Amidst assurances by the Navy leadership that the latest shipbuilding blueprint is on a safe course, several analysts are sounding alarms. Unless the Navy begins to aggressively cut costs from its shipbuilding programs and pump much more money into these accounts, the plan could fail, these experts warn.
To increase its current fleet from 281 ships to 313 ships, the Navy plans to procure between seven to 14 new vessels during each of the next five years. The list includes the purchase of one CVN-21—a new aircraft carrier, five Virginia-class attack submarines, 23 littoral combat ships, and five DD(X) destroyers.
“It’s going to take on average about $13.5 billion of current money … to make the plan work. I don’t consider that out of reach, although it is a goal,” Adm. Michael Mullen, the chief of naval operations, told reporters. He further clarified that it will take $13.5 billion annually “at least through 2020” to meet the service’s shipbuilding goals.
However, the Congressional Budget Office has estimated that the service will need much more—$18.3 billion in 2006 dollars—to cover its shipbuilding costs.
In the president’s 2007 budget, the Navy has requested a shipbuilding budget of $10.57 billion.
“This budget is optimistic and demands cost control; it demands constant attention; it demands willingness to give up things that would be nice to have instead of absolutely required to have, and it also depends on a very healthy and steady shipbuilding budget from Congress with no encroachments,” said Robert Work, senior naval analyst for the Center for Strategic and Budgetary Assessments. He said he applauds the service’s efforts to stabilize the shipbuilding budget, but worries that the cost is a “fiscal bridge too far.” He estimated the account is at least $2 billion to $3 billion short per year.
Proof that the Navy is underestimating its shipbuilding costs is the recent “FY ’07 Unfunded Program Requirements List,” which Mullen sent to Rep. Ike Skelton, a Missouri Democrat and ranking member of the House Armed Services Committee, who makes it an annual ritual to seek from each service a wish list of items they need, but did not get included in the budget request.
The Navy’s list—which totals $4.5 billion—includes $2.3 billion for shipbuilding programs.
In 2000 to 2005, the annual funding for construction of new ships averaged about $10.2 billion, wrote Ronald O’Rourke in a Congressional Research Service report. The Navy’s 313-ship plan “appears to depend in large part on the Navy’s ability to substantially increase annual funding for construction of new ships and to constrain ship procurement costs,” he wrote.
Legislators on Capitol Hill have expressed concern over the affordability of the 313-ship plan.
“Even by conservative estimates, the plan will require a sizeable increase in the shipbuilding account compared to historic funding levels. And we all know that without an increase in the top line, this increase must come at the expense of something else,” said Rep. Duncan Hunter, R-Calif., chairman of the House Armed Services Committee.
When reporters asked about the need to increase the Navy’s budget in order to support the long-term shipbuilding plan, Mullen responded, “I don’t anticipate a lot more money coming into the top line.” The budget request for fiscal year 2007 is $127 billion, which includes $18 billion for the Marine Corps.
Mullen said he expects the shipbuilding account to grow to $13.5 billion in the next few years—even as early as 2008—and that the money would come from within the Navy.
“But I won’t be able to pay for it out of readiness, and I won’t be able to pay for it out of the people side,” he told reporters.
Rear Adm. Stan Bozin, director of the Navy’s budget office, told reporters that the service “did not reduce manpower to create funding for other areas.” The Navy, he said, is focused on having the right amount of manpower for the force, and if the personnel reduction generated savings, then that would be utilized “across the board.”
“We need to keep our manpower costs down; we need to keep our [operation and maintenance] costs down, so we have the money for the investment capability that we’ve outlined,” he added.
Further hampering the affordability issue is that the price tag for shipbuilding, in general, has been increasing.
Up through the last budget, and excluding aircraft carriers, the average cost of a ship has been $1.4 billion, says Work. Based on that average, a budget of $13.4 billion would allow the Navy to purchase 9.6 ships each year—a number that would keep the fleet numbers on course for the service’s goal of 313 total vessels.
