A Congressional Budget Office (CBO) cost estimate report published Nov. 3 estimates a House bill allowing U.S. submarine sales to Australia would sell at $3 billion each and the overall effort would ultimately provide over $4.5 billion in deficit decreases.
The House Committee on Foreign Affairs unanimously passed H.R. 4619, the AUKUS Submarine Transfer Authorization Act, in July. It authorizes the sale of up to two
Virginia-class attack submarines (SSNs) to Australia within 15 years of enactment, permits collecting foreign contributions to expand the U.S. submarine industrial base and authorizes the government to spend the funds provided (Defense Daily, July 27).
The AUKUS agreement among Australia, the U.K. and U.S. aims to help Australia operate and ultimately build nuclear-powered attack submarines to replace its Collins-class conventionally-powered submarines. The U.S. plans to sell up to a maximum of five used and news Virginia-class submarines before the SSN-AUKUS class vessels are ready in Australia in the early 2040s.
The CBO estimated this bill would be enacted near the end of this calendar year and, since it allows the submarines to be sold any time over the following 15 years, spending based on the receipts from those sales would largely occur after fiscal year 2033.
The report noted that, based on U.S. Navy and Australia government information, CBO expects the first submarine would be transferred in 2030 and the second in 2033 at a cost of about $3 billion each.
Notably, the report said under H.R. 4619 payments for each sale would be received in advance of the submarine transfer, so payments would “immediately be available for obligation,” so the budget would record an offsetting increase in budgetary authority that year.
CBO said it “expects that DoD would spend the payments over many years; thus, outlays would decrease in the year payments are made and increase in subsequent years.”
The bill also gives DoD flexibility on how to spend the money gained from the sale, but CBO “anticipates that DoD would use those payments to procure two additional Virginia-class submarines to replace the submarines sold to Australia. Therefore, CBO expects that the spending of those payments will follow historical patterns for shipbuilding programs.”
The office estimates $2 billion of the Australian $6 billion in submarine sale payments would be spent from 2024-2033.
Australia also plans to provide the U.S. government with $3 billion to support the U.S. submarine industrial base operations. CBO estimates $2 billion would be received in 2025, $100 million annually from 2026 – 2033 and the last $200 million contributed in 2034 and 2035.
The report said that there is “significant uncertainty” in how amounts under this Submarine Security Activities would be allocated. CBO estimated it would be spent at a rate of 10 percent each year starting in 2025. This translates to spending $2.2 billion on the industrial base from 2024-2033, and the remaining $800 million after 2033.