As global threats emerge and competition intensifies, the stakes are higher than ever to retain global dominance in U.S. government shipbuilding. From safeguarding our shores to securing global trade routes, U.S. government shipbuilding has been the backbone of national defense and economic strength for generations. However, with years of budget cuts and operational setbacks, America’s naval fleet is at a crossroads. The government either continues down a path of diminishing global influence or we rethink our approach and accelerate the pace of building the next generation of ships. The future of American maritime strength is at stake.
In this blog, we’ll dive into the rich history of U.S. Government shipbuilding from the key achievements of the early 20th century, the challenges we faced as a nation, where we are today, and the opportunities ahead. We’ll explore the introduction of vessel construction management and how it is streamlining shipbuilding, promising new standards for affordability, and improving vessel delivery timelines. A strong and robust government fleet is critical for the prosperity of our great nation. Now it’s time to take decisive action by embracing collaborative solutions and ensuring our US. fleets are prepared for the challenges ahead.
In the first half of the 20th century, U.S. Government shipbuilding was known for its innovation and growth. During this time, vessels such as clipper ships and the Great White Fleet were planned, constructed, and delivered. World War II also brought U.S. shipbuilding to the forefront as the country produced thousands of warships, aircraft carriers, and submarines. The focus was building the U.S. as the world power on the water, and at that time, our military strength was unmatched worldwide.
Not only was the fleet robust, but advances in maritime vessel construction were at an all-time high. The technologies introduced included new propulsion systems, nuclear-powered submarines, and vessels with state-of-the-art weaponry. This allowed our growing fleet to protect the nation and the evolution of “national defense” across the globe.
Not only was the U.S. a powerhouse in government shipbuilding, but commercial shipbuilding was also at its peak with the shipbuilding sector's capabilities growing and exceeding those of our global counterparts. The U.S. remained unmatched on the water for decades.
Following many years of growth and global dominance, the U.S. saw a steady decline in government shipbuilding. In the 1970s, 80s, and 90s, funds were cut and government shipyards began to focus on complex and specialized, high-cost vessels. The U.S. government was no longer producing the Navy combat vessels and auxiliaries, Coast Guard ships, inland fleets, and commercial ships that rounded out our fleet. Overall shipbuilding production had fallen to historic lows largely because of the decline in commercial production. Shipyards, once the backbone of flourishing communities, now faced a myriad of challenges—from talent gaps to outdated operating models—that threaten their ability to grow and thrive. This shift not only meant the U.S. was unable to maintain the quantity and diversity of vessels needed for a balanced portfolio, but it would also be difficult to respond to an economic or security crisis. Since the 1950s, U.S. shipbuilding output had decreased by more than 85%, and the number of American shipyards capable of building large vessels fell by more than 80%.
As the decline continued in the U.S., global competition in government shipbuilding emerged. China specifically began to increase its fleet and capabilities for both government and commercial ships at a rapid rate. As we headed toward the 21st century, China was not only building the world's largest commercial fleet, but they also had a stronghold on the global marketplace. With over 7,000 ocean going vessels and 1,700 on order in 2023, China was ahead of the U.S. which had less than 200 ships ready and 5 on order, and were producing them at a much lower cost by utilizing commercial shipyards. China, Japan, and South Korea now combine for more than 90 percent of global commercial shipbuilding.
Due to insufficient resources and ineffective management, U.S. Government shipyards struggled to keep pace with the growing demands of the industry. By the early 2000s, this lack of capacity left the U.S. unable to maintain its status as a global shipbuilding powerhouse.
The current and persistent challenge facing the Department of Defense is its ability to design and deliver timely, affordable new ships that perform as expected. This is primarily due to the siloing of government and commercial shipyards. While globally shipyards overlay both government and commercial contracts, U.S. shipyards remain specialized in one or the other. This leads to a variety of shipbuilding and management processes and standards without the ability to share the most efficient commercial practices across the industry. Many of the tools, processes, and methodologies used in government shipyards are not as sophisticated as those in commercial shipyards nor shipyards around the world.
In addition, there are a limited number of shipyards that bid on government contracts because they are often very complex–sometimes more complex than the mission requires. The increased difficulty and risk of these projects drive up the price tag and deter commercial shipyards from entering the market. This leaves the government with a limited number of qualified suppliers, and a less competitive industry, which ultimately leads to a slower construction process, longer delivery times, and complex maintenance issues at a higher price tag.
