This paper examines the environment in which improvements in ship construction can occur and looks at the type of planning that must be done to ensure benefits are realized. The Navy is now the major customer of the U.S. shipbuilding industry, and even with the increased emphasis on competitive procurement, by necessity, contracts for a significant amount of sole-source ship construction will exist due to technical or facility constraints. For these contracts, as well as many others, the shipbuilder has a limited incentive to accept the increases in risk inherent in changing his business strategy and existing industrial processes. Recognizing this problem, the Navy began, successfully, to change the environment for aircraft carrier construction. This paper describes the Navy's efforts.