A new Congressional Budget Office (CBO) report comparing various future fleet size costs said moving to a 355-ship Navy in 10-20 years is doable but will cost hundreds of billions more over 30 years.

The Navy currently operates 280 ships.

The CBO report looked at four options: getting to 355 ships quickly by building more ships for the next 20 years;  building more ships and extending the service life of some ships (SLEPs); maintaining a size comparable to today’s 280 ships; and the implications of funding the Navy at roughly its historical level for ship procurement – leading to a decline to 230 ships by 2047.

CBO Chart
CBO Chart

The office estimated that meeting the 355-ship goal by 2037 through new shipbuilding alone would cost about $26.7 billion per year in 2017 dollars. The Navy could reach that number by 2028 if it includes additional SLEP for $27.5 billion annually, although the CBO noted this would not lead to the composition the Navy is seeking until 2037.

The report said this is over 60 percent higher than what the Navy has spent on shipbuilding over the past 30 years and more than 25 percent higher than the amount appropriated for 2017.

The Navy’s FY ’19 budget requested almost $20 billion for 10 ships, $6.7 billion less than the CBO says is required per year to get to 355 ships. The budget’s Future Years Defense Programs (FYDP) plan projects a higher procurement rate in FY ’23 of 13 ships for almost $24 billion. This is still almost $3 billion less than the CBO says is minimally necessary to get to 355 ships within 20 years (Defense Daily, Feb. 12).

Earlier this month the House and Senate Seapower subcommittee chairmen said they preferred shipbuilding budgets closer to the $26 billion+ noted in the CBO report. Sen. Roger Wicker (R-Miss.), who heads the Senate subcommittee, said he wants about $26 billion in FY ’19 procurement for 14 new ships total. Rep. Rob Wittman (R-Va.), who heads the House subcommittee, said he wants a budget at $26.2 billion in FY ’19 ship procurement for 13 ships.

“Anything less is absolutely unacceptable,” Wittman said at the McAleese/Credit Suisse defense programs conference (Defense Daily, March 6).

In comparison, the CBO said if the Navy maintained its current size and composition it would cost about $22.4 billion annually in shipbuilding through 2048. If historical ship procurement held, shipbuilding would cost only $16.8 billion per year. The office said since shipbuilding costs tend to outpace inflation, maintaining historical funding would significantly reduce the fleet size.

Overall, the CBO estimated the total annual cost of increasing the fleet using just new shipbuilding would be about $103 billion: $27 billion in new construction and $76 billion in direct, indirect, and overhead operation and support.

Using new construction + SLEPs it would cost slightly more at about $104 billion per year. Maintaining the current size would cost in total $91 billion per year: $22 billion in new construction and $69 billion for operation and support. The smallest fleet at historical funding would annually average about $82 billion: $17 billion in new ships and $65 billion for operation and support.

Through 2047 these costs add up to under $3.1 trillion for new shipbuilding alone, over $3.1 trillion when adding SLEPs, $2.7 trillion to maintain the current size, and $2.7 trillion at historical funding levels but a smaller fleet.

In the CBO’s estimation, the SLEPs option would:

  • extend all 22 of the Ticonderoga-class CG-47 cruisers to 45 years versus current plans to retire 11 CGs after 33-38 years;
  • extend the oldest Flight I and II Arleigh Burke-class DDG-51 destroyers to serve 45 years versus the planned 35 years;
  • extend existing LSD-41 and LSD-49 amphibious ships plus some logistics ships from 40 to 45 years; and
  • extend a small number of improved Los Angeles-class fast attack submarines (SSNs) by refueling them to serve 10 more years.

The office said SLEP has the advantage of sustaining “capable ships in service for a relatively modest cost,” although they would be older and “thus might not have the most up-to-date combat systems.”

The SSBN(X) will replace Ohio-class ballistic subs. Photo: U.S. Navy
The SSBN(X) will replace Ohio-class ballistic subs.
Photo: U.S. Navy

The total average annual cost estimates do not include aircraft, weapons, and unmanned systems. The extra cost of purchasing aircraft for the 12th carrier and additional helicopters for surface combatants in the first two fleet options would be about $15 billion over 30 years. Maintaining the current fleet size would not require any major changes in planned costs while the smallest option would save about $ billion with fewer helicopters and fixed-wing aircraft purchased.

CBO underscored that in analyzing all the plans it used existing ship designs and production lines for the next decade but had to make its own assumptions about the size and capabilities of ships past 2027 because the Navy is not specific about them.

The report said building and maintaining the 355-ship fleet would require the purchase of 330 new ships in the next 30 years. Additional SLEP would only time ship purchases somewhat differently and require purchasing ships at an average rate of 11-12 per year. After SLEP ships are retired by the 2030s, the Navy would need to build ships at an average rate of 10 per year.

Without SLEP, the Navy would have to purchase ships at a rate of 12-13 per year through the 2030s, then at a rate of nine per year to maintain the size.

Maintaining the current fleet size would require purchasing seven to eight ships per year in the 2020s and then seven to nine in following decades. The smallest alternative fleet would require building about seven to eight ships per year in the 2020s but four to five per year through the 2030s.

The CBO said the lower shipbuilding level in the historical funding option is a result of maintaining the Columbia-class ballistic missile submarine (SSBN) program. The Navy expects to spend over $7 billion on each Columbia-class vessel.

The CBO said shipyards would need to make “significant investments in facilities and infrastructure to build the larger fleets” and a fleet based on historical funding would have less construction business “with the possibility that one or more shipyards could leave the industry.”

USS George Washington (CVN 73) Carrier Strike Group and Japan Maritime Self-Defense Force (JMSDF) ships steam in formation for a photo exercise during the final day of Exercise Keen Sword 2011. Photo courtesy U.S. Navy
USS George Washington (CVN 73) Carrier Strike Group and Japan Maritime Self-Defense Force (JMSDF) ships steam in formation for a photo exercise during the final day of Exercise Keen Sword 2011. Photo courtesy U.S. Navy

The report said building barely five ships per year in the smallest fleet option may not be enough business to keep all seven current shipyards open, “although if it were, the workforces in those yards would shrink to reflect the reduced activity”

However, if a smaller number of ships were built in fewer yards, each would build more than one ship per year and “more efficient production could be achieved, which could result in somewhat lower costs for ship construction than CBO reported here.”

The report also notes if consolidation was done inefficiently than it could lead to higher costs.

The office estimated that based on historical experience the portion of cost to operate and maintain these ships as well as pay for military and civilian personnel will increase faster than inflation. Therefore, even operating a smaller fleet would cost $12 billion, or 21 percent, more annually in 2047 than the current fleet at $56 billion.

By 2047, the average annual cost to operate a 355-ship fleet would be $38 billion, or 68 percent, more than the $56 billion of today. The report pointed out the SLEP option would cost more in earlier years because some of the ships would be retired later than otherwise planned.

Maintaining the current size would cost $22 billion, or 39 percent, more to operate it by 2047.