Magazine article National Defense

Turbulent Waters

Magazine article National Defense

Turbulent Waters

Article excerpt

Ship construction costs endanger Navy's fleet expansion

With runaway shipbuilding costs, disruptions in key programs and competing budgetary needs, the Navy is heading into one of its toughest procurement cycles yet.

"The U.S. Navy is facing a numbers crunch," said Stuart Slade, senior naval editor at Forecast International, a Connecticut-based marketing research and consulting firm.

"The cost of ships is going up through the roof," he said.

As a result, it remains uncertain whether the Navy can reach its goal of a 313-ship force by 2020. The fleet currently stands at 280 ships.

To get to 313 ships, the Navy must spend $13.4 billion - in 2005 dollars - each year, said Rear Adm. Barry McCullough, director of warfare integration.

The Navy, however, historically has programmed $11 billion a year in its shipbuilding accounts. If that rate holds, the service will end up with a fleet of 260 ships, McCullough said.

"We have to get the costs out of our ships to meet the inventory," he said.

George Sawyer, a former assistant secretary of the Navy for research, development and acquisitions, estimated that the Navy needs $19 billion a year to catch up.

But it is unlikely that the Navy will see such a boost, despite recent congressional add-ons to the Virginia-class submarine program. In the fiscal 2008 defense budget, Congress provided an additional $588 million in advance procurement funding to accelerate submarine production. However, even that plus-up is not enough to complete the buy of the ships, which will require between $1.5 to $2 billion more in future years, said Ronald O'Rourke, a naval analyst with the Congressional Research Service.

The Congressional Budget Office has estimated that warships will cost substantially more to build than the Navy estimates. The 30-year shipbuilding plan could cost an average of $20.8 billion per year in fiscal 2008 dollars to execute - about 35 percent more than the Navy's $15.4 billion, according to O'Rourke.

"If the Navy in coming years does not receive or cannot devote more budgetary resources to ship construction, and if the Navy retains roughly the same proportionate mix of ship types as called for in the 313-ship proposal, the fleet could eventually be reduced to a total of 211 ships, or about 33 percent fewer than called for in the 313-ship proposal," he wrote in a report.

"We are in a vicious cycle. As costs go up, ship numbers go down, and if numbers go down, they drive costs up further," said Slade. "These are the questions that the Navy is struggling with at the moment, and they're not easy ones to answer."

Already, the service has taken measures such as cutting sailors from the fleet to free up money. But the drawdown has not generated as big a savings as Navy officials had hoped.

The Navy would have a tough time convincing Congress that it needs a bigger budget right now, said Shaun McDougall, a military budget analyst at Forecast International. "The Navy has no glamorous role to play in the wars in Iraq and Afghanistan," he wrote in a recent report. "There is little in the current Navy story that can be used to push back against encroachment on its budget by the other services."

Ship procurement has been further hindered by program changes and delays, as well as cost overruns in a number of the Navy's most important projects, McDougall said.

The current DDG-1000 destroyer program is a prime example of the difficulties facing the Navy, he noted. "Because the ship is designed to include several new still-experimental technologies, the costs of its development have gone so far beyond the original projections that cancellation is a real possibility."

Navy officials have argued that the costs of DDG-1000 are justified because the ship will be the launch pad for a host of new technologies. Congress appears unconvinced by this argument, McDougall said. "Lawmakers have shown concern over the long-term future of the new destroyer, and may be unwilling to provide full funding down the road should the costs continue to soar. …

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