All that said, the demand for government shipbuilding has increased exponentially. The U.S. Navy, the industry’s principal customer, has increased its shipbuilding budget by 12.5% per year from fiscal year 2020 to fiscal year 2024. Its most recent 30-year plan calls for the construction of 290 to 340 new ships by 2053. Beyond this domestic demand, there is additional demand to meet the anticipated needs of the AUKUS nuclear submarine partnership among the Australian, US, and UK defense agencies.
To improve our global position, and meet the demand to build vessels needed for our economic and national security, it is critical the U.S. Government embraces commercial best practices. Commercial shipyards have the expertise and efficiency to build non-combatant vessels. But, they don’t have the overhead and processes in place to meet and manage all of the government’s onerous requirements.
Below are a number of benefits commercial shipyards would bring to U.S. Government shipbuilding.
Shifting government projects to commercial shipyards can be facilitated by the expertise of a vessel construction management company. With expertise in both commercial and government shipbuilding, a VCM oversees the design, construction, and commissioning of marine vessels. They also ensure vessels meet safety, regulatory, and performance standards. They do so by coordinating between engineers, shipbuilders, and regulatory authorities to ensure cost-effective and on-time vessel delivery.
Let’s take a closer look at the key functions of a vessel construction management company and the benefits of contracting a VCM for a government project.
A vessel construction management company:
In addition to the above, partnering with a vessel management company offers numerous advantages, including:
Let’s consider the current success of the NSMV program as an example of how a VCM can support government vessel construction. In 2019, VCM services were awarded to TOTE Services by MARAD for its new training ship project, five National Security Multi-Mission Vessels. Despite COVID supply chain disruptions across the transportation industry, 41 months after the Philly Shipyard selection, the first vessel was delivered on time and on budget. This was the fastest delivery time for a government vessel across all Navy shipyards.
We are four years into the NSMV contract, and TOTE Services has managed to limit contract changes. The total program cost increased only through government-directed change related to new equipment selection. The NSMV project growth has also been limited to 0.4%, which is unprecedented in U.S. Government shipbuilding. This matches our performance with our Marlin Class containership program. Those two ships were delivered ahead of their contract delivery dates and within 0.3% of contract cost. TOTE Services’ cost performance is two orders of magnitude better than many of the lead ships reviewed by the GAO. In both the NSMV and Marlin programs, the vessels left the shipyard ready for operations within one week of delivery.
Elaine Chao, the United States Secretary of Transportation, emphasized the significance of this new era in government shipbuilding, which leverages commercial shipyards and vessel construction management. Reflecting on the progress and budgetary success of the National Security Multi-Mission Vessel (NSMV) program, she states, “The arrival of this vessel, the first of five cutting-edge National Security Multi-Mission Vessels, heralds a new era not just for the U.S. Merchant Marine, but potentially for procurement processes across the government. Shipbuilding is expensive, especially when the government is the one doing it on a time-and-labor basis. I insisted we employ fixed price contracting with private shipbuilders where cost overruns fall upon the manufacturers, not the taxpayer. This model, the norm in commercial shipbuilding, forces accountability to a strict budget cap. The final contract price was $320 million, which is a fraction of the $750 million-to-$1.2 billion price tag we would have faced had we used the Navy’s shipbuilding program.”
The U.S. Government has a significant opportunity to regain its leadership in global shipbuilding by embracing collaboration with commercial shipyards and vessel construction management companies. This model should also be considered for future government non-combat shipbuilding programs such as tankers, roll on roll off vessels for sealift, Missile Defense Agency replacement vessels, Military Sealift Command auxiliaries, Navy hospital ships, dredges, cable laying ships, and more. The success of programs like NSMV demonstrates the potential of this approach to benefit all parties.
Government shipbuilding goes beyond producing vessels—it's about protecting our national interests. If the U.S. Government continues forward movement in this new era of shipbuilding, not only will we restore our fleet and regain our leadership across the globe, but also revitalize the U.S. maritime industry, ensure long-term economic prosperity, and safeguard our great nation. Now is the time to fully commit to innovative, cost-effective solutions that will shape the future of U.S. Government shipbuilding
