Navy Force Architecture and Ship Acquisition: Selected FY2006 Issues for Congress

Congressional research reportMar 15, 2005

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Navy Force Architecture and Ship Acquisition:

Selected FY2006 Issues for Congress

March 15, 2005

Ronald O’Rourke

Specialist in National Defense

Foreign Affairs, Defense, and Trade Division

Congressional Research Service

The

· Library of Congress

Navy Force Architecture and Ship Acquisition:

Selected FY2006 Issues for Congress

Summary

This report is based on CRS testimony at a March 10, 2005, hearing on Navy

force structure and ship acquisition before the Projection Forces Subcommittee of the

House Armed Services Committee. Since February 2003, if not earlier, there has

been no current, officially approved, unambiguous plan for the future size and

structure of the Navy. Ambiguity concerning required numbers of Navy ships may

cause business-planning uncertainty for industry and may make it difficult, if not

impossible, for Congress to conduct effective oversight by reconciling desired Navy

capabilities with planned Navy force structure, and planned Navy force structure with

supporting Navy programs and budgets. The undefined aspects of the new sea basing

concept for conducting expeditionary operations may be contributing to uncertainty

in Navy ship force-structure planning for amphibious ships, maritime prepositioning

ships, and naval surface fire support requirements.

A Center for Naval Analyses (CNA) report on fleet platform architectures

parallels fairly closely current Navy thinking on the size and composition of the fleet.

An Office of Force transformation (OFT) report on the topic challenges current Navy

thinking and recommends a radically different fleet architecture involving eight new

ship designs. For the six shipyards that build the Navy’s major warships, the Navy’s

proposed FY2006-FY2011 shipbuilding plan would result in relatively low work

loads, revenues, and employment levels. Production economies of scale would be

limited or poor, and layoffs may occur at some of the yards.

Using incremental funding or advance appropriations could help reduce

instability in Navy ship-procurement plans by avoiding or mitigating budget spikes

that can occur when traditional full funding is used to procure aircraft carriers and

“big deck” amphibious ships. A more fundamental cause of instability in Navy shipprocurement programs, however, may be the absence of a current, officially

approved, unambiguous plan for the future size and structure of the Navy. By

avoiding or mitigating budget spikes, using incremental funding or advance

appropriations could marginally, but not dramatically, increase the number of ships

that could be built for a given total amount of funding.

One option for sustaining the ship-construction industrial base in general would

be to increase the amount of commercial-ship construction work. An option for

sustaining the aircraft carrier construction industrial base would be to restore

procurement of CVN-21, the next aircraft carrier, to FY2007. The part of the

submarine industrial base that might be in most need of near-term attention is the

design and engineering portion. Options for submarine procurement include nonnuclear-powered submarines equipped with air-independent propulsion (AIP)

systems and a reduced-cost nuclear-powered submarine based on new “Tango Bravo”

technologies being developed by the Navy. There are several options for supporting

the surface combatant industrial base between now and about FY2011. Options for

FY2011 and beyond include a surface combatant about the same size as today’s

9,000-ton Aegis ships, a 6,000-ton frigate, and a low-cost gunfire support ship. This

report will not be updated.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Selected Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Navy Ship Force-Structure Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Continued Ambiguity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Capabilities-Based Planning And Ambiguity . . . . . . . . . . . . . . . . . . . . 2

Implications Of This Ambiguity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Potential Oversight Questions Arising From This Ambiguity . . . . . . . . 5

Sea Basing Concept And Navy Ship Force-Structure Goals . . . . . . . . . . . . . 6

The Sea Basing Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Effect On Navy Ship Force-Structure Goals . . . . . . . . . . . . . . . . . . . . . 7

Potential Oversight Questions For Congress . . . . . . . . . . . . . . . . . . . . . 9

CNA and OFT Reports on Navy Fleet Platform Architectures . . . . . . . . . . 10

CNA Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

OFT Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Industrial-Base Implications Of Reductions and Deferrals . . . . . . . . . . . . . 20

Overall Ship-Procurement Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Individual Shipbuilding Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Alternative Funding Approaches for Navy Ship Procurement . . . . . . . . . . 28

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Full Funding Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Incremental Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Advance Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Potential For Reducing Instability In Ship-Procurement Plans . . . . . . 38

Potential For Increasing Number Of Ships Procured . . . . . . . . . . . . . . 40

Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Options For Sustaining Ship-Construction Industrial Base . . . . . . . . . . . . . 46

Ship-Construction Industrial Base in General . . . . . . . . . . . . . . . . . . . 46

Aircraft Carrier Construction Industrial Base . . . . . . . . . . . . . . . . . . . 48

Submarine Construction Industrial Base . . . . . . . . . . . . . . . . . . . . . . . 48

Surface Combatant Industrial Base . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Options For Submarine Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

AIP Submarine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Lower-Cost (“Tango Bravo”) Nuclear-Powered Submarine . . . . . . . . 52

Options for Surface Combatant Procurement . . . . . . . . . . . . . . . . . . . . . . . 53

Roughly 9,000-Ton Surface Combatant (SC[X]) . . . . . . . . . . . . . . . . 55

Roughly 6,000-Ton Frigate (FFG[X]) . . . . . . . . . . . . . . . . . . . . . . . . . 55

Low-Cost Gunfire Support Ship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Appendix A: Ambiguity in Navy Force Structure Planning . . . . . . . . . . . . . . . . 57

310-Ship Plan From 2001 QDR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Navy 375-Ship Proposal (2002-2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Navy 2005 Testimony On Force Posture Ranges . . . . . . . . . . . . . . . . . . . . 58

List of Tables

Table 1. CNA-Recommended Force and Navy’s 375-Ship Proposal . . . . . . . . . 11

Table 2. Alternative Fleet Structures From OFT Report . . . . . . . . . . . . . . . . . . 16

Table 3. Navy FY2006-FY2011 Ship-Procurement Plan . . . . . . . . . . . . . . . . . . 21

Table 4. Navy Ship Force Structure Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Navy Force Architecture and

Ship Acquisition:

Selected FY2006 Issues for Congress

Introduction

Members of Congress who track issues relating to the Navy or the shipbuilding

industry have expressed concerns regarding the Administration’s plan for the future

size and structure of the Navy and for procuring new Navy ships. This report reviews

a number of issues relating to these topics. It is based on CRS testimony at a March

10, 2005, hearing before the Projection Forces Subcommittee of the House Armed

Services Committee.1 The Subcommittee asked CRS to testify on the following

topics:

Navy ship force-structure goals;

the effect of the Navy’s sea basing concept for expeditionary

operations on Navy ship force-structure goals;

the recently submitted reports on Navy fleet platform architectures

by the Center for Naval Analyses (CNA) and the Department of

Defense (DOD) Office of Force Transformation (OFT);

the industrial-base implications of reductions and funding deferrals

in Navy ship procurement programs;

alternative funding approaches for Navy ship procurement;

options for sustaining the ship-construction industrial base;

options for submarine procurement; and

options for surface combatant procurement.

Each of these issues is addressed below.

Statement of Ronald O’Rourke, Specialist in National Defense, Congressional Research

Service, Before the House Armed Services Committee Subcommittee on Projection Forces

Hearing on Navy Force Architecture and Ship Construction, Mar. 10, 2005. 55 pp. The

Subcommittee granted CRS permission to convert this testimony into a CRS report.

CRS-2

Selected Issues for Congress

Navy Ship Force-Structure Goals2

Continued Ambiguity. Since February 2003, if not earlier, there has been no

current, officially approved, unambiguous plan for the future size and structure of the

Navy. (For a review of how this situation developed, see Appendix A at the end of

this statement.)

The Navy’s February 2005 testimony that in future years it may require a total

of 260 to 325 ships, or possibly 243 to 302 ships, depending on how much the Navy

uses new technologies and the Sea Swap concept for crewing and deploying ships,3

does little to alter this situation, for three reasons:

These potential force ranges are fairly broad — the high end in each

case is about 25% greater than the low end.

The Navy’s testimony does not make clear whether these planning

ranges have been endorsed by the Secretary of Defense as official

Department of Defense (DOD) force-structure planning goals.

The Navy’s testimony does not specify the kinds and numbers of

ships that comprise the ship totals in these ranges.

Capabilities-Based Planning And Ambiguity. When asked about

required numbers of Navy ships and aircraft, Navy and DoD officials have argued

that under capabilities-based planning, numbers of ships and aircraft per se are not

as important as the total amount of capability represented in the fleet. That may be

correct insofar as the policy objective is to have a Navy with a certain desired set of

capabilities, and not simply one that happens to include a certain number of ships and

aircraft. But that is not the same as saying that a Navy with a desired set of

capabilities cannot be translated into a planned force structure that includes certain

numbers of ships and aircraft of various types.

Although the Navy is currently working to resolve uncertainties concerning the

applicability of new technologies the Sea Swap concept, it arguably should become

possible at some point to translate a set of desired Navy capabilities into desired

numbers of ships and aircraft. Those numbers might be expressed as focused ranges

rather than specific figures (or broad ranges), and these focused ranges may change

over time as missions, technologies, and crewing concepts change. But to argue

indefinitely that desired naval capabilities cannot be translated into desired numbers

Material in this section was adapted from CRS Report RL32665, Potential Navy Force

Structure and Shipbuilding Plans: Background and Issues for Congress, by Ronald

O’Rourke.

See Statement of Admiral Vernon Clark, USN, Chief of Naval Operations, before the

House Armed Services Committee, February 17, 2005, pp. 19-20 and Statement of Admiral

Vernon Clark, USN, Chief of Naval Operations, before the Senate Armed Services

Committee, Feb. 10, 2005, pp. 18-19.

CRS-3

of ships and aircraft would be to suggest that the Navy cannot measure and

understand the capabilities of its own ships and aircraft. In this sense, the shift to

capability-based planning does not in itself constitute a rationale for permanently

setting aside the question of the planned size and structure of the fleet.

Implications Of This Ambiguity. Continued ambiguity in Navy forcestructure planning has potential implications for the Navy, Congress, and industry.

For the Navy. For the Navy, ambiguity concerning required numbers of Navy

ships provides time to resolve uncertainties concerning the applicability of new

technologies and the Sea Swap concept to various kinds of Navy ships. Navy (and

DOD) officials may also find this ambiguity convenient because it permits them to

speak broadly about individual Navy ship-acquisition programs without offering

many quantitative details about them — details which they might be held accountable

to later, or which, if revealed now, might disappoint Members of Congress or

industry officials.

This ambiguity may also, however, make it difficult at some point for Navy

officials, in conversations with the Office of the Secretary of Defense (OSD), to

defend programs for procuring Navy ships in certain total numbers or at certain

annual rates because OSD officials might view alternative total numbers or annual

rates as sufficient for maintaining a Navy that falls somewhere within the broad

ranges of total numbers of ships that Navy officials have presented in their testimony.

For Congress. Ambiguity concerning required numbers of Navy ships may

make it difficult, if not impossible, for Congress to conduct effective oversight by

reconciling desired Navy capabilities with planned Navy force structure, and planned

Navy force structure with supporting Navy programs and budgets. With the middle

element of this oversight chain expressed in only general terms, Congress may find

it difficult to understand whether proposed programs and budgets will produce a

Navy with DOD’s desired capabilities. The defense oversight committees in recent

years have criticized the Navy for presenting a confused and changing picture of

Navy ship requirements and procurement plans.4

For example, the conference report (H.Rept. 107-772 of Nov. 12, 2002) on the FY2003

defense authorization act (P.L. 107-314/H.R. 4546) stated

In many instances, the overall Department of Defense ship acquisition

message is confused.... The conferees also believe that the DON shares blame

for this confusion because it has been inconsistent in its description of force

structure requirements. This situation makes it appear as if the Navy has not

fully evaluated the long-term implications of its annual budget requests....

The conferees perceive that DOD lacks a commitment to buy the number and

type of ships required to carry out the full range of Navy missions without

redundancy. The DON has proposed to buy more ships than the stated

requirement in some classes, while not requesting sufficient new hulls in other

classes that fall short of the stated requirement. Additionally, the conferees

believe that the cost of ships will not be reduced by continually changing the

(continued...)

CRS-4

For Industry. Ambiguity concerning required numbers of Navy ships may

make it easier for industry officials to pour into broad remarks from the Navy or

DOD their own hopes and dreams for individual programs. This could lead to

excessive industry optimism about those programs. Ambiguity concerning required

numbers of Navy ships can also cause business-planning uncertainty in areas such as

production planning, workforce management, facilities investment, companysponsored research and development, and potential mergers and acquisitions.5

(...continued)

number of ships in acquisition programs or by frequently changing the

configuration and capability of those ships, all frequent attributes of recent DON

shipbuilding plans. (Pages 449 and 450)

The House Appropriations Committee, in its report (H.Rept. 108-553 of June 18, 2004)

on the FY2005 DOD appropriations bill (H.R. 4613), stated:

The Committee remains deeply troubled by the lack of stability in the Navy’s

shipbuilding program. Often both the current year and out year ship construction

profile is dramatically altered with the submission of the next budget request.

Programs justified to Congress in terms of mission requirements in one year’s

budget are removed from the next. This continued shifting of the shipbuilding

program promotes confusion and frustration throughout both the public and

private sectors. Moreover, the Committee is concerned that this continual

shifting of priorities within the Navy’s shipbuilding account indicates uncertainty

with respect to the validity of requirements and budget requests in support of

shipbuilding proposals. (Page 164)

In an interview published in the February 2005 issue of Seapower magazine, for example,

Michael Petters, the president of Northrop Grumman Newport News, said:

If there was a clear, stable picture of what the Navy wants, and what sort of

infrastructure needs to be in place to support that, the industry would adapt. But

what you’ve had instead are the annual perturbations. That’s a challenge for us.

We make investments in ships that take eight years to build, then the ship gets

delayed because of the way the budget process works.

In the same published interview, Michael W. Toner, the executive vice president of General

Dynamics’ Marine Systems Group, said:

Mike [Petters] is dead on. I think Secretary [of the Navy Gordon] England has

it right, but it’s up to the Navy to establish the stability. What’s the plan? Give

us a stable plan and then we can make the investments. Industry will do what

industry needs to do. But it is a very difficult environment to make investment

in, that’s for sure.

(“Shipbuilding: An Uncertain Future,” Seapower, February 2005: 28.)

Similarly, a July 2004 press article stated:

Philip Dur, chief executive officer of Northrop Grumman’s Shipbuilding

Systems, argued that the Navy’s concept of “capabilities versus numbers” not

only would hurt the service’s operations, but decimate the industry.

(continued...)

CRS-5

Potential Oversight Questions Arising From This Ambiguity.

Potential oversight questions for Congress that arise from ambiguity in Navy ship

force-structure planning include the following:

What are the kinds and numbers of ships that comprise each of the

total ship figures (290, 375, 260, 325, 243, and 302 ships) presented

in the Navy’s February 2005 testimony? What, in other words, is the

composition of each of these potential fleets? When does the Navy

plan to release these figures?

Is the lack of information on kinds and numbers of specific

categories of ships intended to make it more difficult for Congress

to conduct effective oversight of Navy programs and proposed

FY2006 budget?

For each of the three ranges shown in the Navy’s 2005 testimony —

290 to 375 ships, 260 to 325 ships, and 243 to 302 ships — what

factors explain the difference between the low and high end of the

range? Does the Navy anticipate narrowing the difference between

the low and high end of each range? If so, when? If not, why not?

What is the Navy’s view regarding the prospective affordability of

a Navy of 300 or more ships (i.e., as shown in the high ends of the

three ranges from the Navy’s 2005 testimony) as opposed to a Navy

of roughly 240 to 290 ships (as shown in the low ends of the three

ranges)?

(...continued)

If the Navy decides it cannot afford 300 ships, it should come up with a

smaller number and set new ship construction plans based on that number, Dur

said.

It also would be helpful, he added, if both the Navy and the Coast Guard

jointly planned their long-term shipbuilding buys. “I do not know that either

service takes the other service’s capabilities into account,” he said. If both

services set their shipbuilding goals collectively, “then the shipbuilders can lay

out an investment plan, a hiring plan [and] a training plan that was predicated on

the assumption that we would competing for an X-number of platforms per year

on a going-forward basis,” Dur said....

If the Department of Defense can frame a requirement for ships and defend

it, the industry would make the necessary adjustments to either scale down or

ramp up, Dur told reporters during a recent tour of the company’s shipyards in

Louisiana and Mississippi.

(Roxana Tiron, “Lack of Specificity in Navy Shipbuilding Plans Irks the

Industry,” National Defense, July 2004.)

