An Analysis of the Navy’s December 2020 Shipbuilding Plan

Each year, as directed by the Congress, the Navy submits an annual report with the President’s budget describing the planned inventory, purchases, deliveries, and retirements of the ships in its fleet for the next 30 years. Rather than submitting such a report with the Navy’s 2021 budget, on December 9, 2020, the Department of Defense submitted a 30-year shipbuilding plan to the Congress that covers the years 2022 to 2051. In this report, the Congressional Budget Office analyzes that shipbuilding plan and compares it with the Navy’s fiscal year (FY) 2020 shipbuilding plan, which was submitted to the Congress in March 2019. The average annual cost of buying the ships and unmanned systems under the plan would be about $34 billion (in 2021 dollars), CBO estimates, $2 billion more than under the previous plan.

Increased Inventory Goals for Battle Force Ships

In its December 2020 shipbuilding plan, the Navy substantially increased its planned inventory for the battle force—the fleet of manned ships used to perform naval missions in defense of national interests. The Navy provided information about the goals underlying those plans in late 2020 in its Future Naval Forces Study (FNFS), which it produced in conjunction with the Office of the Secretary of Defense. The FNFS described a total goal of between 382 and 446 battle force ships of various types. (That range reflects different analytic approaches that the Navy employed to determine the number of each type of ship.)

The range is higher than the goal of 355 in the Navy’s 2016 force structure assessment (an earlier evaluation of the Navy’s inventory goals). In particular, the Navy increased its goal for the number of small ships, such as small surface combatants and small amphibious ships, and reduced its goal for the number of large ships, such as aircraft carriers, large surface combatants, and large amphibious ships. (For a description of the ship types in the Navy’s fleet, see Appendix A.)

Estimates of Shipbuilding Costs

In CBO’s estimation, over the next 30 years, the Navy would spend a total of a little more than $1.0 trillion (in 2021 dollars) building the ships and unmanned systems in its December 2020 plan—an average of $34.1 billion per year. That amount of funding, each year for 30 years, would be unprecedented since World War II. Half of the funding would be for submarines, about one-third would be for aircraft carriers and surface combatants, and the remainder would go toward amphibious ships, combat logistics and support ships, and other items. Although the plan calls for building a significant number of unmanned systems, they represent a small fraction of the overall costs of the plan—an average of about $1.2 billion per year, or 4 percent of all shipbuilding costs.

How CBO Estimated Shipbuilding Costs

To estimate ship construction costs, CBO used the cost per thousand tons of lightship displacement, or the weight of the water a ship displaces without its crew, stores, ammunition, and fuel or other liquids. CBO then adjusted its estimates to incorporate the effects of rate (the reduction in average overhead costs that occurs as a shipyard builds multiple ships of the same type simultaneously) and learning (the efficiencies that shipyards gain as they produce additional units of a given type of ship). See Appendix B for more information on CBO’s and the Navy’s estimates for major shipbuilding programs. CBO’s estimates incorporate a projection that labor and materials costs would continue to grow 1.2 percent faster in the naval shipbuilding industry than in the economy as a whole, as they have for the past several decades.

CBO does not yet have a model to estimate construction costs specific to unmanned systems. Therefore, CBO used the Navy’s estimates and applied a growth factor based on growth in costs for similar procurement programs in the past.

Growth in the Navy’s Total Annual Budget

Under the December 2020 plan, the Navy’s fleet would grow from about 300 manned ships today to more than 400 by 2051. Fully purchasing, operating, and maintaining that larger fleet would increase the Navy’s total annual budget by about 40 percent (in 2021 dollars) by 2051, in CBO’s estimation.

To estimate that growth in costs, CBO made independent estimates for each Navy budget account. Specifically, to estimate costs associated with the Navy’s shipbuilding and aircraft procurement accounts, CBO first estimated the cost of each ship and aircraft procurement program. Estimates for other items in those accounts as well as the remaining procurement accounts were projected on the basis of historical relationships between those accounts and the shipbuilding and aircraft procurement accounts.

CBO estimated costs for operation and maintenance accounts on the basis of historical relationships between those costs and the size of the fleet, as measured by its total full-load displacement. Estimates for the Navy’s military personnel accounts were based on the historical relationship between the total number of sailors serving on ships and the total number of service members. Estimates for Marine Corps military personal were based on historical averages, adjusted for the size of the Corps, which is set in law. Estimates for the remaining accounts, such as military construction, were based on historical averages.

