Sunday, July 1, 2012

Shipbuilding Practices - Commercial vs. Navy

We've discussed the Navy's shipbuilding practices and some of their problems which lead to cost overruns and schedule slips.  A commenter in one of those posts suggested looking at a particular GAO report (1) which compared commercial and Navy shipbuilding practices.  I was unaware of that report and would like to thank and credit the person but the comment was anonymous, unfortunately.  In any event, here is the summary portion from the report.  It quite nicely sums up the various differences.  It also demonstrates that I'm not the only one who sees severe problems with the Navy's practices!

"Delivering ships on time and within budget are imperatives in commercial shipbuilding. To ensure design and construction of a ship can be executed as planned, commercial shipbuilders and buyers do not move forward until critical knowledge is attained. Before a contract is signed, a full understanding of the effort needed to design and construct the ship is reached, enabling the shipbuilder to sign a contract that fixes the price, delivery date, and ship performance parameters. To minimize risk, buyers and shipbuilders reuse previous designs to the extent possible and attain an in-depth understanding of new technologies included in the ship design. Before construction begins, shipbuilders complete key design phases that correspond with the completion of a three-dimensional product model. Final information on the systems that will be installed on the ship is needed to allow design work to proceed. During construction, buyers maintain a presence in the shipyard and at key suppliers to ensure the ship meets quality expectations and is delivered on schedule.

Navy programs often do not employ these best practices. Ambitious requirements are set and substantial investments made in technology development, but often the Navy does not afford sufficient time to fully mature technology. New designs often make little use of prior ship designs. As a result, a full understanding of the effort needed to execute a program is rarely achieved at the time a design and construction contract is negotiated. This in turn leads the Navy and its shipbuilders to rely on cost-reimbursable contracts (rather than fixed-price contracts) that largely leave the Navy responsible for cost growth. Complete information on the systems that will be installed on the ship may not be available, leading to changes that ripple through the design as knowledge grows. Starting construction without a stable design is a common practice and the resulting volatility leads to costly out-of-sequence work and rework. These inefficient practices cause Navy ships to cost more than they otherwise should, reducing the number of ships that can be bought under constrained budgets. The Navy’s in-house capability to oversee design and construction has eroded, and it has been slow to build capacity to support new programs. Congress has recently encouraged greater technology maturity and design stability at key points, but required reporting does not directly address completion of a three-dimensional product model.

Differences in commercial and Navy practices reflect the incentives of their divergent business models. Commercial shipbuilding is structured on shared priorities between buyer and shipbuilder, a healthy industrial base, and maintaining in-house expertise. The need to sustain profitability incentivizes disciplined practices in the commercial model. In Navy shipbuilding, the buyer favors the introduction of new technologies on lead ships—often at the expense of other competing demands—including fleet size. This focus—along with low volume, a relative lack of shipyard competition, and insufficient expertise—contributes to high-risk practices in Navy programs. Further, the consequences of delayed deliveries and cost growth are not as severe in Navy programs because of the use of cost-reimbursable contracts."

I'm reminded of a story from the famous ship modeler, Loren Perry.  He was contracted to build a display model of the USS Arleigh Burke before the ship had been constructed and was given official blueprints to work from.  During the course of building the model he discovered that two parts of the ship (deck levels or somesuch, as I recall) that did not match up.  He notified the Navy who were able to correct the drawings.  He had to do some rework of the model but it saved the Navy from having to rework the actual ship.  This story demonstrates the value of having completed plans and a proven three dimensional model (CAD or real) prior to actual construction. 

A Better Way to Build?

GAO-09-322, “Best Practices: High Levels of Knowledge at Key Points Differentiate Commercial Shipbuilding from Navy Shipbuilding”, May 13, 2009.


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