The Defense Department's acquisition overhaul is unlikely to impact legacy shipbuilding programs, according to experts, who say the Navy faces an uphill battle to reform a deeply entrenched shipbuilding system that has contributed to poor performance across the portfolio.
As the service looks to improve production rates and align itself with a Pentagon acquisition framework prizing speed and competition, it is already sitting on a pile of shipbuilding management reforms that it has been unable or unwilling to adopt.
Since 2015, the Government Accountability Office has given the Navy approximately 90 recommendations aimed at improving cost and schedule outcomes across its shipbuilding portfolio. But a decade later, only about a third of these recommendations have been addressed, and lawmakers want to know why.
“The Navy is the worst offender at DOD in not implementing our recommendations,” GAO Contracting and National Security Acquisitions Director Shelby Oakley told Inside Defense, saying although the reasons behind the service’s resistance are complicated, a central factor reinforcing the shipbuilding status quo is the Pentagon-wide acquisition system itself.
Defense Secretary Pete Hegseth’s new push to reform this system, in part by accelerating processes and increasing industrial base competition, may prove especially difficult in shipbuilding where the Navy relies on a handful of companies for extremely technical, expensive and labor-intensive work.
The Navy has yet to roll out specific implementation plans for the Pentagon’s sweeping acquisition guidance. How the service goes about executing a broad and aspirational but often non-prescriptive agenda will determine the results for shipbuilding and the rest of the naval acquisition portfolio.
Though navalists are encouraged by the DOD reform memo and believe it could have a transformational effect on the Navy’s efforts to field uncrewed systems and emerging technologies, they are doubtful of its utility for traditional shipbuilding programs.
Large, complex programs already in production are effectively “grandfathered in,” said Hudson Institute analyst Bryan Clark, meaning their acquisition processes are likely to continue with little change after years of work and funding.
According to Cynthia Cook, a senior fellow at the Center for Strategic and International Studies, “the challenge of acquisition reform, now as in the past, is that leaders come in with really good ideas, but they come up against sort of acquisition reality.”
“We can focus on speed and scale and faster processes, but at the end of the day, there are certain processes you need to do,” Cook said. “You need to send out a [request for information], you need to work with industry, you need to assess the different offers. So, there are some things that are going to just always take time and the question is, what change can you get?”
When it comes to nuclear-powered submarine production, there are just two domestic prime contractors capable of doing the work. These companies, General Dynamics Electric Boat and HII, are collaboratively building the Columbia- and Virginia-class submarine programs, which are both running months behind schedule.
“How are you going to penalize the only people who do it? You don't have a third option that's going to come out and save the day for some of these large, long program industries,” said Bloomberg Intelligence defense analyst Wayne Sanders.
A call for competition
Despite the challenges, the Navy believes added industrial base competition can help lift ship delivery rates. The service is looking for opportunities to facilitate this competition, according to Jason Potter, who is performing the duties of assistant service secretary for research, development and acquisition.
“We need competition at every level, and as you go up, it gets harder,” Potter told Inside Defense last week at an American Society for Naval Engineers event. “Opening a new submarine shipbuilder and competing against our existing situation, that's a really high bar. But we're eager to inject competition where we can.”
Competition will be easiest to foster in acquisition fields where many industry players are already active, like the market for uncrewed systems, Potter said. It will be more difficult for big, complex platforms like aircraft carriers, which have a single domestic builder in HII, he added.
There is room between these two “ends of the spectrum” where the Navy hopes to promote competition, Potter said.
The service will target supply chains, where a small pool of companies -- and sometimes a sole source vendor -- are often responsible for critical subcomponents. There is also opportunity for heightened competition “at the design level or at the construction level,” he added.
According to Sanders at Bloomberg Intelligence, a recent focus on increasing collaboration with foreign shipbuilders could also add a competitive spark for smaller, less technical programs like auxiliary vessels.
Congress may include language in future authorization legislation to make it easier for foreign partners to expand their role in U.S. shipbuilding, Sanders said.
The Pentagon's 'worst offender'
Navy shipbuilding has become a victim of a system that encourages managers to secure funding and advance programs as quickly and cheaply as possible, according to GAO’s Oakley.
The result, she said, is that the Navy often overpromises and underprepares in the early stages of new programs, leading to long-term cost, schedule and platform performance problems.
