The Navy anticipates building its top priority—the Ohio replacement submarine—during a fiscally austere period where the shipbuilding account will be strapped for cash, but using a special, Defense Department-wide account would give the service new funding mechanisms that could save anywhere from 5 to 10 percent per ship, the Congressional Budget Office estimated.
Congress created the National Sea-Based Deterrence Fund in the 2015 defense authorization bill to help the service start to begin saving for its newest boomers before lead ship construction of the first Ohio-class replacement kicks off in 2021. In the 2016 National Defense Authorization Act, it added additional provisions that expand the Pentagon’s funding authorities when using the account, experts said.
For one, the NSBDF account allows for economic order authority, wherein the Navy can buy materials and components for the Ohio-class replacement and other nuclear powered ship classes such as the Ford-class aircraft carrier or Virginia-class attack submarine, Eric Labs, senior analyst for the Congressional Budget Office, told lawmakers at a House Armed Services Committee (HASC) seapower and projection forces subcommittee panel on Tuesday.
The NDAA also authorizes incremental funding and advance construction. Together, those authorities would net as much as 10 percent savings per ship, he added.
“If you’re talking about a $6 billion dollar submarine in round numbers, you’re looking at a $300 [million] to $600 million savings per boat,” Labs said.
Ronald O’Rourke, specialist in naval affairs for the Congressional Research Service, said that using the NSBDF would give the Navy flexibility to spend money in ways it wouldn’t be able to under normal acquisition regulations.
“That could achieve savings that would not be possible under multiyear procurement alone or under a similar provision that might be written into a block buy contract,” he said.
For Rep. Randy Forbes (R-Va.), who helped create the NSBDF and chairs the subcommittee, such are critical for getting lawmakers on board to support a fund that some members have said could reduce oversight and control of the program.
“At a time when we’re making enormous cuts in Army brigades, in readiness, in strike fighter shortfalls and munitions shortfalls all taking really pain to the warfighter, this is an opportunity for us to have substantial savings,” he said.
Navy officials have been adamant that they must build new nuclear-capable submarines to replace the Ohio-class boomers, but if its shipbuilding accounts are funded at historical levels, the service will not be able to afford all of the aircraft carriers, submarines, littoral combat ships and destroyers slated for construction over the next 30 years, experts told the panel.
The service estimates it needs $16.5 billion per year to implement its shipbuilding plan, but that number is for new construction only, Labs said. Other activities paid out of the shipbuilding accounts, such as refueling nuclear aircraft carriers and outfitting new warships, add an additional $1.9 billion per year—bringing costs up to $18.3 billion a year, a 15 percent increase from historical levels, according to the CBO.
Additionally, CBO asserts the Navy has underestimated the cost of building new ships. New ship constructions could cost as much as $18.4 billion, and $20.2 billion will be needed to fund overall shipbuilding needs, Labs said. “That amount is about 30 percent higher than the historical average.”
But greater funding flexibility doesn’t always save money, and in some cases, can increase the risk of waste, said Mandy Smithberger, director of the Project for Government Oversight’s Straus Military Reform Project. For instance, once the Navy has sunk money into components and materials, greater funding flexibility could force the Navy into building all 12 submarines as planned, even if that strategically no longer makes sense.
Furthermore, “Congress can always authorize authorities that provide these benefits without having to have a separate fund,” she added.
Although the House is broadly supportive of using the NSBDF to pay for the new submarines, some members such as Rep. Rodney Frelinghuysen (R-N.J.), who chairs the House Appropriations defense subcommittee, have vehemently opposed the creation and use of such a fund (Defense Daily, June 11), .
After the House Appropriations Committee tried to ban current and future use of the fund in the 2016 defense spending bill, lawmakers struck down that language in a 321-111 vote.