1

Program Executive Office, Ships

1Distribution Statement A: Approved for Public Release; Distribution is unlimited

Defense Acquisition University

Business Planning and Execution:Achieving Affordability and Managing Cost

RDML Dave LewisProgram Executive Officer, Ships

March 28, 2012

2

Program Executive Office, Ships

2Distribution Statement A: Approved for Public Release; Distribution is unlimited

6 Shipbuilding PMs, plus 2 Support Offices

Team Ships OrganizationTeam Ships Organization

PMS 400DDDG51

PM: CAPT Vandroff

SHIPS ACQUISITIONMANAGEMENT OFFICE

DIRECTORB. Budd

DEPUTYDIRECTORC. Teichert

PMS 500DDG 1000

PM: CAPT Downey

DPMB. Rochon

PMS 377SSC / LCAC / LHA(R) / AADS

PM: CAPT Mercer

PMS 317LPD-1 7/ LSD(X)

PM: Vacant

PMS 325AUXILIARY SHIPS /

SMALL BOATS & CRAFTS

PM: F. McCarthey

TEAM SHIPS STAFF

PROGRAM EXECUTIVE OFFICER SHIPS

RDML DAVE LEWIS

PROGRAM EXECUTIVE OFFICER SHIPS

RDML DAVE LEWIS

SWE SUPPORT/CORROSION CONTROL

DEPUTY COMMANDER FOR SURFACE WARFARE

RDML JIM SHANNON

DEPUTY COMMANDER FOR SURFACE WARFARE

RDML JIM SHANNON

DPMC. McKay

PMS 385STRATEGIC AND THEATER

SEALIFT

PM: CAPT Stevens

DPMT. Rivers

DPMM. Lyons

DPMM. Kosar

DPMM. Deskins

SURFACE WARFAREDIRECTORATE

EXECUTIVE DIRECTOR

PMS 333INACTIVE SHIPS /SHIP TRANSFERS

PM: CAPT Pietras

PMS 470AMPHIBIOUS /AUXILIARY/MINE

PM: CAPT Gately

PMS 326INTERNATIONAL FLEET UPPORT

PM: CAPT Baumann

PMS 400F CGs / FFGs / DDG51s

PM: CAPT Eckerle

DPMS. Hale

SURFMEPP

CO: CAPT Malone

DPMB. Smith

DPMINACTIVE SHIPS

G. Clark

DPMSHIP TRANSFERS

B. Gronenberg

FLEET READINESSSEA 21A

PM: CAPT Graham

COMBATANTSOFFICE

MS. BILYANA ANDERSON (SES)EXECUTIVE DIRECTOR

PMS 320Electric Ships Office

Dir: Dr. McCoy

DEPUTYDIRECTOR

CAPT Petersen

AMPHIBIOUS & AUXILIARYSEALIFT OFFICE

MR. JAY STEFANY (SES)EXECUTIVE DIRECTOR

PMS 339SURFACE TRAINING SYSTEMS

PM: CAPT Van Durick

DPMS. Samimi

DPMM. Sermon

DPMT. Conlon

DEPUTYT. Gallagher

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Program Executive Office, Ships

3Distribution Statement A: Approved for Public Release; Distribution is unlimited

10 ACAT I Programs

PEO Ships PortfolioPEO Ships Portfolio

• 33 USN / MSC ships currently under contract or building in PEO Ships portfolio

• 79 FMS craft under construction

• 127 USN boats / craft under construction

• Within one year (Dec 10-Dec 11), 34 Navy ships procured, including options (20 LCS, 2 DDG 1000, 4 DDG 51 Flight 2 restarts, 3 MLP, 1 LPD, 2 JHSV, and 2 AGOR).

• Contract value (of all options exercised or contracted) $14.5B.

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Program Executive Office, Ships

4Distribution Statement A: Approved for Public Release; Distribution is unlimited

LATIN AMERICA GuatemalaHaitiHondurasJamaicaMexicoNicaraguaPanamaParaguay Peru

BelizeBoliviaBahamasColombiaDominican RepublicEcuadorEl Salvador

AlbaniaBotswanaCameroonDenmarkDjiboutiGambiaGabonGeorgiaGhana

Cape VerdeGuinea BissauMozambiqueRwandaSao TomeSenegalSierra LeoneTunisiaUkraine

EUROPE AND AFRICA MIDDLE EAST AND ASIA

AustraliaAzerbaijanBahrainBangladeshEgyptIraqIsraelJordanKazakhstan

Kuwait LebanonMalaysiaOman Philippines Saudi ArabiaSri LankaThailandUzbekistanYemen

