2027 defense budget could double 2026 ship requests, US Navy secretary says
The Navy Secretary announced that the proposed FY2027 defense budget could double shipbuilding procurement from 17 ships in FY2026 to at least 34 ships, with significant focus on auxiliary and support vessels. This represents a major expansion of naval shipbuilding opportunities under President Trum
Cabrillo Club
Editorial Team · February 16, 2026

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Segment Impact Analysis: FY2027 Naval Shipbuilding Budget Expansion
Executive Summary
The proposed doubling of Navy shipbuilding procurement from 17 to 34+ ships in FY2027 represents the most significant expansion of naval construction opportunities in over three decades. This $1.5 trillion defense budget initiative, centered on the Golden Fleet program and auxiliary vessel expansion, fundamentally reshapes the maritime defense industrial base landscape. The explicit focus on "easier-to-build auxiliary vessels" signals a deliberate strategy to broaden the supplier base beyond traditional prime shipbuilders, creating unprecedented entry points for mid-tier contractors and specialized manufacturers.
This event triggers a multi-year procurement wave with implications extending well beyond shipbuilding primes. The auxiliary vessel emphasis—including oilers, ammunition ships, hospital ships, repair vessels, and logistics support craft—creates immediate opportunities across naval architecture, marine engineering, specialized manufacturing, and long-term maintenance sectors. Contractors currently positioned in adjacent defense manufacturing or commercial maritime sectors have an 18-24 month window to establish credentials before major contract awards begin in late 2025 through 2026.
The strategic timing is critical: the Navy's stated goal of rebuilding maritime industrial base capacity means procurement offices will actively seek to diversify their contractor pool. Companies that move decisively on CMMC compliance, establish teaming arrangements with established primes, and demonstrate auxiliary vessel-relevant capabilities will capture disproportionate market share in what could become a 15-20 year procurement cycle. The cascading effects will reshape supply chains, workforce development, and regional maritime industrial clusters across the Gulf Coast, Great Lakes, and Pacific Northwest shipbuilding regions.
Impact Matrix
Shipbuilding & Ship Repair
- Risk Level: Critical
- Opportunity: The doubling of ship procurement creates immediate demand for both prime shipbuilders and second-tier yards capable of auxiliary vessel construction. With 17+ additional vessels beyond the baseline 17, yards that have been operating below capacity can secure multi-year construction contracts. The emphasis on "easier-to-build" auxiliary vessels deliberately opens opportunities for yards without nuclear certification or complex combatant experience. Ship repair facilities face 10-15 year maintenance contract pipelines as the expanded fleet enters service.
- Timeline: Immediate action required. RFI responses likely Q3-Q4 2025, with first auxiliary vessel solicitations in Q1-Q2 2026. Teaming arrangements must be established by Q2 2025 to position for prime or subcontractor roles.
- Action Required: (1) Conduct immediate facility assessment against auxiliary vessel construction requirements (T-AO, T-AKE, T-ATS class specifications); (2) Initiate CMMC Level 2 certification process if not already compliant; (3) Establish teaming agreements with naval architecture firms and specialized systems integrators; (4) Engage with NAVSEA and Military Sealift Command through industry days; (5) Assess workforce expansion needs and initiate recruitment for welders, pipefitters, and marine electricians; (6) Secure bonding capacity for contracts in $200M-$800M range.
- Competitive Edge: Sophisticated contractors are immediately conducting gap analyses between their current capabilities and T-AO(X) next-generation oiler specifications, then making targeted capital investments in specific fabrication capabilities (e.g., double-hull construction, integrated electric propulsion installation). They're establishing exclusive teaming agreements with European auxiliary vessel designers (particularly Korean and Japanese firms with proven commercial tanker/logistics ship designs adaptable to military specs) to bring proven designs to Navy procurement offices. The smartest players are acquiring or partnering with small yards in strategic locations near Naval bases to create distributed maintenance networks, positioning for both construction subcontracts and lifecycle maintenance contracts. They're also pre-negotiating workforce sharing agreements with commercial shipbuilders to rapidly scale skilled labor.
Naval Architecture & Marine Engineering
- Risk Level: High
- Opportunity: Doubling ship procurement requires corresponding expansion in design, engineering, and technical services. Auxiliary vessels need complete design packages, systems integration engineering, and lifecycle support documentation. The 17+ additional ships represent approximately $500M-$750M in pure engineering services across preliminary design, contract design, and production engineering phases. Firms with commercial vessel design experience can adapt existing auxiliary ship designs to military specifications, significantly reducing Navy development costs and timeline.
- Timeline: Immediate to 18 months. Design services contracts precede construction awards by 12-24 months. Firms must be positioned on relevant IDIQs (SeaPort-NxG, OASIS+) and responding to sources sought notices by Q2 2025.
