Brief
A shipyard commander's job, in the Navy's own framing, is simple to state and hard to execute: get the warship back to the fleet. A naval shipyard commander describes the mandate from Navy leadership as straightforward — return warships to the fleet as quickly as possible — while noting that neither their shipyard nor many other public and private shipyards are consistently fulfilling that mission. The scale of the shortfall is documented, not anecdotal: from fiscal 2016 through fiscal 2025, the Navy's four public shipyards took longer than planned for 89 percent of the time completing depot-level maintenance on attack submarines, getting the job done on schedule only 11 percent of the time, according to a GAO report released in August 2026. Ten years of maintenance delays for these submarines have resulted in over 15,000 lost operational days and an estimated $3.4 billion in costs.
The commander's account, published on War on the Rocks, isolates a specific mechanism inside that larger delay problem: how the Navy pays for private-sector labor performed inside its own public shipyards. Because of traditionally high volumes of work, public shipyards routinely rely on private sector partners to execute substantial portions of maintenance availabilities — as of the writing, the Navy had contracted out half of an aircraft carrier availability and just over 30 percent of a submarine availability to private vendors at Norfolk Naval Shipyard. The critical distinction is where that private work happens and how it's priced. When the Navy places a ship into an availability at a private shipyard, the planning and induction process typically ends with the award of a firm-fixed-price contract — but for a variety of reasons, largely convenience, this is not the case for private-sector work at public shipyards, where those contracts are often structured as cost-plus or level-of-effort awards.
The mechanism of harm is not fraud or profiteering — it is incentive misalignment baked into contract design. Cost-plus contracting reimburses contractors for allowable costs plus a fee for profit rather than paying a fixed price, and level-of-effort contracting pays a contractor for labor hours expended on a task rather than for the finished outcome. Neither of these contracting strategies consistently aligns the private sector's economic incentives with the operational imperative of returning ships to the fleet — instead, they can reward labor consumption over timely completion. Crucially, the commander explicitly rules out the more cynical read: the concern on the deckplates is not that a contractor necessarily makes more profit when costs increase — in a typical cost-plus-fixed-fee arrangement, costs rise while the fixed fee remains constant, causing the contractor's effective fee percentage to decline. The failure mode is structural rather than venal: when cost-plus contracting is combined with level-of-effort work and poorly defined requirements, the Navy can inadvertently create incentives to maximize billable labor, encourage incremental changes, and allow schedule growth, and the contract vehicle becomes part of the shipyard's production system, with its flaws translating directly to operational delays.
The Navy has already run a version of the counterfactual, though in a different segment of the fleet. In 2015, facing the same cost-and-schedule pressure on non-nuclear surface ships maintained at private yards, NAVSEA replaced its prior cost-reimbursement approach with a firm-fixed-price structure. The Navy identified improving the quality of workmanship as a goal when it switched from MSMO to MAC-MO — the previous MSMO contracting strategy relied on cost-reimbursement contracts, which only require the government to reimburse the contractor's allowable incurred costs regardless of whether the contractor completed the work, whereas the MAC-MO strategy uses firm-fixed-price contracts that place upon the contractor maximum risk and full responsibility for all costs and performance, including meeting quality requirements. The documented result, per GAO's multi-year review, was a split verdict: cost discipline improved sharply while schedule performance did not follow. Since shifting to the Multiple Award Contract-Multi Order contracting approach for ship maintenance work in 2015, the Navy increased competition opportunities, gained flexibility to ensure quality of work, and limited cost growth, but schedule delays persisted. During this period, 21 of 41 ship maintenance periods for major repair work cost less than initially estimated, and average cost growth across the 41 availabilities was 5 percent. A retrospective account from a former surface-fleet maintenance official adds a caution the GAO numbers don't fully capture: when asked at a 2015 Fleet Maintenance Seminar what changes MAC-MO would bring, a senior officer who later commanded NAVSEA said the two things lost would be flexibility and teamwork — in retrospect, that assessment proved correct, and unfortunately they were lost at a time when they were much needed. Fixed-price discipline curbed cost growth but did not, on its own, solve the schedule problem — because schedule delay in ship repair is driven by more than contract type alone, including the underlying uncertainty of what work a ship actually needs once it is opened up, and capacity constraints that no contract vehicle can fix directly. Navy officials themselves told GAO they were unable to provide documentation of detailed analyses conducted on the feasibility and cost-effectiveness of proposed alternatives like pier-side defueling, underscoring how much of the delay problem sits upstream of contracting choices.
Key Actors (4)
Naval shipyard commander (author of the War on the Rocks account)
Describes firsthand the operational tension between the fleet-return mandate and the contract structures used for private-sector labor inside the public shipyard.
U.S. Navy / Naval Sea Systems Command (NAVSEA)
Sets contracting policy for both public-shipyard private-sector work and private-yard surface ship maintenance; executed the 2015 shift from cost-reimbursement MSMO to firm-fixed-price MAC-MO contracting for the latter.
Government Accountability Office (GAO)
Independently tracked and quantified schedule and cost outcomes under both the cost-plus MSMO model and the fixed-price MAC-MO model, and separately documented the 2016-2025 submarine maintenance delay and cost figures in its August 2026 report.
Private shipyard contractors (e.g., General Dynamics NASSCO, Huntington Ingalls Fleet Support Group, BAE Systems)
Perform private-sector maintenance labor at both public shipyards (typically under cost-plus/level-of-effort task orders) and private shipyards (typically under firm-fixed-price contracts), per current contract award records.
