The Rebaseline Trap

MD Marine Electric | The Current Conversation

On October 30, Hanwha Philly Shipyard won a $269 million contract to build one Medium Landing Ship for the Marine Corps.¹ It will be the first Navy vessel built in Philadelphia since the former Philadelphia Naval Shipyard closed in 1995.² Construction is scheduled to start in the fourth quarter of 2027.³

That single fact, three decades between keels, should be the headline. It isn't, because the number sitting next to it tells the real story: the first LSM is now expected to deliver in 2030.⁴ As recently as July, when the Navy announced the $2.2 billion contract that created this whole arrangement, the service said the first ship would deliver in 2029.⁵ The schedule moved a year in three months, and nobody involved called it a delay.

Call it the Rebaseline Trap: the habit of resetting a program's cost, schedule, or ownership structure whenever the old baseline gets inconvenient, so that the breach never has to be reported as a breach. The Medium Landing Ship program has now been rebaselined at least twice in four years, and the Hanwha award is the clearest evidence yet of how the trick works.

The Ship That Already Had a Builder

The LSM did not start with Hanwha, or with TOTE Services, or with the Vessel Construction Manager model at all. Before this October's award, the Navy had tapped Bollinger Shipyards to construct the initial LSM and had awarded Fincantieri Marinette Marine a contract for long-lead-time materials on four more.⁶ That was the program's first baseline: two established yards, a direct Navy contract, a builder already selected.

Then, in July, the Navy scrapped that structure and awarded TOTE Services a $2.2 billion contract to serve as Vessel Construction Manager, a role the service said would "maximize commercial practices to accelerate delivery, improve cost discipline, and expand the U.S. shipbuilding industrial base."⁷ Under that arrangement, TOTE holds the prime contract and carries direct contractual oversight of construction and delivery, a structure new to Navy shipbuilding even though it is common in commercial shipbuilding.⁸ The Navy's own program office stepped back one layer. TOTE then ran a competitive request for proposals and picked Hanwha, not Bollinger, not Fincantieri, as its first shipyard.⁹ TOTE says it remains in "productive contract discussions" with both original yards, who are "expected to play a meaningful role" eventually.¹⁰ Expected, not contracted. Four years into the program, the builders who were supposed to be building it are still in discussions.

This is not shipyard competition working as intended. It is a program resetting its own history. Every month the original Bollinger and Fincantieri contracts sat unexecuted was a month the LSM's cost and schedule clock could be reset without anyone having to explain a breach against the old baseline, because the old baseline technically no longer applied.

The Cost Nobody Wants to Defend

The Congressional Budget Office took a hard look at what this ship should actually cost, and the gap it found is the clearest evidence of why rebaselining is so useful to a program under pressure. By CBO's estimates, an 18-ship LSM program would cost between $340 million and $430 million per ship in 2024 dollars, and CBO's cost model ranges from two to roughly three times the Navy's own estimates for the ships it wants to buy between 2025 and 2029.¹¹

The Navy's own numbers moved just as much as CBO's critique implies. In the 2023 Future Years Defense Program, the Navy priced the lead ship at $247 million in then-year dollars. Under the 2024 FYDP, the same lead ship dropped to $188 million, a 24 percent cut with no corresponding design change CBO could identify. By the 2025 FYDP, the Navy's own estimate climbed back up to $268 million for the lead ship, after the service added survivability and recoverability features back into the design.¹² That number, not coincidentally, lands almost exactly on the $269 million contract TOTE just awarded Hanwha. The Navy spent three budget cycles sliding the estimate down and back up before settling on a figure that happens to match what the market actually charged.

CBO was blunt about why the estimate is so unstable: the LSM sits in a gap between construction standards. Ships built to military standards have <cite index="4-39">stronger hulls and internal compartments, more shock-hardened systems, and more safety features and equipment, among other things, than commercial ships