- Action Required: (1) Map existing commercial vessel designs to Navy auxiliary requirements; (2) Establish partnerships with classification societies (ABS, DNV) familiar with military specifications; (3) Recruit or partner with engineers holding active Secret clearances with Navy project experience; (4) Develop white papers on cost-reduction approaches for auxiliary vessel classes; (5) Pursue SeaPort-NxG contract vehicle positioning; (6) Invest in Navy-standard design tools (NAVSEA ASSET, ShipConstructor with military modules).
- Competitive Edge: Leading firms are creating "design-ready" auxiliary vessel portfolios by adapting proven commercial designs (Jones Act tankers, offshore support vessels, commercial RO-RO ships) to meet military specifications, then proactively briefing these to NAVSEA and MSC as lower-risk alternatives to clean-sheet designs. They're hiring recently retired Navy engineering duty officers who understand requirements development and can navigate NAVSEA technical warrant holder relationships. The most sophisticated are establishing design-build partnerships where they bring both the design IP and construction capacity, offering the Navy turnkey solutions that reduce procurement complexity. They're also investing in digital twin technology and model-based systems engineering tools that align with Navy's digital shipbuilding initiatives, making their designs more attractive for yards adopting modern construction methods.
Defense Manufacturing (Components & Systems)
- Risk Level: High
- Opportunity: Each auxiliary vessel requires hundreds of specialized components: propulsion systems, power generation, HVAC, damage control systems, communications equipment, navigation systems, cargo handling equipment, and auxiliary machinery. A doubling of ship construction creates corresponding demand across the entire marine systems supply chain. Auxiliary vessels, while less complex than combatants, still require military-grade systems meeting shock, vibration, and electromagnetic interference standards. Manufacturers currently supplying commercial maritime or other defense sectors can expand into naval applications.
- Timeline: 12-24 months for initial positioning, with procurement activity accelerating through 2026-2028 as ship construction contracts are awarded and primes begin supplier selection.
- Action Required: (1) Obtain NAVSEA manufacturer approvals for relevant product lines; (2) Achieve CMMC Level 2 compliance for handling CUI in ship specifications; (3) Establish relationships with major shipbuilders' supply chain organizations; (4) Adapt existing products to meet MIL-SPECs (MIL-S-901 shock, MIL-STD-461 EMI, MIL-STD-167 vibration); (5) Pursue QPL (Qualified Products List) status for applicable systems; (6) Expand production capacity for anticipated 2-3x volume increases.
- Competitive Edge: Sophisticated manufacturers are analyzing the specific systems requirements for auxiliary vessel classes and identifying high-value, lower-competition niches—such as specialized cargo refrigeration systems for T-AKE logistics ships, underway replenishment equipment, or auxiliary propulsion systems. They're acquiring or licensing military-qualified product lines from retiring competitors or international partners, instantly gaining QPL status and NAVSEA approvals that take competitors years to achieve. The smartest are establishing vendor-managed inventory agreements with major shipyards, positioning their components as preferred/sole-source solutions that reduce the yard's procurement burden. They're also creating modular, pre-tested system packages (e.g., complete HVAC zones, integrated pump rooms) that yards can install as units, reducing construction time and attracting prime contractor preference.
Maritime Services & Logistics Support
- Risk Level: Medium
- Opportunity: An expanded fleet requires proportional expansion in lifecycle support services: crew training, technical documentation, spare parts logistics, maintenance planning, fleet management systems, and operational support. The auxiliary vessel focus creates particular demand for specialized services around underway replenishment operations, cargo handling, and multi-mission support capabilities. Service contracts typically represent 3-5x the initial procurement cost over a vessel's 30-40 year lifecycle.
- Timeline: 24-36 months before major service contracts, but positioning must begin immediately. Initial training and documentation contracts will accompany ship construction awards in 2026-2027.
- Action Required: (1) Develop auxiliary vessel-specific service offerings (T-AO operations training, cargo handling certification, replenishment-at-sea procedures); (2) Establish partnerships with shipbuilders for integrated logistics support packages; (3) Pursue SeaPort-NxG and ASTRO contract vehicle task orders; (4) Recruit former Military Sealift Command personnel with auxiliary vessel operational experience; (5) Develop training curricula aligned with Navy training system requirements; (6) Invest in simulation and virtual training capabilities for cost-effective crew training.
- Competitive Edge: Forward-thinking service providers are developing "fleet-ready" training and support packages that shipbuilders can include in their construction proposals, making the prime's bid more competitive by demonstrating complete lifecycle support. They're acquiring or developing auxiliary vessel-specific simulators (oiler replenishment, ammunition transfer, hospital ship operations) that can be deployed before ships are completed, allowing crew training to parallel construction. The most sophisticated are establishing performance-based logistics models where they guarantee vessel availability metrics, taking on inventory and maintenance management risk in exchange for premium margins. They're also creating digital fleet management platforms specifically designed for auxiliary vessel operations, offering the Navy real-time visibility into logistics fleet readiness—a capability MSC desperately needs as the fleet expands.
