On July 31 the USS Missouri, seventh vessel in the Virginia class of nuclear-powered attack submarines, was commissioned at the naval submarine base in Connecticut. A crowd of 3,000 people attended the ceremony, including defense secretary Robert Gates and his wife Becky, House Armed Services Committee chairman Ike Skelton (from Missouri), and House Seapower Subcommittee chairman Gene Taylor. The Virginia class combines stealth, versatility and endurance in a warfighting system that assures U.S. access to all the world’s oceans and littoral regions for at least the next 30 years.
The reason you didn’t hear about any of this from your favorite news outlets is because there weren’t any problems in building the Missouri. The procurement of major weapons systems is often accompanied by news coverage revealing cost overruns and delays, but Missouri was delivered to the Navy eight percent below its target price and nine months early. Unfortunately, the national media usually don’t find stories of military success as interesting as stories of failure. Nonetheless, there may be important lessons in the Missouri story about what defense acquisition could accomplish if everyone were as good at buying weapons as the undersea warfare community seems to be.
The Virginia class of submarines is one of the great success stories of military procurement in modern times. Since the lead vessel began construction in the late 1990s, each successive vessel has taken less time and money to build than the one that preceded it. The first two subs took an average of 15 million man-hours to complete. The next two took about 13 million. The next two took 11 million. And now the latest vessel in the class has clocked in at 10 million man-hours — a one-third reduction from the effort required to build the two lead ships.
What’s especially striking about this track record is that it was achieved with no real competition between the top contractors. General Dynamics and Northrop Grumman — the only two companies in the Western Hemisphere competent to build such vessels — divided up the work and concentrated on being excellent at the parts they were responsible for rather than trying to steal business from each other. The Navy customer fashioned a structure of incentives for the two shipbuilders that in effect rewarded them for continuously surpassing their past performance. That approach has worked very well.
Three key features of the Navy’s acquisition strategy help explain why the Virginia class has been so successful. First, the Navy sought multiyear funding of several subs at a time, so that contractors could plan ahead and take costs out of their processes. Second, contractors were rewarded for gradually reducing the production inputs and schedule time required to build each sub, which resulted in the length of each construction cycle shrinking from 84 months at the beginning of the program to 65 months today — and 60 months in the future. Third, the Virginia class was designed from its inception to facilitate future cost reductions, even as capabilities were being enhanced in each successive vessel.
Among the numerous lessons to be gleaned from this innovative approach to defense acquisition, one of the most interesting is the finding that the government doesn’t need to have competing suppliers to achieve continuous gains in contractor productivity. If you travel a few miles down the road from GD’s Electric Boat shipyard in Groton to the Pratt & Whitney jet engine plant near Hartford, you find another high-tech company whose business is being hurt by the insistence of some congressmen that the only way to maximize contractor performance is to subsidize competition between two sources — in this case, for fighter engines. However, the Virginia class experience proves a smart government customer can get very good results without paying for dual production lines and maintenance systems. It turns out people respond to rewards whether they are locked in competition or collaborating in teams, as long as the customer has fashioned a sound structure of incentives.
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