Last month, Defense Secretary Pete Hegseth fired Navy Secretary John Phelan, effective immediately. Navy Undersecretary Hung Cao, a retired Navy captain with 25 years of service and combat deployments to Iraq, Afghanistan, and Somalia, stepped in as acting secretary.

The timing could not be more consequential. The administration’s FY27 budget includes $65.8 billion for shipbuilding, the largest such request since 1962, funding 34 new ships including the first Trump-class battleship and next-generation frigates. Major naval operations are underway in the Strait of Hormuz and across the Middle East. And the industrial base responsible for translating that budget into actual ships is in serious trouble.

A Broken System

The shipbuilding system receiving those dollars is running at roughly 18 percent on-time delivery. As of early 2026, 82 percent of ships under construction are behind schedule. The GAO has documented that despite a near-doubling of the shipbuilding budget over the past two decades, the Navy has not increased its ship count. Programs run over budget. Ships get cancelled or scaled back mid-build. OMB Director Russ Vought even used Sea Air Space, the Navy’s own flagship conference, to publicly threaten shipbuilderswith foreign competition if they cannot perform.

That is what Hung Cao is walking into.

Change at the Top

The Pentagon gave no public reason for Phelan’s removal,but the context is telling. His departure came the day after he addressed Sea Air Space to champion the Golden Fleet, and the same week the FY27 budget dropped. Phelan, a major Trump campaign donor with no prior military service, had been brought in as an outside business operator. The administration’s frustration appears to be with execution, not vision.

Cao offers a different profile. His Navy career included commanding the Naval Diving and Salvage Training Center and serving as division chief of the Defense Threat Reduction Agency, followed by a stint as a vice president at CACI supporting electronic warfare and enterprise IT. He brings operational credibility his predecessor lacked, and the administration appears to want someone comfortable holding industry and program offices accountable, not just advocating for resources.

Three Immediate Priorities

Based on what is publicly documented about naval shipbuilding’s structural failures, Cao faces at least three urgent priorities.

1.      Program design discipline

The Navy has a well-documented pattern of beginning construction before ship designs are stable. Mid-build design changes are among the costliest drivers of schedule delay and cost overruns. Serious reform starts with genuine design maturity gates before contracts are awarded.

2.      Supply chain visibility

The naval shipbuilding supply chain is brittle, with dangerous single points of failure below the prime contractor level. Most program offices lack real visibility into sub-tier supply chain risk until it surfaces as a crisis. That has to change.

3.      Workforce transition management

The FY27 budget calls for a dramatic shipyard scale-up, but appropriations do not automatically produce skilled welders and pipefitters. Managing that workforce expansion requires deliberate strategy around recruiting, training, and technology adoption, treated with the same rigor as the ship programs themselves.

A Narrow Window

At HumanTouch, we have worked alongside federal agencies, including through direct engagement with OMB leadership, on the program management, workforce transition, and technology adoption challenges that define the shipbuilding execution problem. The management approaches needed to close the Navy’s execution gap are available and proven in other federal contexts. What has been missing is sustained leadership commitment to apply them systematically.

Cao has a narrow window and unprecedented resources. The FY27 budget would give him the dollars. The PMA gives him the accountability framework. What he does with both in the next twelve months will define not just his tenure, but the credibility of the Golden Fleet itself.