Does the US Navy need a lesson from its own history? Cancellation of the second General Dynamics Littoral Combat Ship (LCS-4) on November 1st points up a problem that has plagued innovative American military technology development programs since the 1950s. The ship was cancelled because of "cost overruns." The original estimated cost per LCS was $220 million, but it kept rising as the first General Dynamics ship, the USS Independence (LCS-2), began construction. In response, the Navy tried to get General Dynamics to change the contract from "cost plus" to "fixed cost."
In a "cost plus" contract, the Navy pays whatever the ship costs, plus a profit to the builder, while a "fixed cost" contract has the Navy pay a set amount, and any the cost over that has to be eaten by the builder. General Dynamics refused. Meanwhile the rose to $350 million, and kept going; When it hit $375 million the Navy pulled the plug. Why did the costs rise? Well, one reason is that the General Dynamics design is pretty innovative. Among other things, it's an aluminum trimaran, a three-hulled vessel with a whole lot of new ideas and technologies. But that's only part of the problem.
The main problem with the LCS, and with most post-1950s innovations in military equipment, is that the military keeps changing the specs. Even small changes may have "cascading" effects, as existing plans have to be changed. In some cases completed work may have to be modified or even ripped out, to accommodate the new idea. Sometimes changes follow on changes, and work may have to be redone several times, to insure that the latest nifty innovations are included in the ship. Naturally this costs money, in labor and materials, and also takes time, so that the ship is delivered later than planned.
There's a simple solution to this problem, one that worked very well during World War II, when the Navy was buying ships in huge lots. It was simply this; no new idea gets put into a vessel already under construction. During World War II the Navy determined that it was easier to complete a ship, even an aircraft carrier, to the original design, rather than interrupt work to allow changes. Once completed to the original design, a ship could be sent to a shipyard for the modifications needed to adapt it to the new, improved design (unless she was desperately needed with the fleet, and then her "boring old design" was probably perfectly suited to the mission anyway). Experience proved that doing things this way took less time and less money than trying to introduce modifications during construction. After the war, unfortunately, this intelligent approach was quickly forgotten.