Overhaul10: Navy Maintenance Realities Pt1
Introduction
In my previous post, I completed my analysis of Government Accountability Office Reports (GAO) to illustrate what they tell us about Navy ship depot maintenance. I hope that the biggest takeaway for readers was that ship lifecycle management involves constant tradeoffs among important goals like having confidence that ships will complete maintenance on time, SY capacity, ship warfighting capability, crew manning, operations, and acquisition of new ships and weapons. This isn’t actually IN the GAO reports, mind you.
Some of the biggest cost drivers for depot maintenance are made nearly permanent during acquisition. Just about everyone involved in ship acquisition and lifecycle management knows this. I note it to remind readers that the Navy can’t significantly change repair costs after a ship is delivered to the fleet. Very few people in the Navy act like they know this.
This post continues the ship depot maintenance learning journey. I start by offering my perspective on some of the rubbish propagated by people who don’t understand lifecycle management and the realities of depot maintenance. In part 2 (to be published soon), I’ll explain why a ship’s class maintenance plan must be engineered and constantly updated, and the fiscal realities of Naval ship life cycle management (acquisition, modernization, and maintenance).
Rubbish About Depot Maintenance
I don’t know if people actually believe the rubbish, but one hears it all the time. This is not an exhaustive list. It only addresses the most frequently espoused rubbish.
Maintenance contractors are getting rich off the Navy. Variations of this idea are: maintenance contractors charge too much, it’s cheaper to have Sailors do the work, the Navy can save a lot of money spent on maintenance by doing X or by doing Y again after Z was tried and didn’t work. None of these are true except “Z was tried and didn’t work.”
The big money in ship lifecycle management is in new construction and modernization, not repair. New construction shipyards set a price for building a specified number of ships, THEN they figure out how to do it for less and less money per ship (hint: deliver early). Modernization through designing and installing advanced weapons is also lucrative. There are only a few defense firms that have the expertise to do some of the space-age things the Navy values like laser weapons and pilotless helicopters.
In contrast, Navy ship maintenance isn’t nearly as remunerative. Neither is it a free market. It is a specialized market characterized by monopsony, a single buyer with very specific needs (high-performance warships are not Yugos), and oligopoly, a small number of firms capable of meeting those needs. Typically, just a handful in each of the big Navy ports. When monopsony and oligopoly exist, you have to think differently about the buyer-supplier relationship. Competition among suppliers for the lowest cost isn’t possible or desirable because Navy leaders want quality work performed on their high-performance warships by experienced craftsmen with reliable end dates.
With monopsony and oligopoly, it is in the interests of the single buyer to cultivate long-term relationships with the small number of suppliers, the ship repair contractors. The best analog is the relationship that Toyota develops with its suppliers to provide high-quality components for its cars. Unfortunately, the contracting processes that the Navy has to use make it very hard to do this. This means that the Navy isn’t able to work with ship repair organizations to improve their processes, raise quality, and lower costs unless it awards long-term contracts for many ship overhauls. Yes and the contractor has to make money.
Ship repair would be less expensive if the Navy could sign fixed price contracts for ship repair. On the contrary, fixed price maintenance, where the contractor has to determine a job’s price before opening a system or component to understand the extent of the work to be priced, would be crazy expensive. It would be costly because the contractor’s bid would have to include all the possible unknowns for every job.
A negative, but real possibility for a contractor that signs a fixed-price contract is going out of business. That might make you feel warm while wearing a dark suit (I can say no more), but imagine the disruption and delay caused by stopping work, finding a new contractor, repricing and re-starting all the jobs. You think overhauls get delayed by new work? Just wait until you have to stop all work, move the ship to another shipyard, and bring in a new maintenance provider.
If you can get a contractor to sign a fixed price ship repair contract, a contractor that doesn’t have a bankruptcy death wish, they’ll stay in business by pricing all conceivable repair contingencies and then charging big dollars for all the changes. The Navy is notoriously bad at planning overhauls so this can work for the contractor.
