Friday, April 26, 2013

Stormy Weather for Carriers

The latest CRS report on the Ford class carriers (1) reveals that the construction schedule for new carriers, historically one every five years, is being stretched.  In the data below, the first date listed for each carrier is the procurement date, the second is the actual or projected delivery date, the years from procurement to construction is shown, and, as an interesting sidelight, the final number is the construction cost.  CVN-78 is, of course, the USS Ford, the first of the new Ford class.  CVN-77, the last of the Nimitz class is listed for comparison.


CVN-77  2001  2006  5 yrs
CVN-78  2008  2015  7 yrs  $12.8B+
CVN-79  2013  2022  9 yrs  $11.4
CVN-80  2018  2027  9 yrs  $13.9

Costs are in FY13 dollars

We see that while the procurement frequency is still scheduled for every five years, the delivery dates are going to be stretched out to nine years.  With that in mind, there is almost no chance that the procurement frequency will remain at five years.  It’s just a matter of time, and soon, before the procurement dates are stretched out, as well.

We’ve discussed before that, for a 50 year lifespan, we need to build a new carrier every 4.5 years to maintain the Congressionally mandated level of 11 carriers.  Even the 5 year procurement frequency only gives a force level of 10 carriers.  If the procurement frequency gets stretched out to more closely match the announced delivery frequency, the carrier level will shrink to only 6 (for a nine year frequency).  How this would be reconciled with the Congressionally mandated force level remains to be seen. 

Rough Seas Ahead for Carriers?

 As a reminder, the current carrier force level is 10, one less than the mandated level, due to the retirement of Enterprise and the construction delays for the Ford.  The Navy obtained a waiver from Congress specifically for this situation and the waiver will remain in effect until the Ford enters service in 2015 or 2016.

What is the rationale for stretching out the delivery times, you ask?  Well, as anyone who has ever financed a home or automobile knows, the longer you stretch out the payment time, the lower the payments.  Of course, the longer the payment period, the greater the total payment, in the end.  As best I can tell, the Navy's accounting structure doesn't care about total costs, only yearly budgeted costs.  Hence, the push to stretch out the delivery time.

Now, on to the cost figures.  We see that there is no economy of scale for carrier construction.  Taking into account the first of class one-off expenditures, it’s clear that each succeeding Ford class carrier will increase in cost (dollars are constant FY13 so inflation is accounted for).  Compare the magnitude of the construction cost, around $12B, to the Navy’s entire annual shipbuilding budget of $15B.  When a carrier is built, almost an entire year’s shipbuilding budget is consumed by one ship.  No wonder the fleet size is shrinking!  Regardless of the value of the carrier, they are simply becoming unaffordable and that’s reflected in the stretching out of the delivery dates and why the procurement dates are sure to be stretched out, as well.

Proponents and detractors of carriers can argue all they want but the simple fact is that the carrier is pricing itself out of existence.

Despite this, the Navy is embarked on a logically inconsistent path.  Air wings are approaching half the size they were when we started building supercarriers which would seem to suggest that somewhat smaller carriers would suffice and, yet, the Navy is building the Ford class which is even bigger than the Nimitz class.  Huh??  How does that make sense?  Logically, the Ford class should have been closer to the modernized Midway in size.  This is just like the new SSBN which, despite carrying several fewer missile tubes, will be bigger than the Ohios.

The Navy is embarked on an unsustainable carrier construction path.  Something is going to have to change and soon.  I think we’re going to see the carrier force level drop to around 8 in the fairly near future.  I predict that one of the next couple of upcoming carrier mid-life nuclear refuelings is going to be cancelled and the ship is going to be pre-maturely retired.  Time will tell.

(1) Congressional Research Service, “Navy Ford (CVN-78) Class Aircraft Carrier
Program: Background and Issues for Congress”, Ronald O'Rourke, March 13, 2013

21 comments:

  1. Dark times ahead for the Navy.

    Do you think the carriers pricing themselves out of existence are a sign of bad procurement practices or are they becoming more advanced and expensive naturally?

    Also, economies of scale are universal. The Kennedy and Forrestal class carriers got progressively cheaper as more were created, along with the Essex class (but that was like a 20 ship class so you can exclude that if you wish). Are you saying that economies of scale don't exist for the Ford class and SSBN-X?

    ReplyDelete
    Replies
    1. Scott Brim, USAF PartisanApril 27, 2013 at 7:12 AM

      In the United States, over the last two decades, the construction costs stated in constant dollars of almost all large-scale low-volume high-technology construction projects has approximately doubled, whether it be a nuclear power station, a nuclear aircraft carrier, or a conventionally powered Navy surface combatant.

      For example, the capital cost of a nuclear-generated kilowatt in 2013 is about double what it was in 1990. The reasons are numerous, and include a lack of nuclear certified equipment suppliers, a lack of trained and experienced construction personnel, a lack of experienced project managers and administrators, higher infrastructure support costs in the geographic areas where most of the plants are located, competition for local civil support infrastructure from other residential and commercial projects, higher labor costs across the board for all labor categories, and higher component and material costs for all material categories.

