Navy needs to consider 'ownership' costs, yard official says.

• Author: Jean, Grace V.
• Position: Navy

For every dollar the Navy spends on buying a new ship, it pays an average of two dollars to operate and maintain the vessel throughout its 35-year service life.

Those resulting "life cycle costs" are breaking the bank, say Navy officials.

At the root lies a perennial problem: officials who acquire naval weapon systems usually do not collaborate much, if at all, with those who service the platform during its lifecycle. When they buy a ship, they do so without giving much consideration to how much the service will have to pay to keep it running.

Shipbuilders say that bridging that disconnect could eliminate the problem and help them design better ships that ultimately require less maintenance down the road.

"We haven't cracked the code on that one, but we're working it," said Kevin Graney, vice president of programs at General Dynamics NASSCO in San Diego.

The Navy in recent years has been grappling with how to fix the total ownership cost problem. It is caught between a rock and hard place because the way it encourages competition in an acquisition program is to close off dialogue with the shipyards. That means the shipbuilder is often left with making crucial choices about subsystems and components.

"A lot of those decisions made by the shipbuilder may not be the right decisions, but because they can't communicate with the government customer during the competition phase, it becomes embedded in the design and is very difficult to reverse in later stages," said Graney.

He proposed that government officials follow what's done in the commercial sector, where owners and operators are picky about selecting equipment and subsystems that have proven their longevity and reliability. They are willing to foot higher up-front costs for those technologies with the knowledge that they will reap savings in the long term.

"He can be very specific about what it is he wants in that ship," said Graney. "The reason he does that is because he knows he's going to operate the ship for 30 years, and he knows that the brand-x diesel engine that he wants is going to stand the test of time. It's going to be a low-maintenance engine. It's going to be high quality. So he goes out and specifies that very early on in the process."

The government, however, tends to leave that critical decision up to the shipbuilder, who is motivated by profit. "I'll provide you the best engine you can afford, but it may not be the best choice for you long term. It may break down; it may...