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OM in the News: The Navy’s Learning Curve Problem

August 21, 2018

Huntington Ingalls., the sole U.S. builder of aircraft carriers, continues to fall short of the Navy’s demand to cut labor expenses to stay within an $11.39 billion cost cap mandated by Congress on the second in a new class of warships, reports Industry Week (Aug. 17, 2018). With about 47% of construction complete on the USS John F. Kennedy, the Navy figures show the contractor isn’t yet meeting the goal it negotiated with the service: reducing labor hours by 18% from the first carrier, the USS Gerald Ford, which at $13 billion has become the costliest warship ever. They’re the first two of a planned, 4-vessel, $55 billion program.

USS Gerald R. Ford at Newport News Shipyard

It took about 49 million hours of labor to build the Ford. The Navy’s goal for the Kennedy is to reduce that to about 40 million hours. Huntington Ingalls’s performance “remains stable at approximately 16%” less, said spokesman for the Navy. “Key production milestones and the ship’s preliminary acceptance date remain on track” and there are “ample opportunities for improvement with nearly 4 years until contract delivery and over 70% of assembly work remaining on the vessel.” Navy officials have cited what they describe as progress on the Kennedy as one justification for buying the 3rd and 4th Ford-class carriers under a single contract.

The Navy assesses that, although difficult, the shipbuilder can still attain the 18% reduction goal, said a spokesman. The Navy Secretary, who’s been closely monitoring the carrier program, said that Huntington Ingalls has been on “an impressive learning curve” in reducing labor costs. But a director with the GAO, who monitors Navy shipbuilding, said “with so much of the program underway, it is unlikely that the Navy will regain efficiency. In later phases of a shipbuilding contract, performance typically degrades, not improves.”

Classroom discussion questions:

  1. Why are learning curves so important in ship construction?
  2. What learning curve is the goal? What is the current rate?

 

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