      For a variety of reasons, America has become an expensive place to do business, with low-volume high-technology construction projects suffering the most from ever-increasing cost pressures.

      China can build a nuclear power station for about one-third what we can in America, and they build those stations with as much attention to detail, as much focus on quality construction, and as much regulatory oversight as we have in America. They just do it in about half the time and for a lot less money than we do.

      Delete
    2. E77, as far as economy of scale, the Ford carrier class costs speak for themselves. Clearly, there is no economy of scale evident and that's using Navy cost estimates which are historically way too low.

      As far as the SSBN(X), who knows, since it hasn't even been designed yet.

      Delete
    3. Scott, the factors you list as reasons for cost increases over and above inflation all seem plausible. If you haven't already, please read this post and then give me your further thoughts on the major source of cost increases. Thanks!

      Delete
    4. Scott Brim, USAF PartisanApril 28, 2013 at 7:21 AM

      ComNavOps, as you say in that other post, higher volume can become a key factor in reducing unit costs. That is true of warships as well as nuclear power stations.

      By the end of the 1980s, the nuclear construction industry in the US had learned a lot of hard lessons about how to build a nuclear power plant cost effectively, and had tuned itself up to be about as reasonably efficient in constructing a reactor as it was possible to be.

      But even back then, competition from natural gas and from coal made the higher upfront capital costs of nuclear unattractive, even if total lifecyle costs for nuclear were lower.

      What we saw in nuclear power plant construction in the early 1990s was that greatly reduced demand for the plants -- a factor driven mostly by competitive market forces -- reduced demand to the point where it made no sense for nuclear component suppliers to stay in that business, and it also made no sense for construction contractors to maintain a highly paid collection of nuclear-capable managerial, technical, and craft skills.

      And so here in the year 2013, the skilled workforce of the 1970s and 1980s that built the 2nd and 3rd generation nuclear plants is now either mostly retired or in the graveyards.

      Teamwork is a critical element of doing quality work cost effectively, and is something which has to be maintained at all levels of a nuclear construction project. That kind of teamwork can only be maintained through practice. What we are witnessing now is that for those few nuclear construction projects now underway, everyone is passing through the learning curve of "doing things nuclear."

      The economics of building and maintaining warships is likewise driven by market forces. As you have pointed out, volume is a key factor in controlling unit costs. Volume is just as important in maintaining a teamworked collection of skills at all levels within the shipbuilding industrial base.

      But America wants to spend less on defense, and total lifecycle costs for operating our warships are trending ever higher. So there is less money to spend on constructing new ships and on reconstructing old ones, and hence no easy way to increase volume of production in ways that reduce unit costs.

      Unless the defense budget grows significantly, and/or unless the Navy receives a much greater share of the defense spending pie than it does now, we will not see any increase in the volume of shipbuilding work. Nor will we see any corresponding increase in the volume of production for the weapons systems we install on those warships.

      What it all boils down to is this: the efficiency of the production process is about as good as it is going to be for the ships and the weapons systems we are now buying. There is no magic wand to increase the efficiency of construction of our warships without greatly increasing the volume of our warship construction.

      This situation makes it doubly important to be careful in what ships, aircraft, and weapons systems we decide to buy, and to make up our minds well ahead of time just what it is we want and need, and why. Circumstances are such that we cannot afford to go down technological and operational blind alleys, because in today's defense marketplace, no recovery is possible from these kinds of mistakes.

      Delete
    5. Scott, you seem to be agreeing that volume is one of the major factors, if not the most important, and that inefficiencies and shortages of skilled labor and other factors are largely derived from reduced volume. Correct me if I've misinterpreted what you've written. With that in mind, you seem to suggest that, barring a significant increase in construction budget, we will not and cannot achieve any increase in volume. On a practical and realistic level, I agree. The Navy is not going to change its approach, at least not willingly. The Navy's response to higher costs has been to concentrate more and more technology into the fewer and fewer platforms it can afford. You even allude to that in your final paragraph. Unfortunately, that leads to a vicious cycle, or Catch-22, wherein the increased concentration of technology causes higher costs and the higher costs lead to more concentration which leads to higher costs which leads to ...

      There is a way to break out of the cycle and increase shipbuilding volume which would decrease unit costs. We need to stop building "do-everything" ships and start building "do-one-thing" ships. Consider a conceptual example: we could build 2 Burkes for $4B or, for the same amount of money, we could build 1 Burke and two decent frigates. That gives us three ships instead of two and the construction overhead costs are split three ways instead of two ways. When you start looking at the LCS, for example, we could build many smaller dedicated minesweepers or small ASW vessels for the cost of the LCS. And so on... All it requires is a break from the traditional way of Navy thinking.

      Is that likely to happen? No, but I would submit to you that the Navy is rapidly coming to a crisis point where even they realize that the path they are on is unsustainable.

      Delete
    6. CNO, for as much that is wrong with the LCS, it was actually an attempt to go down the path you are suggesting actually.