CBO adjusted its estimates to vary with changes over time in the Navy’s fleet (ship and aircraft procurement, displacement, and crew size). In addition, most of the Navy’s accounts have experienced inflation greater than that in the economy as a whole; those differences are included as real growth in the estimates.

Estimates of All Shipbuilding Costs by CBO and by the Navy

In CBO’s estimation, the full cost of the December 2020 shipbuilding plan (including new-ship construction, refueling of aircraft carriers, unmanned systems, and other items) would average $34.1 billion per year over the 2022–2051 period—about 10 percent more than the Navy estimates. (CBO’s estimate is almost 50 percent larger than the Navy’s average annual appropriation for shipbuilding over the past five years.)

The Navy’s estimates exclude certain costs that it would need to cover with funds from its shipbuilding account to fully implement the plan, including the refueling of nuclear-powered aircraft carriers and several other items. CBO estimates those costs separately. In addition, it is unclear whether, in the future, the Navy would fund all the unmanned systems from its shipbuilding account; CBO included them in this analysis. Including all of those additional costs adds $2.2 billion to the Navy’s estimates, for an average of $31.3 billion per year over 30 years.

The Navy’s Estimates of New-Ship Construction Costs Under Its Two Most Recent Plans

The Navy expects that costs for new-ship construction would be significantly greater under its December 2020 plan than under its FY 2020 plan. According to the Navy’s estimates, new-ship construction under the December 2020 plan would cost an average of $29.1 billion per year over the next 30 years, $6.3 billion more than under the previous plan and $9.0 billion more per year than what has been appropriated, on average, over the past 5 years. Adjusted for inflation, that annual amount would be double what the Navy has received, on average, over the past 30 years and 45 percent more than what the service has received over the past 5 years.

Displacement and Crew Size Under the Navy’s Two Most Recent Plans

Displacement and crew size are important elements that shape CBO’s analysis of various costs of the Navy’s plan. Displacement is the weight of water that a ship displaces when floating or (in the case of a submarine) submerged. Generally, with respect to ships of the same type, those with larger displacements will cost more to operate but will also be more capable: They usually have larger crews, carry more weapons, have more systems to maintain, and require more installed power to operate those systems. Crew size is the total number of sailors who serve aboard the Navy’s ships or, in the case of unmanned systems, are needed to control and maintain them.

Although the Navy’s December 2020 plan would increase the size of the fleet by one-third and add about 140 unmanned systems, fleetwide displacement would be only 28 percent greater than for today’s fleet. The total number of sailors serving on the Navy’s ships would actually decline by 7 percent. When designing new ships, the Navy seeks to reduce the size of the crews, so the fleet in 2051 would have fewer ships with large crews than today’s fleet even though it had more ships overall. If the Navy’s plans for designing ships with smaller crews did not succeed, then the number of sailors—and costs—would be higher than estimated here.

Operation and Support Costs Under the Navy’s Two Most Recent Plans

The larger fleet envisioned under the Navy’s December 2020 shipbuilding plan would result in greater operation and support costs: More ships would require more maintenance and would consume more fuel and supplies during both training exercises and deployments.

Using information in the President’s 2021 budget, CBO estimated operation and support costs in three categories: direct costs, indirect costs, and overhead costs. Direct costs include crew salaries, fuel, supplies, and repairs and maintenance that the crews perform for the Navy’s combat ships. Indirect costs include expenditures for various support units and organizations that are necessary for combat units to fight effectively, including combat logistics and support ships. Overhead costs are expenditures for various means of support for combat units, such as recruiting, training, acquisition offices, maintenance, and medical care.

Direct costs for operation and support currently total about $32 billion per year. Those costs would rise in real terms to $49 billion annually by 2051—partly because of the Navy’s larger fleet. As with ship construction, the difference of about 1.2 percent per year between inflation in operation and support costs and inflation in the economy as a whole is included as real growth in costs, calculated in 2021 dollars.

Operation and support costs would not be much higher under the December 2020 plan than under the FY 2020 plan. Under the prior plan, the fleet would have been smaller, but it also would have included more large ships, which are more expensive to operate.