CRS-6

Sea Basing Concept And Navy Ship Force-Structure Goals6

The Sea Basing Concept. The Navy and Marine Corps are developing a

new concept of operations for conducting expeditionary operations ashore called

enhanced networked sea basing, or sea basing for short. Under the current concept

of operations for conducting expeditionary operations ashore, the Navy and Marine

Corps would establish a foothold ashore, and then use that foothold as a base from

which to conduct operations against the desired ashore objective. Under sea basing,

the Navy and Marine Corps would launch, direct, and support expeditionary

operations directly from a base at sea, without necessarily establishing an

intermediate base ashore.

Many of the details of the sea basing concept have yet to be worked out; Navy

and Marine Corps officials are currently working to produce a more refined notion

of the concept.7

A key rationale for the sea basing concept is that in the future, fixed land bases

ashore will become too vulnerable to enemy attack from weapons such as cruise

missiles or short-range ballistic missiles, and that launching the operation directly

from a base at sea will enhance the survivability of the attacking Navy-Marine Corps

force by putting the base out of the range of shorter-range enemy weapons and

targeting sensors, and by permitting the sea to be used as a medium of maneuver for

evading detection and targeting by longer-range enemy weapons and sensors.

A second rationale for sea basing is that by eliminating the intermediate land

base — the logistical “middleman” — sea basing will permit the Marine Corps to

initiate and maintain a higher pace of operations against the desired objective, thus

enhancing the effectiveness of the operation. A third rationale for sea basing is that

it could permit the Marine force, once the operation is completed, to reconstitute and

redeploy — that is, get back aboard ship and be ready for conducting another

operation somewhere else — more quickly than under the current concept of

operations.

The sea base being referred to is not a single ship, but rather a collection of

ships. The exact types and numbers of ships involved is now being studied by the

Navy and Marine Corps. Although the results of these studies have not yet been

announced, general points that have emerged from the public discussion to date

include the following:

Material in this section has been adapted from CRS Report RL32513, Navy-Marine Corps

Amphibious and Maritime Prepositioning Ship Programs: Background and Oversight Issues

for Congress, by Ronald O’Rourke.

For a detailed discussion of the sea basing concept, see Defense Science Board Task Force

on Sea Basing, op cit, 168 pp. See also Otto Kreisher, “Sea Basing,” Air Force Magazine,

July 2004: 64; Scott C. Truver, “Sea Basing: More Than The Sum Of Its Parts?” Jane’s

Navy International, Mar. 2004: 16-18, 20-21; Art Corbett and Vince Goulding, “Sea Basing:

What’s New?” U.S. Naval Institute Proceedings, Nov. 2002: 34-39.

CRS-7

The sea base would likely include, among other things, some

combination of amphibious and Maritime Prepositioning Force

(Future), or MPF(F) ships.8 The Navy has studied various

combinations of amphibious and MPF-type ships.

Under sea basing, certain functions previously carried out from the

intermediate land base, including command and control, fire support,

and logistics, would be transferred back to the ships at sea that

collectively make up the sea base. Other things held equal, the ships

making up the sea base would consequently have to be more capable

of carrying out these functions than today’s mix of amphibious and

MPF ships.

Due to both the increased capability of ships making up the sea base,

as well as the increased cost of MPF(F) ships compared to today’s

MPF ships, today’s three MPF squadrons may be replaced by a set

of ships sufficient to form two sea bases.

The Defense Department has expressed some interest in sea basing as a potential

joint concept that could involve Army and Air Force forces as well as the Navy and

Marine Corps.9 The Defense Science Board (DSB) in August 2003 issued a report

on sea basing which concluded that “sea basing represents a critical future joint

military capability for the United States.”10

Effect On Navy Ship Force-Structure Goals. The undefined aspects of

the sea basing concept may be contributing to uncertainty in Navy ship forcestructure planning in one or more of the following areas:

Total number of LPD-17s to be procured. Although the Navy’s

proposed FY2006 budget and FY2006-FY2011 Future Years

A carrier strike group (CSG) would constitute another element of the sea base.

Jason Sherman and David Brown, “Pentagon To Create Multiservice Sea Basing

Requirements Office,” Defense News, December 8, 2003: 30; Catherine MacRae, “Aldridge

Wants Top Defense Scientists To Study Future Of Seabasing,” Inside the Pentagon, Nov.

14, 2002: 1. For articles discussing the potential joint aspects of sea basing, see Otto

Kreisher, “Sea Basing,” Air Force Magazine, July 2004: 64; Ann Roosevelt, “Army, Navy

Collaborating On Sea Basing Concept,” Defense Daily, June 30, 2004: 3; Lisa Troshinsky,

“Army Logistics Using Sat Network, Planning For Sea-Based Capability,”Aerospace Daily

& Defense Report, June 30, 2004: 3-4; Scott C. Truver, “Seabasing: More Than The Sum

Of Its Parts?” Jane’s Navy International, Mar. 2004: 16-18, 20-21; John J. Klein, “Sea

Basing Isn’t Just About The Sea,” U.S. Naval Institute Proceedings, Jan. 2004: 32-35;

Defense Science Board. Defense Science Board Task Force on Sea Basing. Office of the

Under Secretary of Defense For Acquisition, Technology, and Logistics. Washington, 2003.

(August 2003) p. xi. Italics as in the original. Similar statements are made in two cover

memos included at the front of the report, and on page 87. For press reports about this

study, see John T. Bennett, “Marine Corps Commandant, DSB Describe Visions Of

Seabasing Concept,” Inside the Pentagon, Oct. 30, 2004; Jason Ma, “DSB Study,

Conference Examine Seabasing Needs and Challenges,” Inside the Navy, Oct. 27, 2003;

Jason Sherman, “Pentagon Group Details Sea Base Concept,” Defense News, Oct. 27, 2003.

CRS-8

Defense Plan (FYDP) propose reducing planned procurement of San

Antonio (LPD-17) amphibious ships to a total of nine ships, it is

possible that this number might change as the sea basing concept is

refined in more detail.

Design and cost of LHA(R). Although Navy officials currently

appear to support a design for LHA(R) — the next “big-deck”

amphibious assault ship — that is based on the Wasp (LHD-1) class

hull, but with enhanced aviation capabilities and no well deck, it is

possible that ongoing study of the sea basing concept, combined

with more precise estimates of the cost to build LHA9R) to various

designs, could lead to further changes in the design of the ship.

Procurement of “big-deck” amphibious ships after LHA®.

Uncertainty over the details of sea basing may be a barrier to

forming a clearer plan for procuring “big-deck” amphibious ships

following LHA(R).

Total number of amphibious ships and 2.5-MEB goal. Due in

part to the emergence of the sea basing concept, Navy officials

cannot state with confidence whether the Navy in the future will

need a total of 36 amphibious ships or some greater or lesser

number. Navy officials have also made few public comments on the

issue of whether the longstanding 2.5-Marine Expeditionary Brigade

(MEB) lift goal for the amphibious fleet will be retained, modified,

or dropped. Navy officials have reportedly suggested that savings

realized from reducing the number of Expeditionary Strike Groups

(ESGs) may be used to procure new MPF(F) ships.11

Numbers, designs, and costs for MPF(F) ships. Until the Navy

and Marine Corps develop a more complete understanding of the

details of the sea basing concept, it will be difficult for them to

present firm plans for these ships in terms of numbers to be

procured, designs, and unit procurement costs. Navy officials have

acknowledged that their plans for MPF(F) ships need to be more

clearly defined.12

Naval surface fire support requirements. Until the Navy and

Marine Corps develop a more complete understanding of the details

of the sea basing concept, it may be difficult for them to arrive at a

consensus agreement on naval surface fire support (NSFS)

requirements for the fleet.

Uncertainty regarding NSFS

requirements can in turn contribute to uncertainty regarding

Christopher J. Castelli, “Navy May Cut Number Of Expeditionary Strike Groups To Fund

MPF(F),” Inside the Navy, July 12, 2004.

Christopher J. Castelli, “Navy Acquisition Chief Urges Clark To Define Plan For MPF(F)

Ships,” Inside the Navy, June 28, 2004.

CRS-9

requirements for surface combatants, particularly the DD(X)

destroyer.13

Potential Oversight Questions For Congress. Potential oversight

questions for Congress arising from the sea basing concept include the following:

When does DOD plan to present to Congress a more detailed

description of, and a more refined estimate of the potential total cost

to fully implement, the sea basing concept? Should Congress direct

DOD to present a detailed description and cost estimate by a date

certain? How does the current lack of a detailed description and cost

estimate affect Congress’ ability to conduct effective oversight of

programs that might be affected by the concept, including

amphibious and maritime prepositioning ship programs and

programs relating to naval surface fire support? How does it affect

Congress’ ability to assess the potential affordability and cost

effectiveness of sea basing compared to possible alternatives for

conducting future expeditionary operations ashore or programs for

meeting other defense priorities?

What are the potential costs and merits of alternatives to sea basing

for conducting future expeditionary operations ashore? How do land

bases and sea bases compare in terms of vulnerability to attack and

cost to defend against potential attacks of various kinds? What other

defense programs might need to be reduced to finance the

implementation of sea basing? What are the potential operational

risks of not implementing sea basing?

Should development of the sea basing concept be led by a joint DOD

office, or by the Navy and Marine Corps (while still incorporating

input from the Army and Air Force)? Does the Pentagon’s approach

to developing the sea basing concept feature too much, not enough,

or about the right amount of interservice coordination and top-level

DOD direction? To what degree, if any, does sea basing conflict

with any emerging Army or Air Force concepts of operation for

conducting future expeditionary operations? If sea basing is

developed primarily by the Navy and Marine Corps, and is then

subsequently modified by DOD to take Army and Air Force needs

into greater account, will this lead to instability in announced plans

for procuring amphibious and maritime prepositioning ships?

A November 2004 Government Accountability Office (GAO) report concluded that

The Navy and Marine Corps have only recently begun the process to establish

validated NSFS requirements that address the overall capabilities needed and the

balance between different systems that will be required to provide effective,

continuous, and sustaining support fire for forces operating ashore.

(Government Accountability Office, Information on Options for Naval Surface

Fire Support, GAO-05-39R, Nov. 2004, p. 2.)

CRS-10

CNA and OFT Reports on Navy Fleet Platform Architectures14

Section 216 of the conference report (H.Rept. 108-354 of November 7, 2003)

on the FY2004 defense authorization bill (H.R. 1588/P.L. 108-136 of November 24,

2003) required the Secretary of Defense to provide for two independently performed

studies on potential Navy fleet platform architectures.15 The two studies were

conducted by the Center for Naval Analyses (CNA) and DOD’s Office of Force

Transformation (OFT) and were recently submitted to the congressional defense

committees. Subsection (d) of Section 216 states in part that “The results of each

study under this section shall — (1) present the alternative fleet platform

architectures considered, with assumptions and possible scenarios identified for

each...”

CNA Report.16 The CNA report presents a fairly traditional approach to naval

force planning in which capability requirements for warfighting and for maintaining

day-to-day naval forward deployments are calculated and then integrated. The

report’s discussion of how crew rotation may alter force-level requirements for

maintaining day-to-day forward deployments is somewhat detailed and may have

been adapted from other work that CNA has done on the topic for the Navy.

The report recommends a Navy force structure of 256 to 380 ships. The high

end of this range is about 48% greater than the low end, making it almost twice as

broad a range, mathematically, as the ranges presented in the Navy’s February

testimony. The difference between the low and high ends of the CNA range is that

the low end assumes a greater use of crew rotation and overseas homeporting of

Navy ships.

Table 1 below compares the CNA-recommended force range to the 375-ship

fleet proposal mentioned by Navy officials from early 2002 through early 2004.

Material in this section was adapted from a Feb. 25, 2005, CRS memorandum to the office

of Representative Bartlett and is used here with permission from that office.

H.Rept 108-354, pp.28-29 and 612-613. Section 216 is an amended version of a provision

(Section 217) in the House-reported version of H.R. 1588; see pages 255-256 of the House

report on H.R. 1588 (H.Rept. 108-106 of May 16, 2003).

Delwyn Gilmore, with contributions by Mark Lewellyn et al, Report to Congress

Regarding Naval Force Architecture. Alexandria (VA), Center for Naval Analyses, 2005.

(CRM D0011303.A2/1Rev, Jan. 2005) 60 pp.

CRS-11

Table 1. CNA-Recommended Force and Navy’s 375-Ship

Proposal

Ship Type

CNA-recommended

force

375-ship

proposala

Ballistic missile submarines (SSBNs)

Cruise missile submarines (SSGNs)

Attack submarines (SSNs)

38 to 62

Aircraft carriers

10 to 12

Cruisers and destroyers

66 to 112

109

Littoral combat ships (LCSs)

40 to 70

Amphibious ships

18 to 30

Maritime Prepositioning Force (Future) ships

19 to 21

Combat logistics (resupply) ships

25 to 33

Otherb

Total battle force ships

256 to 380

375

Notes: a. Composition as shown in CNA report as the program of record for the year 2022.

A somewhat different composition is shown in CRS Report RL32665.

b. Includes command ships, support ships (such as salvage ships and submarine tenders),

dedicated mine warfare ships, and high-speed sealift ships.

As can be seen in the table, the 380-ship fleet at the high end of the CNA range

is similar in size and composition to the Navy’s 375-ship fleet proposal. The 256ship fleet at the low end of the CNA range is a more-or-less scaled-down version of

the 380-ship fleet. Its reduced numbers for aircraft carriers, amphibious ships, and

attack submarines are similar to figures reported in the defense trade press since early

2004 about possible reductions in planned numbers of those kinds of ships. The 256ship fleet also includes reduced numbers for ships such as larger surface combatants

and combat logistics (resupply) ships.

The CNA range of 256 to 380 ships overlaps with ranges of 290 to 375 ships,

260 to 325 ships, and 243 to 302 ships presented in the Navy’s February testimony.

An additional comparison is that the mid-point of the CNA-recommended range (318

ships) is similar in terms of total numbers of ships to the 310-ship fleet from the 2001

Quadrennial Defense Review (QDR). Unlike the 2001 QDR fleet, however, the

CNA-recommended force includes several dozen Littoral Combat Ships (LCSs) and

smaller numbers of other kinds of ships.

The CNA-recommended fleet platform architecture uses essentially the same

kinds of ships as those currently in the fleet, under construction, or planned for

procurement. It also uses essentially the same kinds of naval formations as those in

use today or planned by the Navy. If an alternative fleet platform architecture is

defined as one that uses ship types or naval formations that differ in some significant

CRS-12

way from those currently used or planned, then the CNA-recommended force

arguably would not qualify as an alternative fleet platform architecture.

In summary, the CNA-recommended force parallels fairly closely current Navy

thinking on the size and composition of the fleet. This is perhaps not surprising,

given that much of CNA’s analytical work is done at the Navy’s request.

OFT Report.17 The OFT report differs significantly (some might say

diametrically) from the CNA report. The OFT report “calls into question the viability

of the longstanding logic of naval force building”18 and presents an essentially cleansheet proposal for a future Navy that would be radically different from the currently

planned fleet.

The OFT report was prepared under the direction of retired Navy admiral Arthur

Cebrowski, who was the director of OFT from October 29, 2001 until January 31,

2005. The report is generally consistent with Cebrowski’s ideas on network-centric

warfare and distributed force architectures, which he has developed and articulated

since his tenure as President of the Naval War College (from July 24, 1998 to August

22, 2001).

The OFT-recommended fleet would include large numbers of manned ships

(about three-quarters of them small, fast surface combatants), about the same number

of carrier-based manned aircraft as in the Navy’s planned fleet, and large numbers

of unmanned systems.

The OFT architecture employs eight new ship designs that differ substantially

from the designs of most ships currently in the fleet, under construction, or planned

for procurement. Among the eight new ship designs are four types of large surface

ships that would be built from a common, relatively inexpensive, merchant-like hull

design developed in 2004 for the Navy’s Maritime Prepositioning Force (Future)

analysis of alternatives. These four types of ships, which would all displace 57,000

tons, include:

An aircraft carrier that would embark a notional air wing of 30

Joint Strike Fighters (JSFs), 6 MV-22 Osprey tilt-rotor aircraft, and

15 unmanned air vehicles (UAVs). The total of 36 manned aircraft

is about half as many as in today’s carrier air wings, and the OFT

architecture envisages substituting two of these new carriers for each

of today’s carriers. This new carrier would also have support spaces

for unmanned underwater vehicles (UUVs), unmanned surface

vehicles (USVs), and mission modules for the 1,000-ton surface

combatant described below. In displacement terms, this ship would

be roughly the same size as a new aircraft carrier design that the

United Kingdom plans to procure, and somewhat larger than the

U.S., Department of Defense, Office of the Secretary of Defense, Alternative Fleet

Architecture Design. Washington, 2005. (Report for the Congressional Defense

Committees, Office of Force Transformation). 101 pp.