International Partnership Base International Partnership Base

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Program Executive Office, Ships

5Distribution Statement A: Approved for Public Release; Distribution is unlimited

Program ACAT Program Manager Experience

SB Experience

DDG 51 ACAT 1C CAPT Mark Vandroff

Div. Officer DDG 51, CSO DDG 66. EDO, SUPSHIP Pascagoula, AEGIS Test Officer, DDG 51 Combat System Test and Trials manger, Dir. for Surface Combatants DASN Ships, LPD 17 class Post Delivery Test and Trials Director, EA to PEO Ships, LPD 17 class shipbuilding DPM.Degrees: BS Physics; MS Physics

15 Years

DDG 1000 ACAT 1C CAPT Jim Downey

Career: COMMS Officer, OPS Officer, SWO, Intel Briefing Officer, APM for Sea Integration, EDO, MSL Branch Chief & CHENG for DISA and NSA MSL, OIC of SPAWAR, CVN 21 Program Warfare Systems Director, PAPM and CHENG of CVN 21, CG(X) PM.Degrees: BS Economics, Computer Science; MS Computer Science

19 Years

LHA 6/SSC/LCAC

SLEP

ACAT 1D/ACAT 1 (TBD)

CAPT Chris

Mercer

Career: AUX Officer, COMMS Officer, MPA, Ship Repair PM at SUPSHIP Conversion and Repair- Portsmouth, EDO, Strategic Sealift Post Delivery PM Rep, HM&E Branch Head, Ship Material Condition Readiness Officer, IPS Project Officer for DD(X), SEA 05 Total Ship Power Division Officer, Production Officer- LPD 17 Class, LCS Production, Test & Post Delivery Director.Degrees: BS Marine Engineering; MS Electrical Engineering and Total Ship Systems Engineering

12 Years

LPD 17/LSD(X)

ACAT 1D/ACAT

1(TBD)Jay Stefany

Career: Project Engineer- LHD 1, Combat & C4I Manager- LHD 5-7, Combat/C4I Lead- Amphibious Warfare Programs (PMS 377), Deputy Director- LCAC program, Deputy Director- JCC(X), DASN(Ships) Dir.Naval &Commercial Construction, DPM LPD 17 Class, CBA/AoA LCC(R) Manager.Degrees: BS Mechanical Engineering; MS Management

24 Years

T-AKE / T-AGM 25 ./ T-

AGS 66 / AGOR

ACAT 1C Frank McCarthey

Career: USCG Naval Engineer, APM PC Acquisition/Construction, PAPM T-AKE program, DPM Support Ships, Boats and Craft Program Office (PMS 325). Degrees: BS Marine Engineering, MS Marine Engineering and Naval Architecture, Engineer’s Degree Ocean Engineering

22 Years

MLP/JHSV

ACAT 1C/ACAT 1D

CAPT Henry

Stevens

Career: SWO ENG, CS, OPS Officer CG 34, CHENG MHC 57. EDO PHNS and IMF Ass't Superintendent SSN Depot Maintenance Overhaul SSN 721/722, Proj.Superintendent SSN 717 DSRA, Proj. superintendent for SSN 715 ERO, SSGCLPD 17 class production officer, Dir. LPD 17 Fleet Intro, Test &Post Delivery, CoS /EA to PEO Ships, Dir. for Surface Combatants DASN Ships.Degrees: BE Civil and Environmental Engineering; MS Mechanical Engineering

13 Years

Experienced Program ManagersExperienced Program Managers

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Program Executive Office, Ships

6Distribution Statement A: Approved for Public Release; Distribution is unlimited

PEO Ships Shipbuilding Workload PEO Ships Shipbuilding Workload

Under Contract & Building

To Contract(FY 12/13)

To Deliver(FY12)

Workload By FY13

22 LCS (PEO LCS) ---- (PEO LCS) (PEO LCS)

5 DDG 51 9 DDG 51 (MYP) 1 13

3 DDG 1000 ---- ---- 3

2 Deckhouses 1 Deckhouse ---- 3

4 LPD 1 LPD 2 3

1 LHA 1 LHA 1 1

2 T-AKE ---- 2 0

10 JHSV ---- 1 9

3 MLP ---- ---- 3

2 SSC ---- 2

1 T-AGS ---- ---- 1

2 AGOR ---- ---- 2

33 Ships 14 Ships 7 40

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Program Executive Office, Ships

7Distribution Statement A: Approved for Public Release; Distribution is unlimited

