Costs of Submarine Maintenance at Public and Private Shipyards

Public shipyards conduct a large majority of all submarine maintenance. Those shipyards are Navy-owned and -operated, but the Navy has been experiencing long delays—sometimes as much as several years—to obtain maintenance on its submarines at those shipyards. As a result, some submarines have missed deployments or had shortened deployments. The Navy has sent several submarines to private shipyards for overhauls in recent years but could send more.

This report compares the costs of submarine maintenance at public and private shipyards. This analysis focuses on depot maintenance—specifically, Docking Selected Restricted Availability (DSRA) overhauls— for the Navy’s Los Angeles class attack submarines (SSN-688s). DSRAs are medium-sized maintenance events that last several months and occur every four to six years over the 33-year lifetime of an SSN-688 submarine. They include maintenance, repairs, and upgrades; the submarine is put into a dry dock to enable work on the hull, propulsion, and systems (which would otherwise be underwater).

What Did This Analysis Find?

CBO found that DSRA overhauls for Los Angeles class submarines cost less, on average, in private shipyards from 1993 to 2017 than in public shipyards, although that difference has narrowed— and perhaps disappeared—in recent years.

• On average, overhauls at private shipyards have been 31 percent less expensive over the entire period (see table below).
• After accounting for the age of the submarines and differences in maintenance plans, the gap was slightly larger: Overhauls at private shipyards were 35 percent less expensive, on average, than at public shipyards.
• From 1993 to 1998, when the Navy used working capital funding (WCF) at public shipyards, DSRAs at private shipyards cost about half as much as those at public shipyards.
• From 1999 to 2006, during the Navy’s transition to mission funding, costs at private shipyards were 21 percent less than those at public shipyards.
• Since 2007, when the switch to mission funding at public shipyards was complete, costs at private and public shipyards have been about the same (see figure below). However, CBO’s data include only one overhaul at a private shipyard after 2010, which makes a comparison of costs for overhauls after 2010 not meaningful.
• The average cost of overhauls at all shipyards has risen: It was about $20 million in the mid-1990s, about $30 million in the mid-2000s, and roughly $50 million in the mid-2010s (see figure below). In part, those rising costs reflect the aging of the submarines and the Navy’s shift to maintenance schedules that increased the time between, and the duration of, DSRAs.

Those findings were derived from CBO’s examination of data on 146 DSRAs (the most common type of overhaul) that occurred between 1993 and 2017. Of the DSRA overhauls that CBO examined, 29 were done at private shipyards and 117 were done at public shipyards.

How Do These Results Differ From CBO’s Earlier Analysis?

In September 2018, CBO released a preliminary analysis of the costs of DSRAs for Los Angeles class submarines. The results of that analysis are very similar to those in this report: DSRAs cost less at private shipyards, on average, from 1993 through 2016, and the gap in costs between public and private shipyards has narrowed over time. The primary difference between CBO’s two analyses is the size of the gap in costs in recent years. The 2018 analysis showed that costs at private shipyards remained lower in recent years than costs at public shipyards, whereas the gap has roughly disappeared in this analysis (for overhauls after 2007).

The reason for that change is that CBO received updated data from the Navy. In response to CBO’s 2018 analysis, the Navy provided CBO with updated data for several of the recent DSRAs conducted at private shipyards. Those data show higher costs for those DSRAs than the costs listed in the Navy’s official Congressionally mandated database. The Navy performed its own analyses as well: Originally, the Navy asserted that overhauls at public shipyards cost about 20 percent less than those at private shipyards. Following discussions with CBO, the Navy changed its analytical approach and now finds that the costs of overhauls at public and private shipyards are nearly the same, a result that is broadly consistent with CBO’s analysis of recent DSRAs.

What Limitations Apply to This Analysis?

Several limitations apply to CBO’s analysis. First, the Navy’s database does not include the overhead costs at public shipyards for overhauls conducted using mission funding. (The public shipyards switched to mission funding between 1999 and 2007.) CBO used other Navy data to adjust for the missing overhead costs, but those other data omit some costs, which suggests that CBO’s estimates of the costs of overhauls at public shipyards are too low. Second, the costs of overhauls in the Navy’s database did not always agree with those from other sources. CBO corrected the data to the extent possible, but some inconsistencies may remain. Third, CBO only examined DSRA overhauls of Los Angeles class submarines. Analysis of other types of overhauls and other ship classes could yield different results. Finally, costs are not the only factor to consider when selecting where to conduct an overhaul: wait times, excess capacity, workforce issues, and the industrial base are also important.