Photo by Christina Gandolfo

When Ross Stuckey (PLDA 21, 2016) joined the NAVSEA Warfare Centers—a part of the naval research labs responsible for developing science and tech for national defense—as their capital improvement program (CIP) manager in 2016, he was charged with doling out $80 million annually from the US Navy Working Capital Fund to finance building projects and equipment purchases for labs and scientists. But he quickly discovered a major difficulty with the fund’s model: While projects were receiving full funding each year, it wasn’t always being used—and the issue was getting worse over time.

“In 2001, we were at 93 percent execution of dollars as an enterprise,” says Stuckey. “Then, in 2002, it was 91 percent. In 2003, for whatever reason, we tanked by 36 percent.” Execution rates had a brief respite before settling around 60 percent, where they remained until Stuckey came on board.

This failure to execute work came from a host of problems, including the inability of contractors to perform or finish projects in any given fiscal year. And when the work doesn’t get done, there’s a lot of deferred maintenance on buildings and old equipment, and—worse yet—unhappy scientists and engineers.

“You might have a situation where a group of our engineers is working on old equipment that is not only inefficient but also might also present a safety risk. Or we might have a situation in which the building itself has safety issues; maybe the roof needs work or there’s leaking water,” says Stuckey. Rather than have talented engineers and scientists tracking down buckets for leaks, he wanted their focus to be where it should be: on advancing the important work of the NAVSEA Warfare Centers.

Right off the bat, Stuckey identified two concerns with the way the Navy Working Capital Fund was operating. First, there was no standard to evaluate the CIP managers at the division level, so a 60 percent execution rate, for instance, might conceivably seem “good enough.” Second, the way the money was being distributed at the headquarters level—Stuckey’s level—was problematic.

“The way the game worked is, the more people you had working at your subsidiary, the more resources you got for buildings and equipment,” explains Stuckey. “Think about that from a fairness perspective: If you were a smaller division, with really old, aging, and decrepit facilities, you weren’t getting as much of the resource pie, precisely because you didn’t have enough people. If you’re a site that’s larger, you’re automatically going to get a bigger share—even if, for example, you have all new facilities.” The model didn’t make sense to Stuckey. More important, the setup simply wasn’t working. So he set about creating one that did.

The plan he assembled had three parts. The first was addressing the performance of CIP division managers by rating their execution performance. Here, Stuckey held fast to the familiar: an academic grading chart. If the subsidiary could improve its execution to 90–100 percent, the CIP manager received an A; 80–90 percent, a B; 70–80, a C; and so on. This gave managers and their teams a goal, and it allowed headquarters to monetarily reward teams with higher execution rates, secure in the knowledge that the building would be constructed or the equipment would be purchased. “That first year, we told them anything below a C was unacceptable,” recalls Stuckey. Obviously, we don’t want them to be C students, but rather to give them an achievable target.”

The second part of the new strategy focused on addressing resource allocation. Instead of basing funding on the number of employees, Stuckey moved to a formula-based allocation that took into account both need and project execution rate. “In other words, if your netbook value was very low, as a percentage of your fixed assets, you’re going to get a lot of need-based points. That means you’re going to get a bigger slice of the pie. On the execution side, we went with a two-year average. If you’ve had high execution marks over the previous two years, that’s going to factor positively in terms of how much of the pie you’re going to get. Not only do we want to establish that a subsidiary has need, but we also want to know that it can execute the project or purchase,” Stuckey explains.

The third piece of the model was to deal with the issues that are unavoidable—like a contractor’s inability to complete a project. “If one of our divisions were looking into their crystal ball and realized they had an issue, or their contractor wasn’t going to perform in any given year, they’d likely request a carryover,” notes Stuckey. “The division may get the request granted, but that puts them at risk for a budget mark, meaning ‘Big Navy’ cuts the budget because the division is not executing their funds.”

The solution lay in an innovative loan program: “If you look at your crystal ball, and it looks like you’re not going to execute? Okay, fine. We’ll loan the amount of money that you’re not going to execute to another division that needs it,” says Stuckey. “They’ll execute their project and pay your division back the following year, interest free. Both divisions win, and we improve execution rates at the enterprise level.”

The new plan went into effect in 2019, and change came fast. Within the first year of implementation, the NAVSEA Warfare Centers went from a 63 percent execution rate on capital projects to a historic high of 94 percent. And the numbers in the years since—hovering between the high 80s and low 90s—account for the top five spots in execution percentages since the Naval Capital Fund was created. “The experience with NAVSEA Warfare Centers taught me about the importance of innovation in management,” observes Stuckey. “If a process or system is not producing a desired outcome, then consider redesigning the machinery producing the outcome.”

With the new model in place and execution numbers at all-time highs, says Stuckey, the labs are able to replace old equipment with modern equipment that’s faster and safer—and they’re able to build new facilities where needed. But equally important is the higher quality of work and life for the teams: “They're happy and proud of where they work now, but then there’s also an improvement in terms of mission,” notes Stuckey. “Now they can focus on the work of improving national defense technologies.”

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