Hard to be more direct than this.
WHAT'S HAPPENING WITH THE GRAY ELEPHANT?I know ... I know ... a lot of you are saying, "But we have spent so much money on the program already!"
Bud Zumwalt, a great man, must be spinning in his grave. Senator Collins (R-GD) thinks the second and third ships are OK, but are they? Will SECNAV ever explain to the U.S. taxpayers just exactly why it has cost so much - DD-21, DD(X) and now DDG 1000 - to achieve so little? Doesn't anyone in the Navy ever give a moment's thought to cost justification? Of course, we've got a SECNAV whose shipbuilding experience is based on being on the Board of Directors of Friede Goldman Halter, one of the most incompetently managed shipbuilding companies in history. (Curiously, this is not included in his bio.) And we have an ASN (RD&A) whose greatest achievement is to have been the Navy's Program Manager for the LPD 17 program, another horrendous waste of the taxpayers' money. So what can we expect? Maybe the new SECDEF, who seems to be having a hard time finding ways to cut the budget, should look at this DDG 1000 program. How many times does it have to be said? Kill DDG 1000, build more DDG 51s.
Folks, that is sunk cost. You need to get your mind right.
Let me see if I can help. Some say that a "business focus" is part of our problem - I disagree. The problem is too many engineers trying to pretend they are businessmen just because they took a 2-week MBA seminar at UNC-CH a few years ago .... but that was a post from ~2006 that I won't repeat again. On with the show:
The largest mistake people make is not understanding sunk cost. Sunk cost can never be regained. It can never be recovered. When a project goes bad - you have to ignore your instincts based on upper-paleolithic hunter gatherers and think like a business.
The key is future return on present investments. If you invest $100 in a bad project that is not completed - that is sunk cost. If you walk away once you figure out that it a bad project - you have lost $100. You live and learn, and move on to better projects that hold greater risk-reward payoffs.
If you focus on your "investment" (sunk cost) and decide to spend another $75 in the project to complete it. Once that project is completed, it never makes a profit (or in this case, adds net value to Fleet effectiveness).
As a result, you have at a minimum lost $175 plus any additional net loss from operations from a non-profit making enterprise. If measured from the decision point (when you realize that it is a bad project) you have $75 plus additional net loss from operations of lost "opportunity cost" on TOP of the $100 "sunk cost" noted at your decision point.
It is "opportunity cost" and not "sunk cost" that you must focus on. With the opportunity cost of moving forward with the Grey Elephants - what could we have bought that would have added value to the ability of the Navy to create global effects in support of the goals of the National Command Authority.
This is all very sad. There are some very promising technology items in DDG-1000 - but bundling them together like we have just flies in the face of everything we know about compound technology risk. The better path would have been to follow the successful outline and best practices of cruiser development in the '20-30s and the missile development of the '50-'70s. Not "transformational" enough, I guess. Sure worked.
Hat tip Lee.
