Testimony on the Costs of Building a 355-Ship Navy

In December 2016, the Navy released a new force structure assessment (FSA) that called for a fleet of 355 ships—substantially larger than the current fleet of 275 ships and also larger than the Navy’s previously stated goal of 308 ships. In response to a request from the Subcommittee on Seapower and Projection Forces of the House Committee on Armed Services, CBO has estimated the costs of achieving the Navy’s objective within 15, 20, 25, or 30 years. As part of its analysis of those alternatives, the agency assessed the implications of building and operating a 355-ship fleet, including the number of ship purchases that would be necessary, prospective inventory levels, personnel requirements, and effects on the shipbuilding industry.

To enlarge the Navy to 355 ships would require a substantial investment of both money and time. CBO estimates that the earliest the Navy could achieve its goal of a 355-ship fleet would be in 2035, or in about 18 years, provided that it received sufficient funding. However, the cost to build and operate a 355-ship fleet would average $102 billion per year (in 2017 dollars) through 2047, CBO estimates, or more than one-third greater than the amount appropriated for fiscal year 2016 for today’s 275-ship fleet. On average under CBO’s alternatives, shipbuilding costs would be at their highest point over the next 10 years, while operating costs would be highest between 2037 and 2047, once the fleet numbered 355 ships.

Shipbuilding Costs

CBO estimates that, over the next 30 years, meeting the 355-ship objective would cost the Navy an average of about $26.6 billion (in 2017 dollars) annually for ship construction, which is more than 60 percent above the average amount the Congress has appropriated for that purpose over the past 30 years and 40 percent more than the amount appropriated for 2016. By comparison, CBO estimates that the Navy’s 2017 shipbuilding plan—which is based in part on the 308-ship goal outlined in the service’s 2014 FSA—would cost an average of $21.2 billion per year to implement over the next 30 years. However, the Navy’s 2017 shipbuilding plan would fall short of the 308-ship force goal in 22 of the next 30 years.

To establish a 355-ship fleet, the Navy would need to purchase around 329 new ships over 30 years, compared with the 254 ships that would be purchased under the Navy’s 2017 shipbuilding plan. In particular, over the next five years, the Navy would purchase about 12 ships per year under CBO’s alternatives compared with about 8 per year under the Navy’s 2017 plan. Over the next 30 years, buying additional fixed-wing aircraft and helicopters to outfit the additional 63 ships would require $15 billion more than the Navy would spend on aircraft under its existing plan. Those costs do not reflect the additional weapons or unmanned systems that the Navy would need to purchase to arm the new ships or the cost of improvements to the shipyards that would be needed to build ships at higher rates.

Operating Costs

In addition to the costs of building 329 new ships, a larger fleet would cost more to operate: More ships would require more sailors; recruiting and training those sailors would require more civilian and military positions onshore; additional ships would lead to larger maintenance budgets; and those extra ships and crews would consume more fuel and supplies, during both training exercises and deployments. According to CBO’s analysis, by 2047, the annual cost in 2017 dollars of operating the Navy’s 355-ship fleet—regardless of whether the buildup took 15 or 30 years—would be about $38 billion (or 67 percent) more than the $56 billion the fleet of 275 ships costs annually to operate today. CBO’s projection of the steep increase in operating costs by 2047 results both from having a larger fleet and from the expectation that operation and support costs would grow faster than general inflation in the economy. Under the smaller buildup proposed in the Navy’s 2017 shipbuilding plan, annual costs would also rise by 2047, by about $23 billion.

Total Costs

CBO estimates that the cost to build, crew, and operate a 355-ship fleet would average $102 billion per year through 2047. That amount would be 13 percent more than the $90 billion needed to build and operate the fleet envisioned in the Navy’s 2017 shipbuilding plan.

Effects of Reaching 355 Ships More Quickly

CBO analyzed four alternatives that would expand the fleet to 355 ships over different time frames: 15, 20, 25, and 30 years. Under each alternative, construction of the additional ships would begin in 2018. The major difference among those alternatives is the timing of when the fleet would reach 355 ships and, thus, when the money to build, crew, and operate those fleets would need to be appropriated. Exactly when the fleet reached the 355-ship goal would not have a significant effect on total 30-year costs in real (inflation-adjusted) terms. For example, buying more ships earlier in the 15-year time frame would mean that those ships would be slightly less expensive to build (because ships would be constructed at more efficient rates and the real cost growth in the shipbuilding industry would be lower than in later years); but establishing a larger fleet earlier would lead to higher operating costs. In addition, in comparison with the 30-year buildup, shipbuilding budgets would need to be significantly higher in the 2020s for the 15-year alternative. Finally, building the fleet more quickly would pose much greater, but not insurmountable, challenges for the shipbuilding industry.