Globalization of Navy shipbuilding: a key to affordability for a new maritime strategy

Naval War College Review, Autumn, 2007 by Robert J. White

In 1992 the Commerce Department studied subcontracting in three Navy weapons systems: the Mark 48 Advanced Capability (ADCAP) Torpedo, the AGM-88 High-Speed Anti-Radiation (HARM) Missile, and the VLF Digital Information Network (VERDIN) communications system. It found that 13 percent of subcontracting went to foreign firms. (44) A 2006 Defense study found that 2 percent of all weapons system procurement went to foreign prime contractors. In fact, a detailed analysis of twelve weapons systems, including the Patriot Advanced Capability (PAC3) Missile, the Predator unmanned aerial vehicle, and the Tactical Tomahawk Missile, indicated that 10 percent of subcontracts went to foreign vendors. (45) In contrast, only 4 percent of the material purchased by military shipbuilders is of foreign origin. (46)

A Quick Calculation: Global Warship Production

Global warship production would allow the Navy to combine the advantages of heavy manufacturing in foreign shipyards and systems integration in the U.S. defense industry. (47) Assume that the cost of a domestically manufactured warship without its combat system is $200 million. Since, as evidence suggests, high-tech combat systems account for roughly one-third the total cost of a ship, completing the vessel adds $100 million, for a total of $300 million. (48) But a South Korean yard could build the same ship, less its combat system, for $67 million. Add back in the U.S.-built combat system, and the total outlay is $167 million--the globally manufactured warship is just over half as expensive as the domestically produced vessel. Granted, this is an oversimplified comparison; for instance, the additional outfitting costs of integrating the hull with the combat system would be substantial. Yet there is plenty of room to pay for outfitting at a domestic shipyard, as well as for "unknowns" like requirements growth, and still save money.

A THOUSAND-SHIPYARD NAVY

Like all new initiatives, global production of warships is not without risk. First, ownership of resources means that shipyards are available when needed; reliance on foreign yards weakens this guaranteed availability. Whatever the financial incentives of foreign industry to deliver, politics creates a whole different calculus for foreign governments. But this risk can be "bought down," by spreading it across multiple international partners--a "thousand-shipyard Navy." The vision is illuminating. It connotes a network of international partners, information sharing, and interoperability like that underlying the "thousand-ship Navy." Friends, allies, and partners find ways of working together. A recent case involving the delivery of a German-built MEKO-type frigate to Australia illustrates this flexibility: the German government refused to send the vessel directly to the Persian Gulf, because of policy disputes over Iraq, but it was more than willing to allow delivery in Australia itself. (49)

Domestic resistance can easily be envisioned as well. Congress, industry, and unions are certainly stakeholders and must be included in the strategy development process. Objections to foreign sourcing are well known. They revolve around loss of jobs, industrial facilities, and, consequently, political clout.