Sunday, November 17, 2013

Save the Industrial Base?

As we discuss the costs of various programs, such as the JSF, LCS, or Zumwalt, one of the common points that keeps recurring is that we can’t afford to cancel the programs because of the impact on the manufacturing base.  We’re down to one or two manufacturers in many of our key areas.  If we were to cancel a program, the manufacturer would fold or downsize to the point that we would lose vital expertise.  Thus, we’re forced to procure weapons and systems that may only be marginally useful in order to support the manufacturer.  The military is, in effect, operating a jobs program simply to maintain an industrial base.

In principle, this is an easy issue.  The military is under no obligation and, indeed, has no tasking or responsibility to ensure the solvency of commercial companies.  If a company can’t survive, it should fail.  That’s the Darwinian law of the free market.

Of course, the reality is that much of the manufacturing and technical expertise that the military depends on is narrowly focused (can’t be transferred into the general market place) and highly concentrated in a very few manufacturers.  If one does fold, it will have an enormous impact on our ability to design and produce new weapons and systems. 

We see, then, that a policy of propping up companies does, in fact, have some validity and strategic worth.  Unfortunately, this leads to two very bad consequences:  high costs due to lack of competition and the procurement of systems of questionable utility.  There is a third, perhaps worse, consequence and that is the concentration of expertise in commercial companies rather than within the military.  Currently, the Navy does not have the engineering expertise to design or even evaluate a ship design.  The Navy does not have the expertise to design new radars, missiles, launch systems, aircraft, or even more mundane and lower tech items such as turbines, motors, valves, etc.  The military has become totally dependent on commercial companies for expertise.  Too often, tech reps keep the Navy running instead of our own sailors.

What has lead us to this situation?  How did we go from having many shipyards, manufacturers, and widespread commercial expertise plus extensive in-house expertise in the 1940’s to the current situation?  There’s many factors, of course, but two main developments have dictated the trend. 

First, the abolishment of BuShips (see here) meant that the Navy gave up its internal ship design expertise.  As we said, not only can the Navy not design new ships, it can’t even evaluate industry designs (no cathodic corrosion protection on the LCS???  no bridge wings on the LCS? vibration so severe on the LCS that the 57mm gun can’t hit a target?).  The Navy forfeited its technical competence to industry. 

Second, the Navy embarked on a pursuit of high end, multi-function, extremely high tech ships and planes which resulted in a spiral of fewer numbers and ever increasing costs.  As the costs increase, the numbers decrease.  That’s a death spiral.  It also means that fewer and fewer ships and aircraft are built which means that fewer and fewer manufacturers can be supported.  Again, a death spiral.

OK, so now we clearly see the problem and recognize the dilemma but no one seems to have a solution.  Is there nothing we can do but wring our hands and ride the death spiral down to the inevitable end?  That’s what the Navy is doing!

Well, having recognized the cause of the problem, what if we reversed it?  What if the Navy stopped the pursuit of technology (or at least tempered it!) and regained its in-house expertise?  Would that have any positive impact?  What if we built more ships and planes?  That would support a larger industrial base, wouldn’t it?  Well, sure, but where would the money come from to build more ships and planes?  We haven’t got enough money to even build sufficient numbers to maintain the fleet size let alone increase it!  So, yeah, I guess those actions would improve the situation but they’re not really practical or even possible … … …     Are they?

