How to Save $4 Billion in a Single Afternoon

Buy Two Aircraft Carriers

The US Navy announced on 31 January it has let a contract to Huntington Ingalls Industries – Newport News Shipbuilding for two new FORD-class aircraft carriers (CVN 80 and 81), saving over $4 billion by procuring two vessels simultaneously. MON understands the contract to be valued in the region of $14.9 billion.

Today marks a great team effort to drive out cost and maximise efficiency in government procurement,” stated Secretary of the Navy Richard V Spencer. “Focusing on optimising construction activities and material procurement, the team was able to achieve significant savings as compared to individual procurement contracts. One contract for construction of the two ships will enable the shipbuilder flexibility to best employ its skilled workforce to design once and build twice for unprecedented labour reductions, while providing stability and opportunities for further efficiencies within the nuclear industrial base.”

In addition to these savings, the contract includes ship integration costs of several modifications required to meet emerging threats. These modifications include provision for the F-35C LIGHTNING II, the Mk 38 gun system and the MQ-25 STINGRAY unmanned aircraft system (UAS): they increase the lethality of the FORD-class and represent an additional $100 million in savings (in addition to the $4 billion), since these new capabilities were not included in the original single-CVN Navy estimate. Furthermore, the saving associated with new capabilities increases to $200 million if installed in the ship prior to delivery, as opposed to subsequently.

This Fixed Price Incentive (Firm Target) (FPIF) contract limits the Navy’s liability and incentivises the shipyard’s best performance. The contract guarantees a single technical baseline for both ships, allowing the shipyard to re-use engineering rollover products, minimise changes between the two ships and leverage economic order quantities for equipment and material procurement.

ENTERPRISE (CVN 80) is the third ship of the FORD-class and the numerical replacement for USS EISENHOWER (CVN 69). CVN 81, yet to be named, will be the fourth ship of the class and the numerical replacement for USS CARL VINSON (CVN 70). CVN 80 began advanced planning and initial long lead time material procurement in May 2016.

Publish date

02/05/2019

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