USA: Budget Office Questions Navy Shipbuilding Cost Estimates

In its 2013 shipbuilding plan, the Navy envisions buying a total of 268 ships during the next 30 years at an average annual cost of $16.8 billion (all figures are in 2012 dollars), totaling $505 billion over 30 years. Those figures are solely for the construction of new ships, the only type of cost reported in the Navy’s long-term plans.

Adding in the cost of other activities typically funded from the Navy’s budget accounts for shipbuilding, which include refueling of nuclear-powered aircraft carriers and other items, yields an average cost of $18.8 billion per year.

By comparison, using its own models and assumptions, Congressional Budget Office (CBO) estimates that the cost for new-ship construction under the 2013 plan would average $20.0 billion per year, or a total of $599 billion through 2042. That figure is 19 percent more than the Navy’s estimate. Including the expense of refueling aircraft carriers and the other items raises that average cost to about $22 billion per year—37 percent more than what the Navy has spent through its shipbuilding accounts on average during the past 30 years.

The 2013 plan contains some significant changes in the Navy’s long-term goals for shipbuilding. Those changes include reducing the goal for the inventory of ships, reducing the number of ships to be purchased, and altering the composition of ships to be purchased (such as buying fewer less-expensive support ships and more high-end combat ships).

Compared to the 2012 plan, the 2013 plan:

• Reduces the goal for the inventory of ships from 328 to a range of 310 to 316,
• Reduces the number of ships to be purchased from 275 to 268, and
• Buys 17 more high-end combat ships and 24 fewer less-expensive support ships.

The Navy’s plan would not meet the service’s goals for inventories of destroyers, attack submarines, and ballistic missile submarines:

• Destroyers would fall below the goal of about 90 after 2029;
• Attack submarines would fall below the goal of about 48 between 2022 to 2034;
• Ballistic missile submarines would fall below the goal of 12 to 14 between 2029 and 2041.

The Navy’s plan would largely meet its inventory goals for aircraft carriers and amphibious ships. Historical Average Funding Would Be Insufficient to Cover the Shipbuilding Contained in the 2013 Plan

If the Navy receives the same amount of funding for new-ship construction in the each of the next 30 years as it has on average over the past three decades—$14.3 billion annually—it will not be able to afford all of the purchases in the 2013 plan. CBO’s estimate of $20.0 billion per year for new-ship construction in the Navy’s 2013 shipbuilding plan is about 40 percent above the historical average funding. CBO’s estimate of $21.9 billion per year for the full cost of the Navy’s shipbuilding program is about 37 percent higher than the $16.0 billion the Navy has spent each year on average for all items in its shipbuilding accounts over the past 30 years.

[mappress]
Naval Today Staff, July 27, 2012