Navy Ship Acquisition: Options for Lower-Cost Ship Designs--Issues for Congress
Navy Ship Acquisition:
Options for Lower-Cost Ship Designs —
Issues for Congress
Updated December 11, 2006
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Navy Ship Acquisition: Options for
Lower-Cost Ship Designs — Issues for Congress
Summary
Rising procurement costs for Navy ships are a matter of concern for both Navy
officials and Members of Congress who track Navy-related issues. The
Congressional Budget Office (CBO) estimates that executing the 30-year
shipbuilding plan that the Navy submitted to Congress in early 2006 may require
annual funding levels about 33% higher than the Navy plans, and about 76% more
than the Navy has received on average in recent years. The issue for Congress is how
to respond to rising Navy ship procurement costs.
Aside from reducing planned ship procurement rates, one option would be to
reduce Navy ship procurement costs by shifting from currently planned designs to
designs with lower unit procurement costs. Lower-cost ship designs have been
proposed in recent reports by the CBO, Department of Defense’s Office of Force
Transformation (OFT), and the Center for Strategic and Budgetary Assessments
(CSBA).
Options for lower-cost submarines include a non-nuclear-powered submarine
and a reduced-cost SSN design using new technologies now being developed.
Options for lower-cost aircraft carriers include a medium-sized, conventionally
powered carrier and a small, high-speed carrier. Options for lower-cost major surface
combatants include a new-design 11,000-ton cruiser-destroyer, a 6,000-ton frigate
(FFG(X)), or a lower-cost gunfire support ship. Options for a lower-cost smaller
surface combatant include a 1,000- or 100-ton surface ship.
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364). Section 121
of P.L. 109-364 (conference report H.Rept. 109-702 of September 29, 2006)
authorizes 4-year incremental funding for the CVN-21 class aircraft carriers CVN-78,
CVN-79, and CVN-80. Section 122 establishes unit procurement cost caps for CVN-
21 class aircraft carriers. Section 123 increases a previously legislated procurement
cost cap for the CVN-77 aircraft carrier. Section 125 establishes a unit procurement
cost cap for LHA(R) amphibious assault ships. Section 126 establishes unit
procurement cost caps for four LPD-17 class amphibious ships. Section 215
authorizes $4 million for implementing or evaluating Navy shipbuilding technology
proposals under the Defense Acquisition Challenge Program. Section 1016 directs
the Navy to conduct an assessment of naval vessel construction efficiencies and of
the effectiveness of special contractor incentives. The sections establishing new
procurement cost caps allow the caps to be adjusted upward for inflation and other
factors.
This CRS report will be updated when events warrant.
Contents
Introduction and Issue For Congress...................................1
Background ......................................................2
Recent Reports Proposing Lower-Cost Designs......................2
Basic Approaches For Arriving At Lower-Cost Designs................2
Options for Lower-Cost Ships....................................3
Attack Submarines.........................................3
Aircraft Carriers...........................................6
Larger Surface Combatants.................................11
Smaller Surface Combatants................................13
Issues For Congress...............................................14
Cost .......................................................14
Development And Design Cost..............................14
Procurement Cost.........................................14
Life-Cycle Operation and Support (O&S) Cost..................15
End-Of-Life Disposal Cost.................................16
Capability ...................................................17
Payload .................................................17
Detectability and Survivability..............................18
Mobility ................................................19
Ship Numbers In Naval Operations...........................20
Technical Risk...............................................21
Homeporting Arrangements.....................................22
Impact On Shipbuilding Industrial Base...........................22
Total Volume Of Work....................................22
Distribution Of Work Among Shipyards.......................22
Legislative Activity For FY2007.....................................24
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364).........24
House ..................................................24
Senate ..................................................27
Conference Report........................................30
FY2007 Defense Appropriations Act (H.R. 5631/P.L. 109-289)........32
House ..................................................32
Appendix A: Other Options for Responding to Rising Ship Costs..........33
List of Tables
Table 1. Matrix of Notional Options For Aircraft Carriers.................10
Navy Ship Acquisition: Options for
Lower-Cost Ship Designs —
Issues for Congress
Introduction and Issue For Congress
Rising procurement costs for Navy ships are a matter of concern for both Navy
officials and Members of Congress who track Navy-related issues. The
Congressional Budget Office (CBO) estimates that executing a 30-year Navy
shipbuilding plan submitted to Congress in early 2006 may require annual funding
levels about 33% higher than the Navy plans, and about 76% more than the Navy has
received on average in recent years.1 Combined with constraints on ship-
procurement funding, rising ship procurement costs have caused the Navy in recent
years to reduce planned ship procurement rates. Some Members of Congress have
expressed concern about the effects these reduced rates would have on the future size
of the Navy and on the shipyards that build the Navy’s ships.
The issue for Congress is how to respond to rising Navy ship procurement costs.
Congress’s decisions on this issue could affect future Navy capabilities, Navy
funding requirements, and the shipbuilding industrial base.
Aside from reducing planned ship procurement rates, options for responding to
rising Navy ship procurement costs include the following:
!increasing annual Navy ship-procurement funding;
!changing the way Navy ships are funded in the budget;
!making greater use of multiyear procurement (MYP) in Navy ship-
procurement;
!changing the acquisition strategy for building certain Navy ships;
!taking steps to reduce the amount of shipyard fixed overhead costs
that are incorporated into the procurement costs of Navy ships;
!improving the operating efficiency of yards building Navy ships;
!building ships without some of their planned equipment (or with less
expensive substitute equipment); and
!building ships in foreign shipyards where construction costs may be
lower to due lower wages and material prices or other factors.
For additional comments relating to these options, see Appendix A.
1 For details on the CBO estimate, see CRS Report RL32665, Navy Force Structure and
Shipbuilding Plans: Background and Issues for Congress, by Ronald O’Rourke.
An additional option, particularly if the above options are not implemented or
prove insufficient, would be to reduce Navy ship procurement costs by shifting from
currently planned designs to designs with lower unit procurement costs. This report
focuses on this option.
The following section of the report provides background information on
notional options for lower-cost attack submarines, aircraft carriers, larger surface
combatants, and smaller surface combatants. The section that follows discusses
issues that Congress may consider in assessing the merits — the potential advantages
and disadvantages — of shifting to lower-cost designs. The final section of the report
reviews recent legislative activity relating to rising Navy ship procurement costs.
Background
Recent Reports Proposing Lower-Cost Designs
Lower-cost designs for attack submarines, aircraft carriers, larger surface
combatants, and smaller surface combatants have been proposed in recent reports on
the future of the Navy by the CBO,2 DOD’s Office of Force Transformation (OFT),3
and an independent policy-research organization called the Center for Strategic and
Budgetary Assessments (CSBA).4 Several of the lower-cost ship designs discussed
below are taken from these reports.
Basic Approaches For Arriving At Lower-Cost Designs
Options for lower-cost Navy ship designs can be generated by starting with
currently planned Navy ship designs and making one or more of the following
changes:
!Reducing ship size. For a given type of ship, procurement cost
tends to be broadly proportional to ship size. Reducing ship size can
thus reduce procurement cost. The Navy can be viewed as using this
strategy for the Littoral Combat Ship (LCS), which is to be
considerably smaller than existing major Navy surface combatants,
but the strategy can be applied more widely.
2 Congressional Budget Office, Options for the Navy’s Future Fleet, May 2006, pp. 56 and
57 (Box 3-1); and Congressional Budget Office, Budget Options, Feb. 2005, pp. 18-19; and
Congressional Budget Office, Transforming the Navy’s Surface Combatant Force, Mar.
respectively.)
3 Department of Defense, Office of the Secretary of Defense, Alternative Fleet Architecture
Design, 2005. (Hereafter cited as OFT report.)
4 Robert O. Work, Winning the Race: A Naval Fleet Platform Architecture for Enduring
Maritime Supremacy, Center for Strategic and Budgetary Assessments, Washington, 2005.
(Hereafter cited as CSBA report.)
!Shifting from nuclear to conventional propulsion. This is a
strategy that can be considered for the Navy’s submarines and
aircraft carriers, whose current designs are nuclear-powered.
Equipping a Navy ship with a conventional (i.e., fossil-fuel)
propulsion plant rather than a nuclear propulsion plant can reduce
the ship’s procurement cost by several hundred million dollars.
!Shifting from a hull built to military survivability standards to
a hull built to commercial-ship survivability standards. A hull
built to military survivability standards has more armoring and
internal compartmentalization than a hull built to commercial-ship
standards, making it more expensive to build than a commercial-like
hull. The Navy is considering building ships for its planned
Maritime Prepositioning Force (Future), or MPF(F), squadron, with
commercial-like hulls, but the strategy can be applied more widely.
!Using a common hull design for multiple ship classes. Using a
common hull design for multiple ship classes avoids the cost of
designing a new hull for each new class of ship, and permits ship
classes sharing a common hull to benefit from improved production
economies of scale regarding their hulls. The Navy plans to use the
hull design for its planned DDG-1000 (formerly DD(X)) destroyer
as the hull for its planned CG(X) cruiser, but the strategy can be
applied more widely. The OFT report proposes building four large
surface ships — an aircraft carrier, a missile-and-rocket ship, an
amphibious assault ship, and a small-craft “mother” ship — using a
common merchant-like hull. The CSBA report proposes using hull
design for the Navy’s LPD-17 class amphibious ship for building
other kinds of ships.
Most of the lower-cost ship options presented below use one or more of these
four approaches. Information on the estimated procurement costs of the lower-cost
designs is presented when available. Lower-cost ship designs using these approaches
will in most cases be individually less capable than the currently planned ship designs
from which they are derived, and this is one of the assessment factors that is
discussed in the final section of the report.
Options for Lower-Cost Ships
For each category of ship below, the discussion describes the current design and
then outlines potential lower-cost options. The discussions are descriptive only; the
potential advantages and disadvantages of shifting to the lower-cost designs are
discussed in the final section of the report.
Attack Submarines.
Current design:
!Virginia (SSN-774) class nuclear-powered submarine
Potential lower-cost options:
!AIP-equipped non-nuclear-powered submarine
!Reduced-cost “Tango Bravo” nuclear-powered submarine
Virginia-Class (SSN-774) Nuclear-Powered Submarine.5 The Navy is
currently procuring one Virginia (SSN-774) class nuclear-powered attack submarine
(SSN) per year. Each submarine currently costs about $2.6 billion to procure. The
FY2007-FY2011 Future Years Defense Plan (FYDP) maintains Virginia-class
procurement at one per year through FY2011.
The Navy is proposing to maintain in coming years a fleet of 313 ships,6
including 48 SSNs. Fully supporting the Navy’s reportedly planned force of 48
boats could involve procuring a total of 35 boats during the 16-year period7
FY2007-FY2022, or an average of about 2.2 boats per year. A continuation beyond
FY2011 of the current one-per-year rate, in contrast, could reduce the SSN force to
fewer than 30 boats by about 2030, before recovering to a steady-state level of 33
boats. 8
One option for a lower-cost attack submarine would be a non-nuclear-powered
submarine equipped with an air-independent propulsion (AIP) system that could be
procured in tandem with Virginia-class SSNs. Another option would be a reduced-
cost SSN using new “Tango Bravo” technologies being developed by the Navy and
the Defense Advanced Research Projects Agency (DARPA) that would be procured
as a successor to the Virginia-class design.
