Inside the CBO’s Attack on Public Naval Shipyards

by Craig Hooper on September 24, 2018

The misguided drumbeat to privatize America’s four remaining public shipyards is proceeding apace. The latest volley, fired by the Congressional Budget Office (CBO), is a September 2018 report, “Comparing the Costs of Submarine Maintenance at Public and Private Shipyards.” CBO researchers looked at the DSRA costs (Docking Selected Restricted Availability) for SSN-688s over the PAST TWENTY YEARS (!!), and came to the obvious “conclusion,” which was, in so many words, that public shipyards are terrible, overpriced and need to be privatized.

That is ridiculous.

Yes, of course, the public yards cost a lot and have a lot of inefficiencies. But the trade-off is that the Nation’s private shipyards do highly-skilled work that is difficult to compete and complete. One yard is based forward, at Hawaii, far from where traditional shipyard labor-forces concentrate. In essence, these shipyards offer the government convenience and schedule flexibility that private shipyards will never match.

The CBO report itself is flawed at the outset. Using historical info (twenty years of pricing data!!) to predict present/future performance might work if one was  predicting, oh, tree growth or something, but….it’s not a way to predict shipyard costs. Using extensive historical pricing data is, frankly, a ridiculous answer to a simple question. I am simply stunned rational people at CBO let this study advance….Remember, the ostensive rationale for the study was, according to CBO, this:

Recently, several navy attack submarines have been delayed in receiving maintenance at public shipyards. As a result , they have missed deployments or had shortened deployments. They Navy could send some submarines to private shipyards for overhauls. However, the Navy has state that it prefers using public shipyards because it believes that they cost less.

Fine.

To make that case (and there is a case to be made for more private-sector support for subs! I’m not a private-sector yard hater!!), the CBO needed to drill down into present demand, costs, and possibly discuss how maintenance work could help grow the cadre of workers needed to absorb demand from the SSBN program and a likely uptick in SSN production. But instead, they go dig into ancient history for pricing data.

Why?

Because HII and General Dynamics need to feed their stockholders and want more tasty, high-margin sub maintenance and nuclear ship decommissioning work.

It is beyond stupid to employ 20 year-old data to inform modern-day shipyard performance requirements. This CBO report was not trying to help solve the immediate maintenance problem, but it was just another front in the effort to privatize everything.

Let’s dig into this.

The Navy Ain’t a Business:

This whole public shipyard privatization exercise gets back to a simple logical fallacy that national security is a business. It is not. The U.S. Navy is not businesses and Congress cannot expect any navy to operate like a business. Public shipyards are going to be, by their nature, sloppy things. They can’t, for example, engineer and refine their labor mix as easily as private entities, firing and hiring as needed. Though they are in shipbuilding centers, they’re also–as I have said before–set forward, in places like, oh, Hawaii, to support the fleet where support is needed.

Public shipyards are also going to be working issues that are often very “niche” oriented, where highly-skilled labor is needed and the prospect for viable private competition is limited. Public shipyards are the last place to seek lowest-cost-technically-acceptable solutions.

Yes, public shipyards DO compete with the private sector. Yes, there’s a reason why hungry ship-repairers like Detyens and Vigor aren’t in the sub business. But the idea that public shipyards and their highly-trained workforces are ripping opportunities from the poor mom-and-pop private shipyards is, frankly, overdone. Right now, most public shipyard work is a niche stuff that could only really be done by Huntington Ingalls and General Dynamics.

Now, there is a case for giving HII and General Dynamics more submarine work. But they need to compete now, today, and not rest on price/competition laurels from two decades ago. By peddling twaddle, the CBO lost an opportunity to do the Navy some real good.

The CBO Report:

The CBO looked at the cost of Los Angeles Class SSN Docking Selected Restricted Availabilities (DSRAs) from 1993 to the present. Their result–that the public yards were fleecing the taxpayer to the tune of forty percent came after sprinkling the numbers under so much fairy dust estimates that is impossible to distinguish truth from fiction.

To me, that failure to show the statistical “work” is always a “tell”.

We are looking a present-day conditions–ostensibly, if the CBO wasn’t looking at privatization, the CBO is looking for ways to help relieve the present-day backlog in Sub maintenance, right? So why go waaay back to 1993 to look at cost records. Focus on the most recent work–the stuff that wasn’t done twenty years ago.

If you look at the last decade–the 2010s–what is immediately obvious is that only two public yards have completed Los Angeles Class DSRAs. Those yards are the Pearl Harbor Naval Shipyard and the Portsmouth Naval Shipyard, with Pearl Harbor carrying most of the load. Of the public shipyards, they’re the most expensive.

And yet, the CBO, for this time period, discovered the cost difference between the private and public yards is, oh, roughly 25%.

