The ChallengeThe affordability of ships is a key concern of the Navy if it is to be successful in its plan to recapitalize the fleet. The Virginia-class submarine program, which delivered its first ship in 2004, had a target unit cost of $2 billion per submarine as a condition for increasing production from one to two boats per year starting in 2012—a cost reduction of nearly 20 percent per submarine.
Complicating the drive for cost reduction was the new joint production arrangement for building these submarines, between General Dynamics Electric Boat Corporation and Northrop Grumman Shipbuilding.
Electric Boat engaged Booz Allen Hamilton to develop a long-term plan to permanently reduce the cost of each submarine. Working with program executives from Electric Boat and the Navy, we developed a unique approach to Design for Affordability, called ISSR, for Inherent, Structural, Systemic, Realized, which leveraged our experience across numerous industries to address inherent and structural program costs in such areas as design, cycle time, acquisition and sourcing, organizational structure, and labor efficiency.
Booz Allen consultants worked collaboratively with more than 200 people on joint teams from all three stakeholders to implement ISSR. The teams created more than 40 broad initiatives, including more than 250 practical ideas to improve design, scheduling, production, testing, and other targeted areas, to drive out unnecessary costs. We also helped Electric Boat create a stronger suppler model built on joint cooperation with valued suppliers.
These changes reduced total program acquisition costs by $3.8 billion and enabled the Navy to accelerate its plan to double production to two submarines a year, saving taxpayers' money and boosting national security. The processes and initiatives that arose from ISSR now are being used in other shipbuilding and weapons systems programs, to help them meet their cost targets.
Download a PDF version of the case study entitled, "Design for Affordability."
Meet Mike Jones, the Booz Allen senior vice president who led this client assignment.
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