The Navy’s report includes estimated costs for “sustainment,” or what CBO calls operation and support costs, but those estimates are not comparable to CBO’s. They reflect programmed spending under the 2021 Future Years Defense Program with 4.6 percent average annual growth and are reported in nominal dollars only. The Navy also categorizes costs differently than CBO does.

Battle Force Ship Purchases and Inventory

Over the next 30 years, total ship purchases would be one-third higher under the December 2020 plan than under the previous one. The Navy envisions buying 300 combat ships, including aircraft carriers, three types of submarines, large and small surface combatants, and large and small amphibious warfare ships. By contrast, the Navy’s FY 2020 plan called for the purchase of 247 combat ships. The Navy would also buy 104 combat logistics and support ships under the new plan, almost double the number called for in the FY 2020 plan.

Some types of ships, such as small surface combatants and small amphibious warfare ships, have a service life of less than 30 years. Therefore, the Navy also plans to purchase replacements for those ships as they retire late in the period. Overall, given both ship purchases and planned retirements, the fleet would grow from about 300 ships today to about 400 by 2038.

The Aircraft Carrier Force

The existing aircraft carrier force comprises 10 Nimitz class CVN-68 nuclear-powered aircraft carriers and one new Gerald R. Ford class CVN-78 aircraft carrier, although the Ford class carrier is still undergoing finishing work and testing and is not yet ready for normal operations. The future carrier force under the December 2020 plan would be similar to that under the previous shipbuilding plan. The Navy would purchase 6 Ford class aircraft carriers between 2022 and 2051. The number of aircraft carriers in the fleet would remain at about 11 through 2040, falling to about 10 through 2051. Aircraft carriers have a service life of 50 years, so to reach and sustain a force of 11 ships—the higher goal in the FNFS and one required by statute—the Navy would need to purchase 1 aircraft carrier every three and a half years between 2028 and 2051.

Although the inventory goals of the FNFS include up to 6 light aircraft carriers of an uncertain but presumably conventional (not nuclear-powered) design, the December 2020 shipbuilding plan does not include purchases of light carriers.

The Ballistic Missile Submarine Force

Today’s ballistic missile submarine (SSBN) force comprises 14 Ohio class SSBN-726 submarines. SSBNs are one component of the nation’s triad of nuclear delivery systems. In 2021, the Navy ordered the first of a new class of 12 SSBNs, the Columbia SSBN-826, to replace retiring Ohio class submarines over the next 20 years. The Navy estimates that the submarines will take 7 years to build and test, so the first Columbia would be commissioned into the fleet in 2028 and go on its first patrol 2 to 3 years later.

Under the previous shipbuilding plan, the SSBN force would have fallen below the Navy’s inventory goal of 12 boats from 2030 to 2041. Under the new plan, the Navy would extend the service life of 5 Ohio class SSBNs by several years, so the force would never fall below that goal.

The Attack Submarine Force

Today’s nuclear-powered attack submarine (SSN) force comprises 28 Los Angeles class, 3 Seawolf class, and 19 Virginia class ships. Under the December 2020 plan, the Navy would purchase 77 attack submarines over the next 30 years, 16 more than under the previous plan.

Specifically, the Navy would purchase 35 Virginia class SSNs equipped with the Virginia payload module, which increases the missile capacity of the submarine by 28 missiles. In 2034, the Navy would begin purchasing 42 ships of a new class of attack submarine, currently designated as the SSN(X). CBO’s assessment of the Navy’s plan incorporates the assumption that SSN(X) submarines would be similar to Seawolf class submarines in their size and capabilities, consistent with statements by Navy leaders. The Navy’s plan would also extend the service life of many Los Angeles class submarines to maintain a force of 50 or more attack submarines over the next 30 years. Under the FY 2020 plan, the attack submarine force would have fallen to 42 in the late 2020s before growing again.

In 2042, the Navy would start purchasing a new type of ship: the large payload submarine. Although not considered an attack submarine, CBO categorized it with attack submarines because it would have the mission of carrying a large number of missiles or special operations forces, not a nuclear-deterrence mission like that of the ballistic missile submarine force. The large payload submarine may be similar in size to the Navy’s existing Ohio class SSGN-726 guided missile submarines, which are converted ballistic missile submarines.

The Large Surface Combatant Force

Today, the Navy’s large surface combatant force numbers 92 ships—22 cruisers and 70 destroyers. The December 2020 shipbuilding plan calls for 55 new destroyers, 21 fewer than the previous plan. That change is consistent with the FNFS objective to reduce the proportion of large surface combatants in the fleet.

