Shipbuilding Accounts Vulnerable to Budget Woes

By Jon Harper
Extended budget freezes would hit Navy shipbuilding accounts particularly hard, according to a September report by the Congressional Research Service.

If Congress persists in funding the Defense Department through continuing resolutions, it would freeze shipbuilding money at fiscal year 2015 levels — about $16 billion. For fiscal year 2016, the Pentagon requested $16.6 billion. 

Continuing resolutions complicate procurement for all the services by prohibiting new program starts, procurement quantity increases and the signing of new multiyear procurement contracts. But they are especially problematic for Navy shipbuilding — known in budget circles as Shipbuilding and Conversion, Navy (SCN) — because those programs are funded at the line-item level rather than the account level like other Defense Department acquisitions, noted the CRS report titled, “Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress.”

“This can lead to line-by-line misalignments (excesses and shortfalls) in funding for SCN-funding programs, compared to the amounts those programs received in the prior year,” the report said, adding that the restrictions could also force the Navy to divide contracts into multiple actions, potentially increasing the final price tag by reducing economies of scale and boosting administrative costs.

According to a Navy paper provided to the research organization in September, a full-year continuing resolution in fiscal year 2016 would create a $4.1 billion shortfall for shipbuilding programs with requested funding levels higher than those enacted in 2015. It would also result in $3.4 billion in excess funding for programs that were slated to receive less money in 2016 than they did the year before.

The Navy reported that the planned new starts affected by a year-long continuing resolution would include: the TAO-X oiler; the aircraft carrier USS Enterprise (the first increment of advanced procurement funding for the new ship has been requested for fiscal year 2016); and the refueling complex overhaul of the aircraft carrier USS George Washington.

The DDG-51 destroyer, littoral combat ship, LPD-17 amphibious ship, joint high speed vessel and ship-to-shore connector programs would all be affected by prohibitions on quantity increases in fiscal year 2016, the Navy said.

The CRS report notes that these looming problems could be avoided or mitigated if continuing resolutions included special provisions that protect shipbuilding programs or gave the Defense Department latitude to reprogram and transfer funds.

Topics: Defense Department, DOD Budget, Shipbuilding

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