HII Sees Two Carrier Buy Saving $1.6 Billion Before GFE

National Harbor, Md. -- The president of Huntington Ingalls Industries’ [HII] Newport News Shipbuilding (NNS) said the company sees a two-carrier purchase of the next Gerald R. Ford-class carriers as saving upwards of $1.6 billion over buying them, separately.

Jennifer Boykin, executive vice president of HII and president NNS, told reports here during the Navy League’s annual Sea Air Space expo that these savings are based on labor efficiency, not repeating engineering and planning for two hulls, creating material economic order quantity for the thousands of carrier suppliers, and pushing the ship centers closer together.

The future USS Gerald R. Ford (CVN 78) arrives at Naval Station Norfolk in Virginia on April 14, 2017, after returning from builder's sea trials. (Photo by U.S. Navy)

The future USS Gerald R. Ford (CVN 78) arrives at Naval Station Norfolk in Virginia on April 14, 2017, after returning from builder's sea trials. (Photo by U.S. Navy)

Last month the U.S. Navy released a Request for Proposals (RFP) to Newport News Shipbuilding to help define possible cost savings when purchasing CVN-80 and 81 as a single two-ship buy. The service was working with the contractor for months before releasing the RFP (Defense Daily, March 19).

Assistant Secretary of the Navy for research, development and acquisition (RDA) James Geurts told the House Armed Services Committee last month the Navy is studying the utility of this purchase. Previous Nimitz-class two-carrier purchases from the 1980s involved ships that were made 1.5 and 2.5 years apart, compared to today with ship centers at four to five years apart (Defense Daily, March 7).

Boykin said HII’s discussions with the Navy also involve pushing the centers closer together, between 3.5 to four years apart.

Even though the ship centers will not be as close together as in previous multi-carrier buys, Boykin said, “if we move the centers closer, the labor valley closes.”

The labor valley is the pace of hiring workers to build a ship, letting some go as construction ends, then ramping up recruitment again when the next ship is built. Under a two-carrier buy, that dip in workers is considerably smaller or nonexistent.  

The efficiencies and savings come from labor efficiencies as HII closes the workforce valley, the HII engineering team producing just one technical baseline for both hulls, HII’s planning organization producing one build plan for both hulls, the value of time and money saved itself, and “the last component is when you buy any quantity through the supply base, when we buy the material, all the suppliers are able to give a better price when they’re selling you two by selling you one,” Boykin said.

“So it’s really labor efficiency in both production and engineering and planning, the value of money, and the material economic order quantity are the components that lead to the savings when you buy two and they’re on closer centers,” she added.

Boykin noted while some material is long lead construction and will be bought earlier, the suppliers have been paying attention to this two-carrier possibility. However, she said they still need a clear signal and “they’re all interested.”

Boykin added the company is working on the RFP now and hopes to respond in the spring.

Geurts told the House committee historically this kind of two-carrier purchase led to savings on the order of 10 percent and in this case could range from $1 billion to $2.5 billion.

Boykin said Geurts was referring to whole program savings, including government furnished equipment (GFE) while HII only looks at the shipbuilders’ component. She underscored the $1.6 billion in savings would be based on both the multiple order buy and moving the ship centers closer together.

Boykin was unwilling to disclose the top long costing lead items in a carrier hull, but acknowledged they are propulsion/engine components.

Separately, Boykin said the company is hiring new personnel at a pace of 400 people per month to raise the total workforce, including covering attrition. Ingalls Shipbuilding’s workforce currently sits at about 22,000 people and the growth period is set to last until August with a peak of 23,000 people. After August, HII will move back to hiring lower numbers, mostly to cover attrition and retirements.

The company expects the workforce level to maintain at or over 23,000 people for a decade, never reaching over 25,000 workers. This workforce is needed to build the new Columbia-class ballistic missile submarines as well as continuing  Arleigh Burke-class DDG-51 destroyers and  Ford-class carriers.

The executive reiterated Huntington Ingalls sees no immediate issue with the Trump Administration’s new steel tariffs. Boykin said HII only buys U.S. steel, largely on long term contracts, but acknowledged the industrial supplier base is looking at the issue closely and assessing tariff effects.

Boykin estimated HII’s steel hedge of long-lead purchases lasts about four years, so it may take them almost that long to feel any serous effects from the tariffs.





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