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The Navy’s Perennial Conundrum: Cost Overruns Interfere with Fleet Sizing March 18, 2010

Posted by Stephen Abott in Analysis.
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by Stephen Abott

The campaign for a 313 ship battle fleet is one of Washington’s classic, bipartisan perennials – as is the failure to actually follow through.  Whether we will ever reach this goal remains uncertain, in part, because ship cost overruns continually accelerate beyond each year’s funding.

Increasing the size of the current 285 ship battle force is a stated goal of the Navy and leading members of Congress.  On multiple occasions the Chief of Naval Operations (CNO) has included a call for 313 hulls in congressional testimony, a position also used as “a reference point” in the 2010 version of the Navy’s 30 year plan. The 2010 Quadrennial Defense Review (QDR) likewise sets the Navy’s size requirements near the 300+ ship level.

Congress has been supportive of this goal. Soon after the President’s election, a bipartisan group of 18 senators wrote Obama to ask him to retain the 313 ship goal.  House Armed Services Committee Chairman Ike Skelton (D-MO), along with his Rep. Gene Taylor (D-MS), likewise entered the FY2011 budget cycle pushing the Navy to slow down ship retirements in order to increase fleet numbers.

Support for a 313 ship fleet is missing, however, from the Pentagon’s future plans.  These plans anticipate constructing 50 ships in the next five fiscal years. Such a construction rate, extrapolated over a normal 30-year lifespan for a naval vessel, would allow the Navy to maintain a fleet of approximately 300 ships. This is still consistent with the QDR decision and closer to the Navy’s goal.  Yet Pentagon plans mask an important obstacle.

The average real cost of Navy ships have increased at an alarming rate, outpacing Pentagon projections and growing from $1.2 billion during the 1980’s to at least $2.5 billion in 2009. Shipbuilding resources, on the other hand, are projected to remain fixed between FY2011-15.  The Navy thus finds itself in a conundrum: projections of a fixed, $14 billion annual shipbuilding budget conflict with CBO’s projection that a 313 ship fleet will cost $20 billion or more annually.

CBO estimates that staying within budget will yield a fleet of between 170 and 240 ships.  Getting to 313 within the context of existing plans, it seems, would require rebalancing in other areas of Navy procurement.  Some in the Department of the Navy hope that the Ballistic Missile Submarine (SSBN) program will be transferred out of their hands and into Defense-Wide procurement.  This approach was used for missile defense – another expensive, strategic procurement objective.  More than enough room for a 313 ship fleet would be created should Congress approve the Navy’s efforts to offload costs for 12 new SSBMs, estimated by the service to be $80 billion (CBO estimate = $85 billion).  At minimum, this approach would provide a scapegoat – Congress – should the Navy fail to reach 313.

Budgetary tactics aside, however, a main cause of this disconnect the Navy’s inability to discipline procurement costs. Every recent major Navy ship purchase has been over budget, with programs such as the Littoral Combat Ship more than doubling in cost.  A strong push to force the Pentagon and the Navy to make hard choices about what programs are important may put necessary downward pressure on costs. Absent hard choices and disciplined management, though, the Navy will find this goal routinely beyond its grasp.

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