Ibid, p. 1

CRS-13

U.S. Navy’s 40,000-ton LHA/LHD-type amphibious assault ships.

Compared to the U.S. Navy’s aircraft carriers, which displace 81,000

to 102,000 tons, this ship could be considered a medium-size carrier.

A missile-and-rocket ship that would be quipped with 360 vertical

launch system (VLS) missile tubes and four trainable rocket

launchers. Additional spaces on this ship could be used to support

UUVs, USVs, and mission modules for the 1,000-ton surface

combatant. Alternatively, these spaces could be used to provide

limited stowage and working space for the 100-ton surface

combatant described below, and mission modules for these 100-ton

ships. This ship could be considered similar in some respects to the

Navy/DARPA arsenal ship concept of 1996-1997, which would have

been a large, relatively simple surface ship equipped with about 500

VLS tubes.19

An amphibious assault ship that would embark a notional air wing

of either 30 CH-46 equivalents or 6 JSFs, 18 MV-22s, and 3

gyrocopter heavy-lift helicopters. It would also have spaces for

Marine Corps equipment, unmanned vehicles, and mission modules

for the 1,000-ton surface combatant.

A “mother ship” for small combatants that would contain stowage

and support spaces for the 100-ton surface combatant described

below.

The four other new-design ships in the OFT architecture are:

A 13,500-ton aircraft carrier based on a conceptual surface effect

ship (SES)/catamaran hull design developed in 2001 by a team at the

Naval Postgraduate School. This ship would embark a notional air

wing of 8 JSFs, 2 MV-22s, and 8 UAVs. The total of 10 manned

aircraft is roughly one-eighth as many as in today’s carrier air wings,

and the OFT architecture envisages substituting eight of these new

carriers for each of today’s carriers. This new ship would have a

maximum speed of 50 to 60 knots. In displacement terms, the ship

would be slightly larger than Thailand’s aircraft carrier, which was

commissioned in 1997, and somewhat smaller than Spain’s aircraft

carrier, which was based on a U.S. design and was commissioned in

1988. Due to its SES/catamaran hull design, this 13,500-ton ship

would be much faster than the Thai and Spanish carriers (or any

other aircraft carrier now in operation), and might have a larger

For more on the arsenal ship, see CRS Report 97-455 F, Navy/DARPA Arsenal Ship

Program: Issues and Options for Congress, by Ronald O’Rourke. 133 pp.; and CRS Report

97-1044 F, Navy/DARPA Maritime Fire Support Demonstrator (Arsenal Ship) Program:

Issues Arising From Its Termination, by Ronald O’Rourke. 6 pp. Both reports are out of

print and are available directly from the author.

CRS-14

flight deck. This ship could be considered a small, high-speed

aircraft carrier.

A 1,000-ton surface combatant with a maximum speed of 40 to 50

knots and standard interfaces for accepting various modular mission

packages. These ships would self-deploy to the theater and would

be supported in theater by one or more of the 57,000-ton ships

described above. This design could be viewed as similar to, but

smaller than, the 2,500- to 3,000-ton Littoral Combat Ship (LCS).

Compared to the LCS, it would be closer in size to the Streetfighter

concept (a precursor to the LCS) that was proposed by retired

admiral Cebrowski during his time at the Naval War College.

A 100-ton surface combatant with a maximum speed of 60 knots

and standard interfaces for accepting various modular mission

packages. These ships would be transported to the theater by the

57,000-ton mother ship and would be supported in theater by that

ship and possibly also the 57,000-ton missile-and-rocket ship.

Compared to the LCS, this ship, like the 1,000-ton surface

combatant, would be closer in size to the Streetfighter concept.

A non-nuclear-powered submarine equipped with an airindependent propulsion (AIP) system.20 These AIP submarines

would be lower-cost supplements to the Navy’s nuclear-powered

submarines (SSNs) and would be transported from home port to the

theater of operations by transport ships. The OFT architecture

envisages substituting four of these submarines for the SSN in each

carrier strike group.21

The 1,000- and 100-ton surface combatants would be built as relatively

inexpensive sea frames, like the LCS.

An AIP system such as a fuel-cell or closed-cycle diesel engine extends the stationary or

low-speed submerged endurance of a non-nuclear-powered submarine. A conventional

diesel-electric submarine has a stationary or low-speed submerged endurance of a few days,

while an AIP-equipped submarine may have a stationary or low-speed submerged endurance

of up to two or three weeks. An AIP system does not significantly increase the high-speed

submerged endurance of a non-nuclear-powered submarine. A non-nuclear-powered

submarine, whether equipped with a conventional diesel-electric propulsion system or an

AIP system, has a high-speed submerged endurance of perhaps 1 to 3 hours, a performance

limited by the electrical storage capacity of the boat’s batteries, which are exhausted quickly

at high speed.

The report states that “Alternatives to the SSNs in formations were diesel Air Independent

Propulsion (AIP) submarines and unmanned undersea vehicles (UUVs). The AIP

submarines were substituted for Virginia class SSNs on a cost basis of roughly four to one.

These submarines could be nuclear-powered if they are designed and built based upon a

competitive, cost suppressing business model.” (Page 60) The strategy of transporting the

AIP submarines to the theater using transport ships is not mentioned in the report but was

explained at a Feb. 18, 2005 meeting between CRS and analysts who contributed to the OFT

report.

CRS-15

The OFT architecture is similar in certain ways to a fleet architecture proposed

by the Naval Surface Warfare Center (NSWC) between 1989 and 1992. The NSWC

architecture, like the OFT architecture, employed a common hull design for a large

ship that could be built in several variants for various missions, including aviation,

missile launching and fire support, amphibious warfare, logistics support, and

mother-ship support of small, fast, surface combatants. The small, fast surface

combatants in the NSWC architecture were called scout fighters and were in the same

general size range as the 100- and 1,000-ton surface combatants in the OFT

architecture.22

The OFT report combines the eight above-described types of ships, plus the

Navy’s currently planned TAOE-class resupply ship, into three alternative force

structures that the report calculates would be equal in cost to the equivalent parts of

the Navy’s proposed 375-ship fleet. The report states that each of these alternative

force structures, like the equivalent parts of the Navy’s proposed 375-ship fleet,

would be organized into 12 carrier strike groups (CSGs), 12 expeditionary strike

groups (ESGs), and 9 surface strike groups (SSGs). The three alternative force

structures are shown in Table 2 on the next page.

For more on this proposed fleet architecture, see Norman Polmar, “Carrying Large

Objects,” U.S. Naval Institute Proceedings, Dec. 1990, pp. 121-122; Michael L. Bosworth

et al, “Multimission Ship Design for an Alternative Fleet Concept,” Naval Engineers

Journal, May 1991, pp. 91-106; Michael L. Bosworth, “Fleet Versatility by Distributed

Aviation,” U.S. Naval Institute Proceedings, Jan. 1992, pp. 99-102; and Victor A. Meyer,

“Naval Surface Warfighting Vision 2030,” Naval Engineers Journal, May 1992, pp. 74-88.

See also “USN’s ‘2030’ Plan For Future Fleet,” Sea Power, April 1992, pp. 79, 82; Edward

J. Walsh, “‘Alternative Battle Force’ Stresses Commonality, Capability,” Sea Power, Feb.

1991,pp. 33-35; Robert Holzer, “Navy Floats Revolutionary Ship Design for Future Fleet,”

Defense News, May 14, 1990, pp. 4, 52; and Anne Rumsey, “Navy Plans Ship Look-ALikes,” Defense Week, Mar. 13, 1989, p. 3.

CRS-16

Table 2. Alternative Fleet Structures From OFT Report

Ship Type

Alternative

57,000-ton aircraft carrier

57,000-ton missile-and-rocket ship

57,000-ton amphibious assault ship

57,000-ton mother ship

13,500-ton aircraft carrier

1,000-ton surface combatant

417

100-ton surface combatant

609

AIP submarine

TAOE-class resupply ship

Subtotal 1,000- and 100-ton ships

417

609

Subtotal other ships

141

165

237

558a

774a

846a

Total shipsa

Source: Table prepared by CRS based on figures in OFT report.

a The totals shown in earlier copies the OFT report are 36 ships lower in each case due to

an error in those copies in calculating the numbers of ships in the 12 carrier strike groups.

The totals shown in the table do not include SSNs, cruise missile submarines

(SSGNs), and ballistic missile submarines (SSBNs) operating independently of the

12 CSGs, 12 ESGs, and 9 SSGs. The totals also do not include combat logistics

ships other than the TAOEs (e.g., oilers, ammunition ships, and general stores ships)

and fleet support ships. The Navy’s 375-ship proposal, by comparison, includes all

these kinds of ships.

As can be seen from the shaded cells in the table, the difference between

Alternatives A and B is that the former uses 1,000-ton surface combatants while the

latter uses 100-ton surface combatants that are transported into the theater by mother

ships, and the difference between Alternatives B and C is that the former uses

57,000-ton aircraft carriers while the latter substitutes 13,500-ton carriers.

As can also be seen in the table, all three fleets are dominated numerically by

the small surface combatants. These ships account for about 75% of the ships in

Alternative A, about 79% of the ships in Alternative B, and about 72% of the ships

in Alternative C. In the Navy’s currently planned architecture, by contrast, the LCS

might account for roughly 15% to 20% of the total number of ships.

The OFT report contains a fairly detailed discussion of the Navy’s budget

situation that calls into question, on several grounds, the Navy’s prospective ability

CRS-17

to afford its 375-ship proposal. The report concludes that funding for Navy shipprocurement in future years may fall as much as 40% short of what would be needed

to achieve the Navy’s 375-ship fleet proposal. If the shortfall is 40%, the report

estimates, the Navy could maintain a force of 270 to 315 ships, which is comparable

in number to today’s force of 290 ships, except that the future force would include

a substantial number of relatively inexpensive LCSs. If proportionate reductions are

applied to the force structures shown in Table 2, Alternative A would include 402

to 469 ships, Alternative B would include 557 to 650 ships, and Alternative C would

include 609 to 711 ships. Again, these totals would not include certain kinds of ships

(independently operating SSNs, etc.) that are included in the total of 270 to 315 ships

associated with the Navy’s currently planned architecture.

In terms of how the OFT architecture would compare in capability with the

currently planned architecture, the report states:

Alternative fleet formations consisting of small fast and relatively

inexpensive craft combining knowledge and attaining flexibility through

networking appear superior to the programmed fleet for non-traditional warfare

in a variety of settings. This is due to increasing the complexity the enemy faces

and increasing U.S. fleet options that in turn reduce enemy options. The speed

and complexity of the alternative fleets can provide them with the capability to

complicate and possibly defeat the attempts of non-traditional adversaries to

elude surveillance. The enemy could have difficulty determining what to expect

and how to defeat them all. The superior speed and more numerous participants

than in the programmed fleet provide a stronger intelligence base and more

numerous platforms from which to conduct strikes and interceptions. This

appears to be true even if the smaller craft are individually somewhat less

capable and less able to sustain a hit than the larger ships in the programmed

fleet.

If these circumstances are not achieved, and the enemy can continue to

elude and deceive, the programmed fleet often is as good as the alternatives,

sometimes even better. It is not necessarily better in cases in which individual

ship survivability dominates, a perhaps counterintuitive result until we realize

that fleet survivability not individual ship survivability is what dominates.

An area in which programmed fleets might have an advantage would be

when the long loiter time or deep reach of CTOL [conventional takeoff and

landing] aircraft on programmed big-deck CVNs [nuclear-powered aircraft

carriers] is needed. That said, there need be no great sacrifice. With airborne

tanking, the VSTOL [very short takeoff and landing] aircraft in the alternatives

could meet the deep strike and long loiter demands. Also, as mentioned earlier,

a combination of advances in EMALS [electromagnetic aircraft launch system]

and modifications to the JSF will make it possible to launch the JSF with only

a marginal range-payload capability penalty. Moreover, trends in technology are

providing unmanned aircraft greater capability, including greater loiter time and

sensor capability.23

At other points, the OFT report argues that its recommended fleet architecture

would:

Alternative Fleet Architecture Design, op. cit., pp. 75-76. Italics as in the original.

CRS-18

“provide a quantum leap ahead in capabilities against a spectrum of

enemies ranging from large, highly developed competitors to small

but determined asymmetric adversaries”24 and be adaptable, in a

dynamic and less-predictable security environment, to changing

strategic or operational challenges;

be capable of both participating in joint expeditionary operations and

maintaining “the strategic advantage the Navy has developed in the

global commons,” avoiding a need to choose between optimizing the

fleet for “performance against asymmetric challenges at the expense

of its ability to confront a potential adversary capable of traditional

high intensity conflict,” such as China;25

pose significant challenges to adversaries seeking to counter U.S.

naval forces due to the “large numbers of combat entities that the

enemy must deal with; a great variety of platforms with which the

enemy must contend; speed; different combinations of forces;

distribution of forces across large areas; and [adversary] uncertainty

as to the mission and capabilities of a given platform;”26

reduce unit shipbuilding costs, and thereby permit an increase in

total ship numbers, by shifting the fleet away from complex, highly

integrated ship designs that are inherently expensive to build and

toward less-complex merchant-like hulls and small sea frames that

are inherently less expensive to build;

increase shipbuilding options for the Navy by shifting the fleet away

from complex, highly integrated ship designs that can be built only

by a limited number of U.S. shipyards and toward less-complex

merchant-like hulls and small sea frames that can be built by a

broader array of shipyards;

make it easier and less expensive to modernize ships over their long

lives, and thereby take better advantage of rapid developments in

technology, by shifting from highly integrated ship designs to

merchant-like hulls and sea frames;

permit more constant experimentation with new operational

concepts, and thereby achieve higher rates of learning about how to

evolve the fleet over time; and

recognize potential future constraints on Navy budgets and make the

Navy more smoothly scalable to various potential future resource

levels by shifting from a fleet composed of limited numbers of

Ibid, p. 6.

Ibid, p. 1 and 2.

Ibid, p. i.

CRS-19

relatively expensive ships to one composed of larger numbers of less

expensive ships.

The OFT report does not include a detailed plan for transitioning from today’s

fleet architecture to its proposed architecture,27 but such a plan could be developed

as a follow-on analysis.

The report poses a significant potential business challenge to the six shipyards

that have built the Navy’s major warships in recent years. The report’s discussion

on implementing its proposed architecture states in part:

The shipbuilding industrial base would also need to start to retool to build

different types of ships more rapidly. Smaller shipyards, which presently do

little or no work for the Navy could compete to build the smaller ships, thereby

broadening the capabilities base of ship design and construction available to the

Navy. The change to smaller, lower unit cost ships would also open up overseas

markets. With more shipyards able to build the ships and potential for a broader

overall market, the U.S. shipbuilding industry would have the chance to expand

its competence, innovation and relevance. Taken together this would sharpen the

industry’s ability to compete and provide alternatives to a ship procurement

system that is beset by laws and regulations that frustrate, even pervert, market

forces.28

The report’s concluding section lists five “dangers” that “risk the Navy’s ‘losing

the way.’” One of these, the report states, is “Shielding the shipbuilding industrial

base from global competition,” which the report states “guarantees high cost, limited

innovation, and long cycle times for building ships.”29

On the topic of transitioning to the proposed fleet architecture, the report states:

Implementation of the alternative fleet architecture should start now and

should target option generation, short construction time, and technology

insertion. The alternative further provides an opportunity to reinvigorate the

shipbuilding industrial base. The many smaller ships, manned and unmanned, in

the alternative fleet architecture could be built in more shipyards and would be

relevant to overseas markets. The potential longevity of the existing fleet will

sustain existing shipyards as they move into building smaller ships more rapidly

in this broader market and more competitive environment. The shipyards would

develop a competence, broad relevance, and operate in an environment driven by

market imperatives instead of a framework of laws that frustrates market forces.

As the new ships enter service and the fleet has the opportunity to

experiment with new operational concepts (expanded network-centric warfare

in particular) existing ships can be retired sooner to capture operations savings.

At this point, the sooner the existing fleet is retired, the sooner the benefits of the

alternative fleet architecture design will accrue. (Page 3)

Additional general discussion of implementation is found on pages 76-77 of the report.

Ibid, p. 76.

Ibid, p. 80.

