May 25, 2010
The Navy is required by law to submit a report to the Congress each year that projects the service’s shipbuilding requirements, procurement plans, inventories, and costs over the coming 30 years. Since 2006, CBO has been performing an independent analysis of the Navy’s latest shipbuilding plan at the request of the Subcommittee on Seapower and Expeditionary Forces of the House Armed Services Committee. Today CBO released its latest report that summarizes the ship requirements and purchases described in the Navy’s 2011 plan and estimates their implications for the Navy’s funding needs and ship inventories through 2040.
The Navy’s report—issued in February and covering fiscal years 2011 to 2040—contains some significant changes in its long-term goals for shipbuilding. The new plan appears to increase the required size of the fleet compared with earlier plans, while reducing the number of ships to be purchased—and thus the costs for ship construction—over the next three decades. Despite those reductions, the total costs of carrying out the 2011 plan would be much higher than the funding levels that the Navy has received in recent years, according to analysis by CBO. Specifically,
- Language in the 2011 shipbuilding plan and in related briefings by the Navy implies that the service’s requirement for battle force ships (aircraft carriers, submarines, surface combatants, amphibious ships, and some logistics and support ships) now totals 322 or 323—up from 313 in the Navy’s three previous long-term plans. The battle force fleet currently numbers 286 ships.
- The 2011 plan calls for buying a total of 276 ships over the 2011–2040 period: 198 combat ships and 78 logistics and support ships. That construction plan is insufficient to achieve a 322- or 323-ship fleet. In comparison, the previous shipbuilding plan (for 2009) envisioned buying 40 more combat ships and 20 fewer support ships over 30 years.
- If the Navy receives the same amount of funding for ship construction in the next 30 years as it has over the past three decades—an average of about $15 billion a year in 2010 dollars—it will not be able to afford the purchases in the 2011 plan.
- The Navy estimates that the construction of the new ships in the 2011 plan will cost an average of about $16 billion per year. Expenditures for other activities that are typically funded from the Navy’s budget accounts for ship construction—such as refueling nuclear-powered aircraft carriers and outfitting new ships with various small pieces of equipment after the ships have been built or delivered—will add about $2 billion to the Navy’s average annual shipbuilding costs under the 2011 plan, in CBO’s estimation, bringing the average cost to a total of $18 billion per year.
- Using its own models and assumptions, CBO estimates that the average total cost to implement the Navy’s plan will come to $21 billion per year. about 18 percent higher than the Navy’s estimates overall. That figure masks considerable variation over time, however: CBO’s estimates are 4 percent higher than the Navy’s for the first 10 years of the plan, 13 percent higher for the following decade, and 37 percent higher for the final 10 years of the plan. Those differences result partly from different estimating methods and different assumptions about the design and capabilities of future ships. The estimates also diverge because CBO accounted for the fact that costs of labor and materials have traditionally grown much faster in the shipbuilding industry than in the economy as a whole, whereas the Navy does not appear to have done so. That difference becomes more pronounced over time.
This study was prepared by Eric Labs of CBO’s National Security Division.