What Happened (5)
1Fleet-return mandate meets contracting reality
A shipyard commander's stated mission is fast fleet return, but the private-sector portion of work inside public shipyards is priced under cost-plus and level-of-effort structures that pay for labor consumed rather than the finished outcome.
Naval shipyard commander
2Incentive misalignment identified, not fraud
The commander explicitly distinguishes the mechanism from profiteering — a cost-plus-fixed-fee contractor's effective fee percentage actually declines as costs rise — locating the problem instead in combined cost-plus/level-of-effort structures paired with poorly defined requirements, which reward billable labor and tolerate schedule growth.
Naval shipyard commander
3A parallel natural experiment: MAC-MO reform
Facing similar cost-and-schedule pressure on private-yard surface ship maintenance, the Navy replaced cost-reimbursement MSMO contracts with firm-fixed-price MAC-MO contracts starting in 2015, shifting cost and performance risk onto the contractor.
NAVSEAPrivate shipyard contractors
4GAO measures the result: cost improves, schedule does not
Across 41 CNO availabilities tracked from April 2015 to April 2019, average cost growth fell to 5 percent and a majority of availabilities came in under initial estimate, but GAO found schedule delays persisted and performance varied by regional maintenance center.
Government Accountability OfficeNAVSEA
5Documented cost of the status quo compounds through 2026
GAO's August 2026 report shows the broader maintenance delay problem — spanning public shipyards where cost-plus/level-of-effort structures remain common for private-sector work — has produced an estimated $3.4 billion in support costs and over 15,000 lost operational days for attack submarines over the prior decade, with only 11 percent of maintenance periods completed on time and inactive idle time projected to worsen through 2030.
Government Accountability OfficeU.S. Navy
The claims behind this analysis, each with its verification status — including what is contested, unverified, or could not be established.
What each grade meansRisk allocation in a contract vehicle is itself a production input, not a neutral financing choice — a payment structure that reimburses inputs (labor hours, costs incurred) rather than outcomes will tend to produce more of what it pays for. — This generalizes to any procurement setting where the buyer's real objective (schedule, outcome) diverges from what the contract technically compensates (effort, cost); the limit is that fixed-price risk transfer only works when the scope of work can be defined with enough certainty upfront, which is often not true in legacy-ship repair where the true condition of the ship is unknown until it is opened up.
✓ DOCUMENTED
Shifting to fixed-price contracting reliably disciplines cost growth but does not by itself guarantee schedule performance. — The MAC-MO case is a controlled comparison within the same institution (the Navy) and the same general problem (ship maintenance cost/schedule control): fixed-price cut average cost growth to 5 percent but GAO still found persistent schedule delays, showing that contract type addresses one failure mode (cost growth) without necessarily addressing another (schedule slippage) that has separate root causes like unplanned work discovery and workforce capacity.
✓ DOCUMENTED
Aggressive risk transfer to contractors can degrade the collaborative flexibility that complex, uncertain repair work often requires. — A retrospective account from a former NAVSEA-associated maintenance official attributes lost flexibility and teamwork directly to the MAC-MO shift; this is a single named source's retrospective judgment rather than an independently replicated finding, so it should be read as a documented caution about a tradeoff rather than a settled causal law — the lesson is that risk-transfer design should be sequenced with, not substituted for, requirements definition and planning maturity.
○ REPORTED
A serving naval shipyard commander's account states the Navy has contracted out half of an aircraft carrier availability and just over 30 percent of a submarine availability to private vendors at Norfolk Naval Shipyard.
Establishes the scale of private-sector dependency inside public shipyards, which is the setting where cost-plus/level-of-effort contracting is used.
The Navy's four public shipyards completed attack submarine depot maintenance on schedule only 11 percent of the time from fiscal 2016 through fiscal 2025, per a GAO report released August 27, 2026.
Quantifies the schedule failure the contracting structure is implicated in, from an independent oversight body rather than the commander's own account.
Maintenance delays and idle time cost the Navy an estimated $3.4 billion over the decade from fiscal years 2016 to 2025, with more than 15,000 lost operational days for attack submarines, per the same GAO report.
Translates schedule failure into an operational-readiness and fiscal cost figure, corroborated across multiple independent outlets citing the same GAO report.
When Navy ships go to private shipyards for availabilities, the contract is typically firm-fixed-price; when private contractors work inside public shipyards, the contract is often cost-plus or level-of-effort, per the shipyard commander's account.
This is the precise structural distinction the case study turns on — same contractors, same type of work, different payment structure depending on venue.
The Navy's 2015 shift from cost-reimbursement (MSMO) to firm-fixed-price (MAC-MO) contracting for private-yard surface ship maintenance reduced average cost growth to 5 percent across 41 availabilities tracked by GAO through April 2019, but schedule delays persisted.
Provides a real, documented natural experiment showing fixed-price contracting's actual effect: it disciplines cost, but is not sufficient alone to fix schedule performance.
A former NAVSEA-associated official's retrospective account states that flexibility and teamwork were lost in the shift to fixed-price contracting, at a time when they were needed most.
Introduces an important caveat/tension to the fixed-price-as-cure narrative — rigid risk transfer can degrade the collaborative problem-solving that ship repair often requires. This is a single retrospective account and should be weighted as such.