By Capt Brent Ramsey, US Navy ret

The U.S. Navy made a conscious decision back in the 1990 timeframe that public shipyards — i.e., shipyards owned and operated by the Navy — would accomplish all nuclear repair and modernization of submarines and aircraft carriers. Let’s review how that panned out.

The Navy used to have eight public yards and now has only four (Norfolk, Puget Sound, Portsmouth, and Pearl Harbor). The public yards are “mission funded,” which means that on October 1 of every new fiscal year (or whenever Congress gets around to passing the budget), the labor is paid for the entire year. They used to be “working capital funded,” which enabled the yards to run more efficiently like a normal business.

In layman’s terms, if a mechanic is working, waiting on material or engineering, or just unable to be productive, his or her salary is already paid! This is not ideal for cost-effectiveness. Private-sector shipyards perform all non-nuclear surface ship repair and overhaul work. To put the workload in perspective, the Navy currently has 11 nuclear-powered aircraft carriers and 67 nuclear-powered submarines in commission. That leaves ~216 conventionally powered ships.

There have been some positive outsourcing actions in the public shipyards, but not enough. Due to wage limits and other inflexibilities of the civil service system, public shipyards cannot hire enough people to do the work, so they need to maximize the use of the private sector as subcontractors and develop discreet work packages on the SSNs, in the non-nuclear portion of the ship, to ease public yards’ manpower problems.

The CVNs have multiyear repair support contracts with the private sector that are managed by the local Regional Maintenance Centers (RMCs) and accomplish non-nuclear repair work. Seems easy, but the culture of the public yards is difficult. The basic culture of the yards that “we can do it all ourselves” is a problem. There are a lot of studies going on to improve the efficiency of accomplishing work, reducing paperwork, getting all the material and drawings on the deck plates faster, etc., but it is like turning a supertanker, all very slow. The result of these continuing challenges is schedule delays in maintenance and repair.

A drastic reform that could be tried would be to take one public shipyard and replace all the senior military (O-6s) and civilians with private-sector executives, establish a five-year contract, incentivize them on a profit-orientated basis, and run the public yard like a business. Currently, the Navy rotates these O-6s through in two to three years. There is no leadership continuity or stability. Experienced workforces tend to resist change — they know better, so constant leadership change is not conducive to production efficiency.

To change this damaging situation, we need drastic action. Reliance on annual congressional appropriations to fund multiyear repairs and overhauls is also unwise and just makes for added costs, delays, and inefficiency. Congress is as much to blame for public shipyards’ deplorable performance due to delays in appropriations and due to the very nature of annual appropriations being fundamentally inefficient.

On the non-nuclear side, in the private shipyards, there is a regrettable misconception held by SECNAV and other senior leaders that we do not have enough capacity in the non-nuclear ship repair industry. This is totally wrong. The private sector is fully capable of maintaining the Navy’s conventional ships. The problem is not capacity but throughput; the industry has enough drydocks, piers, cranes, workers, subcontractors, etc., but the current short-term contract structure does not provide stability and predictability in the workload.

Basically, you fight for your lunch one job at a time, and you have no horizon on workload, layoffs, etc. The Navy needs to consider some form of a multiyear contract structure, such as a Single Award Firm Fixed Price (FFP) Indefinite Delivery/Indefinite Quantity, which is working very well in Rota and was successful in Hawaii many years ago.

To dramatically improve ship maintenance and repair, the Navy should bundle three to five or more ships together, and the prime contractor would accomplish all the planning, material procurement, and work execution on these ships, such as is done with Continuous Maintenance availabilities, major CNO availabilities, and all emergent work. Let the prime contractor own all the work. This establishes relationships with the ship, the CO, and the chain of command. Make contracts FFP negotiated procurements, which is shared risk between the government and the prime contractor.

This contract structure would be best for the fully capable shipyards only — i.e., those yards that have already invested in the docks, piers, cranes, etc. that make them fully capable. In addition, mandate some reasonable percentage (30%-40%) of work that must go to the small business subcontractors. If these types of contract structures are not implemented, the large yards and their owners will not invest in facilities, training, capital equipment, etc., as they will not be able to predict their workload, which drives financial stability and predictability.

Conclusions:

To improve responsiveness and meet deadlines for repair and maintenance, public shipyards must maximize the use of the private sector to help increase the throughput of SSN work. A major reform would be to privatize a public shipyard under a long-term contract and let the private sector manage to an agreed upon fixed cost and schedule.

The fully facilitated non-nuclear private shipyards have the capability and capacity to accomplish the non-nuclear ship repair requirements but need stability, predictability, and less cumbersome oversight. If the yards have a Master Ship Repair Agreement with the Navy, then let them accomplish the work without all the oversight requirements to expedite the process; trust them, audit them, and if they are not adhering to procedures, then penalize them!

Private shipyards very successfully accomplish maintenance and repair of Military Sealift ships, commercial vessels, cruise vessels, etc. on or ahead of schedule because the repair processes support a non-confrontational environment and changes are expeditiously negotiated on the deck plates. The Navy needs to get out of their way; the private-sector yards will/can perform!

Author’s Note: Part 2 is based in part on the input of industry members with detailed knowledge of the ship maintenance field whose contributions to the article must remain anonymous to protect their existing business relationships.