The 2007 budget supports acquisition of seven new ships. Mullen said that he wants ship procurement to rise to nine to 10 ships, and, in some years, above that level.
But with several advanced technology ships, such as the DD(X) and the Virginia-class submarines, pushing into several billions of dollars each, the number of new ships the force can afford from year to year decreases and puts the service in danger of having a higher attrition rate than it can replace, said Work.
“The dirty little secret in the Navy’s 313-ship plan is, every single one of those ships has to remain in service for the full years of expected service life … That hasn’t happened in decades,” he said. For example, the Navy’s first five Ticonderoga-class cruisers left service before they reached the end of their 35-year service life. In addition, the Navy also is getting rid of its submarines much sooner than 33 years, he said.
Even if those ships are retained for the full expected service life, the force also must replace them one for one, otherwise the whole plan starts heading far south, said Work.
Defense watchdogs have expressed concern over that very issue in recent years. The rate of Navy shipbuilding since the early 1990s has been below the so-called steady-state replacement rate for a fleet of about 300 ships, wrote O’Rourke in his report.
Of particular concern is the submarine fleet.
“We have spent so many years not buying many submarines that we now need to go to two per year by fiscal year ‘12 to avoid going below 40 submarines,” said O’Rourke.
The Navy’s 30-year plan states a goal of a fleet of 48 submarines with the intention of procuring two submarines per year beginning in 2012. But O’Rourke pointed out that even if the service were to begin procuring two submarines a year in 2007, there would be an interval of eight years during which the number of attack submarines would fall below a total of 48.
To minimize that gap, critics want the service to begin procuring the Virginia-class submarines sooner, but the Navy’s chief officer has indicated an alternate plan.
“Will I support additional money in ’07 to support a submarine in ’09? The answer to that is no,” Mullen told reporters. “It’s not part of the plan. I’ve said fiscal year ’12 for a very specific reason. It’s what I think we can do.”
The Virginia-class submarine costs $2.4 billion, said Robert A. Hamilton, spokesman for General Dynamics Electric Boat.
In order to afford building two of those submarines per year, Mullen said each boat must cost $2 billion apiece. He pointed out that procuring two submarines in 2009 would impact “pretty severely” on the budget.
According to the shipbuilder, however, the cost will not come down until the Navy ramps up production. “One of the problems is you see fewer and fewer subs being built. That alone drives the cost up. The only way down to $2 billion is through building two per year,” Hamilton said.
Warnings about the force structure problem for the underwater fleet began surfacing in 1995, and they are harbingers of what could happen to the Navy’s surface combatants, said O’Rourke.
“As a result of past decisions, we might now be starting on the same path with cruisers and destroyers,” said O’Rourke.
The Navy is planning for a fleet of 88 cruisers and destroyers. But based upon the 30-year shipbuilding plan, surface combatant numbers will fall below that level and will never become replenished, asserted O’Rourke.
During the first 17 years of the plan, O’Rourke said the Navy would build 1.5 cruisers or destroyers a year. After that, the service plans to ratchet up to building two per year. But, explained O’Rourke, those numbers don’t add up to a steady-state level of 2.5 ships a year; they only average one and three-quarter ships a year.
“In consequence, the Navy could fall below 88 and will never get back to 88,” he said.
The Defense Department, notably, did not endorse the Navy’s 313-ship plan in the quadrennial defense review. Consequently, there will be continued ambiguity in the future size and structure of the fleet as the service pursues its shipbuilding goals, said O’Rourke.
“It has the potential to extend rather than end the uncertainty that Congress and industry have been contending with in trying to understand where the Navy is going,” he said.
The lack of a Pentagon endorsement could mean two things: the comptroller’s office may believe that the plan is not affordable and does not want to commit to a pattern of spending, or Defense Department policy officials might disagree with the number of ships.
In various public speeches and media forums, Navy officials exuded confidence in the long-term shipbuilding plan.
“Clearly, you got to have a plan. You got to have a place to start from. I’m committed to this shipbuilding plan,” Mullen told National Defense.