Sunday, June 24, 2012

Shipbuilding Costs

I'm always interested in program costs and "true" costs are often hard to find.  The LCS program, for example, has widely varying reported costs.  Anyway, here are a few program costs of interest as reported by the Department of Defense in the Selected Acquisition Report (SAR) to Congress.  These costs should, therefore, be as accurate as possible.  They include R&D costs.

CVN-78 Class, Qty=3, Unit Cost = $14B

Virginia Class, Qty=30, Unit Cost = $3.1B

LCS, Qty=55, Unit Cost = $672M (includes govt supplied equipment but not modules;  add another $100-$200M or whatever you think a module might cost to get the total cost)

DDG-1000, Qty=3, Unit Cost = $7.0B

JSF (all versions), Qty=2457, Unit Cost = $161M


The most interesting program, for me, is the LCS.  You'll note that the true cost of the LCS is not the $450M or so that the Navy claims.  That contracted cost is strictly for the hull and very few people realize that.  All the weapons, sensors, electronics, software, etc. are supplied by the government from another cost accounting source.  The Navy was badly stung by the cost overruns on the LCS program;  so bad, in fact, that Congress imposed a maximum cost cap of around $450M.  To meet the Congressional cap and to avoid more bad publicity, the Navy came up with the creative (fraudulent) accounting method of contracting for just the hull so that they could meet the cap and publicly claim that cost was under control.  We see here that the true cost is exactly what the cost for the original two units was.  There has been no savings from serial production as the Navy has tried to claim.

Remember, though, that the cost reported here is still without a module.  The only actual module cost data point is the single module that was delivered for $200M and then was subsequently rejected.  So, the true cost of an LCS is the hull + govt supplied equipment + module, or $672M + module.  Adding in $100M - $200M for a module gives an LCS cost of around $800M - $900M.  Of course, some of the early, stripped down, limited capability modules may cost less. 

Compare this true cost to the original target of $200M for the entire ship and you realize what a stunning cost escalation has occurred.  It's even more amazing when you consider that the current LCS is the stripped down version that has undergone rigorous cost cutting (like removing the corrosion control measures!).  So much for a small, expendable ship. 

The DDG-1000 is also seen to be hideously expensive but around half of that is R&D.  Still counts, though!

Given that the total Navy annual shipbuilding budget is $15B, you can see why we're building fewer and fewer ships.  The costs are simply out of control.

13 comments:

  1. Interesting article by Norman Friedman in this month's 'Naval History' titled "Judging the Good and the Bad" - where he compares successful and unsuccessful warship designs of the 20th century:

    Two key points:
    - Bigger is usually better. A bigger ship is generally more survivable and adaptable.
    - The quest for high-speed is superfluous and often counter-productive.

    History does not bode well for the Little Crappy Speedboat...

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  2. That's fascinating. Wayne Hughes, in his book "Fleet Tactics and Coastal Combat", comes to the opposite conclusion. He contends that "breaking" a larger ship like a destroyer into several smaller vessels produces a better force. Now the difference may be that Hughes was looking at the overall force and not individual ship "goodness". I haven't read Friedman's article so I can't really comment. Was he maybe just looking at individual ships rather the effectiveness of an overall fleet? If so, I don't think anyone would argue that the battleship is the ultimate ship design. Unfortunately, I don't have ready access to Naval History. Maybe you'd be willing to summarize the basis of his comparison for us?


    Thanks!

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  3. I thought the same, since I'd just read Hughes! Friedman's overall conclusion is that bigger ships are more adaptable to changes in circumstances (new technologies, new geo-political circumstances) which will likely occur in the 30+ year lifespan of a ship.

    He also makes the case that USN has gotten little utility out of past investments in small, fast combatants. PT boats accomplished little in WWII, while Pegasus class PHMs were discarded halfway through service life. This "need for speed" has captured US and other navy's fascination in the past, but few appreciated its true costs - both financial and in terms of engineering tradeoffs.