CRS-20

The OFT report proposes building ships that are substantially different from

those currently in the fleet, under construction, or planned for procurement, and

combines these ships into formations which, although similar in name to currently

planned formations (i.e., CSGs, ESGs, and SSGs), might be viewed by some

observers as substantially different in composition from the currently planned

versions of these formations. If an alternative fleet platform architecture is defined

as one that uses ship types or naval formations that differ in some significant way

from those currently used or planned, then the OFT-recommended force arguably

would qualify as an alternative fleet platform architecture.

In summary, the OFT report fundamentally challenges current Navy thinking on

the size and composition of the fleet. This is perhaps not surprising, given both

OFT’s institutional role within DOD as a leading promoter of military transformation

and Cebrowski’s views on network-centric warfare and distributed force

architectures.

Industrial-Base Implications Of Reductions and Deferrals30

The Navy’s FY2006-FY2011 ship-procurement plan, shown in Table 3 below,

reduces or defers funding for a number of Navy ship-procurement programs. This

section discusses the industrial-base implications of these reductions and funding

deferrals in terms of the overall ship-procurement rate and individual shipprocurement programs.

Material in this section is adapted from CRS Report RL32665, op. cit.

CRS-21

Table 3. Navy FY2006-FY2011 Ship-Procurement Plan

(Ships fully funded in FY2005 shown for reference)

FY05

FY06

FY07

FY08

FY09

FY10

CVN-21

SSN-774

DDG-51

CG(X)

LCS

LPD-17

LHA®

Total

FY06FY11

DD(X)

TAKE

FY11

TAOE(X)

MPF(F)

MPF(A)

TOTAL

less LCSs

Source: Department of the Navy, Highlights of the Department of the Navy FY 2006

Budget, Chart 14 (p. 5-1).

Overall Ship-Procurement Rate. The FY2006-FY2011 plan would procure

a total of 49 ships, or an average of about 8.2 ships per year. Assuming an average

Navy ship life of 30 to 35 years, an average procurement rate of about 8.2 ships per

year would, over the long run, maintain a fleet of 245 to 286 ships.

As shown in the table, LCSs account for 21 of these 49 ships, or about 43%.

LCSs are to be built by yards other than the six yards that have built the Navy’s major

warships in recent years.31 Setting aside LCSs so as to focus on larger ships that

would likely be built by these six yards, the total number of larger ships is 28, or an

average of about 4.7 ships per year. Assuming an average Navy ship life of 30 to

These six yards include Bath Iron Works (BIW) of Bath, ME, the Electric Boat Division

of Groton, CT, and Quonset Point, RI, and National Steel and Shipbuilding Company

(NASSCO) of San Diego, CA, all of which are owned by General Dynamics Corporation;

and Avondale Shipyards near New Orleans, LA, Ingalls Shipbuilding of Pascagoula, MS,

and Newport News Shipbuilding of Newport News, VA, all of which are owned by

Northrop Grumman Corporation.

CRS-22

35 years, an average procurement rate of about 4.7 ships per year other than LCSs,

if maintained over the long run, would maintain a fleet that included 140 to 163 ships

other than LCSs.

An average procurement rate of 4.7 ships per year other than LCSs would be

about equal to the relatively low rates of Navy ship procurement of the mid- to late

1990s.32 For the six shipyards that have built the Navy’s major warships in recent

years, this average ship-procurement rate would result, as a general matter, in

relatively low work loads, revenues, and employment levels. Production economies

of scale would be limited or poor, putting upward pressure on unit production costs.

Layoffs may occur at some of the yards, and the two companies that own these yards

may be less inclined to commit to new investments aimed at improving the yards’

production facilities.

Individual Shipbuilding Programs.

CVN-21 Aircraft Carrier Program. CVN-21, the next aircraft carrier, is to

be built by Northrop Grumman Newport News (NGNN). Compared to the FY2005FY2009 ship-procurement plan submitted to Congress in February 2004, the

FY2006-FY2011 plan would defer the procurement of CVN-21 by a year, to

FY2008. This may have been due in part to the need to finance the procurement in

FY2007 of other ships, including the lead DD(X) destroyer and the LHA®

amphibious assault ship. The FY2006-FY2011 plan would also defer the

procurement of the carrier after CVN-21 from FY2011 to a subsequent fiscal year.33

The deferral of CVN-21 to FY2008 may increase CVN-21’s real (i.e., inflationadjusted) procurement cost by lengthening the already-considerable production gap

at NGNN between CVN-21 and the previous carrier, CVN-77, which was procured

in FY2001. Lengthening this gap could reduce the shipyard’s ability to efficiently

shift workers coming off the CVN-77 production effort onto the CVN-21 effort. As

a result, workers coming off the CVN-77 production effort could instead be

furloughed, and any new workers hired later to support the start of CVN-21

The table below shows the number of battle force ships funded by Congress from FY1982

through FY2005.

Battle force ships procured (FY1982-FY2005)

Source: CRS compilation based on examination of defense authorization and appropriation

committee and conference reports for each fiscal year. The table excludes non-battle force ships that

do not count toward the 310- or 375- ship goal, such as sealift and prepositioning ships operated by

the Military Sealift Command and oceanographic ships operated by agencies such as the National

Oceanic and Atmospheric Administration (NOAA).

For more on the CVN-21 program, see CRS Report RS20643, Navy CVN-21 Aircraft

Carrier Program: Background and Issues for Congress, by Ronald O’Rourke.

CRS-23

construction could require training and be less productive initially than experienced

workers.

Under the FY2005 budget and FY2005-FY2009 FYDP submitted to Congress

in February 2004, CVN-21’s acquisition (i.e., research and development [R&D] plus

procurement) cost was estimated at $11.7 billion — $3.1 billion for R&D and $8.6

billion for procurement. Under the new FY2006 budget and FY2006-FY2011 FYDP,

the estimate has increased to $13.7 billion — $3.2 billion for R&D and $10.5 billion

for procurement. Some portion of the $1.9-billion increase in the ship’s estimated

procurement cost may be due to the decision to defer CVN-21 to FY2008.

Inefficiencies resulting from lengthening the production gap between CVN-77

and CVN-21 may also increase costs for attack submarine construction work done

at NGNN because that work might, for a time, need to bear a somewhat higher share

of the shipyard’s fixed overhead costs.

SSN-774 Attack Submarine Program. Virginia (SSN-774) class

submarines are built jointly by General Dynamics’ Electric Boat division (GD/EB)

and NGNN. The FY2006-FY2011 plan would maintain the Virginia-class

procurement rate at one per year through FY2011. The FY2005-FY2009 plan had

called for increasing Virginia-class procurement to two per year starting in FY2009.34

Keeping Virginia-class procurement at one per year through FY2011 would result in

Virginia-class work loads, revenues, and employment levels at GD/EB and NGNN

that are about equal to current levels. As a result, production economies of scale for

submarines would continue to remain limited or poor.

DDG-51 Destroyer Program. Arleigh Burke (DDG-51) class Aegis

destroyers are built by General Dynamics’ Bath Iron Works (GD/BIW) and Northrop

Grumman’s Ship Systems division (NGSS), specifically, Northrop’s Ingalls shipyard.

The FY2006-FY2011 plan leaves unchanged the previous procurement profile for the

DDG-51 program. This profile calls for the three DDG-51s procured in FY2005 to

be the last ships in the program. Construction of these three ships is scheduled to

finish by the end of 2010.

DD(X) Destroyer Program. DD(X) destroyers are to be built by GD/BIW

and/or NG/Ingalls. The FY2005-FY2009 plan had called for procuring a total of

eight DD(X)s through FY2009 — one in FY2005, two in FY2007, another two in

FY2008, and three in FY2009. The FY2006-FY2011 plan would reduce

procurement to one ship per year for the period FY2007-FY2011.

A comparison of the FY2006-FY2011 plan to the FY2005-FY2009 plan

suggests at first that the FY2006-FY2011 plan has deferred the procurement of the

lead DD(X) destroyer by two years, to FY2007. The actual effect of the FY2006FY2011 plan on the schedule for building this ship, however, appears to be less

dramatic. The Navy’s FY2005-FY2009 plan proposed funding the construction of

For more on the SSN-774 program, see CRS Report RL32418, Navy Attack Submarine

Force-Level Goal and Procurement Rate: Background and Issues for Congress, by Ronald

O’Rourke.

CRS-24

the lead DD(X) in the Navy’s research and development account through a stream

of annual funding increments stretching out to FY2011 — an approach commonly

known as incremental funding. Under this proposed scheme, the Navy had some

flexibility to choose which year to record as the nominal year of procurement for the

lead DD(X). The Navy chose FY2005, the year of the first scheduled increment,

even though the amount of funding requested for the FY2005 increment equated to

only about 8% of the ship’s total cost, leaving the remaining 92% of the ship’s cost

to be provided in future years.

Congress, in acting on the Navy’s proposed FY2005 budget, approved the

Navy’s FY2005 funding request for the lead DD(X) but directed that the ship be

procured the traditional way, through the Navy’s shipbuilding account (known

formally as the Shipbuilding and Conversion, Navy, or SCN, account), and that it be

funded the traditional way, in accordance with the full funding policy, which requires

that items acquired through the procurement title of the DOD appropriation act be

fully funded in the year they are procured.35 Consistent with this direction, the

FY2005 funding increment was designated as advance procurement (AP) funding for

a lead DD(X) to be procured in some future fiscal year.

Abiding by this direction required the Navy to alter its funding profile for the

lead DD(X) to one that fully funds the ship in a particular year. The FY2006FY2011 plan suggests that the Navy, after examining its options, selected FY2007

as the year in which the ship would be fully funded. The actual schedule for building

the lead ship, however, may delayed by about a year rather than two years.

Consequently, although the nominal year of procurement for the lead DD(X) appears

to have been deferred two years, the actual amount of change in the schedule for the

lead ship may be less.

The FY2006-FY2011 Navy plan, however, defers the procurement of the second

DD(X) by a year, to FY2008, and as mentioned earlier, reduces DD(X) procurement

to one per year for the five-year period FY2007-FY2011.

The Navy has recently testified that it requires a total of eight to 12 DD(X)s.

Under previous plans, however, the Navy envisioned stopping DD(X) procurement

at about the time that it started CG(X) procurement. If the lead CG(X) is procured

in FY2011, as shown in the FY2006-FY2011 plan, and there is a gap year in FY2012

between the procurement of the lead CG(X) and follow-on CG(X)s starting in

FY2013, then a final DD(X) might be procured in FY2012. If so, then the total

procurement quantity for the DD(X) program would be six ships.36

For more on the full funding policy, see CRS Report RL31404, Defense Procurement:

Full Funding Policy — Background, Issues, and Options for Congress, by Ronald O’Rourke

and Stephen Daggett.

For more on the DD(X) program, see CRS Report RS21059, Navy DD(X) Destroyer

Program: Background and Issues for Congress, by Ronald O’Rourke; and CRS Report

RL32109, Navy DD(X) and LCS Ship Acquisition Programs: Oversight Issues and Options

for Congress, by Ronald O’Rourke.

CRS-25

Supporters of the surface combatant industrial base expressed concern last year

about the gap between the end of DDG-51 procurement and the start of DD(X)

procurement. This gap, supporters argued, would make it difficult for the industrial

base to manage the transition from DDG-51 production to DD(X) production. The

FY2006-FY2011 plan appears to increase the length of this gap, which would likely

intensify these concerns.

The light-ship displacement of the DD(X) design (about 12,135 tons) is about

75% greater than that of the DDG-51 design (about 6,950 tons). If shipyard

construction work is roughly proportionate to light-ship displacement, then building

a DD(X) might generate about 75% more shipyard work than building a DD(X), and

building one DD(X) per year would be equivalent to building 1.75 DDG-51s per

year.

Supporters of GD/BIW and NG/Ingalls have argued in previous years that three

DDG-51s per year, in conjunction with other work being performed at the two yards

(particularly Ingalls), is the minimum rate needed to maintain the financial health of

the two yards. Navy officials in recent years have questioned whether this figure is

still valid. Building the equivalent of 1.75 DDG-51s per year equates to about 58%

of this rate. If the minimum rate of three DDG-51 equivalents per year is valid, then

the one-per-year procurement rate for the DD(X) program may raise questions about

the potential future financial health of these yards.

Until recently, the DD(X) acquisition strategy called for the first DD(X) to be

built by NG/Ingalls and the second by GD/BIW, and for the construction contracts

for the first six DD(X)s to be divided evenly between the two yards. As a result of

the reduction in the planned DD(X) procurement rate, however, the Navy is

considering holding a competition between the two yards for the right to become the

sole builder of the DD(X).

If the Navy holds such a competition, then the consequences for the yard that

loses the competition could be very serious. GD/BIW is involved as a shipbuilder

in no shipbuilding programs other than the DDG-51 and DD(X).37 Consequently, if

GD/BIW loses the DD(X) competition and does not receive other new shipconstruction work, then GD/BIW could experience a significant reduction in

workloads, revenues, and employment levels by the end of the decade. Theoretical

scenarios for the yard under such circumstances could include closure and liquidation

of the yard, the “mothballing” of the yard or some portion of it, or reorienting the

yard into one that focuses on other kinds of work, such as building commercial ships,

overhauling and modernizing Navy or commercial ships, or fabricating components

of Navy or commercial ships that are being built by other yards. Reorienting the yard

into one that focuses on other kinds of work, if feasible, would likely result in

workloads, revenues, and employment levels that are significantly reduced from

today’s.

GD/BIW is also the prime contractor for the GD version of the LCS, but the GD version

is to be built by the Austal USA shipyard, of Mobile, AL.

CRS-26

If NGSS loses the DD(X) competition and other work being done at NG/Ingalls

(particularly construction of amphibious ships) does not increase, then NG/Ingalls

could similarly experience a reduction in workloads, revenues, and employment

levels. The continuation of amphibious-ship construction at NG/Ingalls could make

the scenarios of closure and liquidation or mothballing less likely for NG/Ingalls than

for GD/BIW, but workloads, revenues, and employment levels could still be reduced

from current levels, and the cost of amphibious-ship construction and other work

done at NG/Ingalls could increase due to reduced spreading of shipyard fixed

overhead costs.

If surface-combatant construction work at GD/BIW or NG/Ingalls ceases, the

Navy would be left with one yard actively building larger, complex surface

combatants. If the Navy at some point wanted to reestablish a second source for

building these ships, its options would include reconstituting surface combatant

construction at the yard where the work had ceased, reconstituting it at some other

yard with past experience building larger surface combatants — such as NGNN,

which built nuclear-powered cruisers in the 1970s, NG/Avondale, which built Knox

(FF-1052) class frigates in the 1970s and Hamilton (WHEC-715) class Coast Guard

cutters in the 1960s and 1970s, or perhaps Todd Pacific Shipyards of Seattle, WA,

which built Oliver Hazard Perry (FFG-7) class frigates in the 1980s38 — or

establishing it at a yard that has not previously built larger, complex surface

combatants, but could be made capable of doing so.

CG(X) Cruiser Program. The FY2006-FY2011 plan would accelerate the

procurement of the first CG(X) cruiser to FY2011. The long-range shipbuilding plan

that the Navy submitted to Congress in 2003 showed the first CG(X) cruiser being

procured in FY2018.39 A December 2004 DOD document called Program Budget

Decision 753 (PBD 753), stated that a DD(X) procurement rate of one per year would

“maintain the bridge to the CG(X).”40

Littoral Combat Ship (LCS) Program. The FY2006-FY2011 plan would

defer procurement of the third LCS by a year, to FY2007. This is consistent with

Congress’ direction, in acting on the Navy’s FY2005 budget request, to fully fund a

lead LCS in FY2005 but require a gap year between the procurement of a lead LCS

and any follow-on LCSs built to that same design. The Navy plans to procure two

lead LCSs to different designs developed by two competing industry teams. Under

the FY2006-FY2011 plan, the single ship now planned for FY2006 would

presumably be the second lead LCS, and the two LCSs now planned for FY2007

would presumably be follow-on ships built to the same design as the lead LCS

procured in FY2005. The FY2006-FY2011 plan would also reduce the number of

The Navy’s FFG-7s were built at GD/BIW, Todd Pacific Shipyards, and Todd Shipyards

of San Pedro, CA. The San Pedro yard is now part of Southwest Marine, Inc., which in turn

is part of United States Marine Repair, a group of shipyards that focuses on repairing,

modernizing, converting, and overhauling non-nuclear-powered ships.

For more on the CG(X) program, see CRS Report RL32109, Navy DD(X) and LCS Ship

Acquisition Programs: Oversight Issues and Options for Congress, by Ronald O’Rourke.

U.S. Department of Defense, Program Budget Decision [PBD] 753, Washington, 2004.

p. 6.