AIP-Equipped Non-Nuclear-Powered Submarine. Non-nuclear-powered
submarines are less expensive than nuclear-powered submarines not only because of
the difference in propulsion systems, but also because non-nuclear-powered
submarines tend to be smaller than nuclear-powered submarines.
The OFT report proposed a future Navy consisting of several new kinds of
ships, including air-independent propulsion (AIP)-equipped non-nuclear-powered
submarines.9 An AIP system such as a fuel-cell or closed-cycle diesel engine extends
the stationary or low-speed submerged endurance of a non-nuclear-powered
submarine. AIP-equipped submarines are currently being acquired by certain foreign
navies.
5 For more on the Virginia-class program, see CRS Report RL32418, Navy Attack
Submarine Force-Level Goal and Procurement Rate: Background and Issues for Congress,
by Ronald O’Rourke. (Hereafter cited as CRS Report RL32418.)
6 For additional discussion, see CRS Report RL32665, op cit.
7 See CRS Report RL32418.
8 Ibid.
9 See also Christopher J. Castelli, “Defense Department Nudges Navy Toward Developing
Diesel Subs,” Inside the Navy, Mar. 7, 2005; Dave Ahearn, “Lawmakers Assail Navy
Budget, But Eye Non-Nuke Subs,” Defense Today, Mar. 3, 2005.
AIP submarines could be procured in tandem with Virginia-class boats. One
possibility, for example, would be to procure one Virginia-class boat plus one or
more AIP submarines each year.
The OFT report recommended substituting four AIP submarines for one
Virginia-class submarine in each carrier strike group, suggesting that four AIP
submarines might be procured for the same cost ($2.4 billion to $3.0 billion in the
FY2006-FY2011 FYDP) as one Virginia-class submarine. This suggests an average
unit procurement cost for an AIP submarine of roughly $600 million to $750 million
each. Although AIP submarines being built by other countries might cost this much
to procure, a U.S. Navy AIP submarine might be built to higher capability standards
and consequently cost more to procure, possibly reducing the equal-cost ratio of
substitution to three to one or possibly something closer two to one. If so, then the
annual cost of procuring one Virginia-class SSN plus one, two, or perhaps three AIP
submarines could be equal to or less than that of procuring two Virginia-class boats
per year.
Reduced-Cost “Tango Bravo” SSN. The Virginia class was designed in
the early to mid-1990s, using technologies that were available at the time. New
technologies that have emerged since that time may now permit the design of a new
SSN that is equivalent in capability to the Virginia class design, but substantially less
expensive to procure. The Navy and DARPA are now pursuing the development of
these technologies under a program called Tango Bravo, a name derived from the
initial letters of the term “technology barriers.” As described by the Navy,
TANGO BRAVO will execute a technology demonstration program to enable
design options for a reduced-size submarine with equivalent capability as the
VIRGINIA Class design. Implicit in this focus is the goal to reduce platform
infrastructure and, ultimately, the cost of future design and production.
Additionally, reduced platform infrastructure provides the opportunity for greater
payload volume.
The intent of this collaborative effort is to overcome selected technology barriers
that are judged to have a significant impact on submarine platform infrastructure
cost. Specifically, DARPA and the Navy will jointly formulate technical
objectives for critical technology demonstrations in (a) shaftless propulsion, (b)
external weapons, (c) conformal alternatives to the existing spherical array, (d)
technologies that eliminate or substantially simplify existing submarine systems,10
and (e) automation to reduce crew workload for standard tasks.
Some Navy and industry officials believed in 2004 that if these technologies are
developed, it might be possible to design a new submarine equivalent in capability
to the Virginia class, but with a procurement cost of perhaps 75% of the Virginia
10 Navy information paper on advanced submarine system development provided to CRS by
Navy Office of Legislative Affairs, Jan. 21, 2005. For additional discussion of the Tango
Bravo program, see Aarti Shah, “Tango Bravo Technology Contract Awards Expected This
Spring,” Inside the Navy, Mar. 14, 2005; Andrew Koch, “US Navy In Bid To Overhaul
Undersea Combat,” Jane’s Defence Weekly, Mar. 9, 2005, p. 11; Lolita C. Baldor, “Smaller
Subs Could Ride Waves Of The Future,” NavyTimes.com, Feb. 4, 2005; Robert A.
Hamilton, “Navy, DARPA Seek Smaller Submarines,” Seapower, Feb. 2005, pp. 22, 24-25.
class. Such a submarine could more easily be procured within available resources
at a rate of two per year.
Consequently, as an alternative to the option of procuring AIP submarines,
another option would be to start design work now on a new “Tango Bravo” SSN.
The idea of designing a submarine with capability equivalent to that of Virginia-class
and a procurement cost that is less than that of the Virginia class has been discussed
by Navy and industry officials. Under this option, Virginia-class procurement could
continue at one per year until the Tango Bravo submarine was ready for procurement,
at which point Virginia-class procurement would end, and procurement of the Tango
Bravo submarine would begin.
If design work on a Tango Bravo submarine is begun now and pursued in a
concerted manner, the first Tango Bravo submarine might be ready for procurement
a few years from now.
Aircraft Carriers.
Current design:
!Large nuclear-powered carrier, as exemplified by the George H.W.
Bush (CVN-77) and CVN-78
Potential lower-cost options:
!Medium-sized, conventionally powered carrier based on LHA(R)
amphibious assault ship design
!Medium-sized, conventionally powered carrier based on a
commercial-like hull design
!Small carrier based on high-speed surface effect ship (SES)/
catamaran hull design
CVN-77 and CVN-78.11 The Navy is currently building large nuclear-powered
aircraft carriers (CVNs). These ships have a full load displacement of about 100,000
tons and can embark an air wing of about 75 conventional takeoff and landing
(CTOL) airplanes and helicopters.
The George H. W. Bush (CVN-77), the last Nimitz (CVN-68) class carrier, was
procured in FY2001 at a total cost of $4.975 billion, but the ship’s estimated
construction cost has since risen to about $6.1 billion. The ship is scheduled to enter
service in 2008.
The FY2007-FY2011 FYDP proposes to procure the next aircraft carrier, called
CVN-78, in FY2008. CVN-78 is the lead ship of a planned new carrier class called
the CVN-21 class. (CVN-21 simply means aircraft carrier for the 21st Century.) The
Navy estimates CVN-78’s procurement cost at $10.5 billion, including $2.4 billion
in detailed design and nonrecurring engineering (DD/NRE) costs and $8.1 billion in
11 For more on CVN-77 and CVN-78, see CRS Report RS20643, Navy CVN-21 Aircraft
Carrier Program: Background and Issues for Congress, by Ronald O’Rourke.
hands-on construction costs.12 Advance procurement funding for CVN-78 has been
provided since FY2001. If the ship is procured in FY2008, it would enter service in
The next carrier, called CVN-79, is currently planned for procurement in
FY2012. If the ship is procured in FY2012, it would enter service around 2019. The
next carrier after that, CVN-80, is planned for procurement in FY2016.
One option for a lower-cost aircraft carrier involves designing a medium-sized,
conventionally powered aircraft carrier based on the design for a new amphibious
assault ship called LHA-6 or the LHA Replacement ship (LHA(R)), that is currently
being developed by the Navy.13 A second option involves designing a medium-sized,
conventionally powered aircraft carrier based on a commercial-like hull design. A
third option involves designing a small, high-speed, conventionally powered aircraft
carrier built on a surface effect ship (SES)/catamaran hull design.14
Medium-Sized Carrier Based on LHA(R) Design. The CSBA report
recommended procuring CVN-21-class aircraft carriers as needed to maintain a force
of 10 large carriers (two ships less than the current 12-ship force). It also
recommended procuring an additional four medium-sized, conventionally powered
aircraft carriers based on the LHA(R) design. This ship might displace about 40,000
tons and embark an air wing of perhaps about two dozen vertical/short takeoff or
landing (VSTOL) versions of the F-35 Joint Strike Fighter (JSF). Its unit
procurement cost might be roughly $3 billion.15
Medium-Sized Carrier Based on Commercial-Like Hull. The OFT
report recommended procuring a medium-sized carrier based on a relatively
inexpensive, commercial-like hull design developed in 2004 for the Navy’s Maritime16
Prepositioning Force (Future), or MPF(F), analysis of alternatives. This carrier,
which would have a full load displacement of about 57,000 tons, would embark a
12 The total estimated acquisition cost of CVN-78, which also includes $3.2 billion in
research and development funding for the ship, is $13.7 billion.
13 Navy amphibious ships are given designations beginning with the letter L, which stands
for landing, as in amphibious landing. LHA can be translated as amphibious ship (L),
helicopter platform (H), assault (A). Navy LHAs and closely related ships designated LHDs
(the D standing for well deck, an opening in the stern of the ship for landing craft that the
LHAs also have) have flight decks that run the length of the ship, giving these ships an
aircraft-carrier-like appearance.
14 A surface effect ship is supported above the water by a cushion of air that is trapped
beneath the ship.
15 For more on the LHA(R), see CRS Report RL32513, Navy-Marine Corps Amphibious and
Maritime Prepositioning Ship Programs: Background and Oversight Issues for Congress,
by Ronald O’Rourke. (Hereafter cited as CRS Report RL32513.)
16 For more on the MPF(F) program, see CRS Report RL32513. The OFT report also
recommended using this same 57,000-ton hull as the basis for a missile-and-rocket ship, an
amphibious ship, and a small-combatant mother ship.
notional air wing of 36 manned aircraft — 30 Joint Strike Fighters (JSFs) and 6 MV-
This ship would be somewhat larger than the LHA(R)-based carrier
recommended in the CSBA report, and roughly the same size as the United
Kingdom’s new aircraft carrier design. (The LHA(R)-based ship and the UK carrier,
however, would use military hulls.) The OFT report recommended substituting two
of these 57,000-ton carriers for each of the Navy’s current large carriers, so that the
number of manned aircraft based at sea would remain about the same.
Small Carrier Using High-Speed SES/Catamaran Hull Design. As an
alternative to the 57,000-ton medium-sized carrier, the OFT report recommended
procuring a small, high-speed carrier displacing 13,500 tons that would use a surface
effect ship (SES)/catamaran hull. The ship was based on a design for an unmanned
aerial vehicle/unmanned combat aerial vehicle (UAV/UCAV) carrier that was
developed in 2000-2002 by a team at the Naval Postgraduate School.17 The OFT
report recommended using the ship to embark a notional air wing of 10 manned
aircraft — 8 JSFs and 2 MV-22s — and 8 UAVs, and have a maximum speed of 50
to 60 knots.
This ship would be slightly larger than Thailand’s 11,500-ton aircraft carrier,
which was commissioned in 1997. It would be smaller than Spain’s 17,000 aircraft18
carrier, which was based on a U.S. design and was commissioned in 1988, or the
UK’s three existing 20,600-ton carriers, which were commissioned between 1980
and 1985. The OFT-recommended ship would be much faster than the Thai,
Spanish, or existing UK carriers, or any other aircraft carrier now in operation. The
OFT report recommended substituting eight of these 13,500-ton carriers for each of
the Navy’s current large carriers, so that the number of manned aircraft based at sea
would remain about the same.