PEO SHIPS

FYDP TOA $34.2B

PMS 317$2.4B

PMS 325$1.6B

PMS 377$6.7B

PMS 385$2.1B

PMS 400D$18.4B

PMS 500$2.8B

Jay Stefany

CAPT Chris Mercer

Frank McCarthey

CAPT Henry Stevens

CAPT Mark Vandroff

CAPT James Downey

DDG 51

LPD 17

LPD 17/LSD(X)DDG 1000

LHD 8 / LCAC / LHAR / AADS / SSC

LHD 8

Strategic and Theater Sealift

JHSV 1 / MLP

Auxiliary Ships / Small Boats & Crafts

T-AKE 1

Six PMSs10 ACAT I1 ACAT II3 ACAT III0 ACAT IV

24 NON-ACAT

PEO Ships Acquisition ProgramsPEO Ships Acquisition Programs

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Program Executive Office, Ships

8Distribution Statement A: Approved for Public Release; Distribution is unlimited

PEO Ships IssuesPEO Ships Issues

• Insourcing / New Hires

• Contractor Support Services Consolidation

• OSD / ATL Top Management Issues

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Program Executive Office, Ships

9Distribution Statement A: Approved for Public Release; Distribution is unlimited

Team Ships Workforce TrendsTeam Ships Workforce Trends

FY09 FY10 FY11 FY12 FY130

200

400

600

800

1000

1200

1400

1600

1800

2000

MilitaryCivilian DirectCivilian ReimbursableInsourcingContractors

• Team Ships has aggressively hired from Feb 2009 to Oct 2011

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Program Executive Office, Ships

10Distribution Statement A: Approved for Public Release; Distribution is unlimited

SEA 21 CSS Consolidation (complete)SEA 21 CSS Consolidation (complete)

Omnibus Support Contract

• In 2004 SEA 21 consolidated MIW, PMS 400F and PMS 470 support into a single Omnibus Support Contract

• In 2007 they absorbed the PMS 400C support into the Omnibus Support Contract

MIW

PMS 400F

PMS 470

PMS 400C

• On-site waterfront PMRs

• Logistics Support

• Homeport support

• MSMO support

• ST-1 support

PMS 339

PMS 333

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Program Executive Office, Ships

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Consolidated Production

Support

Consolidated Technical Support

PEO Ships CSS Consolidation (planned)PEO Ships CSS Consolidation (planned)

15ActiveCSS

Contracts

Consolidated Program & Acq. Mgmt. Support

ConsolidatedBFM Support

ConsolidatedILS Support

Front Office Contract

FY14

11

Two consolidated contracts – each awarded to a prime contractor (FY13) Technical Support

• System design, engineering and integration tasks• R&D engineering tasks• Science and technology tasks

Production Support• Production management and engineering tasks• Test and evaluation tasks• PDA and PSA tasks

S&T CSS Contract

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Program Executive Office, Ships

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OSD / ATL – Better Buying Power OSD / ATL – Better Buying Power

LCS Block Buy “The awards represent a unique and valuable opportunity to lock in the benefits of competition and provide needed ships to our Fleet in a timely and extraordinarily cost effective manner.” - Secretary of the Navy Ray Mabus

DDG 1001/1002 “This contract award demonstrates the Navy's commitment to balancing cost, capability and industrial base considerations to improve the affordability of this shipbuilding program. This is a great example of putting in place should-cost targets to meet validated warfighting requirements."- Assistant Secretary of the Navy (Research, Development and Acquisition] Sean Stackley

DDG 114-116 “These awards, including DDG 113 through DDG 116, deliver on Adm. [Gary] Roughead's determination to restart DDG 51 production, providing increased Air and Missile Defense for our future fleet and strengthening our industrial base — all the while, leveraging competition, incentivizing greater productivity and driving down costs. Firepower for the warfighter. Value for the taxpayer. PEO Ships and NAVSEA have put in place the best of practices that Secretary [Ashton] Carter has challenged the Navy to execute.”- Assistant Secretary of the Navy (Research, Development and Acquisition] Sean Stackley

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Program Executive Office, Ships

13Distribution Statement A: Approved for Public Release; Distribution is unlimited

Industry InflationIndustry Inflation

PPI, Industrial Machinery

PPI, Electromedical Apparatus

PPI, Aircraft

OSD Inflation

Navy Shipbuilding Inflation

PPI, Communications Equipment

0.50

1.00

1.50

2.00

2.50

3.00

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Inflation Comparison for Selected Industries 1990=1