CRS-27

LCSs procured in FY2009 from six ships to five. This can be viewed as consistent

with the Navy’s longer-range projection for the LCS program, which has envisioned

a sustaining procurement rate of five ships per year through the end of the program,

as shown by the figures for FY2010 and FY2011.41

LPD-17 Amphibious Ship Program. San Antonio (LPD-17) class

amphibious ships are built by NGSS, particularly NG/Avondale. The FY2006FY2011 plan would end procurement of LPD-17s after procuring the ninth ship in

the class in FY2007. Previous plans had generally called for building a total of 12

LPD-17s through FY2010.42 Under the FY2006-FY2011 plan, workloads, revenues,

and employment levels associated with building LPD-17s would wind down about

three years earlier than under previous plans. NG/Avondale might be able to

compensate for this by beginning to build TAOE(X) resupply ships or MPF(F) ships,

but procurement of these ships is not scheduled to start until FY2009, suggesting that

NG/Avondale might experience a dip in workloads, revenues, and employment levels

between the winding down of LPD-17 production and the scaling up of TAOE(X) or

MPF(F) production. It is not certain, moreover, whether NG/Avondale will

participate in building either of these ships.

LHA® Amphibious Ship Program. The LHA® amphibious assault ship

would be built by NGNN, primarily NG/Ingalls. Compared to the FY2005-FY2009

plan, the FY2006-FY2011 plan would accelerate the procurement of LHA® by one

year, to FY2007. The FY2004-FY2009 shipbuilding plan that the Navy submitted

to Congress in February 2003 showed LHA® in FY2007. Accelerating procurement

of LHA® to FY2007 can thus be viewed as restoring the year of procurement shown

in the plan submitted to Congress in 2003.43 The acceleration of LHA® to FY2007

would improve NG/Ingalls’ ability to shift workers from the previous amphibious

assault ship, LHD-8, to LHA®, and perhaps help NG/Ingalls somewhat in managing

the potential consequences of the Navy’s decisions regarding the DD(X) program.

TAKE Auxiliary Cargo Ship Program. Lewis and Clark (TAKE-1) class

auxiliary cargo ships are built by GD/National Steel and Shipbuilding Company

(GD/NASSCO). Under the FY2005-FY2009 plan, the final three ships in the

program were to be procured in FY2006 (two ships) and FY2007 (one ship). The

FY2006-FY2011 plan would instead procure these ships at a rate of one per year

during the three-year period FY2006-FY2008. As a consequence, employment at the

yard associated with building these ships may start to decline around FY2006 rather

For more on the LCS program, see CRS Report RS21305, Navy Littoral Combat Ship

(LCS): Background and Issues for Congress, by Ronald O’Rourke; and CRS Report

RL32109, Navy DD(X) and LCS Ship Acquisition Programs: Oversight Issues and Options

for Congress, by Ronald O’Rourke.

For more on the LPD-17 program, see CRS Report RL32513, Navy-Marine Corps

Amphibious and Maritime Prepositioning Ship Programs: Background and Oversight Issues

for Congress, by Ronald O’Rourke.

For more on the LHA(R) program, see CRS Report RL32513, Navy-Marine Corps

Amphibious and Maritime Prepositioning Ship Programs: Background and Oversight Issues

for Congress, by Ronald O’Rourke.

CRS-28

than FY2007, but construction work on these ships would continue for an additional

year into the future before ceasing.

TAOE(X) Replenishment Ship Program. The FY2005-FY2009 plan

called for procuring the first two TAOE(X) ships in FY2009. The FY2006-FY2011

plan reduces the FY2009 procurement to one ship. This would appear to reduce the

potential of the TAOE(X) program to serve as a new source of work in FY2009 for

yards that may be attempting to compensate for the winding down of other

shipbuilding programs.

MPF(F)/MPF(A) Maritime Prepositioning Ship Program. The FY2005FY2009 plan included three MPF-type ships in FY2009 — two MPF(F)s and one

MPF(A) (an aviation variant of the MPF(F) design). The FY2006-FY2011 plan

would reduce MPF-type procurement to one ship in FY2009.44 This would similarly

appear to reduce the potential of the MPF program to serve as a new source of work

in FY2009 for yards that may be attempting to compensate for the winding down of

other shipbuilding programs.

Alternative Funding Approaches for Navy Ship Procurement45

Introduction. Some observers, including the Chief of Naval Operations and

shipbuilding industry officials, have recently proposed procuring Navy ships using

funding approaches other than the traditional full funding approach that has been

used to procure most Navy ships since the 1950s.46 These alternative funding

approaches include incremental funding, which has been used to fund a few Navy

ships in recent years, and advance appropriations, which has not been used for Navy

ship procurement. Supporters of these alternative funding approaches believe they

could increase stability in Navy shipbuilding plans and perhaps increase the number

For more on the MPF(F) program, see CRS Report RL32513, op. cit.

Material in this section is adapted from CRS Report RL32776, Navy Ship Procurement:

Alternative Funding Approaches — Background and Options for Congress, by Ronald

O’Rourke. See also CRS Report RL31404, Defense Procurement: Full Funding Policy —

Background, Issues, and Options for Congress, by Ronald O’Rourke and Stephen Daggett.

For the Chief of Naval Operations, see Statement of Admiral Vernon Clark, USN, Chief

of Naval Operations, Before The House Armed Services Committee, Feb. 17, 2005, p. 20,

and Statement of Admiral Vernon Clark, USN, Chief of Naval Operations, Before The

Senate Armed Services Committee, Feb. 10, 2005, p. 20. See also Andrew Scutro, “Clark

Seeks Hearings On Shipbuilding Process,” NavyTimes.com, Feb. 18, 2005; Dave Ahearn,

“Clark Urges Ships Funding Reforms, But Defends Shipbuilding Cuts,” Defense Today,

Febr. 18, 2005; and Geoff Fein, “Federal Acquisition Regulations Should Be Examined,

CNO Says,” Defense Daily, Feb. 18, 2005.

For industry officials, see Dave Ahearn, “Northrop Chief Says Payment Due For Aircraft

Carrier Delay,” Defense Today, Feb. 16, 2005; Nathan Hodge, “Despite Setbacks, Northrop

Grumman Chief Confident On Missile Defense, Budget,” Feb. 16, 2005; William Matthews,

“Northrop Pitches Novel Ship Financing, Again,” Defense News, Dec. 6, 2004, p. 24;

Christopher P. Cavas, “Northrop Chief Urges Spreading Ship Payments,” Defense News,

Nov. 22, 2004; Christopher J. Castelli, “Shipbuilder Northrop Pitches Financing Strategy

For Ships To Navy,” Inside the Navy, Nov. 1, 2004, p. 1.

CRS-29

of Navy ships that could be built for a given total amount of ship-procurement

funding.

Congress may maintain current practices for funding Navy ship procurement or

change them by, for example, increasing the use of incremental funding or starting

to use advance appropriations. Congress’ decision on this issue could be significant

because the full funding policy relates to Congress’ power of the purse and its

responsibility for conducting oversight of Department of Defense (DOD) programs.

Consequently, the issue can be alternately expressed as how to procure Navy ships

economically while maintaining key congressional prerogatives. Congress’ decision

on ship funding approaches could also affect future Navy capabilities, annual Navy

funding requirements, and the shipbuilding industrial base.

Full Funding Policy.

General Description. Most (but not all) Navy ships procured since the late

1950s have been funded in accordance with the full funding policy. Before then,

many Navy ships were procured with incremental funding, which is discussed below.

For DOD procurement programs, the full funding policy requires the entire

procurement cost of a usable end item (such as a Navy ship) to be funded in the year

in which the item is procured. The policy applies not just to Navy ships, but to all

weapons and equipment that DOD procures through the procurement title of the

annual DOD appropriations act.

In general, the full funding policy means that DOD cannot contract for the

construction of a new weapon or piece of equipment until funding for the entire cost

of that item has been approved by Congress. Sufficient funding must be available for

a complete, usable end item before a contract can be let for the construction of that

item. Under traditional full funding, no portion of a usable end item’s procurement

cost is funded in a year after the year in which the item is procured.

Congress imposed the full funding policy on DOD in the 1950s to make the total

procurement costs of DOD weapons and equipment more visible and thereby

enhance Congress’ ability to understand and track these costs. Congress’ intent in

imposing the policy was to strengthen discipline in DOD budgeting and improve

Congress’ ability to control DOD spending and carry out its oversight of DOD

activities. Understanding total costs and how previously appropriated funds are used

are key components of Congress’ oversight capability.

The full funding policy is consistent with two basic laws regarding government

expenditures — the Antideficiency Act of 1870, as amended, and the Adequacy of

Appropriations Act of 1861. Regulations governing the full funding policy are found

in Office of Management and Budget (OMB) Circular A-11 and DOD Directive

7000.14-R, which provide guidelines on budget formulation. OMB Circular A-11

states, among other things, that

Good budgeting requires that appropriations for the full costs of asset acquisition

be enacted in advance to help ensure that all costs and benefits are fully taken

into account at the time decisions are made to provide resources. Full funding

CRS-30

with regular appropriations in the budget year also leads to tradeoffs within the

budget year with spending for other capital assets and with spending for purposes

other than capital assets. Full funding increases the opportunity to use

performance-based fixed price contracts, allows for more efficient work planning

and management of the capital project (or investment), and increases the

accountability for the achievement of the baseline goals.

When full funding is not followed and capital projects (or investments) or useful

segments are funded in increments, without certainty if or when future funding

will be available, the result is sometimes poor planning, acquisition of assets not

fully justified, higher acquisition costs, cancellation of major investments, the

loss of sunk costs, or inadequate funding to maintain and operate the assets.47

Support for the full funding policy has been periodically reaffirmed over the

years by Congress, the Government Accountability Office (GAO), and DOD.48

Advance Procurement (AP) Payments Under Full Funding. The

executive branch regulations that implement the full funding policy for DOD

procurement programs permit two circumstances under which advance procurement

(AP) “down payments” on a usable end item can be provided in one or more years

prior to the item’s year of procurement:49

AP funding may be used to pay for “long-lead items” — components

of a usable end item that have long manufacturing lead times — if

needed to ensure that these items will be ready for installation into

the end item at the appropriate point in the end item’s construction

process.

AP funding may also be used to pay for “economic order quantity”

(EOQ) procurement of a set of long-lead items for a set of weapons

being acquired under a multiyear procurement (MYP) arrangement.

Each of these is discussed below.

AP Payments For Long-Lead Items. Long-lead items are often

manufactured not at the end item’s final assembly facility (such as a shipyard) but at

separate supplier firms. In Navy shipbuilding, AP payments have most commonly

been used to pay for nuclear-propulsion components of nuclear-powered aircraft

carriers and submarines.

Congress in recent years has occasionally approved AP funding for

conventionally powered Navy ships, such as destroyers and amphibious ships, for

which the Navy did not request any AP funding for long-lead items. Congress in

OMB Circular A-11 (July 2003), Appendix J, Section C, Principle 1 (of four principles

for financing capital assets).

For a detailed discussion of the origins, rationale, and governing regulations of the full

funding policy, as well as examples of where Congress, GAO, and DOD have affirmed their

support for the policy, see Appendix A of CRS Report RL31404, op. cit.

Note that the funding discussed here is advance procurement funding, which is not to be

confused with the alternate funding approach called advance appropriations, discussed later.

CRS-31

recent years has also occasionally approved AP funding for “advance construction”

work on certain ships, which apparently refers to early shipyard activities for building

the basic structure of a ship, as opposed to manufacturing long-lead components to

be installed into the ship. The use of AP funding for shipyard advance construction

activities is not recognized in executive branch budget regulations on the full funding

policy, at least not in the same way as these regulations recognize the use of AP

funding for long-lead components.

Congressional decisions to approve AP funding for ships for which the Navy did

not request such funding, or for shipyard advance construction activities, could be

aimed at one or more of the following goals:

generating shipyard construction work (and thus shipyard revenues

and jobs) on a particular ship in a year prior to that ship’s year of

procurement;

creating an early financial commitment to procuring a ship that is

planned for procurement in a future year, which can enhance job

security for construction workers at the yard that would build the

ship;

reducing the total construction cost of a ship through improved

sequencing or year-to-year balancing of shipyard construction work;

and

reducing the portion of a ship’s cost to be funded in the year of

procurement.

AP Payments For EOQ Under Multiyear Procurement. Most DOD

procurement programs use annual contracting, under which DOD lets one or more

contracts for each year’s worth of procurement of a given item. Multiyear

procurement is a special contracting authority, approved by Congress on a

program-by-program basis, that permits DOD to use a single contract to procure a set

of end items that are scheduled to be procured across a series of up to five fiscal years

(i.e., the budget year in question, plus up to four future years). An MYP arrangement

approved for the Navy’s F/A-18E/F strike-fighter program, for example, permitted

the Navy to procure, under a single contract, a total of 198 to 224 F/A-18E/Fs during

the five-year period FY2000-FY2004. Congress over the years has granted MYP

authority for a relatively small number of procurement programs.

The law governing MYP arrangements is set forth in 10 USC 2306b. This

provision permits AP funding to be used to finance, at the outset of an MYP

arrangement, the procurement of long-lead components for all of the end items to be

procured under the MYP arrangement. The MYP arrangement to procure a total of

five Virginia (SSN-774) class nuclear-powered attack submarines over the five-year

period FY2004-FY2008, for example permits the Navy to procure, in the first years

of the arrangement, five sets of long-lead nuclear-propulsion components. This upfront procurement of long-lead items is called an “economic order quantity” (EOQ)

CRS-32

because it procures (i.e., places an order for) these items in the form of a group that

can be manufactured in an efficient (i.e., economic) manner.50

“One Decision For One Pot Of Money”. When Congress approves AP

funding for an item, it does so through a funding decision for that year that is separate

from the decision that Congress subsequently makes, in the item’s year of

procurement, to fund the remainder of the item’s procurement cost. Items procured

with AP funding thus involve two or more funding decisions from Congress — one

or more decisions to approve AP funding in one or more years prior to the year of

procurement, plus a final decision, in the item’s year of procurement, to fund the

remainder of the item’s procurement cost. A decision by Congress to approve AP

funding for an item does not create an obligation on the part of Congress to approve

the remainder of the item’s procurement cost in some future year, but it usually

indicates that Congress anticipates doing so.

Although some DOD weapons and equipment are procured with AP funding,

most DOD procurement items are funded through a single decision by Congress to

provide the entire cost of the item in the item’s year of procurement. For this reason,

the full funding policy for DOD procurement programs can be described in simplified

terms as “one decision for one pot of money.”

Incremental Funding.

General Description. In spite of the existence of the full funding policy, a

few Navy and DOD ships have been procured in recent years (or are currently being

procured) with incremental funding. Examples include DOD sealift ships, the attack

submarine SSN-23, the amphibious assault ships LHD-6 and LHD-8, and the aircraft

carrier CVN-21. The DOD sealift ships were procured through the National Defense

Sealift Fund (NDSF), a DOD revolving and management fund that is outside the

procurement title of the DOD appropriations act and therefore not subject to the full

funding policy in the same way as DOD procurement programs funded through the

procurement title. LHD-8 is currently being incrementally funded by explicit

legislative direction. SSN-23, LHD-6 and CVN-21 amount to cases of de facto

incremental funding. These ships constitute recent exceptions to the use of full

funding in the procurement of Navy ships. Prior to the imposition of the full funding

policy in the 1950s, however, much of DOD weapon procurement was accomplished

through incremental funding.

Under incremental funding, a weapon’s cost is divided into two or more annual

portions, or increments, that can reflect the need to make annual progress payments

to the contractor as the weapon is built. Congress then approves each year’s

increment as part of its action on that year’s budget. Under incremental funding,

10 USC 2306b(i)(4)(B) states: “The Secretary of Defense may obligate funds appropriated

for any fiscal year for advance procurement under a contract for the purchase of property

only for the procurement of those long-lead items necessary in order to meet a planned

delivery schedule for complete major end items that are programmed under the contract to

be acquired with funds appropriated for a subsequent fiscal year (including an economic

order quantity of such long-lead items when authorized by law).”

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DOD can contract for the construction of a weapon after Congress approves only the

initial increment of its cost, and completion of the weapon is dependent on the

approval of the remaining increments in future years by that Congress or future

Congresses. A key feature of incremental funding is that a portion of the ship’s cost

is provided in one or more years beyond the item’s year of procurement.

One form of incremental funding, called split funding, involves dividing a

weapon’s procurement cost into two portions, one of which is funded in the item’s

year of procurement, the other the following year. Split funding, in other words, is

a two-year form of incremental funding.