Ship repair costs too much. Even if repair activities aren’t “getting rich,” they still charge too much. People who operate or support Navy ships and complain about the cost of maintenance are like prospective Ferrari owners asking how much they cost to repair. If you want a low-cost boat to repair, buy a bathtub toy. There are large numbers of contract specialists and contractor officer whose full time job is arguing with the maintenance contractor about the cost of every bolt and pump impeller. They negotiate the lowest reasonable cost so you don’t have to. If the Navy has ships that are expensive to maintain, don’t blame the maintenance provider. They were designed that way.
Ship repair done by experienced, trained professionals in accordance with Navy standards is expensive. The only ways to spend less money on ship repair are:
*Do less of it (sometimes this involves ignoring it) or extend the time between repairs. Both are called deferral. Deferral strategies don’t work well for long term ship material readiness or budgets. Rust never sleeps and deferred maintenance doesn’t get cheaper, especially if a ship breaks down on deployment. That’s expensive deferred maintenance.
*Work faster (safely, of course) and finish jobs earlier. This allows the maintenance provider to remove personnel from the project faster, which lowers the overall cost. The problem is that SF is involved at the beginning, middle and end of most jobs, which tends to slow them down and increase costs. Unless you give the lead maintenance activity many overhauls, it isn’t cost effective to do plan to do them faster.
*Plan work packages better to reduce costly surprises from new work. The only time people like to be surprised is on their birthday. Maintenance surprises are always bad and usually lead to delays in subsequent work and testing. This always raises costs and is bad for the crew. There is no cure for new work surprises, but they can be reduced by planning for them in subsequent depot maintenance periods. Doing more work in future availabilities because it was new work previously will raise costs, but not by as much as when you don’t plan for it.
There is no accountability (for poor quality work, availability planning errors, delays, etc.) in ship repair. If you are worrying about who gets punished for making mistakes in depot maintenance, you are focused on the wrong thing. Planning, repairing, and testing repairs on high tech U.S. Navy ships is nearly as complicated as landing a vehicle on the moon. Even those missions fall on their sides sometimes. Most of the people who want a contractual means to flog the contractor aren’t contract management specialists, don’t manage the technical details of overhaul work (Engineering Duty officers), and couldn’t weld pipe if a pallet of welding rods dropped on their head. We don’t normally take Sailors to Captain’s Mast for making maintenance mistakes and it isn’t appropriate, most of the time, to punish maintenance providers for their mistakes either. Negligence, which can be punishable in ship repair, is very hard to prove.
It is true that shipyards or repair activities sometimes don’t do the work well or estimate it poorly. It is hard to write a contract that a company will agree to that gives the Navy the authority to “fiscally punish” the Lead Maintenance Activity for poor performance during a maintenance period. Any senior leader griping about advocating punishing repair activity personnel for their mistakes could far more productively spend their time making sure ship’s force is getting their work done and not delaying the shipyard.
Note that these statements are about issues not related to safety. Of course there needs to be accountability for lapses in safety that cause fires and flooding and kill people. There typically is.
Costs for repeat work should decrease. This is only true when the conditions are exactly the same as they were before, which is rare. Return costs (i.e., the final cost of a job on a prior availability) are affected by other work done at the same time, new work, and configuration differences between ships. Not even two ships of the same class are identical (shocker).
Lifecycle maintenance is just fixing things. This is not so. Managing the material condition of a ship over its multi-decade life includes things like updating selected records, keeping technical manuals current, and providing material and technical support for the inevitable problems that pop up over a ship’s life. The need to maintain a competent set of technical experts for this work exasperates budget planners. Why? Because it means that there isn’t a linear relationship between the number of ships in the fleet and the technical personnel needed to support them. Thus decommissioning ten percent of the fleet doesn’t render ten percent of the Navy’s technical workforce “redundant.”
Conclusion
Ship lifecycle maintenance isn’t for the faint of heart and drives budgeteers crazy. U.S. Navy warships are exceptionally capable. They are also expensive to repair and modernize. Most of the biggest repair costs are “locked in” to the design before the first hull sections are joined. This is true of every high-performance machine so it shouldn’t be a surprise. In my next post, I will explain why it is so important to keep Class Maintenance Plans up to date and the mischief that occurs when people dive into them looking for “savings.” I’ll conclude my thoughts on ship depot maintenance with what it means to face the facts of ship maintenance.