PPI, Ferrous Metal Foundries

PPI, Farm Machinery & Equipment

PPI, Construction Machinery

PPI, Industrial Machinery

PPI, Railroad Rolling Stock

PPI, Ship Building and Repair

PPI, Household Appliance Mfg

PPI, Semiconductor Machinery

PPI, Motors and Generators

PPI, Electromedical Apparatus

PPI, Aircraft Engines and Engine Parts

PPI, Aerospace Products and Parts

PPI, Aircraft

OSD Inflation

Navy Shipbuilding Inflation

PPI, Communications Equipment

PPI, HH & institutional furniture & kitchen cabinet mfg

Source: BLS Historical PPI – Global Insight 2012 Q1 Forecast

Average Inflation

1991-2011

Average Inflation

2012-2022Navy Shipbuilding Inflation 3.6% 3.0%PPI, Iron & Steel Mills 3.4% 1.4%PPI, Aircraft 3.0% 2.5%PPI, Aeronautical Nautical and Navigational Instruments 2.8% 2.0%PPI, Ship and Boat Building 2.6% 2.7%PPI, Ship Building and Repair 2.6% 2.4%PPI, Railroad Rolling Stock 2.1% 1.5%OSD Inflation 2.0% 1.8%PPI, Industrial Machinery 1.6% 1.2%PPI, Motor Vehicles and Parts 0.8% 1.1%PPI, Semiconductor Equipment 0.3% -0.5%PPI, Communications Equipment -0.5% -0.9%

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Program Executive Office, Ships

14Distribution Statement A: Approved for Public Release; Distribution is unlimited

Shipbuilding: Force Structure ModelShipbuilding: Force Structure Model

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Program Executive Office, Ships

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85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

1 2 5 5 4 5 4 3 3 2 4 4 3 3 3 3 2 3 3 1 2 1 2 1 2 2 2

51 52 54 59 64 68 73 77 80 83 85 89 93 96 99 102 105 107 110 113 114 116 117 119 120 122 124

53 55 60 65 69 74 78 81 84 86 90 94 97 100 103 106 108 111 115 118 121 123 125

56 61 66 70 75 79 82 87 91 95 98 101 104 109 112

57 62 67 71 76 88 92

58 63 72

ACAT IC ACAT ID ACAT IC

61 Delivered to Fleet

BIW 1 1 3 2 2 3 3 2 1 1 2 2 1 1 2 2 1 2 2 1 1 TBD TBD TBD TBD TBD

Ingalls

1 2 3 2 2 1 1 2 1 2 2 2 2 1 1 1 1 1 1 1 TBD TBD TBD TBD TBD

FY 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

5 Under Contract

MS 0

2/80

MS I

6/81

MS II12/8

3

MS IIIA

10/86

MS IV

10/93

# of Ships

Flight I

Flight II

Flight IIA

Flight III

FY

FY02-05 MYPFY98-01 MYP FUTURE AWARD

21Flight IShips

7Flight IIShips

44Flight IIA

Ships

3Flight IIIShips

UNDERDELIVERED CONTRACT TOTAL

BIW 33 3 36Ingalls 28 2 30

UNDERDELIVERED CONTRACT TOTAL

BIW 33 3 36Ingalls 28 2 30

ACQUISITION STRATEGIES

Competition For Work 27

Negotiated Allocation 7

Competition for Profit (PRO) 8

Multi-Year (PRO) 33

Total 75

DDG 51 Class Shipbuilding Plan (PB13)DDG 51 Class Shipbuilding Plan (PB13)

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Program Executive Office, Ships

16Distribution Statement A: Approved for Public Release; Distribution is unlimited

Desired Behaviors and Outcomes: Navy and Industry Desired Behaviors and Outcomes: Navy and Industry

•NavyStable budget with stable, long-term plansOptimized production schedulesReward cost discipline Align fee with risk

• IndustryProductivity improvements through innovationCost reductionTake risks

Increases Force

Structure

Increases Profitability

Create price discipline

Making Progress But More Work To Do

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Program Executive Office, Ships

17Distribution Statement A: Approved for Public Release; Distribution is unlimited

Summary: What Has ChangedSummary: What Has Changed

Acquisition

• Focus on cost and execution performance

• Focus on long-term contracts (MYP, Block Buy)

• Focus on fixed-price type contracts

• Active Navy management of material (GFE, CFE)

• Fee aligned with risk

PEO Ships

• Insourcing

• CSS Consolidation

• Organization

“The winds and the waves are always on the side of the ablest navigators.”

- Edward Gibbon, (1737-1794)

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Program Executive Office, Ships

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Questions?