A new Congressional report found the Navy does not have enough money to deliver on its 30-year shipbuilding plan.
The Congressional Budget Office estimates that the Navy is not likely to reach its goal of a 306-ship fleet without acquiring billions in additional funding in coming years.
“If the Navy receives the same amount of funding for new-ship construction in each of the next 30 years that it has on average over the past three decades, it will not be able to afford its 2015 plan,” the report states.
The CBO estimates that the Navy’s 2015 plan detailing ship purchasing and construction plans out to 2045 will cost an estimated of $20.7 billion per year in 2014 dollars – an amount that is 32 percent higher than the $15.7 billion the Navy has spent on average per year for all items in its shipbuilding accounts over the past 30 years.
“If the Navy’s future funding for shipbuilding is in line with its past funding, the Navy will need to reduce substantially its new-ship purchases relative to the number called for in its 2015 plan,” the plan states.
Also, the CBO’s estimates are $2.2 billion per year, or 13 percent, higher than the Navy’s over the next 30 years as a whole.
The CBO’s cost assessment includes new ship construction and aircraft carrier refueling as well as funding for outfitting new ships with technology upgrades and equipment. The new ship-construction detailed in the Navy’s plan will cost $566 billion over 30 years, averaging $18.9 billion per year, according to the CBO.
The CBO’s estimate of $18.9 billion per year for new-ship construction is 36 percent above the historical average annual funding of $13.9 billion, the report states.
The CBO’s cost estimates are in part based upon a projection that costs for labor and materials will probably continue to grow faster in the shipbuilding industry than in the economy as a whole, as they have for the past several decades.
The Navy, however, has a slightly different calculus for estimating the anticipated shipbuilding plan costs. Service officials say the difference hinges upon how inflation is perceived.
“We’re always going to look for opportunities to reduce costs. The reports go out 20 to 30 years. The Navy recognizes that there are different methodologies to calculate and account inflation,” said Lt. Robert Myers, Navy spokesman. "For consistency and comparative integrity, we utilize base year dollars throughout our 30-year shipbuilding plan. The base year dollars have been calculated using a weighted average of ship building cost, thereby taking into account the higher inflation in shipbuilding."
Despite these apparent cost discrepancies, the Navy plans to buy 44 ships between 2015 and 2019 and an additional 220 ships through 2044 – totaling 264 ships over 30 years.
To illustrate the extent of the shortfall between the Navy’s plan and recent dollars spent on shipbuilding, the CBO provided a projection of what ship purchases the Navy would be able to afford moving forward if they were restricted to the $15.7 billion spent annually in recent years on shipbuilding.
Were this the case, the Navy would only be able to buy four aircraft carriers as opposed to the six called for in the plan, the CBO points out. The CBO report also said the Navy would only be able to purchase 31 attack submarines as opposed to the 48 listed in the plan and 45 destroyers compared to the 65 cited in the shipbuilding plan.
In addition, if the Navy was limited to prior year dollars, the service would only be able to afford fewer Littoral Combat Ships, amphibs, logistics and support ships compared to the desired ship numbers articulated in the Navy’s plan.
The CBO report makes a number of suggestions to the Navy in order to maximize fleet numbers through their acquisition plans. These recommendations include proposing the idea of accelerating carrier purchases after 2018 to one every four years instead of one every five years as a way to keep the desired fleet size of 11 carriers.
Also, to keep the attack submarine force from falling below its inventory goal of 48 submarines, the Navy could accelerate the purchase of seven submarines, the CBO report says.
“Specifically, it could purchase seven additional submarines from 2017 through 2023, increasing the production rate to 3 submarines per year for most of those years. If that increase occurred, the Navy could buy seven fewer attack submarines between 2025 and 2034 than are called for under the 2015 plan and still maintain the desired inventory,” the CBO says.
Meanwhile, to meet its goal of 88 large surface combatants in the last years of the plan, the Navy could purchase five additional destroyers between 2028 and 2037, increasing the production rate to three ships per year for five more years, the CBO report says.
The CBO also says the Navy could prevent the minor shortfalls in amphibious warfare ships after 2035 by not retiring existing ships and extending their service life by a few years in several cases.
Despite the CBO’s assessment and series of recommendations, the Navy itself has repeatedly acknowledged that there does not currently appear to be enough money to actualize its 2015 30-year shipbuilding plan.
The text of the Navy’s 2015 30-year shipbuilding plan, released this past summer, says the service is in danger of not realizing its anticipated vision for a fleet size of more than 300 ships and submarines because there simply is not enough money available to meet stated requirements.
The planned pace of retirement for many of the Navy’s surface ships built between 1980 and 1990 and the funding needed to secure production in 2021 for the next-generation ballistic missile submarine, the Ohio Replacement program, are placing extensive strain on available resources, according to the plan.
Navy acquisition executive Sean Stackley told Congress earlier this year that the shipbuilding plan seeks to correctly identify this problem.
“In order to meet our 306 ship requirements, the funding that's needed greatly exceeds what we have had for the past 20 years. We're identifying this problem years in advance so that we collectively have the opportunity to work on it. The 306 ship plan is under great budget stress," Stackley said.
The Navy’s plan, called the “Report to Congress on the Annual Long-Range Plan for Construction of Naval Vessels for FY2015,” breaks required funding for future ships into three ten-year blocks and specifies that the Navy will need $19.7 billion per year for shipbuilding from 2025 through 2034 due to the expected production of the Ohio Replacement Program
Overall, the Navy estimates that it will need an average of $18.6 billion (2014 dollars) per year from 2015 to 2044 for the shipbuilding plan.
Navy officials said the service currently has 288 ships in service, however there is a slight difference of opinion among some regarding ship counting methodologies.
Navy officials emphasize that the service hopes to reach its 306-ship goal within the next 10 years, despite the apparent budget shortfalls.