Additional Potential Options. Studies of aircraft carrier acquisition options
over the years have discussed many other potential designs, including the following:
!A large, conventionally powered carrier. Such a ship, which
might use the same hull design as CVN-78, might displace about
17 The design was developed by the Total Ship Systems Engineering group at the Naval
Postgraduate School under an effort called the Crossbow project. Within that project, the
carrier was referred to as Sea Archer. For more on the Sea Archer, see
[http://web.nps.navy.mil/~me/tsse/files/2001.htm]. See also Jason Ma, “Naval Postgraduate
School Issues Report on Crossbow Project,” Inside the Navy, Oct. 28, 2002; Randy Woods,
“Students Design Small, Fast Carrier At Projected Cost Of $1.5 Billion,” Inside the Navy,
Jan. 7, 2002. The latter article quoted the leader of the project as saying that if the ship’s
speed were reduced from 60 knots to 40 knots, the ship’s estimated procurement cost of $1.5
billion could be reduced substantially.
18 The U.S. design, which was called the Sea Control Ship, was never built for the U.S.
Navy.
conventionally powered carriers, which displace roughly 82,000 tons
and embark air wings similar to those embarked by the Navy’s large
nuclear-powered carriers. The ship might have a procurement cost
several hundred million dollars less than that of CVN-78.
!A medium-sized nuclear-powered carrier. Such a ship might be
based on the LHA(R) hull and use a half-sized version of the CVN-
78 nuclear propulsion plant.19 Like the CSBA-recommended
conventionally powered carrier based on the LHA(R) design, this
ship might displace about 40,000 tons and embark about two dozen
VSTOL JSFs. If the CSBA-recommended conventionally powered
carrier would cost roughly $3 billion, a nuclear-powered version
would cost more than $3 billion. The ship might be considered
broadly similar to the France’s nuclear-powered carrier, the Charles
de Gaulle, which was commissioned in 2001, displaces 42,000 tons,
and embarks an air wing of about 34 conventional takeoff and
landing (CTOL) airplanes and two helicopters.
!A very small, high-speed VSTOL carrier. The Naval War College
in 2000 developed a conceptual design for a very small, high-speed
VSTOL carrier with a displacement of about 4,000 tons, a maximum
speed of 60 knots, and an embarked air wing of about seven VSTOL
JSFs and two helicopters.20
Matrix of Possible Designs. Table 1 below shows how ship size,
propulsion type, and hull type create a matrix of notional aircraft carrier options,
including the large nuclear-powered carriers currently being procured and the
potential alternatives described above.
Medium-sized carriers of 40,000 to 70,000 tons might operate either VSTOL
or CTOL aircraft, though ships at the higher end of this size range might be able to
operate CTOL aircraft more easily or efficiently. Small carriers, because of their
shorter length, would likely be limited to VSTOL aircraft.
Although the table does not provide any examples of large or small
conventionally powered carriers using a commercial-like hulls, or any examples of
a small nuclear-powered carrier, such ships are possible. Regarding the possibility
of a small nuclear-powered carrier, the Navy between FY1957 and FY1975 procured
19 The nuclear propulsion plant planned for CVN-78, like those on almost all the Navy’s
nuclear-powered aircraft carriers, includes two nuclear reactors and two sets of associated
propulsion equipment. (The sole Navy carrier with a different propulsion plant arrangement
is the Enterprise [CVN-65], the Navy’s first nuclear-powered carrier, whose plant includes
eight smaller nuclear reactors.) A half-sized version of the CVN-78 plant would use one
reactor and one set of associated equipment.
20 Christian Bohmfalk, “War College Explores Notion of Small, Fast Aircraft Carrier
Fleets,” Inside the Navy, October 9, 2000.
a total of nine nuclear-powered cruisers with displacements ranging from about 9,000
tons to about 17,500 tons.21
The table also does not provide examples of ships combining a nuclear
propulsion plant with a commercial-like hull. Although a small number of nuclear-
powered commercial cargo ships were built years ago, a combat ship such as an
aircraft carrier that combined a relatively expensive nuclear propulsion plant with a
commercial-like hull having relatively limited survivability features might be viewed
as a contradictory design.
Table 1. Matrix of Notional Options For Aircraft Carriers
Ship sizeMilitary hullCommercial-like hull
(full loadNuclear-ConventionallyNuclear-Conventionally
displacement) pow ered pow e red pow ered pow ered
Large CTOLCVN-77 orShip broadly similar
carrier (~80,000CVN-78to CV-63 and
to ~100,000tons)CV-67
Medium CTOLCarrier based onCarrier based on57,000-ton
or VSTOLLHA(R) designLHA(R) designcarrier (OFT)
carrier (~40,000(CSBA) or ship(CSBA) or ship
to ~70,000 tons)similar to newsimilar to new UK
French carriercarrier design
Small VSTOL13,500-ton high-speed
carrier (~4,000carrier (OFT) or ship
to ~30,000 tons)similar to Spanish,
Thai, or existing UK
carriers
Source: Table prepared by CRS based on Navy data, OFT and CSBA reports, and Jane’s Fighting
Ships 2004-2005.
Notes: CTOL = conventional takeoff land landing aircraft. VSTOL = vertical/short takeoff and
landing aircraft.
21 The nine cruisers — three one-of-a-kind ships, a class of two ships, and a class of four
ships — entered service between 1961 and 1980 and were decommissioned between 1993
and 1999. Procurement of nuclear-powered cruisers was halted after FY1975 due largely
to a desire to constrain the procurement costs of future cruisers. In deciding in the late
1970s on the design for the new cruiser that would carry the Aegis defense system, two
nuclear-powered design options were rejected in favor of the option of placing the Aegis
system onto the smaller, conventionally powered hull developed for the Spruance (DD-963)
class destroyer. The resulting design became the Ticonderoga (CG-47) class Aegis cruiser.
The first Aegis cruiser was procured in FY1978. Although nuclear power was abandoned
for Navy cruisers, it was retained for the Navy’s large aircraft carriers because adding
nuclear power increases total ship procurement cost in percentage terms less for a large
carrier than for a cruiser, and because the mobility advantages of nuclear power for a surface
ship (see the discussion on mobility in the next section of the report) were viewed as
important for carriers in light of their combat capabilities and limited numbers. Some
observers believe that if oil prices are deemed likely to remain high, the option of nuclear-
powered surface combatants might bear revisiting.
Larger Surface Combatants.
Current design:
!14,500-ton DDG-1000 (formerly DD(X)) destroyer/CG(X) cruiser
Potential lower-cost options:
!Roughly 11,000-ton cruiser-destroyer (SCD)
!Roughly 6,000-ton frigate (FFG(X))
!Low-cost gunfire support ship
14,500-Ton DDG-1000 Destroyer/CG(X) Cruiser.22 The Navy currently
plans to procure DDG-1000 destroyers and, starting in FY2011, CG(X) cruisers. The
CG(X) would be based on the DDG-1000 design and could be somewhat larger and
more expensive than the DDG-1000. The Navy’s FY2007 budget requests
procurement funding for the first two DDG-1000s, both of which are to be procured
in FY2007 using split funding (i.e., incremental funding) across FY2007 and
FY2008.
The DDG-1000 would have a full-load displacement of about 14,500 tons,
which would make it roughly 50% larger than the Navy’s current 9,000-ton Aegis
cruisers and destroyers, and larger than any U.S. Navy destroyer or cruiser since the
nuclear-powered cruiser Long Beach (CGN-9), which was procured in FY1957.
The Navy estimates that the first two DDG-1000s would cost about $3.3 billion
each, and that the third, fourth, and fifth ships would cost an average of about $2.5
billion each.
The Congressional Budget Office believes and the Cost Analysis Improvement
Group (CAIG) within the Office of the Secretary of Defense (OSD) reportedly
believes, that DDG-1000 procurement costs may be considerably higher than the
Navy estimates.23
The Navy originally envisaged procuring a total of 16 to 24 DDG-1000s, but
now plans, as part of its proposed 313-ship fleet, to procure a total of 7. The
proposed 313-ship fleet also includes 19 CG(X)s. The FY2006-FY2011 FYDP
submitted to Congress in February 2005 reduced planned DDG-1000 procurement
to one per year for FY2007-FY2011, for a total of five ships through FY2009. The
FY2007-FY2011 FYDP maintains an average procurement rate of one DDG-1000
per year for the period FY2007-FY2011.
Options for a reduced-cost surface combatant include a roughly 11,000-ton
cruiser-destroyer, a roughly 6,000-ton frigate, and a lower-cost gunfire support ship
based on the basic LPD-17 amphibious ship hull design.
22 For more on the DDG-1000 and CG(X) programs, see CRS Report RL32109, Navy
DDG-1000 (DD(X)) and CG(X) Ship Acquisition Programs: Oversight Issues and Options
for Congress, by Ronald O’Rourke. (Hereafter cited as CRS Report RL32109.)
23 See CRS Report RL32109.
Roughly 11,000-Ton Cruiser-Destroyer Combatant (SCD). One option
for a lower-cost surface combatant would be a new-design ship of about 11,000 tons.
Such a ship would be roughly 25% smaller than the current DDG-1000 design,
roughly equal in size to two classes of nuclear-powered cruisers that the Navy24
procured in the 1970s, and about 1,800 tons larger than today’s Arleigh Burke
(DDG-51) class Aegis destroyers. Such a ship, which might be called the smaller
cruiser-destroyer (SCD) could:
!be intended as a replacement for either the CG(X) program or both
the DDG-1000 and CG(X) programs;
!incorporate many of the same technologies now being developed for
the DDG-1000 and CG(X);
!cost substantially less to procure than a DDG-1000 or CG(X);
!be similar to the DDG-1000 and CG(X) in terms of using a reduced-
size crew to achieve annual operation and support costs that are
considerably less than those of the current DDG-51 design;
!carry a payload — a combination of sensors, weapon launchers,
weapons, related computers and displays, aircraft, and fuel — that
is smaller than that of the DDG-1000 or CG(X), but greater than of
current Ticonderoga (CG-47) Aegis cruisers or DDG-51 class Aegis
destroyers..
A land-attack oriented version of the SCD could carry two Advanced Gun
Systems, or AGSs (a new-design 155mm gun), like the DDG-1000, while reducing
other payload elements. An air- and missile-defense version of the SCD would
preserve CG(X) radar capabilities while reducing other payload elements.
Roughly 6,000-Ton Frigate (FFG(X)). A second option for a smaller, less
expensive, new-design ship that has been suggested by CBO would be a frigate
intended as a replacement for both the DDG-1000/CG(X) effort and the Littoral
Combat Ship (LCS) program that is discussed later in this report. CBO estimated
that such a ship, which it calls the FFG(X), might displace about 6,000 tons. CBO
estimates that a 6,000-ton FFG(X) might have a unit procurement cost of about $800
million.
A 6,000-ton FFG(X) might be too small to be equipped with the AGS, in which
case it could not provide the additional naval gunfire capability that would be
provided by the DDG-1000. A 6,000-ton FFG(X) might, however, be capable of
performing the non-gunfire missions that would be performed by both the DDG-1000
and the LCS. A 6,000-ton FFG(X) would could be viewed as a replacement in the
surface combatant force structure for the Navy’s Oliver Hazard Perry (FFG-7) class
frigates and Spruance (DD-963) class destroyers. Since a 6,000-ton FFG(X) would
be roughly midway in size between the 4,000-ton FFG-7 design and the 9,000-ton
24 These are the two California (CGN-36) and four Virginia (CGN-38) class cruisers.
DD-963 design, it might be suitable for carrying more modern versions of the
mission equipment currently carried by the FFG-7s and DD-963s.
