Using the Steel-Vessel Material-Cost Index to Mitigate Shipbuilder Risk

RAND Corporation Technical Report should be of interest to persons involved with Navy and U.S. Department of Defense (DoD) weapon-system acquisition issues.

This product, written by Edward G. Keating, Robert Murphy, John F. Schank and John Birkler, is part of the RAND Corporation technical report series. The U.S. Navy is in the initial production stages of the Littoral Combat Ship (LCS) program. LCS is designed to operate in littorals where many of the Navy's traditional ships cannot function. The Navy selected a team led by Lockheed Martin to construct two of these ships and another team led by General Dynamics to construct two others.

Reports of cost escalation in construction of these vessels led the Navy to ask the RAND Corporation to examine possible sources of material cost escalation, i.e., cost escalation in all elements of ship-construction costs except prime contractor and shipyard labor, overhead, and profits. The authors discussed what was learned about LCS material costs. That report contains competition-sensitive, proprietary information and therefore has distribution limited to appropriate government audiences.

This publicly released technical report, by contrast, discusses more general issues related to Navy material cost indexes that we encountered in the course of the LCS project. However, this report is not about the LCS per se; its focus is much broader. This report should be of interest to persons involved with Navy and U.S. Department of Defense (DoD) weapon-system acquisition issues.

This research was sponsored by the U.S. Navy and conducted within the Acquisition and Technology Policy Center of the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

To read the report, click HERE.

RAND Reports may include research findings on a specific topic that is limited in scope; present discussions of the methodology employed in research; provide literature reviews, survey instruments, modeling exercises, guidelines for practitioners and research professionals, and supporting documentation; or deliver preliminary findings. All RAND reports undergo rigorous peer review to ensure that they meet high standards for research quality and objectivity.
The research described in this report was prepared for the United States Navy. The research
was conducted in the RAND National Defense Research Institute, a federally funded
research and development center sponsored by the Office of the Secretary of Defense, the
Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine
Corps, the defense agencies, and the defense Intelligence Community under Contract
W74V8H-06-C-0002.

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