Efforts to build new ships for the Navy are far from shipshape. Rising costs are endangering the Pentagon's vision of a 21st century fleet of cutting-edge aircraft carriers, destroyers and submarines. The Navy's top admiral, Vern Clark, has even told Congress that shipbuilding expenses "have spiraled out of control," climbing so high that "we can't build the Navy that we believe that we need in the 21st century."

For example, the Navy initially sought 24 new DD(X) destroyers (rendered on the left). But now that the cost of the first two are up $1.5 billion from initial estimates (according to confidential budget documents, they're now at $6.3 billion), the Navy thinks it can get only 5 destroyers at the most--one a year for the next 5 years. What's more, a new aircraft carrier, the CVN-21, is up $2 billion to some $13.7 billion while the cost of the new Virginia-class submarine has risen by $400 million to $2.5 billion each. And all these price hikes have occurred in the last six months.

The culprits: old-style politics and the rickety nature of American shipbuilding.

For starters, Navy officials had intentionally "underestimated the price" of the DD(X) destroyer program, says John J. Young Jr., the assistant Navy secretary responsible for buying new weapons. "There's a motivation in this building to birth programs," he tells The New York Times, referring to the Pentagon's enthusiasm for large new weapons systems. "People tend to understate their costs."

Additionally, political squabbling may further drive up the costs of the DD(X) destroyers. The Navy wants the two contracting giants--Northrop Grumman and General Dynamics--to compete to build the destroyers. Meanwhile, Congress is pushing for a two-shipyard approach, with one assigned to Northrop Grumman's shipyard in Mississippi and the next to General Dynamics' yard in Maine. This way, it says, it can spread the wealth and enrich both yards. The Navy argues, however, that using two shipyards will tack on $300 million or more to the cost of each DD(X). In fact, skyrocketing costs have prompted some in the Navy and the shipbuilding industry to propose abandoning plans to build the DD(X) entirely and instead focus on the next-generation destroyer--unless costs are kept in check.

Another big stumbling block is the machinery of military shipbuilding, which is dominated by the two aforementioned contractors. Only they can build the ships the Navy seeks. Northrop Grumman and General Dynamics own, between them, the six remaining yards that can produce American warships. Members of Congress representing the states in which those yards are located (Maine, Connecticut, Virginia, Mississippi, Louisiana and California) unsparingly support them. In exchange, the contractors back thousands of smaller suppliers (which are often the only suppliers of what they produce).

What's more, Northrop Grumman and General Dynamics do not vie for jobs, say officials, but divvy up the billions that Congress spends to produce ships. Ditto with benefits, including the power to delay paying federal taxes on the profits. "I don't think we really have competition today," Admiral Clark told Congress. "I think we have apportionment. And I think all the numbers are now clear that apportionment is costing us money."

Many agree. "It's prehistoric," says Harlan K. Ullman, a senior adviser at the Center for Strategic and International Studies, a research group in Washington that tackles national security issues. "It's an unbelievably regulated socialist industry, dominated by politics, not rational judgment. Because there is no competition, it's very difficult to get efficiencies. Admiral Clark is absolutely right. We cannot afford the ships we need because the system is so bloated. It's a monstrosity."

But Northrop Grumman has another explanation for soaring costs. According to Philip A. Dur, president of Northrop Grumman Ship Systems, costs are rising as the number of ships the Navy orders is falling. He says his company made large investments in equipment and people, under the belief that the Navy would purchase ships at a steady clip. When the Navy's plans "change dramatically from year to year, the assumptions we make are radically altered," he tells The New York Times. "That generates extraordinary costs."

And Michael W. Toner, executive vice president of General Dynamics Marine Systems, concurs. "Our fragility is due largely to the instability of the Navy's shipbuilding plans," he says.

Baloney, responds Young, the assistant Navy secretary in charge of buying weapons. "The shipbuilders' complaints about stability are way overstated," he says. "If I gave you $30 and told you to eat lunch for a week, you'd find a way to do it. If I said, 'Eat lunch for a week and it costs whatever it costs,' things would come out different." Young believes that shipbuilders simply do not try hard enough to keep costs down. "They don't work like an automaker facing competition from Japan," he points out.

Source:

Navy of Tomorrow, Mired in Yesterday's Politics
Tim Weiner
The New York Times, April 19, 2005
www.nytimes.com