Can support for commercial shipbuilding produce cost-savings?
by Chris Hellman, Senior Research Analyst, chellman@cdi.org In December the Navy issued an interim rule which permits U.S. shipbuilders to bill the service for overhead costs associated with construction of commercial ships. The move, seen as an effort to boost commercial sales by U.S. companies, is possible because of language added to this year’s Defense Authorization Act by Senator John Warner (R-VA). Senator Warner, a senior member of the Armed Services Committee and chairman of the Seapower Subcommittee, represents Newport News Shipbuilding and the Norfolk Naval Shipyard. The new subsidy permits the Navy to pay for certain indirect costs associated with commercial work such as facilities and tools. Currently the Navy usually shares these costs with commercial yards doing government work. The hope is that by shifting these costs to the Navy the yards can be more competitive in bidding for commercial work. The payoff for the Navy will be the increasing amount of work at U.S. shipyar