That, right there, is also a “tell”. When the “correct” answer isn’t obvious, just reach for more and more data until the answer  appears.

The labor alone almost makes up for the difference. Using the FY-19 man-hour labor cost figures (available in any O&M budget justification book), labor costs at Pearl Harbor are about 20% higher than work done at at a center of shipbuilding/shipwork like Norfolk (from the Feb 2018 O&M justification book, PHNS estimated labor cost per man/day was $1005,59 and PNS was $984.75  while NNS was $817.86). Eliminate East Coast transit cost and the cost of accommodating a Hawaii-based crew in CONUS for 100+ (Or, as I explain below, 400+) days, and suddenly the cost differential from exploiting the HII labor force becomes far less exciting.

And then there’s the time differential. Since 2010, the public yards kept their subs for, on average, 209 days. The private yards took twice as much time–399 days. How much operational time does that eat up?  I mean, look HII got USS Helena’s DSRA started last October, and, as of August, the yard was getting change orders/contract modifications for millions of dollars.

That dancing around obvious problematic data is a “tell” too.

And what it all ultimately tells me is that this report is little more than a hatchet job.

Conclusion:

The CBO is full of sh*t.

Really. There’s no other way to put it. I am ashamed that our local defense journalists didn’t call the CBO on this transparent piece of “casework”, and call it for what it is (it’s not a press release, guys….reports are made to be reviewed with a jaundiced eye).

Eric Labs should be ashamed this came out of his shop.

Don’t get me wrong. The public shipyards serve a purpose. They help the Navy get the job done. But they’re not meant to be profit-centers–they’re often doing difficult jobs in places where there’s nobody to do it.

Likewise, private sector shipyards have hurdles to overcome. They need to build a labor force. If there’s a work backlog, then it makes some sense (if there’s an economic case to be made) to throw a bit of this work to the private yards to help them grow the workforce required for the SSBN recapitalization. If HII puts some investment into Pascagoula to re-introduce their old, long-retired submarine shipyards there, then it might be useful for the Navy to send some of the SSN maintenance backlog down there to build up a sub-ready workforce in that soon-to-be-contested part of the world. But, at the end of the day, the market rules. And if the private shipyards cannot do the job, the Navy is under no obligation to subsidize or otherwise coddle them.

Look, everybody loves to hate public shipyards. But they do good work and fulfill needs that the private sector cannot–or won’t–meet efficiently (Guam’s shabby shipyard looks up from the bar, waves and the Coast Guard’s shipyard looks up from his lottery cards and shouts a colorful oath or two). Let’s get over it, and rather than just arrange for a fat-cat transfer of assets to the private sector, let’s urge Congress to give the private yards the funds they need to recapitalize their crumbling infrastructure, add a few extra dry-docks, and really get about enabling these pieces of infrastructure to do their job of supporting the national security of the United States.

View Craig Hooper's profile on LinkedIn

Follow NextNavy on Twitter

{ 0 comments }

Arleigh Burke Wisdom in the Age of AI

by Craig Hooper on August 31, 2018

Back in January 1984, the U.S. Naval Institute’s Proceedings Magazine published some commentary by World War II destroyer skipper and former CNO, Admiral Arleigh Burke. The free-wheeling comments from this old Analog Admiral are appropriate in today’s whiz-bang AI era.

Now, to understand the context of his comments, Admiral Burke–who had built his wartime reputation upon, in large part, doing the unexpected–had just been aboard a new Spruance Class Destroyer, and things hadn’t gone well–stuff broke, basic gear failed, and the Admiral came away concerned. So, when asked about his opinion of the new ships coming online for the Reagan build-up, he came straight down to the essence of the matter–offering a cautionary warning about over-reliance upon an over-reliance upon Silicon Skippers:

“…If people can anticipate exactly what’s going to happen, and put it in a computer and program it exactly right and say, “this is what the enemy is going to do” and the enemy does it–which they never did for me–you’ll come out fine. The computers are much more accurate than man’s judgement. The programs are worked out in detail, and they’re checked and double-checked, they ought to be very good programs, and better than any man can do on his feet. But that works only when you’ve been able to foretell exactly what the hell is going to happen…”

Like Burke, I have enormous concerns about an over-reliance upon predictive algorithms–I mean, our Silicon Skippers are great, but over-reliance on them can be fatal. He continued,

“…Nobody knows what these modern ships will or will not do. They won’t really know until they go into battle. But one of the things you active duty people have got to make sure of is that your equipment has to work just like you do: it has to work every time…”

This is also a concern. When things fail, they fail for a reason. And there’s still far too much eagerness to grasp at the happy shreds of fact (the Ford’s berthing units are awesome!) rather than to grapple with huge complex failures (the Ford can only launch and recover a few aircraft before breaking down.). Gear must be pushed until it breaks and be made flexible enough to at least permit innovative, “off manual” or “in extremis” employment.

