Nov. 20, 2013 - By CHRISTOPHER P. CAVAS – Defense News
'Won't Drive Shipbuilders Out Of Business'
WASHINGTON — Across the board, all of the US Navy’s shipbuilding programs are improving, reports the Government Accountability Office (GAO). But too many ships are being accepted still needing work, the GAO says, and the Navy needs better standards to get the work done before taking delivery.
The Navy, however, says the service already has good practices in place, and forcing shipbuilders to deal with one-size-fits-all standards would result in higher costs and more delayed deliveries.
“There can be a standard of practice, but I’m uncomfortable with saying all ships will be delivered with no discrepancies,” Rear Adm. David Lewis, program executive officer for ships under the Naval Sea Systems Command, said during an interview Nov. 20. “That could end up driving the Navy to spend tens of millions of dollars to save a couple million, and that’s not a good outcome.”
The GAO report, released Nov. 19, details deficiencies on most recent Navy surface ship programs. Even in the worst cases — the LPD 17 San Antonio-class amphibious transport docks and the Littoral Combat Ship programs — the statistics show gradual and sometimes dramatic improvement in shipyard performance.
“In recent years, Navy leadership has increased its focus on reducing what it considers to be the most serious deficiencies at the time of ship delivery with some notable successes,” GAO said. “However, the continued practice of accepting ships with a substantial number of deficiencies differs from the commercial practices we observed and can be attributed to differing interpretations of what Navy policy requires.”
Lewis defended the Navy’s policy of setting standards, but evaluating each situation as needed.
“Each ship and program is a little bit different,” he said. “Each shipyard is different, and the problem that shipyard is having at any particular time is different. There’s a variety of performance among the yards. Some are doing very well and some — well, today they’re all doing pretty well. But back then, some had some issues. And I would like to be able to deploy tools to make the yards that are deficient better, and not necessarily have to deploy those tools on yards that are doing just fine.”
While GAO investigators visited all the Navy’s shipbuilders, they also visited a number of shipyards doing commercial work, and looked at the performance of several commercial designs. In many cases, GAO is impressed with how the commercial world handles shipbuilders.
“Leading ship buyers have made a business decision that the risks to quality belong with the shipbuilder,” GAO said. “They also make greater use of how payments are structured in the shipbuilding contract to incentivize the builders to ensure timely correction of deficiencies.”
Lewis, however, bristled at the suggestion that treating the Navy’s shipbuilders should be akin to the commercial world.
GAO, Lewis, said, “mentioned that in the commercial world they might have up to a dozen yards bidding on a commercial ship contract. I’m lucky to get three.
“They implied that … if a shipyard was sued for damages, they could go bankrupt. If a shipbuilder can’t perform [and] is paying all that cost, that could drive a shipbuilder out of business in the commercial world. I can’t do that. I’m not allowed to do that, I don’t want to do that.
“In my world, I don’t want cutthroat competition,” he added. “I want competition, but I don’t want any of these shipyards to go away.”
With fewer shipbuilding choices, the Navy, he said, is more interested in improving the shipyards’ performance than penalizing them.
“In the commercial world,” Lewis said, “if someone is performing badly, you just don’t do business with them anymore. You ditch them and you’ve got eleven other bidders. You don’t care about the industrial base in the international commercial world.
“In naval shipbuilding in the United States, I care deeply about the industrial base. If I have a shipbuilder that’s got problems, I want that shipbuilder to not have problems.”
A mandatory policy, he said, would not work with naval shipbuilding.
“A standardized policy that mandates certain fixed points of performance makes me uncomfortable given the variety of situations I have and the variety of the shipyards. My responsibility is to work with the shipbuilders to bring them in compliance with our contractual standards.
“I can’t drive them out of business, and I won’t drive them out of business,” he declared.
Of the GAO’s other recommendations, Lewis said the Navy is essentially already doing what the watchdog agency suggests.
“We concurred with a lot of the recommendations. They’re good recommendations, but the reality is that’s what we’re doing,” Lewis said.
“They’re basic research is good — factually correct. It shows what we’ve been doing, beefing up our presence [in the shipyards]. Shows we are doing what we said we would do — building ships with fewer defects.
“But telling me we need more policy and oversight is not a helpful thing.”
The complete GAO report is available at www.gao.gov/products/GAO-14-122