Low-Cost Gunfire Support Ship. CBO and CSBA have suggested a third
option for a smaller, less expensive, new-design ship — a lower-cost gunfire support
ship based on the San Antonio (LPD-17) amphibious ship. This option would
involve placing one or two AGSs on the basic LPD-17 hull design. LPD-17s
currently under construction for supporting Marine operations are to displace about
25,000 tons, but a basic version of the LPD-17 hull equipped with one or two AGSs
might have a different displacement.25 CBO estimates that an initial AGS-armed
LPD-17 might cost about $1.9 billion, including detailed design and nonrecurring
engineering costs, and that subsequent ships might cost about $1.5 billion each.26
Smaller Surface Combatants.
Current design:
!2,500- to 3,000-ton Littoral Combat Ship (LCS)
Potential Lower-Cost Options:
!Roughly 1,000-ton surface combatant
!Roughly 100-ton surface combatant
1000 destroyers and CG(X) cruisers, the Navy currently plans to procure, as part of
its proposed 313-ship fleet, a total of 55 Littoral Combat Ships (LCSs), which would
be small (2,500- to 3,000-ton), fast surface combatants that would use modular
“plug-and-fight” weapon systems. One LCS was procured in FY2005 and another
three were procured in FY2006. The proposed FY2007 budget requests funding for
another two. The Navy wants the procurement cost of each LCS sea frame (i.e., the
basic version of the ship, without any modular weapons systems) to be no more than
$220 million. Figures from the FY2006-FY2011 FYDP suggest that when the cost
of the mission modules is added in, the LCS program might have an average ship
procurement cost of about $387 million, and that a program of 55 might therefore
have a total acquisition (i.e., research and development plus procurement) cost of
about $22.1 billion.28
25 The Navy currently plans to procure a total of nine LPD-17 class ships, with the ninth
ships to be procured in FY2008. An additional surface combatant option recommended in
the OFT report is a large missile-and-rocket ship based on the same 57,000-ton
commercial-like hull design that the report recommended using as the basis for a
medium-sized aircraft carrier. Although this ship would be based on a commercial-like hull,
the unit procurement cost of this ship would be higher than, not lower than, that of the DDG-
26 Congressional Budget Office, Options for the Navy’s Future Fleet, op cit, p. 57 (Box 3-1).
27 For more on the LCS program, see CRS Report RL33741, Navy Littoral Combat Ship
(LCS) Program: Oversight Issues and Options for Congress, by Ronald O’Rourke.
28 For a discussion, see CRS Report RL32109.
1,000-Ton Surface Combatant. Rather than procuring the LCS, the OFT
report recommended procuring a 1,000-ton surface combatant. Like the LCS, this
ship would have a maximum speed of 40 to 50 knots and standard interfaces for
accepting various modular mission packages, and would self-deploy to the theater of
operations. The ship would be supported in theater by one or more larger types of
ships that were also recommended by OFT.
100-ton Surface Combatant. As an alternative to the 1,000-ton surface
combatant, the OFT report recommended procuring a 100-ton surface combatant
with a maximum speed of 60 knots and standard interfaces for accepting various
modular mission packages. These ships would be transported to the theater by a
“mother ship” based on the same 57,000-ton commercial-like hull used for OFT’s
proposed medium-sized aircraft carrier. The 100-ton surface combatants would be
supported in theater by the mother ship and possibly another larger ship that was
recommended by OFT.
Issues For Congress
The potential lower-cost ship designs outlined above can be assessed in terms
of cost, capability, technical risk, homeporting arrangements, and potential impact
on the shipbuilding industrial base.
Cost
Although the potential ship designs outlined in the previous section would have
lower unit procurement costs than currently planned designs, a complete assessment
of the cost implications of these options would take into account development and
design cost, procurement cost, life-cycle operation and support cost (O&S), and end-
of-life disposal costs. Each of these are discussed below.
Development And Design Cost. Developing and designing a large,
complex Navy ship can cost billions of dollars. Consequently, if a currently planned
ship has already been developed and designed, stopping that program in favor of a
new, lower-cost design could incur substantial additional development and design
costs, and consequently might save money over the long run (i.e., reach the financial
break-even point compared to continuing with the current design) only if the lower-
cost design is procured in large enough total numbers so that the cumulative
procurement savings were greater than the additional up-front development and
design costs. The earlier in the development and design process that an existing ship
acquisition program is stopped, the earlier in the future it might be that a lower-cost
alternative design might reach the break-even point. In addition, if a lower-cost ship
could use many of the same technologies intended for the more-expensive ship, or
technologies already developed for other ships, then the cost to develop the new
design could be reduced, perhaps substantially.
Procurement Cost. Through a process common to many manufacturing
activities called moving down the learning curve, the number of shipyard labor hours
required to build a ship design decreases as a shipyard builds more ships to that
design and shipyard workers become increasingly familiar with the design.29
Consequently, if some number of ships have already been built to a currently planned
design, the difference in cost between that design and the first units of a lower-cost
alternative design might be less than if the currently planned design had not yet
entered production, and the break-even point for the lower-cost design will be further
into the production run than if the currently planned design had not yet entered
production. On the other hand, if the lower-cost design can be procured at a greater
annual rate than the currently planned design (e.g., two ships per year for the lower-
cost design vs. one ship per year for the currently planned design), then the lower-
cost design could benefit from greater spreading of the shipyard’s annual fixed
overhead costs and also move down the learning curve more quickly and achieve the
cost-reducing benefits of the learning curve more fully than the currently planned
design.
Life-Cycle Operation and Support (O&S) Cost. Navy ships are
expensive to operate and support, and can remain in service for many years — 20 or
more years for a small combatant, 30 or more years for an attack submarine or larger
surface combatant, and up to 50 years for an aircraft carrier. Consequently, although
ship procurement costs are often more visible in the budget than ship O&S costs, a
ship’s life-cycle O&S cost can contribute as much as, or even more than, its
procurement cost to total long-term Navy expenditures.
Personnel and Maintenance Costs. Reducing a ship’s life-cycle O&S
cost can sometimes involve including design features that increase its procurement
cost. Personnel costs are a major component of ship O&S costs, and reducing crew
size can involve fitting the ship with technology for automating functions that were
previously performed by people, including damage control, which is a function that
traditionally has contributed to a need for larger crews. If the cost of added
technology is greater than the avoided expense of building extra crew-related spaces
into the ship, then adding the technology will increase the ship’s procurement cost.
Maintenance costs are another major component of ship O&S costs, and reducing
maintenance costs might require building certain parts of the ship with more-durable
but more-expensive materials, or increasing the size (and thus construction cost) of
certain spaces on the ship, so as to provide room for easier access during
maintenance.
In light of these considerations, it is possible for an alternative ship design to
have a lower procurement cost in part because it incorporates features that give it a
higher life-cycle O&S cost. If so, then procuring this ship rather than the currently
planned design might not reduce total Navy expenditures over the long run as much
as might be expected by looking only at ship procurement costs.
Fuel Costs. The life-cycle O&S cost of a conventionally powered ship
includes the cost of all the fuel the ship uses over its life. That is not the case for
nuclear-powered ships, because the procurement cost of a nuclear-powered ship
29 For more on learning-curve effects in Navy shipbuilding, see CRS Report 96-785, Navy
Major Shipbuilding Programs and Shipbuilders: Issues and Options for Congress, by
Ronald O’Rourke, pp. 59, 95-110. (Out of print; available from the author.)
includes the cost of the nuclear fuel core that is loaded into the ship’s reactor at the
time the ship is built. In the case of a nuclear-powered attack submarine, that fuel
core in 2004 cost about $158 million and is designed to power the ship for its entire
33-year expected life, while in the case of a nuclear-powered carrier, the core in 2004
cost about $300 million and is designed to power the ship for one-half of its 50-year
expected life.30
Consequently, although a nuclear-powered submarine or carrier is more
expensive to procure than an otherwise-equal conventionally powered submarine or
carrier, the nuclear-powered submarine will incur no fuel-related O&S costs over its
lifetime, while the conventionally powered carrier will incur no fuel-related O&S
costs during the first half of its lifetime.
This difference in accounting for fuel costs means that when procurement and
life-cycle O&S costs are added together, the difference in cost between a nuclear-
powered submarine and a conventionally submarine will be smaller than the
difference in procurement cost alone. The same can true in comparing a nuclear-
powered carrier to a conventionally-powered carrier, if the cost of the nuclear-
powered carrier’s second core is less than the cost of the conventionally powered
carrier’s fuel over its entire life. The higher the price of oil during conventionally
powered carrier’s life, the more likely this is to be the case.
A more general consideration arising out of this discussion is that other things
held equal, the higher that oil costs are expected to be in coming decades, the more
cost-effective nuclear power might be compared to conventional power for powering
a given type of ship. In theory, if the cost of oil is high enough, the total ownership
cost (i.e., the sum of procurement cost, life-cycle O&S cost, and end-of-life disposal
cost discussed below) of a nuclear powered ship could be less than that of an
otherwise-equal conventionally powered ship.
End-Of-Life Disposal Cost. Other things held equal, nuclear-powered ships
have higher end-of-life disposal costs than conventionally powered ships because of
the need to defuel, cut out, and seal up the reactor compartment and transport it to the
permanent Navy reactor-plant storage area at the Hanford nuclear reservation in
Washington state. For a nuclear-powered submarine, this work might cost about $30
million to $35 million, while for a nuclear-powered carrier, which has a much larger31
nuclear propulsion plant, it might cost roughly $570 million.
30 Source for cost figures: Telephone discussion with Naval Nuclear Propulsion Office, May
while the $300 million figure is for a 25-year core for the aircraft carrier CVN-78. Both
figures are in constant FY2005 dollars.
31 Telephone consultation with the office of the Navy Nuclear Propulsion Program, Apr. 28,
2005. The office stated that the total cost to inactivate, dismantle, and dispose of a retired
nuclear-powered submarine is currently about $64 million, and that work related to the
reactor compartment accounts for roughly half of this total. The office stated that the
currently estimated cost to inactivate the nuclear-powered carrier Enterprise (CVN-65) in
2013 is about $1.1 billion in then-year dollars, which equates to about $830 million in
(continued...)
Capability
As mentioned earlier, lower-cost ship designs in most cases will be individually
less capable than their higher-cost counterparts. One exception to this might be the
reduced-cost Tango Bravo SSN, which might be equal in capability to the Virginia-
class design due to its use of the more advanced technologies being pursued under
the Navy-DARPA Tango Bravo program.
Aspects of capability that may be considered include ship payload, ship
detectability and survivability, ship mobility, and the value of ship numbers in naval
operations.
Payload. As the size of a Navy combat ship decreases, its total payload — the
weight and volume of the ship’s sensors, weapon launchers, weapons, related
computers and displays, aircraft, and fuel — tends to decrease. Indeed, due to certain
factors relating to ship design, as ship size decreases, payload can often decrease
more quickly, making the smaller ship not just less capable than the larger ship, but
proportionately less capable. One factor contributing to this effect relates to
propulsion: As ship size increases, the amount of horsepower needed to move a ton
of the ship’s weight through the water at a certain speed tends to decrease. As a
result, as ship size increases, the size of the propulsion plant increases less than32
proportionately, leaving proportionately more room for payload.