Put another way, “if the goal of the program at the outset is to gain funding from Congress, the incentives look a little bit different than if it's to build the best ship possible for an accurate price and schedule,” said Laurier Fish, assistant director at GAO.
Industry leaders also see the system as an impediment that, along with chronic budgetary uncertainty, makes it difficult to do business with the government.
“The acquisition process has kind of instigated this race to the bottom, where you have contractors that ‘win’ awards, but they do it by taking on unstable margins, unanticipated cost growth,” said Shipbuilders Council of America Vice President Paula Zorensky. “By the time they get to the construction of the vessels, they are operating at that loss. Is that the best way to build Navy vessels? We don’t think so.”
Today, almost every Navy shipbuilding program is facing substantial delays including the top-priority Columbia-class ballistic missile submarine, multimission Virginia-class attack boat, workhorse Arleigh Burke-class surface combatant, power-projecting San Antonio-class amphibious warship and next-generation frigate and ocean surveillance ships.
“All of our programs are a mess, to be honest,” Navy Secretary John Phelan told lawmakers in June. “We are behind schedule and over budget. I think our best-performing one is six months late and 57% over budget.”
However, implementing the potential improvements recommended by GAO -- which include completing a vessel’s basic and functional design before a production contract is awarded and collecting detailed technical and cost information early in a program’s development to form realistic business plans -- generally require increased front-end planning and spending, meaning they run counter to the system’s incentives even if they save time and money in the long run.
“The incentive is to get your foot in the door: move forward and get your slice of the budget pie so that you can begin to move out on your program,” Oakley said. “Doing some of the recommendations that we have made would require a more measured approach and it's inconsistent in some respects with the system in which they operate.”
Program managers are competing with other weapon systems and government programs to win funding from Congress and are also encouraged to keep costs relatively low.
Spending additional time and money early in a program’s life means increasing near-term costs, potentially making the program less attractive, and delaying the point at which the program receives production funding -- a milestone that generally secures its future as a program of record.
Additionally, “information costs money and a lot of our recommendations related to cost and schedule would require the Navy to obtain different data from the contractors to be able to do the type of oversight analysis that we're talking about,” Oakley said.
For instance, in 2018, GAO advised the Navy to conduct a schedule risk analysis on its Columbia submarine program -- a process that would have required purchasing more detailed data from industry. The Navy declined, and according to Oakley, missed an opportunity to mitigate months of delay that mounted as Columbia progressed.
Years later, officials conceded that they missed their chance for comprehensive schedule risk analysis, saying that without it, they will have to deliver on schedule by any means necessary, even at the expense of other programs. Lead boat Columbia (SSBN-826) is now on pace to deliver about 17 months late.
Design standards
One of GAO’s top-ranking recommendations is to complete 100% of a vessel’s basic and functional design in a 3D model before awarding a construction contract. A common practice in commercial shipbuilding, this standard helps establish realistic cost and schedule projections, avoid inefficient design changes as the program progresses and ensure “you know to some extent what it is you’re paying for,” Oakley said.
The standard does not require every facet of the ship’s detailed design to be mapped out before construction. But it does ensure a basic layout is established -- including how mechanical, electric, fuel and water systems are routed through the vessel -- and that space, weight, power and cooling parameters are set.
“These are basic design elements, super important details,” said GAO’s Laurier Fish. “To go out and buy a ship without knowing how the jet fuel is going to be routed or stored . . . that can cause problems.”
The Navy, however, often advances programs into production with only around 80% of their design complete. In some cases, GAO has found that even this 80% is based on immature technologies unproven within the system, or that the remaining 20% is “significant and wholesale across the ship,” according to Oakley.
The service’s haste to begin construction, Oakley and Fish said, is tied to its acquisition incentives.
“When you're thinking about wanting to push forward on a program, get contracts and get the workforce flexed and beginning to be exercised, that often results in moving out on construction before you're ready,” Oakley said.
Once construction is underway, altering one design element -- for example, changing the way a pipe is routed through a ship -- can reverberate across the whole of the vessel. The result is often expensive and time-consuming re-work that could be avoided if the design was fully developed in advance.
Late design changes can also have the unintended consequence of adding weight to a vessel or eating into its space or power margins, which can undercut capabilities and limit modernization later in life.
