Why is the Navy shifting away from Multi-Ship/
Multi-Option (MSMO) contracts?
DOWNEY: For our lead yards, that strategy started in
the 2014 timeframe. In the past, it was more a cost-plus type of approach on the contracting under MSMO.
That fit the requirements in those periods and there
were multiple elements involved in that contracting:
the material, the planning and the execution of the
work. Going from MSMO to where we are heading —
firm, fixed-price contracts — was one piece.
We also separated out the planning. We hired
third-party planners across the classes of ships, three different contracts. We did that on all the lessons learned
on the work that has been going on over the last decade,
to determine goals for returns on investment on our
planning products so that we’re not essentially funding
repeat planning for every availability. Part of that 2014
strategy was to start to separate the work related to the
risk to get these avails done and start to address overall
goals of the Navy related to cost effectiveness. That was
awarded and we’re about 18 months into that now.
We’ve awarded multiple ships under firm, fixed-
price for several different reasons. When you have a
cost-plus situation, appropriate in certain situations, it
sometimes has opportunity for managing less-defined
work or adding work to the packages in an easier man-
ner. From fixed-price efforts, you have to be more spe-
cific on the work you’re requesting industry to execute.
You’ve got to have that agreement firm, upfront, agreed
to and specified in the contract.
On a goal of achieving on time, on budget, a general
approach really isn’t going to get you there. So it really
does fit in with the effort that, if we’re going to change
the contract, we need a contract structure that is very
visible that things are changing, and firm, fixed-price
certainly allows that.
Another element is to give more of the tools to
industry, specify the work we want them to do and let
them move forward with that. In some regards, they
are more in control of executing the package and it’s a
bit harder to add changes to the contract. You have to
be more definitive.
Another piece was to promote competition. We have
had some significant competition in the firm, fixed-price area and we see positive trends at the end of the
prior MSMO and into today on cost performance. The
cost performance is getting better and is getting much
closer to the budget with fewer overruns. That is starting to manifest more in the firm, fixed-price results
that we’re seeing.
WWW.SEAPOWERMAGAZINE.ORG 16 SEAPOWER / NOVEMBER 2016
The guided-missile cruiser USS Cowpens sits pierside at BAE Systems Ship Repair San Diego Aug. 3 while undergoing a
Special Selected Restricted Availability. The availabilities for cruiser modernization include upgrades to the hull, mechanical and electrical systems, and combat systems suite.