguided project based on the belief that private industry is always superior to the public sector. In the pursuit of cost savings, we have developed into a Navy that serves contractors, not the other way around. Rather than using external sources for band-aid fixes, we need an internal revolution in how we conduct our affairs. We must recover our independence and self-sustainability by returning to our greatest asset, our sailors, and investing in them to the hilt. Therefore, we must close the chief-to-contractor feedback loop, increase manning, and foster increased specialization and externship opportunities. Simultaneously, we must realign our training and supply systems to fit on-the-ground realities by allowing more open purchase and spare-parts storage, and simplifying our supply system while boosting servicemembers’ knowledge of it. This will require implementing innovative solutions and adapting our practices, while realizing that we are not a corporation, and that market forces are not inherently superior in providing public goods. Ultimately, we must rediscover the strength of the empowered and knowledgeable sailor willing to fight and die for the Navy over the span of a full career.

1. Wendy Ginsberg and Moshe Schwartz, “Department of Defense Trends in Overseas Contract Obligations,” Congressional Research Service, 1 March 2013, .

2. Lydia Saad, “Americans Hesitant, As Usual, About U.S. Military Action in Balkans,” Gallup News Service, 24 March 1999, .

3. Ginsberg and Schwartz, “Department of Defense Trends.”

4. Ankita Panda, “How Fat Leonard Scammed the US Navy,” The Diplomat , November 2013, .

5. Jennifer Church and Moshe Schwartz, “Department of Defense’s Use of Contractors to Support Military Operations: Background, Analysis, and Issues for Congress,” Congressional Research Service, 17 May 2013, .

Ensign Stefanus is currently the fire control officer on board the USS Anchorage (LPD-23) and a graduate of the Duke University NROTC program.


Conferences and Events

WEST 2019

Wed, 2019-02-13 - Fri, 2019-02-15

Sharpening the Competitive Edge: Are We Ready to Compete, Deter, and Win Globally? Wednesday, 13 February - Friday, 15 February...

2019 U.S. Naval Institute Member Event

View All

From the Press

23 January - Book Talk

Wed, 2019-01-23

9 February - Presentation

Sat, 2019-02-09

Why Become a Member of the U.S. Naval Institute?

As an independent forum for over 140 years, the Naval Institute has been nurturing creative thinkers who responsibly raise their voices on matters relating to national defense.

Become a Member Renew Membership