November 24,2008: The U.S. Navy is going to war with the firms that build its warships. At least it's trying to. Poor quality, delays and inflated prices are the cause. For decades, there have been growing problems with "low balling." This is where the shipbuilder gives the navy a very low estimate of what a proposed ship is going to cost. Then, when construction is under way, costs creep up, often resulting in the ship costing more than twice the original estimate. When this practice began, after World War II, it was with the cooperation of the navy, that wanted to have an easier time convincing Congress to allow construction of new ships.

 For the past decade, the navy has been saying, "no more", while the ship builders say, "OK." But the low balling continues. All current ship building projects over budget. The worst case is the LCS (Littoral Combat Ship), which was to be the poster boy for doing it right. Didn't work out that way. Three years ago, when building plans for the LCS were laid out, each one was to cost $223 million. Now the estimated price is $460 million, and the navy is confident that the ultimate price will be higher. Congress is outraged, and are demanding that the admirals do something.

The real problem is "sole source" procurement of big deck vessels (plus the Navy's penchant for changing designs every Tuesday). The real reasons for the problem goes back to when the navy destroyed the Navy Yard system, which was the best check on corruption and carelessness in shipbuilding. How does one bring back quality production, or even prove it can be done better, if there are no government owned ship yards that enable the navy to find out how it can be done better?

The shipbuilding industry will sometimes blame the unions. But Norway, Denmark, Japan, Korea, etc., maintain effective, efficient shipbuilding operations and have strong unions. The principal problem with the US Navy's yard system was that there were too many yards, more actually than the Royal Navy had. But the basic notion of having navy-owned yards was so that the service (and the taxpayer) could have an independent "authority" on ship construction and repair. 

Examples abound. Back in the '30s, with substantial construction contracts being let again, the Navy placed orders for three very similar classes of destroyers, two to be built in private yards and one in navy yards. There were about a dozen ships all together. The end result was that the navy-built ships came in on time, on budget, and with few teething problems, while the privately built ones ran over in time and money and required some additional work after completion.

Post-World War II, the shipbuilding industry decided it needed the work more than the navy's yards did. A series of interesting laws got passed that marginalized the navy's yards. One good one was a law that came out of the Virginia congressional delegation that mandated that modernization, maintenance, and repair jobs be done at yards in proximity to where ships were based. This was very good for Newport News, but meant that navy yards in places like New York, where there were usually no ships based, became "uneconomical." We've only got a few navy-owned yards now, and none of them do construction.

The private shipbuilders and the shipping lines, plus their local members of Congress, have also contributed to the decline of the merchant marine, though they blame the unions, OSHA, EPA, "cheap foreign labor," etc., and so forth. Books have been written about this (like "The Abandoned Ocean: A History of United States Maritime Policy"), but not enough of the right people read them, or wanted to act on the evidence presented. The problem, as in so many areas of military procurement, is politics. The defense budget is seen as a source of votes, above all. No politician will admit it, but the facts speak for themselves.