An Analysis of the Navy's Fiscal Year 2012 Shipbuilding Plan

Report
June 23, 2011

Since 2006, CBO has performed 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. This CBO study, the latest in that series, summarizes the ship inventory goals and purchases described in the Navy's 2012 plan and assesses their implications for the Navy's funding needs and ship inventories through 2041.

Through 2011, at the direction of the Congress, the Department of the Navy issued annual reports that described its plans for ship construction over the coming 30 years. But in the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383), the Congress relieved the Navy of that requirement except when the Department of Defense submits the Quadrennial Defense Review. Instead, the report accompanying the legislation required the Navy to submit a 10‑year shipbuilding plan if requested by the appropriate oversight committees.

Consequently, for fiscal year 2012, the Navy's intentions for shipbuilding came out in stages, in documents that can be combined with one another and with the plan of the previous year to yield a new 30-year plan comparable to previous ones. In late February, the Navy provided briefing slides highlighting the major changes the service had made in the schedule for constructing new ships and retiring older ones during the next 10 years, as well as providing some information about the expected cost of the shipbuilding called for in the new schedule. In late May, at the request of the House Armed Services Committee, the Navy provided tables showing a 30-year schedule that made a number of adjustments to the schedule released one year earlier. CBO viewed those briefing slides and tables as reflecting a 2012 shipbuilding plan that represents a modification to the previous year's plan.

Although the total costs of carrying out the Navy's 2012 plan would be less than those for the 2011 plan, they would still be much higher than the funding levels that the Navy has received in recent years. Specifically:

  • The Navy's documents constituting its 2012 shipbuilding plan imply that the service's current goal for its inventory of battle force ships (aircraft carriers, submarines, surface combatants, amphibious warfare ships, and some logistics and support ships) is 328—up from 322 or 323 under the 2011 plan (that plan was unclear as to whether the inventory goal for carriers was 10 or 11) and 313 in the Navy's three previous long-term plans, which were based on its 2005 assessment of the desired force structure. The battle force fleet currently numbers 286 ships.
  • Under the 2012 plan, the Navy would buy a total of 275 ships over the 2012–2041 period: 205 combat ships and 70 logistics and support ships, including 5 for the Army. Given the rate at which the Navy plans to retire ships from the fleet, that construction plan is insufficient to achieve a 328-ship fleet.
  • In comparison, in the 2011 shipbuilding plan, the Navy envisioned buying 198 combat ships and 78 logistics and support ships between 2011 and 2040, for a total of 276. That plan was insufficient to achieve a fleet of 322 or 323 ships.
  • The Navy estimates that buying the new ships in the 2012 plan will cost an average of about $15.5 billion per year, or a total of $465 billion over 30 years (about 6 percent less than its estimate for the 2011 plan). Those figures are solely for the construction of new ships, the only type of costs reported in the Navy's 30-year shipbuilding plans. However, other activities 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, in CBO's estimation, add nearly $2 billion to the Navy's average annual shipbuilding costs under the 2012 plan, which would bring the total to $17.3 billion per year on average.
  • Using its own models and assumptions, CBO estimates that the cost for new-ship construction under the 2012 plan will average about $18.0 billion per year, or a total of $539 billion through 2041. Including the expense of refueling aircraft carriers as well as outfitting new ships raises that average to about $19.8 billion per year, CBO estimates. Those figures are about 8 percent lower than CBO's estimates of the Navy's 2011 plan.
  • CBO's estimate of the costs for new-ship construction in the 2012 shipbuilding plan is about 16 percent higher than the Navy's estimate overall. That figure masks considerable variation over time, however: CBO's estimates are 7 percent higher than the Navy's for the first 10 years of the plan, 10 percent higher for the following decade, and 31 percent higher for the final 10 years of the plan. Those differences result partly from different estimating methods and different assumptions about the designs and capabilities of future ships. The differences also arise partly because CBO accounted for the fact that costs of labor and materials have traditionally grown faster in the shipbuilding industry than in the economy as a whole, whereas the Navy does not appear to have done so; that factor produces a widening gap between the estimates over time.
  • 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, it will not be able to afford all of the purchases in the 2012 plan. CBO's estimate of the full cost of the Navy's 2012 shipbuilding plan is about 27 percent above the average funding of almost $16 billion per year (in 2011 dollars) that the Navy has received over the past three decades.