Under the previous shipbuilding plan, the first new future destroyer, now designated as the DDG(X), would have been purchased in 2025. Under the December 2020 plan, that first purchase is delayed until 2028. The DDG(X) has not yet been designed; according to the Navy, it will carry combat systems similar to those on the DDG-51 Flight III destroyer but will have a larger hull, more power, and more cooling. CBO estimated that the DDG(X) would displace 12,000 tons, which would make it larger than the latest DDG-51 and smaller than the Zumwalt class destroyer.

Under the previous plan, the Navy intended to extend the service life of all DDG-51 destroyers to 45 years. In the spring of 2020, the Navy discarded that idea, citing the high cost of maintaining and operating older ships. The Navy now expects that DDG-51s will serve for 35 or 40 years depending on their flight, or variant. The first 28 DDG-51s—Flights I and II—would serve for 35 years; the later ships—Flights IIA and III—would serve for 40 years.

The Small Surface Combatant Force

The Navy’s small surface combatant force today includes 23 littoral combat ships; the Navy also operates 8 mine countermeasures ships, which it sometimes includes in the small surface combatant category. There are 12 more littoral combat ships and 2 new Constellation class FFG-62 guided missile frigates currently under construction. Under the December 2020 plan, the service would purchase 25 more frigates for a total of 27 (7 more than under the previous plan), as well as 51 future small surface combatants of an undetermined design. In determining the cost of future small surface combatants, CBO estimated that those ships would be similar to frigates—larger than the 3,000-ton littoral combat ship but smaller than the 7,300-ton Constellation class.

The Amphibious Warfare Force

The Navy’s current amphibious warfare force comprises 32 large ships: 9 amphibious assault ships, designated as LHAs or LHDs; 11 amphibious transport docks, or LPDs; and 12 dock landing ships, or LSDs. Under the December 2020 plan, the Navy would purchase 16 large amphibious ships (LHAs and LPDs), 12 fewer than under the FY 2020 plan, and would begin a major building program for smaller light amphibious warfare ships (LAWs). (The LHA the Navy would purchase in 2022 was authorized by the Congress in 2020.) The first 36 LAWs would be purchased between 2022 and 2038. Because they would have only a 20-year service life, the Navy would start buying replacements in 2042, ultimately purchasing 55.

With the building program, the Navy would meet its minimum inventory goal of 61 amphibious ships by 2040. However, the number of large amphibious ships would fall to around 26 by 2024. The Navy’s plan does not identify separate goals for LPDs and LAWs, even though the ships are quite different: LPDs displace around 25,000 tons and LAWs are expected to displace 4,000 tons or less.

The Combat Logistics Force and Support Ships

Under the December 2020 plan, the Navy would buy 104 new combat logistics and support ships, 47 more than under the previous plan. Combat logistics ships operate with or directly resupply combat ships that are at sea. The December 2020 plan calls for the purchase of 38 large combat logistics ships—22 T-AO oilers and 16 T-AKE dry cargo ships—and 42 new, smaller T-AOL oilers to help resupply a larger fleet with a greater proportion of smaller ships. Of the 24 support ships, 9 would be large ships (2 tenders, 2 command ships, 2 expeditionary transfer docks, 2 T-AKEs for the Navy’s maritime prepositioning squadrons, and 1 expeditionary sea base) and 15 would be small ships (7 surveillance ships, 6 expeditionary fast transports, and 2 salvage/fleet tugs).

Unmanned Systems

Unlike the Navy’s FY 2020 shipbuilding plan, the new plan would incorporate large numbers of unmanned undersea and surface vehicles into the fleet. The FNFS included inventory goals of 119 to 166 unmanned medium surface vehicles (MUSVs) and large surface vehicles (LUSVs) and 24 to 76 extra-large unmanned undersea vehicles (XLUUVs), for a total of 143 to 242 systems. The LUSVs would operate in conjunction with other ships, carrying offensive and defensive missiles that manned ships could employ as needed. MUSVs would serve as sensor or command and control platforms, providing information about opponents to other ships in the Navy’s fleet. Although the Navy’s plan is less specific with respect to XLUUVs, they could carry a variety of payloads to support naval operations. The Navy is still developing its concepts of operations for unmanned systems, which increases the risk for both cost growth and delays in their construction and operations.