To build more ships without increasing the shipbuilding budget just requires a philosophical adjustment.  Let’s give up a few of the top end ships in exchange for greater numbers of solid, highly useful ships that don’t have to be technological wonders.  For example, the three Zumwalts are going to add a very marginal improvement in capability to the fleet.  At a construction cost of $12B or so (not to mention the R&D costs!), we could have bought twelve modern, highly useful $1B frigates or twenty four basic but still quite useful $500M frigates.  If we gave up a single $14B Ford class carrier we could afford a lot of AFSBs, MLPs, four air wings worth of brand new Super Hornets, an entire new class of MCM vessels, and so on.  If we gave up the LCS we could afford to build dozens of dedicated MCM vessels and low end dedicated ASW vessels.  I could go on with example after example but you get the idea.  Note that I’m not advocating giving up technology or high end ships – just saying that not every ship and plane needs to be ultra high end.  A judicious restraint on our technology pursuit fetish can still give us the high end we need, provide lots of extra ships and planes to support our industrial base, and significantly expand the fleet size while still providing useful platforms.  Throw in more upgrades rather than early retirements and the industrial base is further supported.

Reconstituting BuShips would provide the Navy with the in-house expertise it needs to better monitor the products and services it gets from industry.  If we had had in-house naval engineering expertise, how much money would we have saved on the LCS corrosion debacle?  Yeah, I know, a drop in the bucket compared to overall budgets and costs.  However, over time, enough drops eventually equal a bucket.  With in-house expertise, perhaps we wouldn’t have had to accept a clearly sub-standard LCS design, or EMALS that has no electromagnetic shielding and glows like an electromagnetic beacon, or an F-35C that doesn’t have enough rear end to get its tailhook to engage, or an LPD-17 design that has a boat launch that is inherently dangerous, or a Burke Flt III AMDR that is too small for the required task, or ….  All of those things cost extra money to fix – some drops of money and some quite a lot.  The more money we save, the more money we have available for additional ships and planes thereby strengthening the industrial base.

Greater in-house expertise also offers another, radical possibility.  If we can’t fully support the industrial base we need, what about absorbing it?  Why can’t the Navy actually design and build their own ships?.  Sure, we’d have to essentially create a shipbuilding company within the Navy but we would no longer have to pay the profit portion of the costs.  I don’t know what the profit margin on a ship is, for instance, but it’s got to be at least 20% or industry wouldn’t do it.  My guess is that it’s a lot higher than that.  Regardless, do the math.  A profit of 20% on a $12B carrier is $2.4B.  That could buy a lot of additional planes and ships or fund a great deal of maintenance and upgrades so that our existing fleet could last longer!  Instead of having to try to separate industry sales spin from reality maybe the Navy would have the expertise to know the straight story - not that the Navy is exactly renowned for straight talking or wise decisions but, you know, theoretically…

It comes down to this:  we can all say that the current system is too fragile to change – while riding the death spiral to complete failure – or we can peek outside the box and consider some more radical changes.  Would they be easy to implement?  Probably not but faced with a death spiral, isn’t it worth trying something different?  The Navy has 285 or so ships now and can’t meet the mission demand.  What’s going to happen when the fleet shrinks to 230?  Yeah, those are the numbers that even CNO is throwing around although he seems not to understand the reason why it’s happening.

The choice is simple:  die or change.  I’d like to try changing.


  1. A couple of years ago, in a military blog, someone suggested nationalizing LMT,RTN and NG. Big outcry at the time but the idea might not be so "unAmerican" as it might be seem. If we continue on this course, we are going to end up with one contractor anyways. We are continuing to lose our industrial base, we need to come up with some solutions if not forget about paying billions, at this rate, we won't have anything to buy anyways when the industry just keeps exiting the market....

    One area is obviously requirements. Lets stop these gold plated solutions, do we really need 40kts capability to hunt mines? do we need stealth to go after some "terrorist" in Yemen? how about just buying a regular air tankers (Italy/Japan KC767) that's already out in production and certified instead of one tailored made to USAF?

    How many of these requirements are really needed or just nice to have?

  2. This is very similar to the concept Adm. Rickover advocated for to do most big contracts. "Government Owned, Contractor Operated" (GOCO for short).

    The Navy would own and control the facility, design the ship, and put it out for bid. The chosen contractor would then manage the construction in the Navy's facility.

    This would also work well for the USAF. The Army and the Marines have some obvious candidates for this as well.


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