Outsourcing Options to Finance Navy Recapitalization
Brooks, Chad M.
White, Edward J., Jr.
Moore, David E.
Jones, Lawrence R.
Summers, Donald E.
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Navy leadership is searching for ways to finance urgent fleet recapitalization despite severely limited resources. This study exposes the enormity of the recapitalization challenge using budget forecasting and ratio analysis to frame potential trade-offs among major Navy appropriations that would achieve programmed procurement targets. We illustrate the organizational and operational challenges associated with even small tradeoffs and also examine the increasingly common practice of competitive sourcing using private-sector risk criteria popularized in business literature. Our research suggests that current recapitalization goals are financially untenable without significant Defense restructuring. We show with a Marine Corps rescission example that implementing the trade-offs suggested by our analysis would challenge the very way DoD does business. However, we find that the early success of Sea Enterprise in identifying business efficiencies offers the best promise for success. We caution that competitive sourcing must not be purely cost-driven but rather a strategic approach to managing risk. We offer perspectives and considerations beyond the outsourcing roadmap currently provided by OMB Circular A-76. This study is intended for Navy leaders and other stakeholders who are evaluating the factors constraining fleet re-capitalization, considering the practical ramifications of looming financing decisions, and weighing the strategic and operational risks of competitive sourcing.
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