Advantages and Disadvantages.

Potential Advantages. Supporters of incremental funding could argue that,

compared to full funding, using incremental funding in DOD procurement can be

advantageous because it can do one or more of the following:

permit very expensive items, such as large Navy ships, to be

procured in a given year while avoiding or mitigating budget

“spikes” (also called lumps) that could require displacing other

programs from that year’s budget, which can increase the costs of

the displaced programs due to uneconomic program-disruption startup and stop costs;

avoid a potential bias against the procurement of very expensive

items that might result from use of full funding due to the item’s

large up-front procurement cost (which appears in the budget)

overshadowing the item’s long-term benefits (which do not appear

in the budget) or its lower life cycle operation and support (O&S)

costs compared to alternatives with lower up-front procurement

costs;

permit construction to start on a larger number of items in a given

year within that year’s amount of funding, so as to achieve better

production economies of that item than would have been possible

under full funding;

recognize that certain DOD procurement programs, particularly

those incorporating significant amounts of advanced technology,

bear some resemblance to research and development activities

(which can be funded in increments), even though they are intended

to produce usable end items;

reduce the amount of unobligated balances associated with DOD

procurement programs;51

For an explanation and discussion of unobligated balances, see CRS Report RL30002, A

Defense Budget Primer, by Mary T. Tyszkiewicz and Stephen Daggett.

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implicitly recognize potential limits on DOD’s ability to accurately

predict the total procurement cost of items, such as ships, that take

several years to build; and

preserve flexibility for future Congresses to stop “throwing good

money after bad” by halting funding for the procurement of an item

under construction that has become unnecessary or inappropriate due

to unanticipated shifts in U.S. strategy or the international security

environment.

Potential Disadvantages. In spite of its potential advantages, Congress

replaced incremental funding with the full funding policy in the 1950s, and has

periodically reaffirmed the full funding policy since then, on the grounds that

incremental funding did (or could do) one or more of the following:

make the total procurement costs of weapons and equipment less

visible to Congress and more difficult for Congress to understand

and track;

permit one Congress to “tie the hands” of one or more future

Congresses — a kind of action that Congress traditionally tries to

avoid — by providing initial procurement funding for a weapon

whose cost would have to be largely funded by one or more future

Congresses;

create a potential for DOD to start procurement of an item without

necessarily understanding its total cost, stating that total cost to

Congress, or providing fully for that total cost in future DOD

budgets — the so-called “camel’s-nose-under-the-tent” issue; and

increase weapon procurement costs by exposing weapons under

construction to potential uneconomic start-up and stop costs that can

occur when budget reductions or other unexpected developments

cause one or more of the planned increments to be reduced or

deferred.

Navy Proposal For Funding Lead Ships. As part of its proposed FY2005

budget and FY2005-FY2009 Future Years Defense Plan (FYDP), the Navy in 2004

proposed funding the procurement of the lead DD(X) destroyer and the lead Littoral

Combat Ship (LCS) program in the Navy’s research and development (R&D)

account rather than the Navy’s ship-procurement account, which is known formally

as the Shipbuilding and Conversion, Navy (SCN) account. Funding the procurement

of lead ships through the R&D account would permit them to be incrementally

funded without violating the full funding policy.

Congress, in acting on the Navy’s proposed FY2005 defense budget, rejected

the Navy’s proposal to procure the lead DD(X) through the Navy’s research and

development account, directed the Navy to fully fund the lead DD(X) in the Navy’s

ship-procurement account, and fully funded the lead LCS in the Navy’s research and

development account.

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Although Congress in 2004 rejected the Navy’s proposal to incrementally fund

the lead DD(X) and lead LCS, Navy officials testifying in early 2005 in support of

the Navy’s proposed FY2006 defense budget and FY2006-FY2011 FYDP have again

expressed support for the concept of funding the procurement of lead ships in the

R&D account, which would permit them to be funded incrementally.

“Multiple Decisions For Multiple Pots Of Money”. Since incremental

funding divides the procurement cost of an end item into two or more annual

increments, and since Congress typically approves one of these increments each year,

incremental funding can be described in simplified terms as “multiple decisions for

multiple pots of money.”

Advance Appropriations.

General Description. Advance appropriations have not been used in Navy

ship procurement, but have been used by other executive branch agencies to fund

various programs.52

Advance appropriations is an alternate form of full funding that is permitted

under executive branch budget regulations. As a funding approach, it can be viewed

as lying somewhere between traditional full funding and incremental funding.53

Under advance appropriations, as under traditional full funding, Congress makes a

one-time decision to fund the entire procurement cost of an end item. That cost,

however, can then be divided into two or more annual increments, as under

incremental funding, that are assigned to (in budget terminology, “scored in”) two or

more fiscal years.54

In contrast to incremental funding, under which Congress must take a positive

action each year to approve each year’s funding increment, under advance

appropriations, Congress, following its initial decision to fund the item, would need

to take a positive action to cancel or modify an annual funding increment in a future52

Use of advance appropriations in the federal budget is summarized in the appendix

volume of each year’s U.S. government budget. For the FY2006 version, see U.S.

Executive Office of the President. Office of Management and Budget. Appendix [to the]

Fiscal Year 2006 Budget of the U.S. Government. (Washington: GPO, 2005), pp. 12411242.

As discussed in an earlier footnote, advance appropriations is not to be confused with

advance procurement (AP) funding that can occur under traditional full funding.

Advance appropriations can also be used to fund the entire cost of an item and have that

entire cost assigned to a single future fiscal year.

OMB Circular A-11 defines advance appropriations as appropriations that are:

— Enacted normally in the current year;

— Scored after the budget year (e.g., in each of one, two, or more later years,

depending on the language); and

— Available for obligation in the year scored and subsequent years if specified in

the language.

(OMB Circular A-11 (July 2003 version), Appendix J (Principles Of Budgeting For

Capital Asset Acquisitions), Section E (Glossary).)

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year budget. In this sense, advance appropriations can be thought of as a legislatively

locked in form of incremental funding: the future-year funding increments will occur

unless Congress takes action to stop them.

OMB Circular A-11 allows for the use of advance appropriations to help finance

capital assets under certain circumstances:

Regular appropriations for the full funding of a capital project or a useful

segment (or investment) of a capital project in the budget year are preferred. If

this results in spikes that, in the judgment of OMB, cannot be accommodated by

the agency or the Congress, a combination of regular and advance appropriations

that together provide full funding for a capital project or a useful segment or an

investment should be proposed in the budget.

Explanation: Principle 1 (Full Funding) is met as long as a combination of

regular and advance appropriations provide budget authority sufficient to

complete the capital project or useful segment or investment. Full funding in the

budget year with regular appropriations alone is preferred because it leads to

tradeoffs within the budget year with spending for other capital assets and with

spending for purposes other than capital assets. In contrast, full funding for a

capital project (investment) over several years with regular appropriations for the

first year and advance appropriations for subsequent years may bias tradeoffs in

the budget year in favor of the proposed asset because with advance

appropriations the full cost of the asset is not included in the budget year.

Advance appropriations, because they are scored in the year they become

available for obligation, may constrain the budget authority and outlays available

for regular appropriations of that year.

If, however, the lumpiness caused by regular appropriations cannot be

accommodated within an agency or Appropriations Subcommittee, advance

appropriations can ameliorate that problem while still providing that all of the

budget authority is enacted in advance for the capital project (investment) or

useful segment. The latter helps ensure that agencies develop appropriate plans

and budgets and that all costs and benefits are identified prior to providing

resources. In addition, amounts of advance appropriations can be matched to

funding requirements for completing natural components of the useful segment.

Advance appropriations have the same benefits as regular appropriations for

improved planning, management, and accountability of the project

(investment).55

Advantages and Disadvantages. Supporters of advance appropriations

could argue that it offers many of the potential advantages of incremental funding

outlined earlier — including avoiding or mitigating budget spikes — while avoiding

some of its potential disadvantages, such as the risk of increasing weapon

procurement costs created by uneconomic start-up and stop costs that can occur when

budget reductions or other unexpected developments cause planned increments to be

reduced or deferred.

OMB Circular A-11 (July 2003), Appendix J, Section C, Principle 2 (of four principles

for financing capital assets). Italics as in the original.

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Opponents of advance appropriations could argue that it retains (or even

expands) one of the key potential disadvantages of incremental finding — that of

tying the hands of future Congresses — by committing a portion of one or more

future-year budgets to the financing of an item procured in a prior year and requiring

a positive action from future Congresses to undo those commitments. Opponents

could also argue that compared to full funding, advance appropriations under certain

circumstances could increase ship-construction costs by causing work on a ship to

stop and then be restarted. Specifically, they could argue, if a given increment of

construction work on the ship is completed before the end of a fiscal year and that

year’s funding increment is entirely expended, the Navy might have to halt work on

the ship and wait until the start of the next fiscal year to access the next increment of

funding and resume work. Under full funding, in contrast, the Navy would have

access to funding for the ship’s entire construction cost and consequently would not

have to halt work until the start of the next fiscal year, avoiding the additional costs

of halting and then resuming work.

Navy Advocacy In 2001. In 2001, some Navy officials advocated the use

of advance appropriations for Navy ship procurement, noting at that time that this

funding approach is used by several federal agencies other than DOD.56

Although use of advance appropriations for Navy ship procurement was

supported by some Navy officials and some Members of Congress,57 the Navy in

Source: Slides for May 3, 2001 Navy briefing to CRS, Advance Appropriations for Navy

Shipbuilding, pp. 16, 19-21. The Navy also argued that current law, contrary to some

assertions, does not prohibit the use of advance appropriations. Specifically, the Navy

argued that:

! 31 USC 1341, [the] “Anti-Deficiency Act,” prohibits writing a contract

which “involves the government in a contract or obligation for the

payment of money before an appropriation is made unless authorized by

law.”

! 10 USC 2306b [the provision covering multi-year procurement contracts]

allows [DOD and certain other federal agencies] to enter into multi-year

contracts for the purchase of weapon systems, as long as [there is] “a

reasonable expectation that throughout the contemplated contract period

the head of the agency will request funding for the contract at the level

required to avoid contract cancellation.”

! 31 USC 1105 [a provision relating to the contents of the federal budget

and its submission to Congress] requires that [the executive branch]

identify in advance of need future appropriations that will have to be

approved in order to complete the contract. These advance appropriations

have to be specifically approved by Congress to allow [the executive

branch] to obligate the government in advance of receipt of funds.

Christian Bohmfalk, “O’Keefe: Advance Appropriations, If Used Correctly, Could Help

Navy,” Inside the Navy, Nov. 26, 2001; Christian Bohmfalk, “Stevens Promotes Advance

Appropriations To Boost Ship Production,” Inside the Navy, Sept. 10, 2001; Mike

McCarthy, “CNO Advocates Advance Funding of Ships,” Defense Week, July 16, 2001, p.

2; Christian Bohmfalk, “Senior Navy Leaders Describe Benefits of Advance

Appropriations,” Inside the Navy, Apr. 16, 2001; Christopher J. Castelli, “Congress Weighs

(continued...)

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2001 apparently did not receive approval from the Office of Management and Budget

(OMB) to use the approach for ship procurement, and did not officially propose its

use as part of its FY2002 budget submission to Congress.58 Congress in 2001 did not

adopt advance appropriations as a mechanism for funding Navy ships.

The House Appropriations Committee, in its report (H.Rept. 107-298 of

November 19, 2001) on the FY2002 defense appropriations bill (H.R. 3338), stated

that it was

dismayed that the Navy continues to advocate the use of alternative financing

mechanisms to artificially increase shipbuilding rates, such as advanced

appropriations, or incremental funding of ships, which only serve to decrease

cost visibility and accountability on these important programs. In attempting to

establish advanced appropriations as a legitimate budgeting technique, those

Navy advocates of such practices would actually decrease the flexibility of future

Administrations and Congresses to make rational capital budgeting decisions

with regard to shipbuilding programs. Accordingly, the Committee bill includes

a new general provision (section 8150) which prohibits the Defense Department

from budgeting for shipbuilding programs on the basis of advanced

appropriations.59

The provision mentioned above (Section 8150) was not included in the final version

of the bill that was passed by Congress and signed into law (H.R. 3338/P.L. 107-117

of January 10, 2002).

“One Decision For Multiple Pots of Money”. Because advance

appropriations involves a one-time decision by Congress to approve the entire

procurement cost of the end item, which can then be divided into two or more

increments that are assigned to two or more fiscal years, advance appropriations can

be described in simplified terms as “one decision for multiple pots of money.”

Potential For Reducing Instability In Ship-Procurement Plans.

Could using incremental funding or advance appropriations reduce instability

in Navy ship-procurement plans?

Using incremental funding or advance appropriations could help reduce

instability in Navy ship-procurement plans by avoiding or mitigating budget spikes

that can occur when traditional full funding is used to procure ships that are very

expensive and are procured once every few years. The ships that best fit this

(...continued)

Using ‘Advance Appropriations’ For Shipbuilding,” Inside the Navy, Apr. 9, 2001; Dale

Eisman, “Plan Would Boost Navy Shipbuilding,” Norfolk Virginian-Pilot, Apr. 5, 2001.

Dale Eisman, “White House Rejects Proposal To Stretch Shipbuilding Funds,” Norfolk

Virginian-Pilot, Sept. 6, 2001; Christian Bohmfalk, “Advance Appropriations, Not Part of

FY-02 Request, May Resurface,” Inside the Navy, July 16, 2001.

H.Rept. 107-298, p. 119.

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description are aircraft carriers and “big-deck” amphibious assault ships.60

Accommodating budget spikes for such ships within an overall ship-procurement or

Department of the Navy budget for a given fiscal year can require the Navy to move

to other fiscal years other ships that the Navy would have preferred to procure in the

spike year, or, conversely, require the Navy to move the carrier or amphibious assault

ship from a preferred year of procurement to a less-preferred year that happens to

have fewer other Navy ships in it. Such movements of planned ship procurements

can be a source of instability in Navy ship-procurement planning.

The FY2006-FY2011 Navy ship-procurement plan submitted to Congress in

February 2005 contains at least two potential examples of such ship movements:

The Navy, as part of its proposed FY2005 budget and FY2005FY2009 FYDP submitted to Congress in February 2004, had

proposed funding the lead DD(X) destroyer through the Navy’s

research and development account, which would have permitted the

ship to be funded through a stream of incremental payments during

the seven-year period FY2005-FY2011. Congress, in acting on the

FY2005 budget request, directed the Navy to instead procure the

lead DD(X) through the Navy’s ship-procurement account and to use

full funding. In testifying on the Navy’s proposed FY2006 budget

and FY2006-FY2011 FYDP, Navy officials have suggested that due

in part to an inability to fully fund the lead DD(X) in FY2006 while

still meeting other FY2006 spending needs, the Navy decided in its

FY2006-FY2011 budget submission to fund DD(X) in FY2007.

The Navy, as part of its proposed FY2005 budget and FY2005FY2009 FYDP, had planned to procure CVN-21 in FY2007. Doing

so, however, might have required the Navy to displace one or more

other ships from FY2007 to a later year. Perhaps due in part to this

consideration, the Navy decided in its FY2006-FY2011 budget

submission to defer the procurement of CVN-21 by a year, to

FY2008, which is a year that might more easily accommodate CVN21 in budgetary terms but from a production standpoint might be a

less-preferred year for procuring CVN-21 than FY2007 because it

lengthens an already-substantial gap in the aircraft carrier production

line between CVN-21 and the previous carrier, CVN-77, which was

procured in FY2001.

Although use of full funding can contribute to instability in Navy shipprocurement plans by causing budget spikes that lead to the movement of planned

ship procurements from one year to another, a more fundamental cause of instability

in Navy ship-procurement programs in recent years may be the absence of a current,

“Big-deck” amphibious assault ships, which carry the designations LHA or LHD, are large

amphibious ships that are designed to embark and operate a total of about two dozen Marine

Corps helicopters and VSTOL (vertical-short takeoff and landing) airplanes. They have a

flight deck that runs the entire length of the ship and consequently look like medium-sized

aircraft carriers.

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officially approved, consensus plan for the future size and structure of the Navy.

This in turn may reflect evolution and uncertainty in Navy and DOD thinking about

desired Navy capabilities and the metrics for translating those desired capabilities

into required types and numbers of ships.61 If so, then the primary means for

improving stability in Navy ship-procurement programs would be to encourage the

Navy and DOD to better define their thinking regarding desired Navy capabilities and

the metrics for translating those desired capabilities into ship requirements.