Infrastructure & Shipyard Modernization
- Risk Level: Medium
- Opportunity: Expanding ship production from 17 to 34+ vessels annually requires significant shipyard infrastructure investment. Existing yards need capacity expansion, modernization of fabrication facilities, and implementation of digital shipbuilding technologies. New yards may be established or mothballed facilities reactivated. The Navy's stated goal of rebuilding maritime industrial base capacity will likely include direct infrastructure investment programs, grants, or loan guarantees. Construction and engineering firms specializing in maritime industrial facilities face a multi-year expansion cycle.
- Timeline: 18-36 months. Infrastructure investments must precede or parallel ship construction awards. Expect Navy industrial base investment programs announced in FY2026 budget with implementation through 2027-2030.
- Action Required: (1) Identify shipyard clients and develop expansion master plans; (2) Establish expertise in modern shipbuilding facility design (modular construction halls, automated panel lines, digital fabrication); (3) Pursue relationships with Navy industrial base investment program offices; (4) Develop financing packages combining private capital with potential government loan guarantees; (5) Recruit personnel with shipyard construction experience; (6) Establish partnerships with equipment suppliers for specialized maritime construction equipment.
- Competitive Edge: Sophisticated infrastructure contractors are proactively developing turnkey shipyard expansion proposals for second-tier yards, combining facility design, financing arrangements, and equipment procurement into comprehensive packages that yards can execute rapidly. They're establishing relationships with international shipbuilding equipment manufacturers (particularly Asian and European firms with advanced automation technology) to bring proven productivity-enhancing systems to U.S. yards. The smartest are identifying underutilized industrial waterfront properties in strategic locations and securing options or acquisitions, then approaching the Navy and potential shipbuilders with shovel-ready expansion sites. They're also developing specialized expertise in environmental remediation and permitting for waterfront industrial sites, removing critical path obstacles that delay yard expansions.
Cybersecurity & Compliance Services
- Risk Level: High
- Opportunity: The expanded shipbuilding program brings hundreds of new contractors into the defense industrial base, all requiring CMMC Level 2 certification, NIST 800-171 compliance, and potentially ITAR registration. Each shipyard, engineering firm, and component manufacturer must implement comprehensive cybersecurity programs to handle controlled unclassified information (CUI) in ship designs, specifications, and technical data. The Navy's increasing emphasis on digital shipbuilding and supply chain security creates additional demand for specialized maritime sector cybersecurity services.
- Timeline: Immediate. CMMC Level 2 will be required for contracts awarded in 2025-2026. Companies without compliance will be excluded from bidding.
- Action Required: (1) Develop maritime sector-specific CMMC and NIST 800-171 compliance packages; (2) Establish C3PAO (Certified Third-Party Assessor Organization) partnerships for CMMC assessments; (3) Create rapid compliance programs for small/mid-size manufacturers entering defense shipbuilding; (4) Develop supply chain cybersecurity assessment services for prime contractors; (5) Establish expertise in shipyard operational technology (OT) security for digital fabrication systems; (6) Recruit assessors with maritime/shipbuilding industry experience.
- Competitive Edge: Leading cybersecurity firms are creating industry-specific compliance packages tailored to shipbuilding operations—recognizing that yard environments differ significantly from typical IT environments with their mix of design systems, fabrication control systems, and operational technology. They're developing "compliance-as-a-service" models where they provide ongoing managed security services that maintain CMMC compliance, rather than one-time assessments, creating recurring revenue and deeper client relationships. The most sophisticated are establishing partnerships with shipyard management software vendors to embed compliance controls directly into production systems, making compliance automatic rather than burdensome. They're also creating supply chain cybersecurity assessment programs that prime contractors can mandate for their suppliers, positioning themselves as the Navy shipbuilding sector's standard cybersecurity provider.
Workforce Development & Technical Training
- Risk Level: Medium
- Opportunity: Doubling ship production requires massive workforce expansion across all skill categories: welders, pipefitters, electricians, marine engineers, naval architects, project managers, and specialized trades. The maritime industrial base currently faces significant skilled labor shortages. Workforce development programs, apprenticeship systems, technical training providers, and recruitment services will see sustained demand throughout the 2025-2035 period as the industry scales up. The Navy may establish or expand programs like the Maritime Workforce Development Initiative with direct funding for training.
- Timeline: Immediate to 24 months. Workforce development must precede or parallel facility expansion. Training programs need 12-18 months to develop and begin producing qualified workers.
