Rick Scott Asks Experts About 'Repercussions' For Firms That Underdeliver On Shipbuilding Contracts

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During a Senate Armed Services Committee hearing prior to the congressional recess, Sen. Rick Scott (R-FL) spoke about private firms that underdeliver on DoD contracts.

Transcript

00:00So first off, thanks to each of you for your answers. Mr. Sherman, so you you run

00:06the Maritime Industrial Base Program. Since 2018 we've had, you've received

00:11funding above, or not you, but the program, you've received funding above

00:15normal funding. So how much is it and what's what's the return that we can

00:20tell our taxpayers? Yes sir, thank you for the question. Since 2018 we've received

00:26about about 6.7 billion dollars that's focused on the 1 plus 2 mission and then

00:34I believe around around 3.16 billion dollars that's focused on submarine

00:38sustainment mission. That those have been focused in a handful of areas as I

00:44mentioned as we mentioned supply chain uplift what we've seen there and that's

00:50where we started 18 to 22 was focused on supply chain uplift. The statistics we

00:54have from the projects that that took place between or were funded between 18

00:57and 22 and together with that in the rising demand signal we've actually

01:02increased the parts output from 16 percent of what what is required in order to

01:07execute 1 plus 2 to just over 40 percent. We need to we have to continue to advance

01:12that and and you know the the plan for the for the money that's in battery now

01:17that we haven't seen the results yet because it takes between 24 and 48 months

01:22depending on the on the type of project to really bring those things into battery.

01:26But 1,200 projects across workforce across supply chain and across advanced

01:32manufacturing are in battery working to to get up to get our production rates

01:37better sir. You know what I don't what I don't get is I never understand how with

01:43government private companies can can bid not do their their contract and then

01:49somehow government's responsible for somehow putting up more money to get

01:52something done. It seems like if if they bid up for something they know what

01:56employees cost it's there are it's their responsibility to go get these employees

02:00not government's responsibility so it's never made sense to me. So let's talk about

02:05contracts. So you all every one of you have dealt with companies that have not

02:11performed on their contract. Do they have any negative anything bad happened to

02:15them? Do they like do they have penalties? Do this what's what's the

02:21repercussions of not doing what they said there they don't want to committed to

02:24it you're not the one committed to it. I guess all of you have dealt with this

02:29right? Yes sir. If you could just say what if what what's the accountability part of

02:34this? Sir I will just you say in you know when we choose a contract type it is

02:39different for each type of ship that we're procuring in the circumstances and so

02:42all of them come with various tools. You obviously cost plus is a different

02:47strategy fixed price puts more accountability on the shipbuilder. We

02:51have fixed price for share lines which strongly incentivize them to have

02:54positive cost performance. Every contract has a often a typical set of

03:00incentives that go along with that that incentivize the shipbuilder to perform

03:04and schedule or other key program aspects. We hold the contractor

03:08accountable by by first of all the the the profit that's associated with those and

03:14sometimes with other measures but it differs for each contract depending on

03:18what we're executing. So I'm a record. Yes sir thanks for the question I agree with my

03:24colleague Admiral Moten. What I would also say is in addition to holding them

03:28accountable via their profit and how much money they make or lose we have had

03:33cases where vendors have not performed one of our strategic outsourcing vendors in

03:37which case we move the work from them to other vendors so we do take action when

03:41we do see something that is affecting our production. Are they responsible for

03:45any increased cost if you have to move it? Depending it goes back to what I'm a

03:50week said sir it depends on the contract structure so it's a my answer is it

03:53depends in some cases they are fixed price contracts which they are fully

03:57responsible in other cases it might be a cost contract depending on if it's a

04:00development one or not and so it depends on the amount of risk and how we

04:03share that risk. Yes sir and I would add that you know in extreme cases we can

04:08also withhold payments so we do retain will retain some of the payments if the

04:14companies are not performing to the contract so that is another tool that's in

04:17our inventory if we needed to use it. Chairman. Yes sir as Admiral Rucker said we've

04:22had 17 suppliers where we've stood up additional suppliers were in where we

04:28were single source previously with the submarine industrial base investments. To

04:34fully address your question sir I would say that the direction that we are

04:38headed with these maritime industrial base efforts with partnering across the

04:42submarine aircraft carrier community is particularly in submarines is to get to

04:47leverage competitive forces to get the best results and both in terms of

04:53schedule and cost out of our industrial base and as we build up the

04:57maritime industrial base we are positioning ourselves to better leverage those

05:01forces. Thank you. Senator Sheehy.

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