U.S. Navy Secretary John Phelan delivered a scathing assessment of the Navy’s contracting practices during a Wednesday posture hearing with the House Appropriations Committee, vowing to cut waste and overhaul the service’s acquisition system.
Phelan, alongside acting Chief of Naval Operations Adm. James Kilby, highlighted the Navy’s “bloated” acquisitions contracting system and inefficient workforce. He pointed to the stark statistic that the Navy employs 56,000 contracting personnel who, on average, process only two contracts per month. Despite handling 217,000 contracts in 2024, the average employee only processed 34 in total.
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“I’ll also be honest, when I look at our contracting, it’s poor,” Phelan stated 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, a former Wall Street executive, emphasized his commitment to leveraging his non-traditional background to drive efficiency and ensure the Navy’s combat readiness. His efforts to cut costs are already underway, with $568 million in Navy programs slashed in April, according to DefenseScoop. He also expressed a desire to reduce the overall size of the contracting workforce while retaining essential personnel.
A key pillar of Phelan’s reform agenda is achieving a clean financial audit for the Navy, a feat the Pentagon has failed to accomplish for seven consecutive years.
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“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. “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.”
The Navy’s contracting woes coincide with significant challenges in shipbuilding. Delays in new ship deliveries, with some contractors missing deadlines by up to three years, and difficulties in maintaining existing vessels have compounded the problem. This comes at a critical time, as China continues to expand its naval capabilities, surpassing the U.S. in total ship count in 2020, according to a Congressional Research Service (CRS) report.
In response to these challenges, Phelan and Kilby are prioritizing shipbuilding, aligning with President Donald Trump’s executive order to increase 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 outlined.
The push for efficiency and increased shipbuilding comes as the Defense Department’s budget is projected to exceed $1 trillion by 2026, highlighting the urgency for fiscal responsibility within the Navy.
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