NATIONAL HARBOR, Md. — The director of the Office of Management and Budget closed out the Navy’s largest trade show with a sharp warning to shipbuilders: Deliver on time and budget, or else the Trump administration will go elsewhere.
“If we cannot get the ships we need from traditional sources at cost and on time, we will get them from other shipyards,” Russ Vought said during a speech closing out the Sea Air Space conference.
Throughout the speech’s brisk 15-minute runtime, Vought railed against the industrial base for yearslong delays on shipbuilding programs, which he contended have padded out companies’ backlogs while costing the government money.
“Over the past year, industry has alternatively pushed back on this point in meetings with the government, in which they emphasize it as being addressed, while then also highlighting backlogs during their quarterly earnings calls, when they discuss as if they were company assets on the books, instead of indicators of an inability to deliver products to the customer on time,” he said.
“Backlogs are leading to a fleet-wide operational death spiral,” he added. “From our perspective, long backlogs are to us, within OMB, key indicators of corporate underperformance.”
OMB is tracking one- to five- year backlogs across six ship classes, including destroyers, amphibious ships, submarines and aircraft carriers, Vought said. Those backlogs “come with a cost” regardless of whether a shipbuilding contract is structured as a firm-fixed price deal or cost-plus award, as both agreements permit shipbuilders to invoice the Navy for cost-to-complete bills.
“Taken together, these cost-to-complete bills can now toll to more than we are actually paying for high end individual battle force ships,” he said. “Additionally, these cost to complete bills also are coming from shipbuilders who are increasingly requesting additional capital investments from the government to modernize their yards.”
Vought, who served as OMB director during Trump’s first administration, said he previously believed that shipbuilders simply needed more money and a stronger demand signal to make improvements to production.
“I no longer believe that, because if you look back over the last administration, Congress provided sustained resources for shipbuilding, but productivity went down, not up,” he said.
The OMB director also took aim at the shipbuilding industry over employee pay, with Vought stating that the administration takes a “dim view” of the fact that wages for shipyard workers now hover around the local average, rather than three to four times more, as was the historical average.
“Let me be clear, President Trump believes that blue collar jobs not only strengthen the US economically and in terms of national defense, he also believes that tradesmen and craftsmen and the work and culture they bring strengthens our character,” he said. “Work is identity, and identity is work.”
The US shipbuilding industrial base has weathered continued capacity constraints, as well as difficulties hiring and retaining skilled workers at shipyards. Concerns about industry’s ability to produce the 19 warships requested by the Navy in the fiscal 2027 budget have led the service to consider alternatives such as foreign shipbuilders.
During a gaggle with reporters on Tuesday, Navy Secretary John Phelan said the service is “tak[ing] a hard look” at the prospect of using foreign shipbuilders to construct ship modules.
“I would say everything’s on the table,” he said. “We just need to look at it, understand it, understand the implications behind it, and decide if we think that makes sense or not.”
Diana Stancy contributed to this report.
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