Consequently, for example, as the size of an aircraft carrier is reduced, the total
weight of the aircraft that can be embarked on the carrier can decline even more
quickly. A 40,000-ton LHA(R)-based medium-sized carrier, for example, is about
40% as large as a 100,000 ton carrier, but its potential air wing of about two dozen
aircraft might have a total weight equivalent to less than 40% of the 75 aircraft on the
Moreover, if a medium-sized carrier’s air wing is transferred to a larger carrier,
the larger carrier may be able to use that air wing to generate more sorties (i.e.,
flights) per day because of its larger flight deck and greater fuel and ordnance
capacities. According to one study, for example, a carrier capable of embarking 75
aircraft, can, with a 55-aircraft air wing, generate 40% more strike sorties per day33
than a medium-sized carrier that is sized for that same 55-aircraft air wing.
31 (...continued)
FY2005 dollars, and that work related to the reactor compartment accounts for about $570
million of this $830-million figure.
32 The Navy’s 100,000-ton carriers, for example, are about 11 times as large as the Navy’s
9,000-ton DDG-51 class destroyers, and both types of ships have a maximum sustained
speed of more than 30 knots. In terms of shaft horsepower, however, the carriers’
propulsion plant is less than three times as powerful as the DDG-51-class propulsion plant
(about 280,000 shaft horsepower vs. about 100,000 shaft horsepower, respectively).
33 David A. Perin, “Are Big Decks Still the Answer?,” U.S. Naval Institute Proceedings,
June 2001, pp. 30-33.
Reducing ship size can, in addition to reducing total payload, make it difficult
or impossible for a ship to be equipped with certain desired systems. A carrier
smaller than a certain size, for example, would not be able to operate CTOL aircraft,
while a surface combatant smaller than a certain size could not be equipped with
certain large radars, sonars, missile-launching tubes, or guns.
A principal implication of payload decreasing more rapidly than ship size is that
the total cost to put a certain collection of combat-related equipment to sea can go up
as the size of the ships used to put the equipment to sea goes down. If total fleet
payload is held constant, in other words, then reducing unit procurement costs by
shifting to smaller ships can lead to a fleet design with a higher total procurement
cost. In addition, if crew size and fuel consumption does not go down
proportionately with ship size, then a similar effect could occur with regard to total
fleet operation and support (O&S) costs.
The OFT report counters some of these points by arguing that using new
technologies would permit the payload fraction of its recommended 1,000- and 100-
ton surface combatants to be greater than what would have been possible in the past.
Another counter-argument is that improvements in precision-guidance technology for
weapons is permitting weapon size to be reduced because a smaller warhead that
lands precisely on a target can do the same amount of damage to the target as a larger
warhead that lands less precisely. As a result, it could be argued, payload related to
weapons and weapon launchers can be reduced without reducing the ship’s
capability. Any improvements in technology that would permit a reduction in the
weight and volume of sensors (e.g., radars or sonars) could lead to a similar argument
relating to the sensor portion of a ship’s payload.
Detectability and Survivability. Supporters of larger ships could argue that
with careful design and construction, a large ship can be made no more susceptible
to detection by enemy sensors (e.g., radars, sonars, or infrared sensors) than a much
smaller ship. They could also argue that other things held equal, larger ships and
ships built to military survivability standards are better able to withstand a hit from
a weapon of a given size than a smaller ship or a ship built with an equal-sized
commercial-like hull. A larger ship or a ship built to military survivability standards,
they could argue, might be able to continue operations to some degree after being hit,
or would at least would not be sunk, whereas a smaller ship or a ship built with a
commercial-like hull is more likely to be sunk or rendered completely operable.
Supporters of smaller ships or ships built with commercial-like hulls could
argue that making larger ships less detectable adds to their cost, and that a fleet
composed of a large number of small ships could, by presenting the enemy with a
large number of targets, overwhelm the enemy’s target-tracking capabilities.34 They
could also argue that even large ships built to military survivability standards can be
sunk or put out of operation, and that a fleet consisting of a relatively small number
of such ships concentrates too large a fraction of the fleet’s total capability and
replacement value in each individual platform. They could argue that the most
important measure of survivability is not individual-ship survivability but overall
34 The OFT report makes the second argument.
fleet survivability, and that a fleet consisting of a larger number of smaller ships can
have superior overall fleet survivability. They could also argue that U.S. leaders
might be averse to using expensive, highly capable Navy ships in certain high-threat
situations because they would not want to risk one or more of them being heavily
damaged or sunk, in which case the effective utility of these ships would be reduced.
Mobility.
Nuclear Power. Since nuclear propulsion plants do not require access to the
atmosphere to generate power, equipping a submarine with a nuclear propulsion plant
produces a fundamental change in ship mobility and consequently in the kinds of
operations for which the submarine may be suitable. Some observers, particularly
supporters of nuclear-powered submarines, have stated that without nuclear power,
ships referred to as submarines are simply submersibles — ships that occasionally
and for limited periods of time operate below the surface — and that it is the addition
of nuclear power that creates a true submarine — a ship whose primary operating
environment is below the surface.
As mentioned earlier, an AIP system such as a fuel-cell or closed-cycle diesel
engine extends the stationary or low-speed submerged endurance of a
non-nuclear-powered submarine. A conventional diesel-electric submarine has a
stationary or low-speed submerged endurance of a few days, while an AIP-equipped
submarine may have a stationary or low-speed submerged endurance of up to two or
three weeks.
An AIP system does not, however, significantly increase the high-speed
submerged endurance of a non-nuclear-powered submarine. A non-nuclear-powered
submarine, whether equipped with a conventional diesel-electric propulsion system
or an AIP system, has a high-speed submerged endurance of perhaps 1 to 3 hours, a
performance limited by the electrical storage capacity of the submarine’s batteries,
which are exhausted quickly at high speed.
In contrast, a nuclear-powered submarine’s submerged endurance, at any speed,
tends to be limited by the amount of food that it can carry. In practice, this means
that a nuclear-powered submarine can remain submerged for weeks or months at a
time, operating at high speeds whenever needed.
As a consequence of their very limited high-speed submerged endurance, non-
nuclear-powered submarines, even those equipped with AIP systems, are not well
suited for submarine missions that require:
!long, completely stealthy transits from home port to the theater of
operation,
!submerged periods in the theater of operation lasting more than two
or three weeks, or
!submerged periods in the theater of operation lasting more than a
few hours or days that involve moving the submarine at something
more than low speed.
With regard to the first of the three points above, the OFT report proposes
transporting the AIP submarines into the overseas theater of operations aboard a
transport ship.35 In doing so, the OFT report accepts that the presence of a certain
number of U.S. AIP submarines in the theater of operations will become known to
others. A potential force-multiplying attribute of having an SSN in a carrier strike
group, in contrast, is that the SSN can be detached from the strike group, and
redirected to a different theater to perform some other mission, without alerting
others to this fact. Opposing forces in the strike group’s theater of operations could
not be sure that the SSN was not in their own area, and could therefore continue to
devote resources to detecting and countering it. This would permit the SSN to
achieve military effects in two theaters of operation at the same time — the strike
group’s theater of operations, and the other theater to which it is sent.
With regard to the second and third points above, the effectiveness of an AIP
submarine would depend on what kinds of operations the submarine might need to
perform on a day-to-day basis or in conflict situations while operating as part of a
forward-deployed carrier strike group.
For aircraft carriers, the effects of adding nuclear power are less dramatic than
they are for submarines, but still significant. Nuclear-powered carriers can make
high-speed transits over long distances to respond to urgent crises without need for
stopping or slowing down to refuel along the way. They do not need to be refueled
upon arriving at the area of operations, permitting them to commence combat
operations immediately upon arrival. And since they do not need large fuel tanks to
store fossil fuel for their own propulsion plant, they can devote more of their internal
volume to the storage of aircraft fuel and ammunition, which permits them to sustain
combat operations for longer periods of time before they need to be resupplied.
Maximum Speed. Proponents of higher-speed ships like the LCS, the
13,500-ton carrier recommended in the OFT report, or the 1,000- or 100-ton surface
combatants recommended in the OFT report, argue that the higher maximum speeds
of these ships increases their capability by enabling them to shift locations more
rapidly and making them more difficult for the enemy to track and target. Skeptics
could argue that the advantages of ship speeds much higher than about 30 knots are
unproven or overrated.
Ship Numbers In Naval Operations. Advocates of a fleet with a larger
number of ships, which is something that might be facilitated by shifting to lower-
cost ship designs, argue that a ship cannot be in two places at the same time, and
consequently that a fleet with a larger number of ships would be better able to
maintain a day-to-day presence in multiple locations around the world or be better
able to respond to simultaneous crises or conflicts in multiple locations. A fleet
consisting of a larger number of less-capable ships, they could argue, might offer
more flexibility for responding to situations with an appropriate amount of naval
35 The strategy of transporting the AIP submarines to the theater using transport ships is not
mentioned in the report but was explained at a Feb. 18, 2005 meeting between CRS and
analysts who contributed to the OFT report.
capability, as opposed to being forced to deploy a naval force with more capability
than needed at a high daily O&S cost.36 Advocates of a fleet with a larger number
of ships could also argue that under the theory of network-centric warfare, the
capability of the force grows as a function of the number of nodes (e.g., ships,
aircraft, unmanned vehicles, and distributed sensors) that make up the network, and
that increasing the number of ship nodes will consequently increase the total
capability of the force.37 Advocates who make this last argument in some cases
might argue that in light of networking and other advanced technologies, U.S.
military forces in general should shift to less concentrated and more highly
distributed force designs.
Defenders of a fleet consisting of a smaller number of more-expensive ships
could argue that being able to deploy ships to a greater number of locations around
the world might be of limited value if those ships are less-capable designs that are not
capable of performing required missions. They could also argue that the Navy has
taken steps in recent years to increase the fraction of the fleet that is deployed, or
ready to be deployed, at any given time, mitigating the effects of having a relatively
limited total number of ships in the fleet.38 They could argue that current ship
designs already provide adequate flexibility for creating naval formations with
appropriate amounts of capability for responding to various situations. They could
also argue that when numbers of aircraft, unmanned vehicles, and distributed sensors
are taken into account, a fleet consisting of a smaller number of more-expensive
ships would still have an adequate number of nodes for engaging in network-centric
warfare.
Technical Risk
Of the lower-cost options outlined earlier, those that might pose some technical
risk for the Navy include the AIP-equipped non-nuclear-powered submarine (because
a non-nuclear-powered submarine has not been designed and built for the U.S. Navy
since the 1950s), the Tango Bravo nuclear-powered submarine (because of the need
to mature the Tango Bravo technologies), the 13,500-ton high-speed carrier (because
of its fairly large SES/catamaran hull design), and perhaps the 1,000- and 100-ton
surface combatants (because of the new technologies that are intended to increase
their payload fractions).
36 The OFT report makes this point from a budgetary perspective as well, arguing that a fleet
consisting of lower-cost ships can be adjusted in size more smoothly to adapt to changes in
available funding levels.
37 For more on network-centric warfare, see CRS Report RL32411, Network Centric
Warfare: Background and Oversight Issues for Congress, by Clay Wilson; and CRS Report
RS20557, Navy Network-Centric Warfare Concept: Key Programs and Issues for Congress,
by Ronald O’Rourke.
38 For additional discussion of this point, see CRS Report RS21338, Navy Ship
Deployments: New Approaches — Background and Issues for Congress, by Ronald
O’Rourke.
Homeporting Arrangements
Smaller ships might offer a wider range of homeporting possibilities because
some ports might not have large enough berthing spaces or deep enough waters to
accommodate ships of more than a certain size.