    The article is definitely a ship to ship comparison vice a battle force. Here are some of the comparisons made:

    1. Atlanta vs. Dido cruisers
    2. Essex vs. Illustrious carriers
    3. Perry FFG vs. Spruance DD (and follow-on Ticonderoga)
    4. Discussion of PT and PHM (speed not useful)
    5. Skate vs. Los Angeles SSN

    I think this article will be made accessible on the USNI webpage - although I don't think they'll put the August 2012 issue up for at least another month.

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  4. OK, so he's comparing within classes. A bigger carrier is better than a smaller carrier, a bigger destroyer is better than a small destroyer, and so on. I'm not sure comparing a FFG to a DD is a valid direct comparison since they're different roles/classes. For that matter, Skate vs Los Angeles is a questionable comparison since they're different generations. Hey, enough criticism from me. I haven't even read the article!

    The point is that designing an ultimate vessel is different from designing an ultimate fleet force structure. And, of course, the force structure will be dependent on the enemy you face and the challenges they present.

    Did cost enter into Friedman's analysis since this post was about cost (although I certainly don't mind wandering off topic!)?

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  5. Here's the link - not sure if you are member of USNI.

    http://www.usni.org/magazines/navalhistory/2012-07/judging-good-bad

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  6. Different needs for different ships/missions.

    DDG's need size for the surface and air-air role.

    Frigates dont and need to be cheap and efficent at auxiliary roles.

    Basicly you have front line ships that need to be big insanely tough. The secondary ships frigates etc dont need this but need to be used in large amounts so they can be in many places.

    Oh btw the F-35 cost are off.

    F-35A is probably going to be around 140-170mi.
    F-35B 200-220.
    F-35C 150-180 maybe more it has to be entirely redone because it cant land on a carrier (fail).

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    Replies
    1. James, thanks for checking in. You're quite right about the different requirements for different roles, of course.

      The F-35 costs are taken directly from the DoD SAR referenced in the article. The unit cost is obtained by dividing the total program cost by the number of planned F-35 purchases. There was no breakout for the different versions. Do you have a source for the version costs?

      Thanks!

      Delete
    2. Erm ill try to find them there have been different versions But the GAO has had some pretty steady ones.

      The F-35A is the most ready but it still needs work.
      The B is still in the works but it is the least bought and the most expensive.
      The C doesnt work because of a screwup with the design and the arrestor cable......so..

      Delete
  7. OK holy jesus never mind i was wrong.

    Cancel F-35 NOW!



    F-35A: US$197 million (flyaway cost, 2012)[4]
    F-35B: US$237.7M (weap. sys. cost, 2012)[5]
    F-35C: US$236.8M (weap. sys. cost, 2012)[5]

    http://www.saffm.hq.af.mil/shared/media/document/AFD-120210-115.pdf

    Straight from the airforce.

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    Replies
    1. Some question for James concerning these F-35 unit costs figures:

      F-35A: US$197 million (flyaway cost, 2012)[4]
      F-35B: US$237.7M (weap. sys. cost, 2012)[5]
      F-35C: US$236.8M (weap. sys. cost, 2012)[5]

      James, could you elaborate further as to where those unit cost figures are contained inside the referenced USAF budget document?

      IIRC, the last F-35 is bought in 2034. Are the unit costs cited above expected to continue throughout the life of the program? Is that projection stated explicitly somewhere in the referenced document?

      Delete
  8. Ah, a true disbeliever is born! Another convert to the Church of What Did That Cost?!

    People may gripe about the LCS or whatever but the F-35 (JSF) program is absolutely killing the military. By the time it's ready, if it ever is, the F-35 will be around $250M per plane (I've seen predictions as high as $300M) depending on what set of numbers are used. That's a lot of money for a plane that provides only a small improvement over the Super Hornet in terms of range and has a smaller weapons carry capacity.

    This program, along with several others, needs to be scrapped!

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  9. By the way, 2457 JSF aircraft multiplied by $200M per plane equals

    $491 billion !!!!!

    Even using the $161M figure, it equals $395 billion.

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    Ship Building

    ReplyDelete