Monday, September 3, 2012

SSBN(X) Costs

Continuing our weekend SSBN examination, let's look at the cost of the SSBN(X) program.  As you know, the Navy is planning to build 12 new SSBN(X) Trident ballistic missile submarines to replace the 14 Ohio class subs currently in service.  And what, you ask, is this program going to cost?

A lot!  So much so that, for starters, budget issues have pushed the procurement program two years further out than originally planned, to 2021, which will result in the SSBN fleet dropping to 10 or 11 subs during the period from 2029-2041.

The costs discussed below come from the recent CRS SSBN(X) report (1).

The Navy’s original cost estimate was $6-$7B per sub in 2010 dollars.  As a result of cost cutting (reduced capabilities, for example, reducing the number of missile tubes from 24 to 16 and reducing the tube size from a planned 97 inches diameter to accommodate future, larger missiles to 87 inches which is the current size), the Navy now estimates the cost of subs 2-12 to be $5.6B in 2010 dollars ($6.0B-2012) and has set a further cost reduction target of $4.9B-2010 ($5.3B-2012) cost per sub.  Of course, the accuracy of the Navy’s cost estimates has historically been understated by significant amounts. 

GAO estimates the total acquisition cost for the program to be $90.4B in 2012 dollars which is $7.5B per sub.  This figure includes $11.1B in Research & Development plus $79.3 of actual procurement costs.  Considering only the acquisition costs, the average cost is $6.6B-2012 per sub.

In FY2011, CBO estimated the average cost at $8.3B-2011 (includes R&D) with the lead ship costing $13.3B-2011.

To summarize, the average procurement costs (excludes R&D costs) per sub in 2012 dollars from the various sources is:

Navy    $5.3B
GAO    $6.6B
CBO    $7.3B   (approximate after ballpark adjustment for R&D)

We see that the Navy’s cost estimates are the most optimistic which is in line with their demonstrated inability to accurately estimate program costs.  Thus, it is far more likely that the GAO or CBO costs will turn out to be closer to reality.  An average procurement cost of $7B-2012 per sub with a total average procurement cost of around $9B-2012 per sub seems likely to me.

The impact of this program on the Navy’s shipbuilding plans will be huge.  The Navy is already struggling with trying to maintain fleet size at around 285 ships.  The current administration and Navy leadership have put forth ridiculous shipbuilding plans that call for increasing the fleet to 300+ ships, however, every objective analysis of the plan has pointed out that the current budget projections don’t even remotely allow for the plan to succeed.  Adding a 12 year period wherein half the $15B yearly shipbuilding budget will be consumed by the SSBN(X) program renders the 30 year fleet size plan utterly unachievable.

There have been suggestions, including from CNO Greenert, that the Department of Defense should pay for some of the program from other, non-Navy account lines.  Of course, this is simply moving money around on paper and doesn’t change the overall impact.  We’ll have to wait and see how this one plays out.



(1) Congressional Research Service, “Navy Ohio Replacement (SSBN[X]) Ballistic Missile Submarine Program: Background and Issues for Congress”, Ronald O'Rourke, June 12, 2012

5 comments:

  1. The same thing happened in the 1960's with the introduction of the SSBN to the US Navy. The overall shipbuilding budget was not incresed to handle an entire new class of expensive warships which were needed quickly. The "41 for Freedom" SSBNs were built between 1958 and 1965 and the Navy had to cancel several other ships like a sister to the Enterprise and the Typhon missile system to keep within Congressional limits. That was partly why the next two carriers after Enterprise (America, JFK) were oil-fueled.

    At the time the Navy cried foul over having to pay for a national, strategic asset out of their budget. But the USAF and Army are the only real non-Navy accounts worth dipping into.

    I see the same thing happening if we are not careful in the next decade. The Navy has its work cut out for it.

    WireguidedMarine

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  2. This is one of those difficult to understand costs. The USN is basically taking a $2.4 billion Virginia and inserting a module in the middle which is going to be ballpark 1/3rd the size of the sub. Is that missile module room with design and installation really, plus any other modifications to the boat, really need to cost $5 billion?

    Separately the SSBN's shouldn't be part of the Navy's budget given it's the most important strategic asset the nation has.

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    1. Lane, I have no problem with funding the SSBN(X) at the higher DoD level rather than the Navy budget. However, unless DoD goes to Congress and (successfully) requests additional funding, it's just going to be moving money on paper. Every dollar spent on SSBN(X) at the DoD level will be a dollar less on some other program. Absent additional funding, what programs would you see as "donors" for the several billion dollars per year for twelve years?

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  3. "The Navy has its work cut out for it." -WireguidedMarine

    "This is one of those difficult to understand costs." -Lane

    Wow! Two strong candidates for understatement of the year. :)

    Just kidding, guys! Thanks for the comments.

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  4. Certainly I agree the result would be less spent elsewhere but that's a better outcome, balancing SSBN's within the total defense budget, than putting it all within the USN shipbuilding budget. Strategic nuclear forces shouldn't be funded by the individual services.

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