Navy reviewing contracts as Secretary Phelan looks to eliminate waste, ‘inefficiencies’
NATIONAL HARBOR, Md. — The Department of the Navy is taking a look at its contracts and preparing for an acquisition system review under its new leader in the Trump administration.
In his first major speech as Navy secretary, businessman-turned-SECNAV John Phelan — who was sworn in March 25 — noted that he’s looking to eliminate “waste and inefficiencies” so the sea services can get more bang for their buck as they pursue modernization.
“I intend to bring a huge focus to the Department of the Navy’s procurement and acquisition strategy,” Phelan said Wednesday at the Sea-Air-Space conference.
“I will ensure we will receive the appropriate risk-adjusted rate of return on our investments,” he said. “In many ways, warfare is like a business. Our military must operate at optimal efficiency, maximizing its resources to ensure that every American tax dollar spent delivers results that strengthen our defense.”
Phelan cited underinvestment in workforce and manufacturing capacity, “gold-plated” requirements and bureaucratic decision-making as problems that have led to huge cost overruns, extremely late deliveries and maintenance issues.
“In the coming weeks, I will review our acquisition systems and identify how we can streamline and reform them. I will work across the department and especially with industry, to find solutions. We will restore and maintain operational readiness and fiscal responsibility,” he said Wednesday at the conference.
He added: “We are currently in the early stages of reviewing all of our contracts and also understanding how the decision process works. You know, from start to finish, I’m still trying to understand why things take as long as they do, I’m trying to understand why they cost as much as they do. You know, I see numbers on things that are eye-opening to me.”
Phelan noted that he intends to meet with the Navy’s major contractors as well as other companies that would like to do business with the organization.
The department needs to encourage more competition in the industrial base and expedite some of its acquisition processes to make things easier, he suggested.
Under Phelan, the department will also be “moving to a philosophy of more shared risk” with industry, the SECNAV said.
“We demand a lot from the shipbuilding industry, from the private sector — and the private sector gets things in return. And I think that you’ve got to determine what is fair and what is right. And if we’re being too demanding and too exacting, then they should be compensated for the risk we’re asking them to take. At the same time, you know, we need to make sure that we’re being adequately compensated for the risks we’re taking and we’re getting what we ask for. So I think there’s got to be an equal balance, a more fair-partnership approach with the shipbuilding industry,” he said.
Phelan isn’t the only senior official pushing for efficiencies. The Trump administration’s DOGE team is already reviewing the service’s software enterprise.
“It’s all about making the right investments in modernizing, but modernizing with an eye towards effectiveness and efficiency. We’ve got this new administration. We’ve got the DOGE in working with us, and they’re focused on effective consumption of commercial software. Are we doing the best job we can deliver in buying and utilizing the software that we have? So I think the Department of Defense spends like $5.2 billion on just software. And how can we make sure that we’re buying it effectively and getting the biggest bang for our buck … out of that consumption?” Navy Chief Information Officer Jane Rathbun said Tuesday at the Sea-Air-Space conference.
