U.S. Navy Secretary John Phelan took aim at the rampant waste in the Navy during a Wednesday posture hearing with the House Appropriations Committee.
Phelan and acting Chief of Naval Operations Adm. James Kilby laid out the Navy’s bloated acquisitions contracting system and inefficient workforce, which employs 56,000 people but only processes two contracts a month per employee on average. Phelan, a former Wall Street executive, stressed his mission is to cut waste and utilize his unorthodox background to promote efficiency in keeping America’s Navy ready to fight and win wars.
Phelan said the Navy processed a total of 217,000 contracts in 2024, with an average employee processing 34 in total.
“I’ll also be honest, when I look at our contracting, it’s poor,” Phelan said during the hearing. “We don’t control our [intellectual property]. We can’t repair stuff. We don’t have very good penalties built in for lack of performance. These are all things we are going to really try to change.”
Phelan already slashed a slew of Navy programs in April in the name of cost savings, worth a grand total of $568 million, according to DefenseScoop. In the hearing, he expressed interest in shrinking the overall workforce while maintaining vital employees.
The secretary also pledged to have the Navy pass a financial audit, even as the Pentagon failed its seventh consecutive audit in 2024. The Defense Department’s budget is set to balloon to over $1 trillion in 2026 as the various branches of the armed forces jockey for funding.
“Accountability is not just a regulatory requirement. It is the bedrock upon which we will build a stronger, more efficient Navy and Marine Corps,” Phelan said in the hearing. “Under my leadership, the Department of the Navy will achieve a clean audit, following the example set by the Marine Corps, which has completed two consecutive unmodified audits.”
While the Navy struggles with overspending and a bloated contract system, it is also struggling to put ships in the water at a time when China is being aggressive in the Pacific Ocean.
The Navy has struggled to maintain its existing ships, while new ships have been plagued by massive delays, with some contractors extending their deadlines for ship delivery by up to three years. China maintains the upper hand in military shipbuilding, surpassing the U.S. Navy’s total ship count in 2020 with 360 ships compared to just 296 in the U.S. fleets, according to a January Congressional Research Service (CRS) report.
Phelan and Kilby aim to shift the Navy’s focus towards shipbuilding to fulfill President Donald Trump’s executive order calling for increased ship production.
“I will lead this department with three focus areas that will guide our Navy and Marine Corps: strengthen shipbuilding and the maritime industrial base, foster an adaptive, accountable, and innovative warfighter culture, improve the health, welfare, and training of our people,” Phelan said during the briefing.
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