Leadership: People Problems in the U.S. Navy

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July 26, 2007: The U.S. Navy is going to war with the firms that build its warships. 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.

One area where the navy will definitely save money with its new ship designs, is in payroll and personnel expense in general. That's because all the new navy ships will have much smaller crews and more automation. The main reason for this is to bring down operating costs. Currently, it costs $37 million a year to operate a Spruance class destroyer, $21 million for a Perry class frigate (similar in size to the LCS), and $38 million for a Ticonderoga class cruiser. The Spruance is expensive because it has proved to be an unreliable and high maintenance design. The new Zumwalt class of destroyer is aiming for $21 million a year to operate, while the next cruiser will be $29 million, and the LCS $15 million. Big savings will come from smaller crews. Instead of 300-400 sailors for current destroyers and cruisers, the navy is hoping to get by with fewer than a hundred per LCS. The next generation aircraft carrier will have its crew sized reduced by 3,000 sailors, saving nearly $400 million a year in operating costs. So while ship building costs continue out of control, the navy is laying off thousands of sailors to pay for it.

 


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