An unsettled design and “requirements creep” also causes headaches for industry, making production increasingly difficult as the ship is continually re-designed, according to SCA President Matt Paxton.
“That makes things fundamentally complicated because you've been awarded a contract based on certain specifications and requirements, and here you are down the road, you're adding more specification requirements, and fundamentally, the design has changed, and now we're working off of a contract award for something that isn't what you’re now building,” Paxton said.
The impact extends beyond the prime shipbuilder to its suppliers, which see change orders and delays cascade down as high-level design alterations are inserted.
A prime example of what can go wrong when production begins before a stable design is established is the troubled Constellation-class frigate, which still lacks a complete design more than three years into production, and now faces potential cancelation.
The frigate is based on the Fregata Europea Multi-Missione ship used by the Italian and French navies and once shared about 85% commonality with this parent design -- a factor that the Navy used to persuade Congress to fund the program, arguing that an established parent design would lower costs and risk.
But as the program progressed, the service approved a series of alterations that reduced commonality to as little as 15%. Problems began to mount almost immediately once lead ship Constellation (FFG-62) entered construction. The ship is now projected to deliver three years late.
Though builder Fincantieri Marinette Marine has also struggled with labor shortages, GAO has cited the lack of design stability as the key factor responsible for these delays and attributed design problems to critical mismanagement by the Navy.
This year, GAO identified unanticipated weight growth on the frigate stemming from an underestimation of applying Navy requirements to a foreign ship design. This weight growth could leave the frigate “less combat-capable, limit the ability to add capabilities to address evolving threats and reduce planned service lives,” GAO warned in June.
The Navy in 2024 agreed to complete more functional design work on new shipbuilding programs prior to milestone B. However, the service has stopped short of adopting the full recommendation.
The road ahead
Lawmakers have increasingly taken notice of shipbuilding issues and looked to advance a variety of legislative proposals to both bolster the industrial base and require the Navy to follow commercial shipbuilding best practices.
The Fiscal Year 2025 National Defense Authorization Act restricts future frigate funding until 95% of the vessel’s functional design drawings have been approved. Congress is also requiring the Marine Corps’ Landing Ship Medium program to utilize a Vessel Construction manager -- a third-party contractor that can help uphold design stability and limit change orders.
Beyond the Pentagon’s new acquisition effort, the Trump administration has taken an active interest in shipbuilding, with Trump himself vowing to bolster the domestic maritime industrial base in part through an April executive order designed to complement Congress’s pending SHIPS Act legislation.
As attention on shipbuilding grows, experts say tackling longstanding issues is largely a matter of matching funding with areas of need.
“I think they just have to figure out how best to put the money in the right place, identify the biggest choke points, and work that at the DOD level to continue to chip away,” Sanders said.
The administration’s FY-26 budget request seeks substantial investment in shipbuilding and the maritime industrial base, though this funding is divided between a yet-to-be passed annual appropriation and an already-passed budget reconciliation package containing approximately $29 billion in shipbuilding support.
Contracting tools like multiyear procurement and block buys can be part of the solution by providing steady funding that encourages industry to make productivity-boosting investments and helps shield priority programs from budgetary uncertainty.
“Block buys and multiyear deals are really important in shipbuilding, because shipbuilders argue that in a relatively low-margin business, without the promise of multiple ships or years of contracts, they don't have the business case to invest in new technologies for efficiencies,” Cook at CSIS said.
According to Paxton at SCA, if industry is afforded stable design requirements and the security provided by multiship contracts, it is placed in a good position to purchase long lead time materials and invest in workforce and infrastructure, leading to improved production efficiency.
“When you have the design requirements set and you have that design maturity and do not break from it, and you build for producibility, in series construction and via multiship contracts, that’s where we can build at scale,” he said.
The Navy has used these contracting approaches for several programs in recent years. Last year, the service awarded a $5.8 billion block-buy for three amphibious warships and another $6.75 billion block-buy for John Lewis-class fleet replenishment oilers, in both cases projecting hundreds-of-millions in cost savings compared to individual awards.
Though the Pentagon’s acquisition overhaul may be ill-suited to addressing long-standing problems in the shipbuilding industry, the Trump administration's amplification of the issue has the potential to galvanize substantive action, analysts said.
“To make real change in a complex organization with multiple stakeholders and multiple ways of spending money, it has to be somebody very, very senior to get behind ideas,” Cook said.