Homeporting a nuclear-powered carrier or submarine can be a more complex
undertaking than homeporting a conventionally powered ship due to requirements
that are unique to nuclear-powered ships, such as having access in the home port to
a nuclear-certified maintenance shop. In addition, gaining permission to forward-
homeport a Navy ship in a foreign country can be politically more difficult if the ship
in question is nuclear-powered and there are substantial anti-nuclear sentiments in
the intended host country.
Impact On Shipbuilding Industrial Base
Lower-cost ship designs could affect the shipbuilding industrial base by
changing the total volume of Navy shipbuilding work or the distribution of that work
among various shipyards.
Total Volume Of Work. The total volume of Navy shipbuilding work is to
a large degree a function of the total amount of funding available for Navy ship
procurement. Consequently, the effect that shifting to lower-cost designs might have
on the total volume of shipbuilding work would depend to a large degree on whether
the shift somehow affects the total amount of funding available for Navy ship
procurement. At least three scenarios are possible:
!One possibility is that shifting to lower-cost designs does not
substantially affect the total amount of funding available for Navy
ship procurement, in which case the total volume of Navy
shipbuilding work might not change substantially.
!A second possibility is that the shift to lower-cost designs is used to
reduce the total cost of building the same total number of ships as
previously planned, in which case the total volume of Navy
shipbuilding work would be reduced.
!A third possibility is that the shift to lower-cost designs makes Navy
ships appear more cost-effective compared to competing Navy or
DOD programs, in which case the total amount of funding available
for Navy ship procurement might be increased, enabling an increase
in the total volume of Navy shipbuilding work.
Distribution Of Work Among Shipyards. The lower-cost ship designs in
this report could affect the distribution of shipbuilding work among various shipyards
in one or more of the following ways:
!Attack submarines. A Tango Bravo nuclear-powered submarine
would be designed and built by one or both of the country’s two
current nuclear-submarine construction shipyards — General
Dynamics’ Electric Boat (GD/EB) of Groton, CT, and Quonset
Point, RI, and Northrop Grumman Newport News (NGNN) of
Newport News, VA. If both GD/EB and NGNN are involved in the
program, the division of work between the two yards could be
different than the current, roughly even, division of work the two
yards have for building Virginia-class submarines. An AIP-
equipped non-nuclear powered submarine could be designed and
built by GD/EB or NGNN, or by a non-nuclear shipyard, such as the
Ingalls shipyard at Pascagoula, MS, that forms part of Northrop
Grumman Ship Systems (NGSS). Ingalls has been associated with
past proposals for building non-nuclear-powered submarines for
export to foreign countries. If AIP submarines were procured in lieu
of nuclear-powered submarines, that could reduce the total amount
of work available to U.S. naval nuclear propulsion component
manufacturers, many of whom are sustained by the work provided
by the Navy’s nuclear submarine and aircraft carrier programs.
!Aircraft carriers. NGNN is the only U.S. yard that can build large
nuclear-powered carriers (and the only yard that could readily build
large conventionally powered carriers). A medium-sized,
conventionally powered carrier based on the LHA(R) design could
be built by NGNN or by another yard, such as Ingalls, the builder of
previous ships similar to the LHA(R). A medium-sized,
conventionally powered carrier based on a merchant-like hull could
be built by NGNN, Ingalls, or other shipyards, particularly those
with experience building merchant-like hulls, such as the Avondale
shipyard near New Orleans that also forms part of NGSS or General
Dynamics’ National Steel and Shipbuilding Company
(GD/NASSCO) of San Diego, CA. A small, high-speed carrier
using an SES/catamaran hull design might be built at a number of
yards, particularly any that might have experience building
SES/catamaran hulls. If conventionally powered carriers were
procured in lieu of nuclear-powered carriers, that could reduce the
total amount of work available to U.S. naval nuclear propulsion
component manufacturers, many of whom are sustained by the work
provided by the Navy’s nuclear submarine and aircraft carrier
programs. In terms of the amount of work provided to these
manufacturers, a carrier nuclear propulsion plant is considered
roughly equivalent to five submarine nuclear propulsion plants.
!Larger surface combatants. DDG-1000 destroyers are to be built
at NGSS (particularly Ingalls) and General Dynamics’ Bath Iron
Works (GD/BIW) of Bath, ME. A 11,000-ton SCD, a 6,000-ton
FFG(X), or a low-cost gunfire support ship would likely be built at
one or both of the same yards, but could also be built at other yards,
such as Avondale or NGNN. If built at both NGSS and GD/BIW,
the division of work between the two yards might not be the same as
would occur under the DDG-1000 program.
!Smaller surface combatants. One version of the LCS is to be built
at Marinette Marine of Marinette, WI, and Bollinger Shipyards of
Louisiana and Texas. The other version is to be built at the Austal
USA shipyard at Mobile, AL. A 1,000- or 100-ton surface
combatant could be built at either of these yards or at other yards,
particularly yards that focus on building smaller ships.
Legislative Activity For FY2007
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364)
House. Sections 122, 123, and 124 of H.R. 5122 would limit the procurement
costs of CVN-21 class aircraft carriers, LHA(R) class ships, and LPD-17 class ships,
respectively, to current Navy cost estimates, with adjustments permitted for inflation
and other factors. Section 1014 would establish a shipbuilding industrial base
improvement program.
The House Armed Services Committee, in its report (H.Rept. 109-452 of May
The rising cost and lengthening production schedules of major defense
acquisition programs has led to more expensive platforms fielded in fewer
numbers. The committee believes that internal DOD pressure to develop
follow-on weapons systems that include all necessary and anticipated military
capabilities may create an over-reliance on individual ‘’mega’‘ systems that are
potentially more expensive and time-consuming to develop than less
sophisticated but capable systems. These increases in cost and development time
generally result in smaller numbers of platforms purchased, creating a ‘’high
demand, low density’‘ situation in which the needed platforms have higher
operational tempos, wear out faster, increase stress on military personnel,
undermine the ability to conduct traditional presence missions intended to shape
the strategic choices of potential adversaries and limit the strategic depth of
United States forces responding to multiple contingencies. (Pages 14-15; see
also pages 350-351)
Regarding the affordability of the Navy’s shipbuilding plan, the report stated:
The committee applauds the Chief of Naval Operations for developing the
Navy’s future force structure and the accompanying long-term shipbuilding plan
to build it. This long-term plan provides the shipbuilding industry a view into the
future that has been lacking.
However, the committee is concerned that the plan was developed using
unrealistic assumptions that will not make the plan executable. Of greatest
concern to the committee is the affordability of the ship construction plan.
According to the Navy’s estimates, execution of this plan requires a significant
increase in shipbuilding funds from $8.7 billion in fiscal year 2006 to $17.2
billion in fiscal year 2011. Obtaining these additional funds in a period of
anticipated federal spending reductions will be difficult. The plan also assumes
that individual ship acquisition programs can avoid the cost growth that has
plagued most Navy ship acquisition programs.
The committee is concerned about the affordability of the Navy’s long-term
shipbuilding plan, recreating much of the uncertainty about the future of naval
shipbuilding that the plan was designed to eliminate. (Page 67)
The report also stated:
The committee is concerned that the U.S. shipbuilding/ship repair industrial
base has significant capacity beyond what is necessary for all anticipated DOD
new construction and maintenance work, and believes that Navy ship acquisition
programs are paying the price....
The committee directs the Secretary of the Navy to report to the
congressional defense committees on measures that can be taken to manage the
capacity of the shipbuilding/ship repair industrial base in a manner that would
make Navy shipbuilding more affordable. Such report shall be submitted by the
submission of the President’s request for fiscal year 2008, as required by section
Regarding the Navy’s cost estimates for ships, the report stated:
The committee is deeply concerned about the process used for establishing
the Navy’s ship cost estimates. The committee notes that the original cost
estimates on numerous existing ship classes have regularly been described by the
Navy as inaccurate and unrealistic when those ships near completion of
construction. The committee notes that in several cases it has been informed that
ship cost estimates delivered to the committee in prior years either intentionally
or unintentionally excluded certain known shipbuilding costs such as escalation,
and that these cost estimates were known to be inaccurate on the day they were
first delivered to the committee. The committee recommends that the process for
deriving ship cost estimates be revised to ensure that all major known elements
of ship cost are routinely included in all ship cost estimates.
The committee notes that Sections 122, 123, and 124 of the bill would
impose cost limitations on three current ship classes based on the Navy’s latest
costs estimates. The committee further notes that the imposition of these
statutory cost limitations makes the need for a high level of confidence in the
cost estimates for these ship classes unusually important. Accordingly, the
committee directs that the Secretary of the Navy revalidate the cost estimates for
CVN-21, for the ships currently programmed in the LHA Replacement program,
and for the eight ships of the San Antonio class amphibious ship that follow the
lead ship. The committee further directs that the revalidated costs estimates be
submitted for review and approval by the Under Secretary of Defense for
Acquisition, Technology, and Logistics. Finally, the committee directs that no
later than July 1, 2006, the Secretary of the Navy submit a report in writing to the
congressional defense committees containing the revalidated cost estimates for
these ship classes including a certification by the Secretary that all known and
anticipated major elements of cost have been included in the estimate. (Page 71)
Regarding the DDG-1000 program, the report also stated:
The committee does not believe the DD(X) is affordable.... the committee
understands there is no prospect of being able to design and build the two lead
ships for the $6.6 billion budgeted....
Originally, the Navy proposed building 32 next generation destroyers,
reduced that to 24, then finally to 7 in order to make the program affordable. In
such small numbers, the committee struggles to see how the original
requirements for the next generation destroyer, for example providing naval
surface fire support, can be met.... By reducing the requirements for the DD(X),
a smaller, less expensive destroyer could be procured in greater numbers.
Because of its expense, the committee does not believe that DD(X) will be
procured in sufficient numbers to meet the operational need.... The committee
supports the construction of up to two DD(X)s to demonstrate technologies that
could be incorporated into future, more affordable, major surface combatants.
(Pages 69-70)
Regarding Section 1014 and other measures intended to improve the efficiency
of Navy shipbuilding, the report states:
Maritime technology
The budget request contained no funds in PE 78730N for the maritime
technology program.
The committee understands that the purpose of the maritime technology
(MARITECH) program is to reduce the cost of naval ship construction,
modification, and repair by enhancing the efficiency and competitiveness of the
U.S. shipbuilding and ship repair industries. The committee understands that
since the late 1970s the Navy has considered capital for facility investments to
be an allowable cost on contracts that are not firm fixed price. The committee
is also aware that in the past three years, the Navy and industry have agreed to
specific recapitalization contract incentives in the Virginia class submarine and
the CVN-21 programs. These incentive clauses have allowed the Navy and the
contractors to identify improvements in sequencing and build processes to lower
construction costs. The committee encourages the expansion of these efforts to
all ship procurements, including the Lewis and Clark (T-AKE) class program.
The committee includes a provision (section 1014) that creates a
shipbuilding industrial base improvement program through which the Secretary
of the Navy shall award grants and loan guarantees to qualified shipyards to
improve their productivity and cost effectiveness. These authorities will allow
the Navy to work to an even greater extent with shipbuilders to identify and
finance process changes, equipment investments, and facilities improvements to
lower the cost of Navy ship procurement. The committee expects that these
authorities will allow the Navy to achieve savings in the construction of the T-
AKE class ships, in addition to other ship classes, and improve the
competitiveness of U.S. shipyards. Consequently, the committee recommends
providing funds for the shipbuilding industrial base improvement program and
for the enhancement of the U.S. shipbuilding and ship repair industrial base.