Potential For Increasing Number Of Ships Procured.

Could using incremental funding or advance appropriations increase the

number of Navy ships that can be built for a given total amount of shipprocurement funding?

Using incremental funding or advance appropriations could, under some

circumstances, marginally increase the number of ships that could be built for a given

total amount of ship-procurement funding (or, conversely, marginally reduce the total

cost to procure a given number of ships). By avoiding or mitigating budget spikes

that could cause ships to be moved from one year to another in ship-procurement

plans, using incremental funding or advance appropriations might avoid perturbations

in ship production schedules. Such perturbations could increase construction costs,

reducing at the margin the total number of ships that could be procured for a given

total amount of ship-procurement funding.

In addition, if a situation arises in which annual funding for ship procurement

limits ship-procurement in the near term to low rates with poor production economies

of sale, but is expected to rise in future years to levels that would be more than

adequate to support higher, economic rates of ship procurement, then using

incremental funding or advance appropriations could permit construction to begin on

additional ships in the near term, improving near-term production economies of

scale, while still permitting the Navy to procure ships in future years at economic

rates of production. Improving near-term production economies of scale while

preserving acceptable production economies of scale in later years might result in

marginally higher average economies of scale for the entire period in question and

thereby reduce, at the margin, the collective cost of all the ships procured in the near

term and the later years.

This scenario, however, is dependent on realizing the expected increase in shipprocurement funding in the later years. If this increase is not realized, then using

incremental funding or advance appropriations could simply trade poor production

economies of scale in the near term for poor production economies of scale in future

years. Put another way, it would simply trade an inability to afford something now

for an inability to afford something later.

For more discussion of this point, see CRS Report RL32665, Potential Navy Force

Structure and Shipbuilding Plans: Background and Issues for Congress, by Ronald

O’Rourke.

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In discussing the potential effects of using incremental funding or advance

appropriations, it is possible to construct presentations showing how a decision today

to begin using incremental funding or advance appropriations could increase, perhaps

dramatically, the number of ships on which construction can be started in the near

term. This is simply because using incremental funding or advance appropriations

would defer much of the procurement cost of the ships in question to future years.

In those future years, the remainder of the cost of these ships would still have to be

paid. As a result, other things held equal, the number of new ships that could be

procured in those future years for a given amount of ship-procurement funding will

be reduced because portions of those future-year budgets would now be needed to

pay for the ships on which construction had started in prior years.

Presentations that show a dramatic near-term increase in the number of ships on

which construction could begin by starting to use incremental funding or advance

appropriations — if not tempered by cautions that this could also reduce the number

of new ships that could be procured in future years for a given amount of

shipbuilding funding — can mislead audiences into concluding that using

incremental funding or advance appropriations can dramatically increase the total

number of ships that can be procured over the long run for a given total amount of

ship-procurement funding. Incremental funding or advance appropriations, by

avoiding perturbations in ship production schedules or improving average production

economies of scale over a period of several years, might marginally reduce shipprocurement costs and thereby marginally (rather than dramatically) increase the total

number of ships that can be procured over the long run for a given amount of shipprocurement funding. The reduction in ship-procurement costs might be sufficient,

for example, to increase from 20 to 21 the total number of ships that could be fully

paid for with a certain total amount of funding.

Under certain other circumstances, using incremental funding or advance

appropriations could increase rather than reduce ship-procurement costs. As

discussed earlier, using incremental funding could increase the procurement cost of

a ship if one of more of the ship’s funding increments is reduced or deferred and the

ship’s production schedule is consequently disrupted. In addition, if budget

circumstances require reducing the ship-procurement budget for a given year and

some portion of that year’s budget is already devoted to paying for ships started in

prior years with incremental funding or advance appropriations, then preserving that

portion of the budget so as to avoid disrupting the production schedule of those prioryear ships would mean that the budget reduction would fall more heavily on the

remaining part of the ship-procurement budget. This could increase the chance that

the reduction would lead to a decision to defer to a future year the procurement of a

new ship planned for that year, which could increase the procurement cost of that

ship.

Lastly, if Congress decides to make more use of incremental funding or to start

using advance appropriations, and then decides at a later point to return to a more

exclusive reliance on full funding, it could temporarily reduce the number of new

ships that could be procured because the full costs of new ships being procured and

portions of the costs of ships started in prior years under incremental funding or

advance appropriations would need to be funded at the same time.

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Options for Congress. Options for Congress that arise out of proposals to

make greater use of incremental funding or begin using advance appropriations for

procuring Navy ships include (but are not limited to) the following:

maintain current ship-procurement funding practices;

strengthen adherence to the full funding policy in ship procurement;

increase the use of incremental funding in ship procurement;

begin using advance appropriations in ship procurement; and

shift lead-ship detailed design/nonrecurring engineering (DD/NRE)

costs to the Navy’s research and development (R&D account).

Each of these is discussed below.

Maintain Current Funding Practices. Current ship-procurement funding

practices can be summarized as procuring almost all ships with full funding,

procuring a small number with de facto or explicit incremental funding, and

approving, for some ships being fully funded, advance procurement (AP) funding

that the Navy did not request, or for purposes of shipyard advance construction

activities rather than long-lead components.

Supporters of this option could argue that current funding practices give DOD

and the Congress the flexibility to use incremental funding on a limited basis for

aircraft carriers and selected amphibious assault ships while not formally abandoning

the full funding policy. They could similarly argue that current funding practices

provide Congress with flexibility for using AP funding for purposes other than

funding long-lead items requested by DOD. Such flexibility, they can argue, is

important for meeting policy goals such as preserving the shipbuilding industrial base

within available funding.

Opponents of this option could argue that current practices weaken adherence

to the full funding policy by making even limited use of incremental funding and by

using AP funding for purposes other than funding long-lead items requested by DOD.

Such practices, they could argue, increase the chance that supporters of other kinds

of procurement items, such as aircraft, could seek to have them funded using

incremental funding, and that such proposals have already been made.62

Other opponents of this option could argue that current funding practices

provide DOD with insufficient formal authority to use incremental funding or

Opponents of this option could note that DOD, as part of its FY2003, FY2004, and

FY2005 defense budgets and its FY2003-FY2007, FY2004-FY2009, and FY2005-FY2009

FYDPs, proposed procuring 60 C-17 airlift aircraft under a follow-on multiyear procurement

(MYP) arrangement approved by Congress in FY2002 that would procure at least some of

the aircraft with funding profiles that resembled incremental funding rather than full

funding. Under this approach, the Air Force requested Congress to appropriate enough

money in a given year to make progress payments on the MYP contract rather than to fully

fund a specific number of aircraft. See CRS Report RL31404, op. cit., pp. 7-8.

CRS-43

advance appropriations so as to avoid or mitigate funding spikes associated with

procurement of ships like aircraft carriers and big-deck amphibious assault ships.

Giving DOD formal authority to budget for ships using these mechanisms, they could

argue, would permit DOD to structure its budget submission to Congress so as to

take optimum advantage of these mechanisms.

Strengthen Adherence To Full Funding Policy. This option would

involve reducing or eliminating the use of incremental funding in Navy ship

procurement and reducing or eliminating the use, in ships being fully funded, of AP

funding for purposes other than funding the procurement of long-lead items requested

by DOD.

Supporters could argue that this option, by strengthening adherence to the full

funding policy, would reduce the chance that supporters of other kinds of DOD

procurement items, such as aircraft, would seek to have them funded using

incremental funding. Budget spikes associated with procuring aircraft carriers or bigdeck amphibious assault ships, they could argue, can be anticipated years in advance,

permitting their effects to be carefully managed. They could argue that stability in

Navy ship-procurement plans can be increased by encouraging the Navy and DOD

to better define their thinking regarding Navy requirements, and that shipprocurement costs can be reduced through measures other than incremental funding

or advance appropriations, such as multiyear procurement, contracts that are

structured to provide incentives to shipbuilders to control costs, and investment in

improved shipyard production capabilities.

Opponents of this policy could argue that it would deprive Congress of the

flexibility it has under current funding practices to use incremental funding on a

limited basis when absolutely necessary and to use AP funding for purposes other

than funding long-lead items requested by DOD. Congress, they could argue, should

not deprive itself of tools that might help improve stability in Navy shipbuilding

plans, reduce ship-procurement costs, and preserve the shipbuilding industrial base

within available funding. Congress, they could argue, has recently taken steps to

discourage the spread of incremental funding to DOD procurement items other than

ships, and can continue doing this while preserving some flexibility for itself in

funding ship procurement.

Increase Use of Incremental Funding. This option could involve

explicitly (rather than tacitly) using incremental funding for aircraft carriers, using

incremental funding to procure all (not just some) big-deck amphibious assault ships,

or both. It could also involve funding the procurement of the lead ships of each new

class of Navy ships in the Navy’s research and development account rather than the

ship-procurement account, as the Navy has proposed.

Supporters of this option could argue that it would take maximum advantage of

opportunities for avoiding or mitigating budget spikes associated with the

procurement of these ships. They could also argue that it could strengthen the full

funding policy by making it clear to observers that only certain ships, and no other

DOD procurement items, may be procured with incremental funding. They could

argue that current funding practices — under which aircraft carriers can be funded

with de facto (rather than explicit) incremental funding and some (but not all)

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amphibious ships are funded with incremental funding (either de facto or explicit)

— can send confusing signals regarding adherence to the full funding policy, and

that a clear, explicit policy of using incremental funding only for certain ships would

send a clear signal that these ships represent special exceptions to an otherwise strict

practice of adhering to the full funding policy.

Opponents of this option could argue that any use of incremental funding

weakens the full funding policy, increasing the likelihood of proposals to use it for

funding other DOD procurement items. Incremental funding, they could argue,

should be used to avoid or mitigate budget spikes only when doing so is necessary

to avoid disruptions in ship-procurement programs that would substantially increase

procurement costs. Depending on the composition of the ship-procurement plan,

they could argue, the budget spike associated with a carrier or big-deck amphibious

assault ship might or might not lead to a disruption that substantially increased

procurement costs, and that such increases in any event would have to be weighed

against the risk of an increase in cost of an incrementally funded ship due to a

decision in a future year to reduce or delay a funding increment.

Begin Using Advance Appropriations. This option could involve starting

to use advance appropriations for ships such as aircraft carriers or big-deck

amphibious assault ships.

Supporters could argue that this option, like the previous one, would take

maximum advantage of opportunities for avoiding or mitigating budget spikes

associated with the procurement of these ships. Since advance appropriations is a

form of full funding, they could argue that this option would not weaken the full

funding policy. They could also argue that compared to the previous option, this

option would create less risk of an increase in the cost of an aircraft carrier or bigdeck amphibious assault ship due to a decision to reduce or defer a funding increment

because, under advance appropriations, funding increments occur automatically

unless Congress takes a positive actions to stop them.

Opponents of this option could argue that even though advance appropriations

is a form of full funding, introducing its use into Navy ship procurement would still

amount to a relaxation of the application of the full funding concept to DOD

procurement that could serve as a precedent for subsequent proposals to relax its

application still further. This option, they could argue, is unnecessary because

mitigating a budget spike associated with the procurement of an aircraft carrier or

big-deck amphibious assault ship can be accomplished through the currently accepted

practice of occasionally using incremental funding. Starting to use advance

appropriations for aircraft carriers or big-deck amphibious assault ships, they could

argue, creates a risk of increasing the procurement cost of other ships as a result of

concentrating potential reductions in future-year ship-procurement budgets on those

ships.63

For additional discussion of the options of using incremental funding or advance

appropriations for procuring aircraft carriers or other Navy ships, see Irv Blickstein and

Giles Smith, A Preliminary Analysis of Advance Appropriations as a Budgeting Method for

(continued...)

CRS-45

Transfer Lead-Ship DD/NRE Costs To R&D Account. In Navy shipprocurement programs, the detailed design and nonrecurring engineering (DD/NRE)

costs for each class of ship — the cost to create the detailed plans for building the

class — are included in the procurement cost of the lead ship in the class. Since the

DD/NRE costs for a complex combatant can be significant, including them in the

procurement cost of the lead ship can make that ship significantly more expensive to

procure than the second and subsequent ships in the class.

In the case of the DD(X) destroyer program, for example, the lead ship’s total

procurement cost of roughly $2.8 billion includes about $1 billion in DD/NRE costs

for the class. The remaining $1.8 billion or so is the actual hands-on construction

cost for the lead ship. Including $1 billion of DD/NRE costs in the procurement cost

of the lead DD(X) increased the ship’s procurement cost by roughly 56% and may

have contributed to a Navy decision that it could not afford to fully fund the ship in

FY2006 while meeting other FY2006 funding needs.

Including DD/NRE costs in the procurement cost of the lead unit is a practice

that is not followed by other DOD procurement programs, such as programs for

procuring aircraft, ground vehicles, and missiles. If it were, the lead units of these

other types of procurement programs would be significantly more expensive to

procure.

One response to the challenge of paying for lead ships whose procurement cost

includes significant DD/NRE costs would be to fund the procurement of lead ships

through the Navy’s research and development (R&D) account rather than the Navy’s

ship-procurement account, as the Navy has proposed in 2004 and 2005. This

approach, which would permit both DD/NRE costs and the hands-on construction

costs of lead ships to be funded incrementally while not violating the full funding

policy, can be viewed as an example of the previously-discussed option of increasing

the use of incremental funding.

As discussed earlier, Congress, in acting on the Navy’s proposed FY2005

defense budget, rejected the Navy’s proposal to procure the lead DD(X) through the

Navy’s research and development account, directed the Navy to fully fund the lead

DD(X) in the Navy’s ship-procurement account, and fully funded the lead LCS in the

Navy’s research and development account.

An alternative approach to the challenge of paying for lead ships whose

procurement cost includes significant DD/NRE costs would be to treat DD/NRE

work as the final stage of the R&D process and transfer DD/NRE costs to the Navy’s

R&D account. Under this option, the DD/NRE costs for a ship class could be

(...continued)

Navy Ship Procurements, (RAND: Santa Monica (CA), 2002), MR-1527-Navy; and John

Birkler, et al., Options for Funding Aircraft Carriers, (RAND, MR-1526-Navy). The

second report also discusses a third option for funding aircraft carriers called capital account

funding. The report describes this as an approach “in which Congress commits to a specific

level of annual funding (adjustable from time to time) sufficient to support all carrierconstruction activities over the long term. The account could serve as a source of either

incremental funding or full funding.” (p. xi)

CRS-46

incrementally funded without violating the full funding policy, while the actual

hands-on construction cost of the lead ship would be fully funded, in conformance

with the full funding policy.

This option can be viewed as an intermediate approach that is between the

current practice of fully funding both DD/NRE costs and the lead ship’s hands-on

construction costs, and incrementally funding both these costs in the R&D account,

as would occur under the Navy’s proposal.

In the case of the DD(X) program, this intermediate approach would permit the

Navy to incrementally fund roughly $1 billion in DD/NRE costs, potentially

increasing the Navy’s ability to fund the lead DD(X) in FY2006 while meeting other

FY2006 funding needs.

Supporters of this option could argue that DD/NRE work is best viewed as the

final stage of research and development and should be treated as such in the budget,

and that shifting these costs to the R&D account would make Navy ship-procurement

programs look more like DOD procurement programs for things such as aircraft,

ground vehicles, and missiles.

Opponents could argue that NN/NRE work is more closely related to production

than to research, and that the current practice of including DD/NRE costs in the

procurement cost of the lead ship makes these costs more visible to Congress, which

is important because detailed design costs for certain past Navy ships have

experienced significant cost growth.

Options For Sustaining Ship-Construction Industrial Base

Options for sustaining the ship-construction industrial base are discussed below

in terms of how they might sustain the following:

the Navy ship-construction industrial base in general;

the aircraft carrier construction industrial base;

the submarine construction industrial base; and

the surface combatant construction industrial base.

Ship-Construction Industrial Base in General. Aside from procuring

larger numbers of Navy ships, one option for sustaining the ship-construction

industrial base in general would be to increase the amount of commercial-ship

construction work. This option has been discussed or pursued by Congress at various

times, particularly since the early 1990s, when the construction rate of large Navy

ships declined as a result of the end of the Cold War and associated reductions in the

planned size of the Navy.

Yards that are competitive builders of commercial ships traditionally have been

configured somewhat differently from yards that focus on building complex

combatant ships. Commercial ships typically require less outfitting of their interiors

than complex combatant ships, so yards that are competitive builders of commercial

ships traditionally have had work forces with a fairly high percentage of basic steel

workers (who build the shell of the ship) and lower numbers of outfitters, while yards

CRS-47

that focus on building complex combatant ships traditionally have had work forces

that have included larger numbers of outfitters. In addition, yards that focus on

building complex combatant ships have equipment for assembling, integrating, and

testing complex ship combat systems and (in the case of GD/Electric Boat and

NGNN) equipment for assembling, installing, and testing nuclear-propulsion

equipment.