Admiral Burke also offered a few words about training, which, in the aftermath of the USS McCain and USS Fitzgerald collisions, might sting a little:

“…Destroyer skippers have always been faced with the fact that there is never enough time. If he can’t make decisions, he’s had it. He’s got to depend upon his people to do things automatically. And if his crew members are not trained, it’s too late. He will probably wish they had been trained, but that’s probably the last thing he’ll do…”

And the good Admiral included some comments about training that need to be mulled by every sailor out there:

“…You can’t do any better than they can do in peacetime. You can’t expect performance in battle that is superior to that in an exercise…”

And this:

“…People get excited in battle; they make mistakes. And if there are going to be any mistakes made any time, they’re going to be made under the tension of your first battle…”

This, in a nutshell, is any modern aggressor’s goal when embarking upon high-end warfare. Their aim will be to surprise, confuse and capitalize on mistakes. So if we are failing to train in a realistic fashion, pulling punches and resting on rosy assumptions, the short sharp shock of a modern battle be too much to bear. Listen to the old Analog Admiral….Even if the well-worn adage of “Train as you fight” is overdone, the Navy must do more in fake fights to stress, flex and break the force so that, when duty calls, the Navy is ready, reliable and resilient enough to persevere.

View Craig Hooper's profile on LinkedIn

Follow NextNavy on Twitter

{ 0 comments }

Unpopular Opinion: Russia’s Sub Fleet is Dying

July 7, 2018

For all the dire talk about Russia’s undersea resurgence and phoenix-like re-emergence from post-Cold War disarray, Russia’s nuclear sub fleet is dying. There is no denying it. Despite all the hand-wringing over increased undersea activity and fretful talk of new sub designs and weapons, nothing of substance has changed since the Cold War. Outside of […]

Read the full article →

When “Kill The Robots” Is Routine

June 23, 2018

Even the most optimistic unmanned evangelists must acknowledge that naval doctrine will, eventually, boil itself down to a simple precept: “Kill the Robot, and Quickly”. My sense is that America, as the first-mover in the unmanned space, finds that future somewhat distasteful. It is difficult to move from uncontested exploitation of potential utility to a […]

Read the full article →

Is the West Ignoring Asian Naval Architecture?

June 6, 2018

Asia is in the midst of a naval renaissance. But this renaissance has failed to lead to widespread adoption of Japanese and South Korean warship designs in the West. Why? Not that there haven’t been opportunities for hybridization. But the American FFG(X) program is full of European designs, the Australian Navy has rebuilt their Navy […]

Read the full article →

Is HII’s “Missing” FFG(X) Using StanFlex? Is it a Type 31e?

May 23, 2018

What is Huntington Ingalls Industries (HII) going to offer for the FFG(X) competition? America is in the midst of a multi-billion-dollar competition for the next surface combatant, and HII–after years of gleeful anti-LCS rabble-rousing, agitating for FFG(X) and showing all kinds of notional National Security Cutter (NSC)-based FFG(X) prototypes–has gone completely and utterly quiet. Why […]

Read the full article →

Sea State 3 Limitations Mean Failed Operations

May 14, 2018

By now it should be pretty obvious that the post-Cold War U.S. Navy forgot about high-Sea-State operations…and somehow decided to harness the Navy’s future to a foolish idea that Sea State 3 was a fine operational goal for critical shipboard systems. It made sense.  Life was good back in the Post Cold War era–The Navy […]

Read the full article →

Appreciate the Un-deterrable Sub

April 23, 2018

Future undersea attackers will become far less deterrable. That’s a big shift–the idea that attacking submarines are deterrable has been enshrined in ASW Doctrine since World War I, and, even today, the idea that undersea attackers can be forced to break off their attack (or other mission) informs the resourcing and posture of ASW assets. […]

Read the full article →

Huntington Ingalls Confronts the Stigma of Shipbuilding

April 17, 2018

With all the fun and excitement of Washington’s Sea/Air/Space exposition, it was easy to overlook one of the more interesting and consequential displays of the show. Most observers missed it–because this Huntington Ingalls offering was stuck off on a tractor-trailer, off the display floor. It was parked way out back, beyond the reach of the […]

Read the full article →

The Tug and Salvage Fleet T-ATS(X) has a Builder!

March 26, 2018

As a staunch advocate for the Navy’s tug and salvage fleet, I am thrilled to see the drama-filled T-ATS(X) program head towards production (some history here). It has been a long road for this important but low-profile and oft-ignored vessel–the T-ATS(X) wallowed under multiple RFIs for years. It nearly foundered after several efforts to privatize […]

Read the full article →