The committee recommends $120.0 million in PE 78730N for the maritime
technology program.
National shipbuilding research program
The budget request contained no funds in PE 78730N for the national
shipbuilding research program.
The committee understands that the national shipbuilding research program
(NSRP) provides a unique collaborative environment where shipbuilders and
government agencies examine processes, tooling and management techniques to
improve the efficiency of the United States shipbuilding industry. The
committee understands that NSRP operates on a 50-50 cost share between
government and industry, all results are shared with all members, and a
conservative estimate for NSRP’s return on investment is five to one.
The committee recommends $20.0 million in PE 78730N for the national
shipbuilding research program.
Shipbuilding industrial base improvement grants
The budget request contained no funds in PE 78730N for shipbuilding
industrial base improvement grants.
The committee understands the national security importance of sustaining
viable and efficient shipbuilding and ship repair industries in the United States.
Accordingly, the committee recommends providing grants to U.S. shipyards to
facilitate the development of innovative design and production technologies and
processes for naval vessel construction, and the development of modernized
shipbuilding infrastructure.
The committee recommends $50.0 million in PE 78730N for shipbuilding
industrial base improvement grants.
Shipbuilding industrial base improvement loan guarantees
The budget request contained no funds in PE 78730N for shipbuilding
industrial base improvement loan guarantees.
The committee understands the national security importance of sustaining
viable and efficient shipbuilding and ship repair industries in the United States.
Accordingly, the committee recommends providing loan guarantees to U.S.
shipyards to facilitate the acquisition of technologies, processes and
infrastructure to enhance the efficiency and competitiveness of the U.S.
shipbuilding and ship repair industries.
The committee recommends $50.0 million in PE 78730N for shipbuilding
industrial base improvement loan guarantees. (Pages 192-193)
Senate. Section 121 of S. 2766 would authorize 4-year incremental funding
and economic order quantity (EOQ) purchases of long-lead components for CVN-21
class aircraft carriers. Section 123 would increase a previously legislated cost limit
on CVN-77 to $6,057 million.
Regarding Section 121 on procurement of aircraft carriers, the Senate Armed
Services Committee, in its report (S.Rept. 109-254 of May 9, 2006) on S. 2766,
stated:
In reviewing the budget request for fiscal year 2006, the committee received
testimony from the Navy and industry that the low rate of shipbuilding was
driving higher costs, which in turn further reduced shipbuilding rates, creating
a downward spiral. The committee believes that stable ship requirements,
increased funding in the shipbuilding budget, and increased flexibility for
funding large capital ships are critical elements of any strategy to reverse this
trend....
Elsewhere in this report, the committee has expressed concern with cost
growth on the CVN-77 program, and has urged the Navy and the shipbuilder to
identify opportunities to improve affordability of future aircraft carriers.
Procurement delays, excess inflation, and material escalation have been reported
as significant contributors to CVN-77 cost growth. The shipbuilder has proposed
to achieve significant CVN-21 class program savings through a stable
procurement plan, and through procurement of economic order quantity material
for CVN-79 and CVN-80 in conjunction with CVN-78 procurement.
In view of the potential for significant program savings, the committee
recommends an increase of $50.0 million in SCN for CVN-21 class advance
procurement, and directs the Secretary of the Navy to review economic order
quantity and long lead time material procurement for the CVN-21 class. The
Secretary is to submit a report to the congressional defense committees with the
fiscal year 2008 budget request, outlining the advance procurement requirements
to potentially optimize economic order quantity savings and escalation avoidance
(to include offsetting factors) for the first three vessels of the CVN-21 class. Of
the amount authorized to be appropriated for advance procurement for CVN-79
and CVN-80, none of the funds are available for obligation prior to 30 days
following receipt of the Secretary’s report. (Page 67)
Regarding Section 123 on the cost limit for CVN-77, the report states:
The procurement cost increase to $6.057 billion, which equals the
government’s maximum contractual liability, is attributed to extraordinary
escalation impacts, increased labor hours and overhead rates, and costs related
to schedule delays. The fiscal year 2007 budget request included $348.4 million
for CVN-77 cost growth, with the balance of additional funding to be included
in future budget requests. The committee is aware that the Navy has taken a
series of management actions to contain cost on CVN-77, including deferral of
upgrades that are not required for safe system operation or certification;
minimization of contract change orders; implementation of a joint
Navy-shipbuilder Lean Six-Sigma program; and a schedule revision to enable a
more efficient completion of CVN-77. The committee is concerned, however,
that despite these management actions, the Navy is projecting CVN-77 cost to
grow to the contract ceiling, in excess of 30 percent above the baseline cost cap.
The committee notes that the Secretary’s report to Congress on the
long-range plan for construction of naval vessels establishes cost estimates for
future ship construction, which target improved performance based on a series
of management actions similar to ongoing efforts to control CVN-77 cost.
Visibility into cost performance while completing CVN-77 is necessary in order
to assess the effectiveness of these management actions, and will assist in
determining further actions necessary to improve affordability of the future force.
Improved visibility into completion cost performance will also afford greater
opportunity to deliver CVN-77 below the contract ceiling. Accordingly, the
Secretary of the Navy is directed to submit a quarterly report to the congressional
defense committees, beginning December 1, 2006, providing the following
information regarding the CVN-77 ship construction contract:
(1) contract target cost;
(2) Program Manager’s Estimate at Completion;
(3) contractor’s Estimate at Completion;
(4) contract ceiling price;
(5) end of period actual costs; and
(6) percent progress. (Page 69)
Regarding the Littoral Combat Ship (LCS) program, the report states:
The construction of lead LCS vessels at two shipyards inherently adds cost
risk, which will persist until these ships near completion in 2007 and 2008. The
emphasis on cost control would dictate that the Navy pursue competition,
commonality, and the results of learning curves to the extent practical in the
procurement of this 55 ship class.
The committee views LCS as an important component of the Navy’s
strategy for conducting the global war on terror, and has supported the Navy’s
approach to rapidly field this capability. The design and construction of LCS in
parallel with development of the mission modules requires heightened
management of program risk to ensure affordable, full mission capability of the
LCS program. However, the committee is concerned that the affordability appeal
of the LCS program is being overtaken by apparent cost growth, and that the
rapid ramp up in LCS procurement will compound the issue. The stated
emphasis on affordability is obscured by the absence of a clear acquisition
strategy to guide strategic program decisions.
Additionally, it is unclear that the Navy has assessed the added cost for
training, maintenance, configuration management, planning and engineering, and
supply support for the two flight 0 ship classes. Further, by virtue of budgeting
the costs for procuring the flight 0 LCS vessels in three different appropriations,
total costs for the program’s start are difficult to discern. In view of these
concerns, the committee directs the Secretary of the Navy to submit a report on
the LCS program, no later than December 1, 2006 to the congressional defense
committees. The report shall outline the Navy’s acquisition strategy for the
program, including the competition plan, the flight strategy, and the cost
containment strategy for the program; contain a clear representation of all R&D
and procurement costs for the total program; and assess the added life cycle costs
associated with operation and support for two dissimilar flight 0 LCS designs.
(Page 113)
Regarding shipyard costs and efficiency, the report states:
The budget request included no funding in PE 78730N for maritime
technology. The National Shipbuilding Research Program-Advanced
Shipbuilding Enterprise (NSRP-ASE) is a collaborative effort between the Navy
and industry, which has yielded new processes and techniques that reduce the
cost of building and repairing ships. Annual Navy funding, which is matched
and exceeded by industry investment, has achieved savings and cost avoidance
for the Navy, a positive return on investment, and a high research-to-
implementation transition rate. The committee believes that continuation of the
NSRP-ASE provides a vital contribution towards achieving the overarching
objective of improving the affordability of naval warship construction and
maintaining a healthy, innovative shipbuilding industrial base. The committee
recommends an increase of $10.0 million in PE 78730N to support NSRP-ASE
efforts, including:
(1) establishing a comprehensive national program for development
and training of a skilled shipbuilding production and engineering workforce;
(2) establishing a concept for a national supply chain that will enable
leveraging buying power across product lines in an effort to reduce the high cost
of material in ship construction;
(3) exploring secondary and commercial markets for private
shipbuilders to broaden the business base and share the overhead applied to naval
shipbuilding; and
(4) developing and deploying an industry-wide architecture for
computer interoperability. (Pages 181-182)
Conference Report. Section 121 of H.R. 5122 (conference report H.Rept.
21 class aircraft carriers CVN-78, CVN-79, and CVN-80. Section 122 establishes
unit procurement cost caps for CVN-21 class aircraft carriers. Section 123 increases
a previously legislated procurement cost cap for the CVN-77 aircraft carrier. Section
Section 126 establishes unit procurement cost caps for four LPD-17 class amphibious
ships. Section 215 authorizes $4 million for implementing or evaluating Navy
shipbuilding technology proposals under the Defense Acquisition Challenge
Program. Section 1016 directs the Navy to conduct an assessment of naval vessel
construction efficiencies and of the effectiveness of special contractor incentives.
The sections establishing new procurement cost caps allow the caps to be adjusted
upward for inflation and other factors.
Regarding Section 122, the report states:
The amendment would not provide the Secretary authority to adjust the
limitation amounts for cost increases attributable to congressional actions that
impact on the shipbuilding program of record. However, the conferees
understand that such action could have significant impact on program cost, and
therefore direct that the Secretary include, within the annual written notice to the
congressional defense committees regarding changes to the cost limitations, an
assessment of any negative impact of congressional action on program costs.
The conferees understand that the CVN–21 class budget represents the
Navy’s risk-balanced assessment of the cost for completing design and
construction of the future class of nuclear powered aircraft carriers. The
conferees recognize that many uncertainties remain with regard to completion of
CVN–21 design and construction, including innumerable, inestimable events
which will impact cost during the next 15 years of performance on the program.
Accordingly, the amendment would allow adjustment to the cost limitation for
non-recurring design and engineering in order to enable the Navy to reduce this
risk in the execution of the design effort.
The conferees expect that the Navy will ultimately manage program
execution within the bounds of the budget estimate. Accordingly, the conferees
understand that compliance with this provision will require procurement cost
trade-offs to be accomplished, which could reduce the capabilities, system
performance, safety, crew quality of life, future growth margin, or other
important factors in the design and construction of the CVN–21 class. The
conferees believe that most of these trade-offs will be within the purview of the
program office and requirements office. However, the Secretary shall notify the
Committees on Armed Services of the Senate and the House of Representatives
not less than 30 days prior to implementing any cost-driven reduction which
would unacceptably impact safety, crew quality of life, or otherwise preclude the
program from meeting the requirements of the CVN–21 Operational
Requirements Document. The Secretary’s notification shall identify the specific
characteristic proposed to be reduced and the cost avoidance provided by such
reduction. (Page 552)
Regarding Section 125, the report states:
The amendment would not provide the Secretary authority to adjust the
limitation amounts for cost increases attributable to congressional actions that
impact on the shipbuilding program of record. However, the conferees
understand that such action could have significant impact on program cost, and
therefore direct that the Secretary include, within the annual written notice to the
congressional defense committees regarding changes to the cost limitations, an
assessment of any negative impact of congressional action on program costs.
The conferees understand that the LHA-6 budget represents the Navy’s
risk-balanced assessment of the cost for completing design and construction of
the future LHA Replacement ship. The conferees recognize that many
uncertainties remain with regard to completion of LHA-6 design and
construction, including innumerable, inestimable events which will impact cost
during the next 6 years of performance on the program. Accordingly, the
amendment would allow adjustment to the cost limitation for non-recurring
design and engineering in order to enable the Navy to reduce this risk in the
execution of the design effort.
