May 1, 2005

CBO analyzes implications of Navy shipbuilding plans

As recently as 2003, the U.S. Navy was telling Congress that its long term goal was a 375 ship Navy.

On March 23, 2005, the Department of the Navy released An Interim Report to Congress on Annual Long-Range Plan for the Construction of Naval Vessels for FY2006. That report includes projected inventories for a 260-ship fleet and a 325-ship fleet through 2035. However, in recent testimony before the Congress, the Chief of Naval Operations, Admiral Vern Clark, stated that the Navy's total requirement could be reduced to between 260 and 325 ships through increased use of technology, forward basing of ships in Guam and Japan, and crew rotation. According to Admiral Clark, the 260-ship plan would cost about $12 billion a year for ship construction, and the 325-ship plan would cost about $15 billion a year for shipbuilding.(Those figures exclude the cost of refueling nuclear-powered aircraft carriers and submarines.)

In response to requests from both the Senate Committee on the Budget and the House Projection Forces Subcommittee, the Congressional Budget Office has assessed the near-term and long-term demands for shipbuilding resources associated with sustaining either a 260-ship or 325-ship fleet.

The CBO analysis indicates that under either plan, the shipbuilding industry will face substantial peaks and valleys in demand.

CBO estimates that the Navy would need to spend an average of $15 billion annually (in 2005 dollars) on ship construction to achieve a 260-ship fleet in 2035. Achieving a 325-ship fleet by that year would require an average shipbuilding budget of $18 billion per year. Those estimates are based on a number of assumptions that CBO made about the size and characteristics of the various types of ships that the Navy would buy and when it would buy them. It says different assumptions could produce different estimates.

Under the 260-ship plan, ship purchases and spending would show a peak-and-valley pattern over the 2006-2035 period. Through 2015, the Navy would buy an average of 9.5 ships per year, at an annual cost of about $14.4 billion. The peak in purchases reflects large numbers of littoral combat ships (LCSs)and the size of the fleet would initially rise as the first 63 LCSs purchased under this plan entered the inventory over the next 20 years.

The fleet would peak at 326 ships in 2020 and then gradually decline to 260 by 2035.

The mid to late 2020s would be a period of low ship purchases under the 260-ship plan.

That procurement valley would directly result from purchasing and deploying large numbers of LCSs through 2020 and then not needing to buy many ships for about a decade thereafter, because fewer would be required to meet the 260-ship force goal by 2035.

With LCSs excluded, the remaining fleet would number 197 ships under the 260-ship plan, compared with 287 today. Thus, 90 ships would not have to be replaced if the Navy wanted to aim for a 260-ship fleet.

A similar, but less pronounced, valley occurs in the 325-ship plan because that fleet numbers 243 ships excluding LCSs; thus, 44 ships would not need to be replaced, compared with 90 under the 260-ship plan.

By the 2030s, however, the Navy would have to buy large numbers of LCSs again, as well as new fleet air-defense surface combatants, to replace LCSs and Arleigh Burke class destroyers that had reached the end of their nominal service lives. That pattern is similar to the decline in ship purchases that occurred in the 1990s, when the end of the Cold War caused the Navy to cut its total requirement for ships almost in half. The oldest ships were retired, leaving a relatively young fleet that did not need an influx of many new vessels to maintain its size.

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