- Action Required: (1) Develop shipbuilding-specific training curricula in partnership with yards and unions; (2) Establish relationships with community colleges and technical schools in shipbuilding regions; (3) Create apprenticeship programs meeting DOL and Navy standards; (4) Develop recruitment programs targeting veterans and transitioning military personnel; (5) Establish mobile training capabilities to serve multiple yard locations; (6) Pursue Navy workforce development grants and contracts.
- Competitive Edge: Sophisticated workforce development providers are establishing "earn while you learn" programs in partnership with shipyards, where trainees are employed by the yard from day one while completing structured training—reducing the yard's recruitment risk and providing trainees with immediate income. They're creating specialized training for auxiliary vessel-specific skills (underway replenishment systems, cargo handling, specialized welding for double-hull construction) that aren't covered in standard maritime training, making their graduates immediately valuable. The smartest are developing relationships with military transition programs to create direct pipelines from Navy technical ratings (hull technicians, machinery repairmen, electricians) to civilian shipyard positions, leveraging existing skills and security clearances. They're also establishing regional training consortiums where multiple yards share training infrastructure and costs, making them the preferred provider across entire maritime industrial clusters.
Cross-Segment Implications
Supply Chain Cascade Effects: The doubling of ship procurement creates a cascading demand surge that flows from prime shipbuilders through multiple tiers of suppliers. Naval architecture firms must deliver designs 12-24 months before construction begins, creating the first wave of opportunity. Component manufacturers face order increases 6-18 months into construction programs as primes finalize supplier selections. This creates timing dependencies where delays in design or prime contract awards ripple through the entire supply chain. Contractors in supporting segments must monitor prime contract awards as leading indicators for their own opportunity timing.
Geographic Clustering Dynamics: Shipbuilding expansion will concentrate in existing maritime industrial regions (Gulf Coast, Great Lakes, Pacific Northwest, Hampton Roads), creating localized demand surges for all supporting services—workforce development, infrastructure construction, logistics support, and compliance services. Contractors in these regions gain proximity advantages, while those outside must establish local presence or partnerships. The Navy's desire to expand industrial base capacity may also drive investment in currently underutilized regions, creating first-mover advantages for contractors who identify and position in emerging shipbuilding clusters before they're officially designated.
Compliance Interdependencies: CMMC Level 2 requirements create a compliance floor that affects all segments simultaneously. Prime shipbuilders cannot award subcontracts to non-compliant suppliers, creating a forcing function where compliance service providers must scale rapidly to serve hundreds of companies entering the defense industrial base. This creates a potential bottleneck where C3PAO assessment capacity constrains the pace at which new contractors can enter the market. Early compliance achievement becomes a competitive differentiator, while delayed compliance creates market access barriers.
Workforce Competition: Expanded shipbuilding competes for skilled labor with other defense sectors and commercial maritime industries. Workforce development programs that serve multiple segments create efficiency but also potential conflicts as different industries compete for the same talent pools. Contractors offering premium compensation, better working conditions, or superior training will capture disproportionate talent share. This creates particular pressure on smaller contractors who lack resources to compete on compensation, driving consolidation or forcing specialization in less labor-intensive niches.
Technology Adoption Acceleration: The Navy's emphasis on rebuilding industrial base capacity includes modernization expectations—digital shipbuilding, automation, and advanced manufacturing technologies. This creates opportunities for technology providers but also forces traditional contractors to adopt new methods or risk obsolescence. Segments that successfully integrate digital technologies (model-based engineering, digital twins, automated fabrication) gain productivity advantages that translate to cost competitiveness. This creates a technology adoption race where early movers establish advantages that late adopters struggle to overcome.
Teaming and Partnership Networks: The scale and complexity of auxiliary vessel programs require extensive teaming across segments—shipbuilders partner with naval architects, component manufacturers, service providers, and infrastructure contractors. These teaming relationships, once established for initial contracts, tend to persist across multiple programs, creating semi-permanent partnership networks. Contractors who establish themselves in winning teams early in the cycle gain sustained advantages, while those excluded from initial teams face barriers to entry in subsequent competitions. This creates urgency for cross-segment relationship building in the 2025-2026 timeframe before major teaming arrangements solidify.
Lifecycle Cost Focus: The Navy's budget constraints despite increased procurement create emphasis on lifecycle cost reduction. This shifts value from pure construction to integrated lifecycle support—designs that reduce maintenance, components with longer service lives, training systems that reduce crew requirements, and support services that improve operational availability. Contractors who position offerings around total ownership cost rather than acquisition cost alone align with Navy priorities and gain evaluation advantages. This creates opportunities for innovative business models like performance-based logistics, availability guarantees, and integrated support packages that span multiple segments.
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