FEATURE ARTICLE

December 2005

Navy Must Close Budget Gap To Build Future Fleet

By Grace Jean

Amid budget constraints and rising shipbuilding costs, the Navy faces a significant challenge in building its future force, according to naval analysts.

There’s some expectation that there will be a “very substantial gap,” measured in billions of dollars, between the costs of new ships and the Navy’s procurement budgets, said Ronald O’Rourke, a naval analyst for the Congressional Research Service.

The Navy’s annual shipbuilding budget normally ranges from $8 billion to $12 billion, said analysts. But some of the advanced ships that the Navy wants cost upwards of $2 billion each.

The Navy has proposed new acquisition strategies or alternative funding mechanisms to address the budget shortfalls, but these only “tend to help at the margin,” O’Rourke said at a symposium of the U.S. Naval Institute, in Virginia Beach, Va.

O’Rourke said the Navy must make difficult choices.

“These are choices in terms of reducing the planned size of the fleet, the planned number of ships you want to maintain, or scoping down the designs of the ships that you now have planned for procurement— taking things off the ships, making things smaller, or less capable,” he said.

Part of the problem is that the Navy has lacked a clear force structure plan, said O’Rourke. In March, the Navy submitted its 30-year ship building plan to Congress, but for the first time in history, gave a range, instead of a solid number, for its projected fleet size.

“The Navy said it would be comfortable going down to 260 ships and up to 325,” said Robert Work, senior defense analyst for Center for Strategic and Budgetary Assessments. “I don’t think it needs to grow substantially. It needs to change in character.”

The current fleet is at 281 ships.

At a media roundtable discussion in October, Adm. Michael G. Mullen, who became chief of naval operations in July, declined to answer any specifics on the size of the future fleet because of the ongoing Quadrennial Defense Review. However, he did comment on the 2006 budget, which includes funding for four new ships.

“Four ships in the ’06 budget on the Hill is as low as we’ve been, and I’m not anxious to stay there,” he told reporters.

Those four ships are the Virginia Class submarine, the LPD-17 San Antonio Class amphibious transport dock ship, the Littoral Combat Ship and the T-AKE dry cargo and ammunition ship.

In 2005, the Navy funded eight new ships.

Speaking before an audience comprising industry and military in Panama City, Fla., during an expeditionary warfare conference sponsored by the National Defense Industrial Association, Mullen gave a slightly clearer picture of his intentions for the future fleet.

“We’re at 281 ships today. We’ve come down, and I believe that number is projected to go up, and we need to sustain that projection in a positive direction,” he said.

“One thing that people will be looking for coming out of the QDR is an unambiguous, that is, a fairly precise ship force structure plan, rather than a range that we’ve been operating with for the last several months or the even more ambiguous situation that we had, going back a year or two before that,” said O’Rourke.

Until the QDR comes out in early February, analysts can only speculate about the size of the fleet.

The Defense Department intends to make the “global war on terror” more important in its priorities and also wants to hedge against a rising China, according to analysts.

“The Navy really worries about a rising China. That would be a big navy war,” said Work.

“The Navy… faces a planning challenge in trying to balance the needs of things for [its] role in the [global war on terror] versus the downstream potential challenge of countering improved Chinese maritime military forces,” said O’Rourke. “The things you would want to have for these two sets of challenges are not identical. There are some overlaps between them but there are also differences between them, and in a constrained funding environment, I think it is going to be a challenge for the Navy to figure out what the balance of resources is that it’s going to put into each of those two areas of concern,” he said.

If the QDR places greater focus on China, then plans for building the new destroyer, the DD(X), may become really important, said Work. But if the war on terror takes precedence, then the Littoral Combat Ship (LCS), may well receive more attention.

The DD(X) already has been at the center of much debate because of its high cost. Estimates range from $2 billion to more than $3 billion per ship.

The Navy plans to purchase one DD(X) per year, for a total production of 23 to 30 DD(X) and CG(X), the force’s next-generation cruiser.

O’Rourke sees two problems with that plan.

“The first issue that arises in connection with a one per year rate is whether you are introducing the most critically needed technologies on those ships into the fleet in sufficient numbers, in a timely enough way,” he said. “The second issue is that if you complete a 23 to 30 ship program at one per year, by the time you complete that program, so many of your older service combatants will have left service.”

A possible solution, O’Rourke said, is to look at a reduced cost alternative to the current ship design. He said the Navy ought to consider building a ship around the most critically desired capabilities while cutting costs by 25 to 35 percent.

“Anything less than that, it’s not worth the effort,” he said.

The Navy should consider buying more LCS ships with the money it would save from cutting DD(X), said Work.

“The LCS looks better for what we’re doing right now, so why not build LCS first and hold off on DD(X) until the threat for these bigger ships is more clearly defined,” he said.

The cost of building the hull of LCS is projected at $220 million. It would be equipped with one of three $80 million modules designed to be interchangeable for different missions.

“Now that we’re fighting a global war on terrorism, you need a ship that is fast in shallow draft, because that’s where the terrorists will be. This ship seems very useful in that role, and it’s designed to be modular, so that if one day you’re chasing terrorists, and suddenly you have to shift over to do a power projection operation and sweep mines somewhere else, you just lift out the module, put in another module and away it goes,” said Work.

Lt. Gen. James Mattis, commanding general of the Marine Corps Combat Development Command, told National Defense that based upon his experiences, he would argue for the Littoral Combat Ship as well.

“There were things we were doing in the north Arabian Sea—I was also responsible for the ships of Task Force 58, involved in some maritime ops there—plus the asymmetric dangers, as we closed on the coast every night, I would loved to have LCSs there,” said Mattis.

Two LCS prototypes are currently in production.

However, an industry analyst who spoke on condition of anonymity said that the first LCS has come in at more than twice the budgeted price, at $900 million.

The fate of the Navy’s fleet of 12 aircraft carriers also will be determined by the QDR. The former CNO, Adm. Vernon Clark, supported the retirement of the 37-year-old USS John F. Kennedy carrier earlier this year. His successor, Mullen, has said that he would be fine with only 11 aircraft carriers in the fleet.

Losing a carrier would not reduce the strike power of the fleet, said Work.

The Navy has maintained a fleet of 12 aircraft carriers since the end of the Cold War, but retiring the JFK could save the force $1.2 billion—an amount it could spend on new platforms.

“We tend to think of platforms of being real important at the high end. And at the low end, people are the platform,” said Rear Adm. William E. Gortney, director for operations, plans and policy, U.S. Fleet Forces Command. “Let’s not get enamored with the platform.”

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