The conferees expect that the Navy will ultimately manage program
execution within the bounds of the budget estimate. The conferees understand
that compliance with this provision will require procurement cost trade-offs to
be accomplished, which could reduce the capabilities, system performance,
safety, crew quality of life, future growth margin, or other important factors in
the design and construction of the LHA Replacement ship. The conferees believe
that most of these trade-offs will be within the purview of the program office and
requirements office. However, the Secretary shall notify the Committees on
Armed Services of the Senate and the House of Representatives not less than 30
days prior to implementing any cost-driven reduction which would unacceptably
impact safety, crew quality of life, or otherwise preclude the program from
meeting the requirements of the LHA Replacement program Capability
Development Document. The Secretary’s notification shall identify the specific
characteristic proposed to be reduced and the cost avoidance provided by such
reduction. (Pages 553-554)
FY2007 Defense Appropriations Act (H.R. 5631/P.L. 109-289)
House. The House Appropriations Committee, in its report (H.Rept. 109-504
of June 16, 2006) on H.R. 5631, stated that
the Committee believes that the viability of the Navy’s long range [shipbuilding]
plan will remain tied to the service’s ability to control costs in ship design and
construction. Navy leadership agrees that cost control is essential, but the Navy
has produced no plan or initiatives to meet the cost targets assumed in the long
range shipbuilding plan. Furthermore, the recent history of ongoing shipbuilding
programs indicates the trend in cost growth may be getting worse, and not better.
The Committee encourages the Navy to set firm cost targets in its future
shipbuilding programs, to develop specific initiatives addressing cost control,
and to sign contracts that reduce the likelihood of cost growth. (Page 139)
The report recommended reducing by $141.4 million the Navy’s request for
FY2007 procurement funding to cover cost growth on ships procured in prior years.
The report stated:
The Committee remains concerned over the lack of cost control in Navy
shipbuilding programs. In last year’s report, the Committee noted the rising cost
growth in ongoing ship construction contracts, and required the Navy to submit
a plan on resolving these issues. That report was submitted two months late, and
was little more than a summary of cost overruns in shipbuilding over the past two
decades. The Committee is concerned about the gap between the Navy’s public
statements about the need for firm cost controls, and the programmatic and
contractual actions needed to accomplish that objective. Navy briefings this year
document a litany of programs, including the CVN-77 aircraft carrier and certain
attack submarines of the Virginia class, that continue to defy attempts to control
costs. The Navy estimates an overrun of $867,900,000 over the next 3 years
alone in the CVN-77 production effort. These funds cannot be obligated without
Congressional legislation to raise the current cost cap on the program — a cap
that was put in place several years ago to control costs. The fiscal year 2007
budget requests $136,000,000 for further cost growth in the U.S.S. Texas (SSN-
775), and cost performance on the U.S.S. North Carolina (SSN-777) is seriously
below Navy expectations. In fact, current cost performance on the Virginia class
jeopardizes the ability of the Navy to meet the performance goals of the
multiyear contract signed in 2004 as well as cost targets needed to increase the
submarine production rate in future years. The Committee is unwilling to
provide increased appropriations for cost overruns in the absence of compelling
justification or a realistic and detailed plan for cost control. The Committee
recommendation provides $436,449,000 for Completion of Prior Year
Shipbuilding Programs, a reduction of $141,400,000 from the request. The
reduction should be allocated against the following programs: CVN-77 (-
$30,000,000); SSN-777 (-$48,000,000); SSN-776 (-$10,000,000); SSN-775 (-
$10,000,000); and the LPD-17 class (-$43,400,000). (Page 140)
Appendix A: Other Options for Responding to
Rising Ship Costs
Aside from reducing planned ship procurement rates or shifting or shifting to lower-
cost ship designs, one option for responding to rising Navy ship procurement costs would
be to increase annual ship-procurement funding. The Navy’s proposed FY2007 budget
and the FY2007-FY2011 shipbuilding plan propose increasing annual funding for ship
construction to an average of roughly $14.4 billion per year in constant FY2007 dollars.
Increasing annual ship-procurement funding substantially from current levels, however,
may not be easy. In a situation of finite defense funding, increasing funding for Navy
ship procurement could require reducing funding for other Navy or DOD priorities. The
Navy has worked in recent years to operate more efficiently on a day-to-day basis so that
the resulting savings could be applied to Navy procurement programs. In practice,
however, savings from these efficiencies have been offset by rising Navy costs in other
areas, such as personnel-related costs.
A second option would be to modify the way in which new Navy ships are
funded in the budget. Possible changes that have been suggested include making
greater use of incremental funding or starting to use advance appropriations. This
option, which is examined in CRS Report RL32776,39 might marginally increase the
number of ships that could be procured for a given total amount of money. As
discussed in that report, however, it could also pose potentially significant issues
relating to Congress’s power of the purse and Congress’s responsibility for
conducting effective oversight of DOD activities.
A third option would be to make greater use in Navy ship-procurement programs
of a contracting method known as multiyear procurement (MYP). This option, like the
previous one, might marginally increase the number of ships that could be procured for
a given total amount of money. Not all Navy ship-procurement programs, however,
would meet the legal requirements for MYP,40 and making greater use of MYP could
reduce DOD’s and Congress’s flexibility to adjust ship-procurement plans in future years
to respond to changing strategic and budgetary circumstances.41
A fourth option would be to change the acquisition strategy for building certain
Navy ships. For example, the Navy estimated in 2005 that changing from a strategy
of dividing DDG-1000 destroyers evenly between two yards to a strategy of having
all DDG-1000s built by a single yard could reduce the cost for building 10 DDG-
1000s by a total of $3 billion, or an average of $300 million per ship.42 Shifting to
a single-yard acquisition strategy, however, could cause the second yard to
39 CRS Report RL32776, Navy Ship Procurement: Alternative Funding Approaches —
Background and Options for Congress, by Ronald O’Rourke. (Hereafter cited as CRS
Report RL32776.)
40 These requirements are set forth in 10 U.S.C. § 2306b, the statute governing MYP
arrangements.
41 For further discussion, see CRS Report RL32776.
42 See CRS Report RL32109.
permanently exit the business of building that kind of ship. That could leave the
Navy with a single source for building that kind of ship, which could prevent the
Navy in the future from using competition or benchmarking43 to spur design
innovation, constrain costs, maintain production quality, and ensure adherence to
scheduled delivery dates.
Another potential change in acquisition strategy would be to make greater use
of competition in Navy ship acquisition. Competition is used today in Navy ship
acquisition primarily in the early stages of ship-acquisition programs, to determine
who will design and build the lead ship in each new class. Making greater use of
competition in Navy ship acquisition could involve using competition between
shipyards in awarding contracts for building follow-on ships in each class. This step,
if taken, would represent a return to Navy practices in the 1980s. Employing
competition in the awarding of contracts for building follow-on ships, however,
requires either an annual procurement rate for the class of ship in question that is
high enough so that the government can contemplate giving ships to one yard or
another without endangering the financial health of either yard, or a willingness on
the part of the government to have contract award lead to a decision by the losing
yard to permanently withdraw from the business of building that kind of ship, or
Navy ships generally. In the latter case, the Navy’s contract-award decision could
leave the Navy with a single source for that kind of ship in the future.44
A fifth option would be to take steps to reduce the amount of shipyard fixed
overhead costs that are incorporated into the procurement costs of Navy ships. This
could be accomplished by eliminating any excess capacity among the yards building
Navy ships, which would eliminate the fixed overhead costs associated with
maintaining that capacity, or by increasing other kinds of work done by those yards,
so that this other work could absorb a greater portion of the yards’ fixed overhead
costs. Potential other forms of work include construction of ships for other U.S.
government agencies, such as the Coast Guard or the National Oceanic and
Atmospheric Administration (NOAA), construction of commercial ships, overhaul
and repair of Navy or other U.S. government ships, and overhaul and repair of
commercial ships.
A sixth option would be to improve the operating efficiency of yards building
Navy ships by incorporating more advanced design and production processes and
equipment. The National Shipbuilding Research Program (NSRP) Advanced
Shipbuilding Enterprise (ASE) is one effort aimed at this goal.45 A May 2005 DOD
report compares the operating efficiency of the yards that build the Navy’s major
ships relative to that of foreign shipyards that are considered to be among the world’s
43 Benchmarking, which can take place in the absence of active competition, is the process
of using one yard’s performance in building a certain kind of ship to help measure or judge
the performance of another yard in building that kind of ship.
44 For further discussion of competition in Navy ship acquisition, see David H. Lewis, “No
Bucks, No Buck Rogers,” U.S. Naval Institute Proceedings, May 2005, pp. 54-58.
45 For more on this program, see the NSRP ASE website at [http://www.nsrp.org/].
most efficient, and makes recommendations for how to improve the operating
efficiency of the U.S. yards.46
A seventh option would be to build Navy ships without some of their planned
equipment (or with less expensive substitute equipment). Building a ship without
some of its planned equipment (or with less expensive substitute equipment) would
likely reduce its capabilities. Equipment not installed during the original
construction process could be added back later, after the ship had entered service.
This would restore the ship’s lost capability but add back the cost of this equipment,
in which case the ship’s procurement cost, instead of being reduced, would have been
partially deferred into the future. Installing this equipment on an in-service ship,
moreover, may be more expensive than building it into the ship during its original
construction process. As a consequence, this strategy over the long run could
increase the procurement total cost of the ship above what it would have been if the
ship had been built from the beginning with all its planned equipment.
An eighth option would be to build Navy ships in foreign shipyards where
construction costs may be lower to due lower wages and material prices or other
factors. Regarding this option, 10 U.S.C. § 7309 states that “no vessel to be
constructed for any of the armed forces, and no major component of the hull or
superstructure of any such vessel, may be constructed in a foreign shipyard.” The
provision permits the President to authorize exceptions when the President
determines that it is in the national security interest. In such cases, the President is
to notify Congress of the determination, and no contract may be made until the end
of the 30-day period beginning on the date on which the notice is received. The
provision also exempts inflatable boats and rigid inflatable boats. In addition to 10
U.S.C. § 7309, the annual DOD appropriations act contains a provision in the section
entitled “Shipbuilding and Conversion, Navy,” stating that funds for Navy
shipbuilding are made available for the fiscal year in question provided, among other
things, “That none of the funds provided under this heading for the construction or
conversion of any naval vessel to be constructed in shipyards in the United States
shall be expended in foreign facilities for the construction of major components of
such vessel: Provided further, that none of the funds provided under this heading
shall be used for the construction of any naval vessel in foreign shipyards.”
A recent report from the RAND Corporation provides additional discussion of
why Navy ships cost much more today than they did decades ago, and of options for
reducing the cost of Navy ships.47
46 U.S. Department of Defense, Global Shipbuilding Industrial Base Benchmarking Study,
Part I: Major Shipyards, Washington, 2005, 184 pp. (May 2005, Office of the Deputy
Under Secretary of Defense [Industrial Policy].)
47 Mark V. Arena, Irv Blickstein, et al., Why Has the Cost of Navy Ships Risen? A
Macroscopic Examination of the Trends in U.S. Naval Ship Costs Over the Past Several
Decades, RAND Corporation, Santa Monica (CA), 2006. (National Defense Research
Institute, MG-484-Navy) 98 pp.