Shipbuilding Contract Risk Sharing

U.S. Navy shipbuilding programs continue to face chronic cost overruns, schedule delays, and performance challenges—despite decades of studies, reforms, and well-intended oversight. In Shipbuilding Contract Risk Sharing, we argue that the root cause is not technical complexity, but a systemic misalignment of risk, incentives, and trust between the Navy and industry that has steadily eroded program performance over time.

Based on a systems dynamics assessment and deep program experience, the white paper identifies nine areas where contracting and acquisition practices have shifted disproportionate risk to industry without corresponding changes in governance or decision-making. Chief among them is the absence of a stable, functional design baseline at contract award. SMA shows how this practice—combined with fixed-price contracting, extensive design specifications, and intense government involvement—drives uncompensated changes, delayed design approvals, and predictable cost and schedule growth

The paper draws on recent Navy shipbuilding efforts—including the Constellation-class frigate, T-AGOS ocean surveillance ships, AS(X), and the Medium Landing Ship—to illustrate how design instability and risk imbalance reduce competition, inflate costs, and delay delivery before construction is fully underway. These case studies demonstrate why current detail design and construction approaches are fundamentally incompatible with the contract structures being used today.

We conclude by outlining actionable options to rebalance risk, improve outcomes, and restore trust—including establishing a contract design baseline at award, aligning contract type with design maturity, refining technical authority, and returning to proven partnership models that have delivered successful ships on time and on budget.

Download the full white paper to explore the analysis, evidence, and practical recommendations shaping the future of U.S. Navy shipbuilding:

Shipbuilding Contract Risk Sharing (0 downloads )