Why Has the Cost of Navy Ships Risen? A Macroscopic Examination of the Trends in U.S. Naval Ship Costs Over the Past Several Decades

by Arena, Mark V.; Blickstein, Irv; Younossi, Obaid; Grammich, Clifford A.

• ISBN13: 9780833039217
• ISBN10: 0833039210
• Format: Paperback
• Copyright: 2006-05-15
• Publisher: RAND Corporation

Summary

Over the past several decades, increases in acquisition costs for U.S. Navy combatants have outpaced the rate of inflation. To understand why, the authors of this book examined two principal source categories of ship cost escalation (economy-driven factors and customer-driven factors) and interviewed various shipbuilders. Based on their analysis, the authors propose some ways the Navy might reduce ship costs in the future.

Table of Contents

Preface	iii
Figures	ix
Tables	xi
Summary	xiii
Acknowledgments	xxi
Abbreviations	xxiii
The Growth of Ship Costs	1	(10)
Former Chief of Naval Operations' Perspective and the Significance of the Problem	1	(3)
Ship Cost Escalation and Complexity	4	(2)
Study Objectives and Overview	6	(5)
Approach	6	(3)
Sources of Data	9	(1)
Report Organization	10	(1)
Historical Cost Escalation for Ships	11	(10)
Cost Escalation for Navy Ships	11	(4)
Surface Combatant Example	12	(3)
Comparing Cost Escalation Among Ships	15	(1)
Cost Escalation for Other Weapon Systems	15	(2)
Cost Escalation in Other Sectors of the Economy	17	(2)
DoD Deflator	17	(1)
GDP Deflator	18	(1)
Consumer Price Index	18	(1)
Summary	19	(2)
Sources of Cost Escalation for Navy Ships	21	(30)
Typcs of Cost Escalation	21	(1)
Comparing Ship Costs Across Time	22	(1)
Economy-Driven Factors	23	(9)
Labor	24	(4)
Material and Equipment	28	(2)
Summary of Economy-Driven Factors	30	(2)
Customer-Driven Factors	32	(16)
Characteristic Complexity	33	(6)
Other Ship Features	39	(5)
Procurement Practices	44	(3)
Summary of Customer-Driven Factors	47	(1)
Total Contribution of Factors	48	(3)
Industry Views on Ship Cost Escalation	51	(8)
Unstable Business Bases	51	(2)
Shrinking Vendor Bases	53	(1)
Workforce Issues	54	(2)
Increasing Government Regulations	56	(1)
Summary	57	(2)
Options for the Navy to Reduce Ship Costs	59	(12)
Increase Investments in Shipbuilding Infrastructure Aimed at Producibility	60	(1)
Increase Shipbuilding Procurement Stability	61	(2)
Fund Shipbuilding Technology and Efficiency Improvements	63	(1)
Improve Management Stability	63	(1)
Change GFE Program Management Controls	64	(1)
Employ Batch Production Scheduling	64	(1)
Consolidate the Industrial Base	65	(1)
Encourage International Competition and Participation	66	(1)
Build Ships as a Vehicle	66	(1)
Change the Design Life of Ships	67	(1)
Buy a Mix of Mission-Focused and Multi-Role Ships	67	(1)
Build Commercial-Like Ships	68	(1)
Summary	68	(3)
Conclusion	71	(24)
APPENDIXES
A. Ship Classes Included in the Multivariate Regression Analysis	73	(2)
B. Multivariate Regression for Ship Cost	75	(2)
C. RAND Questions to Each Firm	77	(2)
D. Cost Escalation Over the Past 15 Years	79	(10)
E. Passenger Ship Price Escalation	89	(6)
Bibliography	95