Road to 350: What Does the US Navy Do Anyway?

[BigRed389]

Defense acquisitions is less profitable than commercial sales, but at least it makes up for it by burying you under an avalanche of bureaucracy. If that isn't enough, you too can be accused of being a "dirty profiteering contractor".

So. Much. Fun.

I don’t have an issue with any of the folks that do “real work”, whether they turn wrenches or punch in spreadsheets.

It’s the BD types, the boards or anybody else in management positions that actually do try to drive for absurd profitability that annoy the shit out of me.

I don’t hate on them for profit either, just that if they want commercial profits, they should actually behave like commercial sector companies that have to focus on value and long term horizons over short term profits.

 

[sevenhelmet]

I don’t hate on them for profit either, just that if they want commercial profits, they should actually behave like commercial sector companies that have to focus on value and long term horizons over short term profits.

We do plan long term. Projects are measured in decades, with years of at risk (read: self-funded) activity before dollar one flows from Uncle Sam.

I’m not a BD guy, but- at least for smaller defense contractors like my employer- profits in defense simply aren’t the grifting exercise many of you have been led to believe. It’s a long, painful grind to get to maybe a decimal point on the company balance sheet. Or maybe not. We get the rug pulled out from under us regularly after investing money, time, and tremendous sweat equity into a project.

Might be different for the Boeings and Lockheeds of the world, but at the little end, Defense Acq frankly sucks! Commercial has its issues, but it’s much more straightforward from a day-to-day perspective.

 

[BigRed389]

We do plan long term. Projects are measured in decades, with years of at risk (read: self-funded) activity before dollar one flows from Uncle Sam.

I’m not a BD guy, but- at least for smaller defense contractors like my employer- profits in defense simply aren’t the grifting exercise many of you have been led to believe. It’s a long, painful grind to get to maybe a decimal point on the company balance sheet. Or maybe not. We get the rug pulled out from under us regularly after investing money, time, and tremendous sweat equity into a project.

Might be different for the Boeings and Lockheeds of the world, but at the little end, Defense Acq frankly sucks! Commercial has its issues, but it’s much more straightforward from a day-to-day perspective.

I mean it’s definitely a grind. I’ve been embedded with one of the big primes and I see how hard a lot of those guys work.

And the big guys are different. They have very little motivation as a corporate culture to do any internal investment to give themselves a true strategic advantage.

Where it gets gross is when they’re expecting the government to pay for literally everything that could make them more capable (new test or manufacturing equipment, a new factory building, whatever), but then they turn around and start demanding obscene profits on top of it.

 

[sevenhelmet]

Where it gets gross is when they’re expecting the government to pay for literally everything that could make them more capable (new test or manufacturing equipment, a new factory building, whatever), but then they turn around and start demanding obscene profits on top of it.

Got an example?

 

[taxi1]

Got an example?

I don’t know about the obscene profits but the DoD ManTech programs pay the shipyards for example (Bath, EB, HII) to improve their processes, when pursuit of profit ought to be enough.

 

[sevenhelmet]

I don’t know about the obscene profits but the DoD ManTech programs pay the shipyards for example (Bath, EB, HII) to improve their processes, when pursuit of profit ought to be enough.

What’s the lead time on those investments? How many commercial ships do those facilities manufacture? Process improvement is a process mandated by… the government! Makes sense, considering prices are contracted well in advance of delivery. Imagine if shipyards could improve process and then jack up prices at will in pursuit of profit?

In the real world, DoD projects take years to decades to bear fruit (if they ever do), shareholders demand ROI within the quarter, and government insists on its own bespoke infrastructure for what amounts to small volume, high end manufacturing. Under those conditions, “pursuit of profit” often isn’t enough, especially where those profits are subject to legal limits that don’t account for the years of upfront spending.

I’m not pretending industry is without fault. I am pointing out what a huge bureaucratic nightmare it’s all become. I don’t know why anyone would want to voluntarily join this industry today.

 

[BigRed389]

What’s the lead time on those investments? How many commercial ships do those facilities manufacture? Process improvement is a process mandated by… the government! Makes sense, considering prices are contracted well in advance of delivery. Imagine if shipyards could improve process and then jack up prices at will in pursuit of profit?

In the real world, DoD projects take years to decades to bear fruit (if they ever do), shareholders demand ROI within the quarter, and government insists on its own bespoke infrastructure for what amounts to small volume, high end manufacturing. Under those conditions, “pursuit of profit” often isn’t enough, especially where those profits are subject to legal limits that don’t account for the years of upfront spending.

I’m not pretending industry is without fault. I am pointing out what a huge bureaucratic nightmare it’s all become. I don’t know why anyone would want to voluntarily join this industry today.

Shipyard process improvement is literally bringing outside industrial engineers to come in and teach the established companies and key suppliers how to industrial engineer. There is a reason we are going to Hanwha and other ROK shipbuilders to start assembly lines over here because the US shipbuilding industry isn’t actually the leading edge of manufacturing technology or processes anymore.

I also saw that Hanwha also is looking to start a factory here for artillery shells…because shocker, we kinda are only just ok at that too, with US companies literally turning away fistfuls of cash post Ukraine because they didn’t have the capacity to run all the US DOD demand.

I also won’t pretend that government bureaucracy wasn’t complicit in all this. We have organizations super focused on compliance over results, and the big companies have their own massive bureaucracy to deal with compliance bureaucracy.