The additional costs associated with maintaining larger numbers of outfitters

and equipment related to complex combat systems and nuclear propulsion can pose

challenges to complex combatant yards seeking to enter the commercial-ship

construction market. Some of today’s complex-combatant yards explored the option

in the 1990s. GD/BIW, for example, examined the option during the 1990s but

ultimately decided against attempting to enter the market. As another example,

NGNN in the 1990s started a program to build double-hulled tankers, but lost money

on the project and stopped it after building a few ships.

Among the six yards that currently build the Navy’s larger warships, the yards

for which the option of increasing commercial-ship construction work currently

might be most suitable are GD/NASSCO and NG/Avondale. GD/NASSCO builds

auxiliary and sealift ships for the Navy and DOD. Since these ships are similar in

design and complexity to commercial ships, GD/NASSCO is similar to purely

commercial shipbuilding yards in terms of numbers of outfitters and lack of

equipment related to complex combat systems and nuclear propulsion.

GD/NASSCO pursues commercial-ship construction work, and its workload is often

a mix of commercial ships and Navy/DOD auxiliaries and sealift ships. The yard is

currently building 185,000 DWT oil tankers for BP Oil Shipping Company USA. A

total of four of these ships are to be delivered by 2006. The ships are to be used for

transporting crude oil from Valdez, Alaska, to oil refineries on the U.S. West Coast,

meaning that these ships fall under the Jones Act (Section 27 of the Merchant Marine

Act of 1920 [46 USC. 883]), which, as discussed in a CRS report, “requires that all

waterborne shipping between points within the United States be carried by vessels

built in the United States, owned by U.S. citizens (at least 75%), and manned with

U.S. citizen crews. The act essentially bars foreign built and operated vessels from

engaging in U.S. domestic commerce.”64

NG/Avondale has also built auxiliary and sealift ships for the Navy and DOD,

but its current workload includes construction of LPD-17 amphibious ships, which

are somewhat complex in terms of their outfitting requirements and combat systems.

Recent commercial-ship construction work at NG/Avondale includes 125,000 DWT

oil tankers built for Polar Tankers, Inc. The first of five such ships was delivered in

2001. These ships also appear intended for transporting crude oil from Alaska to the

U.S. West Coast,65 which would qualify them under the Jones Act.

CRS Report RS21566, The Jones Act: An Overview, by John F. Frittelli.

Avondale’s website [http://www.ss.northropgrumman.com/company/avondale.cfm] states:

“These 895-foot-long, 125,000 DWT ships are capable of carrying more than one million

barrels of crude oil along the treacherous trade route from Alaska to the U.S. West Coast.”

CRS-48

One option that might make it easier for U.S. yards that build complex

combatants to compete for commercial-ship construction work would be to make

Navy combatant ships more like commercial ships. The OFT report on alternative

fleet architectures discussed earlier essentially proposes this by using a merchant-like

hull as the basis for building four kinds of large surface ships.

Aircraft Carrier Construction Industrial Base. One option for sustaining

the aircraft carrier construction industrial base would be to restore FY2007 as the

year of procurement for CVN-21, which would shorten the gap in production

between CVN-77 and CVN-21 and thereby reduce the cost of CVN-21 (and possibly

also costs for submarine construction work at NGNN). Restoring FY2007 as CVN21’s year of procurement might be facilitated by making greater use of incremental

funding for CVN-21 than currently planned, by using advance appropriations for

CVN-21, by transferring CVN-21’s DD/NRE costs to the Navy’s research and

development account, where they could be incrementally funded, or by using

incremental funding or advance appropriations to fund other ships currently planned

for FY2007, such as LHA® or the lead DD(X).

Submarine Construction Industrial Base. The part of the submarine

industrial base that might be in most need of near-term attention is not the

construction portion, which would continue to be supported at roughly current levels

by the plan to continue procuring Virginia-class submarines at one per year through

FY2011, but the design and engineering portion. According to Navy and industry

officials, the submarine design and engineering base is facing the near-term prospect,

for the first time in about 50 years, of having no new submarine design to work on.

The Navy believes that this design and engineering workforce, if not maintained

through significant new submarine design work, might atrophy and be very difficult

to reconstitute. As discussed below in the section on submarine procurement

options, one option for addressing this situation would be to begin work now on a

new-design, lower-cost submarine that might be ready for lead-ship procurement

around FY2011.

Surface Combatant Industrial Base.

Options for FY2006-FY2011. As discussed earlier, the Navy’s FY2006FY2011 plan for procuring DD(X) destroyers may put considerable pressure on the

two yards — GD/BIW and NG/Ingalls — that currently build larger surface

combatants for the Navy. Options for supporting the surface combatant industrial

base between now and about FY2011, many of which could be combined, include the

following:

accelerating procurement of the first one or two DD(X)s by a year;

procuring additional DD(X)s;

procuring additional DDG-51s;

procuring additional LPD-17 or LHA® amphibious ships;

transferring construction of LCSs to these yards;

modernizing Ticonderoga (CG-47) class Aegis cruisers;

modernizing Arleigh Burke (DDG-51) class Aegis destroyers,

perhaps more extensively than currently planned by the Navy; and

CRS-49

accelerating and expanding procurement of large and medium

Deepwater cutters for the Coast Guard.

Accelerating procurement of the first one or two DD(X)s might be facilitated

by transferring DD(X) DD/NRE costs to the Navy’s research and development

account, where they could be incrementally funded, or by using incremental funding

or advance appropriations for these ships.

The Navy has no requirement for additional DDG-51s, but the last five DDG51s were arguably procured in part for industrial-base purposes,66 and if additional

DDG-51s were procured, the Navy would find ways to make good use of them.

Procuring additional LHA(R)s during the period FY206-FY2011 period might

be facilitated by using incremental funding or advance appropriations.

Transferring construction of LCSs to GD/BIW or NG/Ingalls would likely

increase the cost of these ships due to the higher overhead costs of these yards

compared to the smaller yards where these ships are currently planned to be built.

It might also, however, reduce the cost of other work being done at GD/BIW or

NG/Ingalls by spreading the fixed overhead costs of these over a broader workload.

It might also avoid the risk of the LCS program creating one or more new yards that

are highly dependent on Navy shipbuilding work, which could make more complex

the task of managing the shipbuilding industrial base.

Options for modernizing DDG-51s more extensively than currently planned by

the Navy include making changes to reduce crewing requirements to about 200

people per ship, and lengthening the ships with a plug that would permit an increased

payload.

The current Coast Guard Deepwater acquisition program of record calls for

procuring 33 large and medium cutters (eight large cutters and 25 medium cutters)

over a period of many years at low annual production rates. The total planned

procurement quantity of 33 ships was established prior to 9/11. Many analysts

believe that more than 33 of these cutters will be needed to fully meet the Coast

Guard’s expanded post-9/11 mission requirements. The RAND Corporation has

published a report stating that the Coast Guard might need as many as 90 of these

ships (44 large cutters and 46 medium cutters) to fully meet its post-9/11 mission

requirements. Members of Congress and others have expressed interest in

accelerating procurement of these cutters so as to achieve more economic production

rates, and in expanding the total number of cutters to be procured.

In terms of light-ship displacement, four or five large and medium Deepwater

cutters would be roughly equivalent to one DD(X). Procuring four or five of these

cutters per year might therefore generate about as much shipyard construction work

as one DD(X) per year, and procuring eight or 10 per year might generate about as

much shipyard construction work as two DD(X)s per year. Although the skill mix

The Navy for several years stated that it planned to build a total of 57 DDG-51s. A total

of 62 were procured.

CRS-50

for building Deepwater cutters is somewhat different than the skill mix for building

DD(X)s, accelerating and expanding procurement of Deepwater cutters could:

reduce the Coast Guard’s unit procurement costs for these ships by

procuring them at more economic annual rates;

increase Coast Guard capabilities toward post-9/11 requirements

more quickly;

permit the Coast Guard to retire its aging cutters more quickly,

thereby eliminating more quickly the high operation and support

costs of these cutters; and

help sustain the Navy’s surface combatant industrial base through a

program funded in the budget of the Department of Homeland

Security (DHS), the Coast Guard’s parent department, rather than

the Navy or DOD budget.67

Options For FY2011 and Beyond. As discussed below in the section on

surface combatant procurement options, one option for supporting the surface

combatant industrial base in FY2021011 and beyond would be to begin work now

on a new-design, lower-cost surface combatant that might be ready for lead-ship

procurement around FY2011.68

Options For Submarine Procurement

Two new options for submarine procurement have recently emerged. One

would supplement procurement of Virginia-class submarines with procurement of

non-nuclear-powered submarines that are equipped with air-independent propulsion

(AIP) systems. The other would be to design a new, lower-cost nuclear-powered

submarine and shift from procurement of Virginia-class submarines to procurement

of these new submarines perhaps around FY2011.

AIP Submarine. The OFT report on alternative fleet platform architectures

recommended substituting four AIP-submarines for one Virginia-class submarine in

each carrier strike group, suggesting that four AIP submarines could be procured for

the same cost ($2.4 billion to $3.0 billion in the FY2006-FY2011 FYDP) as one

Virginia-class submarine. This implies an average unit procurement cost for an AIP

submarine of roughly $600 million to $750 million each when procured at a rate of

four per year. Although AIP submarines being built by other countries might cost

this much to procure, a U.S. Navy AIP submarine might be built to higher capability

For additional discussion of the Deepwater program, see CRS Report RS21019, Coast

Guard Deepwater Program: Background and Issues for Congress, by Ronald O’Rourke.

For additional discussion of options for supporting the surface combatant industrial base,

see CRS Report RL32109, Navy DD(X) and LCS Ship Acquisition Programs: Oversight

Issues and Options for Congress, by Ronald O’Rourke.

CRS-51

standards and consequently cost more to procure, possibly reducing the equal-cost

ratio of substitution to three to one or possibly something closer two to one.

As noted in an earlier footnote, an AIP system such as a fuel-cell or closed-cycle

diesel engine extends the stationary or low-speed submerged endurance of a

non-nuclear-powered submarine. A conventional diesel-electric submarine has a

stationary or low-speed submerged endurance of a few days, while an AIP-equipped

submarine may have a stationary or low-speed submerged endurance of up to two or

three weeks. An AIP system does not, however, significantly increase the high-speed

submerged endurance of a non-nuclear-powered submarine. A non-nuclear-powered

submarine, whether equipped with a conventional diesel-electric propulsion system

or an AIP system, has a high-speed submerged endurance of perhaps 1 to 3 hours, a

performance limited by the electrical storage capacity of the submarine’s batteries,

which are exhausted quickly at high speed.

As a consequence of their very limited high-speed submerged endurance, nonnuclear-powered submarines, even those equipped with AIP systems, are not well

suited for submarine missions that require:

long, completely stealthy transits from home port to the theater of

operation,

submerged periods in the theater of operation lasting more than two

or three weeks, or

submerged periods in the theater of operation lasting more than a

few hours or days that involve moving the submarine at something

more than low speed.

Recognizing that AIP submarines are not well suited for making long,

completely stealthy transits, the OFT report proposes transporting the AIP

submarines into theater aboard a transport ship. In doing so, the OFT report accepts

that the presence of a certain number of U.S. AIP submarines in the theater of

operations will become known to others. A potential force-multiplying attribute of

having an SSN in a carrier strike group, in contrast, is that the SSN can be detached

from the strike group, and redirected to a different theater to perform some other

mission, without alerting others to this fact. Opposing forces in the strike group’s

theater of operations could not be sure that the SSN was not in their own area, and

could therefore continue to devote resources to detecting and countering it. This

would permit the SSN to achieve military effects in two theaters of operation at the

same time — the strike group’s theater of operations, and the other theater to which

it is sent.

A significant risk of a plan to begin procuring AIP submarines while continuing

to procure Virginia-class submarines at one per year is that financial pressures in

future years could lead to a decision to increase procurement of AIP submarines

while reducing procurement of Virginia-class submarines to something less than one

per year. Such a decision would result in a total submarine force with more AIP

submarines and fewer SSNs than planned, and consequently with potentially

insufficient capability to meet all submarine mission requirements. This possibility

CRS-52

is a principal reason why supporters of the U.S. nuclear-powered submarine fleet

traditionally have strongly resisted the idea of initiating construction of non-nuclearpowered submarines in this country.

Lower-Cost (“Tango Bravo”) Nuclear-Powered Submarine. The

Virginia class was designed in the early to mid-1990s, using technologies that were

available at the time. New technologies that have emerged since that time may now

permit the design of a new SSN that is substantially less expensive than the Virginiaclass design, but equivalent in capability. The Navy and the Defense Advanced

Research Projects Agency (DARPA) are now pursuing the development of these

technologies under a program called Tango Bravo, a name derived from the initial

letters of the term “technology barriers.” As described by the Navy,

TANGO BRAVO will execute a technology demonstration program to enable

design options for a reduced-size submarine with equivalent capability as the

VIRGINIA Class design. Implicit in this focus is the goal to reduce platform

infrastructure and, ultimately, the cost of future design and production.

Additionally, reduced platform infrastructure provides the opportunity for greater

payload volume.

The intent of this collaborative effort is to overcome selected technology barriers

that are judged to have a significant impact on submarine platform infrastructure

cost. Specifically, DARPA and the Navy will jointly formulate technical

objectives for critical technology demonstrations in (a) shaftless propulsion, (b)

technologies that eliminate or substantially simplify existing submarine systems,

and (e) automation to reduce crew workload for standard tasks.69

Navy and industry officials believe that if these technologies are developed, it

would be possible to design a new submarine equivalent in capability to the Virginia

class, but with a procurement cost of perhaps no more than 67% of the Virginia class,

and possibly less. Such a submarine could more easily be procured within available

resources at a rate of two per year, which is a rate that the Navy would need to start

in FY2012 or FY2013, and sustain for a period of about 12 years, to avoid having the

SSN force drop below 40 boats.70

Consequently, as an alternative to the option of procuring AIP submarines,

another option would be to start design work now on a new “Tango Bravo” SSN.

The goal of such an effort could be to produce an SSN design with capability

equivalent to that of Virginia-class and a procurement cost that is 50% to 67% that

of the Virginia class. The idea of designing a submarine with these features has been

discussed by Navy and industry officials. Under this option, Virginia-class

procurement could continue at one per year until the Tango Bravo submarine was

Navy information paper on advanced submarine system development provided to CRS by

Navy Office of Legislative Affairs, Jan. 21, 2005.

For a discussion of future submarine force levels and associated procurement rates, see

CRS Report RL342418, Navy Attack Submarine Force-Level Goal and Procurement Rate:

Background and Issues for Congress, by Ronald O’Rourke, particularly the 40-boat column

in Table 5, entitled “Notional Procurement Profiles for Various Force Sizes.”

CRS-53

ready for procurement, at which point Virginia-class procurement would end, and

procurement of the Tango Bravo submarine would begin.

If design work on a Tango Bravo submarine is begun now and pursued in a

concerted manner, the first Tango Bravo submarine might be ready for procurement

by FY2011. (Some industry officials believe that under ideal program conditions, the

lead ship could be procured even earlier.) If the lead ship of such a submarine is

procured in FY2011, then the procurement rate could be increased to two per year

starting in FY2012 or FY2013, meeting the time line needed to avoid falling below

40 boats.

Starting design work now on a Tango Bravo submarine would provide near-term

support to the submarine design and engineering base and thereby help maintain that

base, addressing an issue discussed earlier. After completing the design of the Tango

Bravo SSN, the design and engineering base could turn to designing the nextgeneration ballistic missile submarine (SSBN), the lead ship of which might need to

be procured around FY2020. After designing this new SSBN, the design and

engineering base could turn to designing a follow-on SSN that would take advantage

of technologies even more advanced than those in the Tango Bravo submarine. This

sequence of three successive submarine design projects could help maintain the

submarine design and engineering base for the next 15 or so years.

Some or all of the $600 million programmed in the FY2006-FY2011 FYDP for

a new undersea superiority system could be used to help finance a concerted effort

to design a Tango Bravo submarine that would be ready for procurement by FY2011.

Options for Surface Combatant Procurement

The decision to reduce DD(X) procurement to one ship per year in FY2007FY2011, which appears to have been driven in large part by affordability

considerations, suggests that, unless budget conditions change, the Navy may never

be able to afford to procu

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