Navy Says No to “Low Balling”
Here is Strategypage clarifying something yours truly mentioned over the weekend, about how the Navy deliberately plays down the price of a warship program in order to sell it to Congress. This article maintains it’s the shipbuilders:
For several decades now, the navy has had growing ship construction problems, with poor quality, delays and inflated prices making it difficult to maintain the size and effectiveness of the fleet. One of the major problems is the practice of “low balling.” This is where the shipbuilder gives the navy a very low estimate of what a proposed ship is going to cost. Then, when construction is under way, costs creep up, often resulting in the ship costing more than twice the original estimate. When this practice began, after World War II, it was with the cooperation of the navy, that wanted to have an easier time convincing Congress to allow construction of new ships.
For the past decade, the navy has been saying, “no more”, while the ship builders say, “OK.” But the low balling continues. All current ship building projects over budget. The worst case is the LCS (Littoral Combat Ship), which was to be the poster boy for doing it right. Didn’t work out that way. Four years ago, when building plans for the LCS were laid out, each one was to cost $223 million. Now the estimated price is $460 million, and the navy is confident that the ultimate price will be higher. Congress is outraged, and are demanding that the admirals do something.
Makes sense that the Navy would want nothing to do with this practice anymore, since its is they who are raked over the coals in Congress when things go wrong. As far as I know the shipbuilders are not being held accountable, and even get off with “early cancellation fees” if the government changes its mind about a program.