      Part of the goal is to increase the number of hulls of the same type and then have a level of modularity that allows you to specialize the hulls to meet combat needs. Which is the best way to maintain the volume required to keep costs down.

      While the actual LCS designs in many ways fail at this due to a variety of ancillary reasons, the basic premise is reasonably sound.

      Each different hull we design has a large amount of sunk costs that can only be reduced though volume. Therefore we want to be able to build as many of a given hull design as fast as possible to reduce the NRE costs as low as possible. In order to do this, the hulls have to be designed such that they have a level of modularity that allows post hull completion configuration of the actual warship.

      The LCS fails mainly because they didn't actually have a plan for this post hull completion development or configuration and that they chose hull designs that weren't really as optimal as they should be. For LCS-2 there is little need for a helo deck that large for example, while the weapons capability of the ship is also too low. Some of this could be reasonably fixed, for example, adding cells of VLS while reducing the hanger area would greatly increase the ship's combat ability. While others, such as the manning levels and stores levels will take significant redesign to correct.

      Another way around the problems is to work with partner nations on hull designs that are shared with a modular system's architecture that is also shared. One realistic problem with this is the large NIH issues within the armed forces and not just the navy. An example of this is the army's hostility to adopting the Pz2000, AS90, or K9 and instead sinking 10s of billions into developing failed designs over the years like the Crusader and NLOS-C. The money spent on the Crusader gun system alone would of paid for a brand new Ford class aircraft carrier.

      In general, the armed forces are and have been for quite some time, completely horrible at designing and developing new vehicles, ships, etc.

      Delete
    7. ats, you've completely missed my point regarding do-one-thing vessels. To be fair, I didn't lay out all aspects of that path in my comment given the space limitations. The do-one-thing vessels should be 100% proven (meaning existing) technology. That alone would save enormous amounts of money. Further, the vessels should be the bare minimum (but no less than the minimum) needed to fully execute the mission. This is where the LCS would fail utterly. Take the mine warfare mission, for example. What we need is a new Avenger class with the latest existing technology. Such a ship ought to cost around $100M. The LCS, in its MCM guise, travels 40+ kts, carries far too much weaponry for an MCM auxilliary, and operates helos, among other capabilities. None of that is needed for a simple minesweeper. If the helo truly is required for MCM work then, fine, add a hangar and flight deck to the Avenger. The point is that the LCS is vast overkill for the MCM mission due to all the unnecessary equipment and capabilities. Far from being an example of the do-one-thing vessel, the LCS is an example of the do-everything vessel with totally unproven and largely non-existent technology.

      Does that make more sense?

      Delete
    8. So the problem with just building another Avenger class is that while they are generally great MCM ships in peacetime and in controlled waters, they are almost entirely useless in an area denial zone. For an area denial zone, the ship is at a minimum going to need defensive weaponry. And ideally, will require remove operation mine detection and the ability to scoot if a threat is detected.

      Pretty soon, the MCM starts to look somewhat like an LCS design.

      But my point was that we cannot afford a fleet of do-one-thing vessels. They don't need to be able to do everything at once, but they do need to be configuration and upgradable such that their mission can change.

      Delete
  2. Consider the A4 Skyhawk
    40ft long, 27ft wide, 4750kg

    Consider the F35C
    51.5ft long, 43ft wide, 15,800kg

    The Lightning Engine weighs 70% more, which means heavier lifting gear if you need you need to pull it out and replace, its also nearly twice as long, which means bigger bigger work space needed to work on it, and much bigger transit spaces, one rotates in 9 square metres, the other 25.
    Stronger floors to take all that weight, more powerful lifts that can carry the planes on to the deck, stronger decks to deal with heavier planes landing, and hotter (more?) exhaust gasses.

    Bigger and more powerful catapults, with bigger and more powerful steam tanks, not to mention stronger arresting gear to stop a fifteen ton jet rather than a five ton.

    And on and on it goes.

    ReplyDelete
    Replies
    1. TrT, whatever point you were making, I completely missed it. Want to try again?

      Delete
    2. Why Carriers get bigger but air wings get smaller :)
      And why carriers get more expensive.

      *****************
      Off topic
      As for "manufacturing".
      http://blogs.telegraph.co.uk/finance/edmundconway/100002310/what-the-ipod-tells-us-about-britains-economic-future/
      China earnt $4 for assembling each iPod, Apple earnt $80 for designing it, Japan earnt $26 for manfacturing the high value parts china soldered together, ect.

      The biggest problem, is Labour costs, followed by regulatory burden.
      China wages for skilled stuff like nuclear and aerospace engineering are about 80% of those in the west. Airbus built a factory in China. From airbus green lighting the project, to the first jet rolling out of the warehouse, took six months. You spend six years getting permission for building a house in the UK, a big mfg site covering hundreds of acres, god knows. Not six months...

      Delete
    3. In china, if you want a piece of land and can pay the right people, you can have it, regardless of what the current owners want. If you don't want inspections and can pay the right people, you won't have inspections. If you don't want to worry about environmental regulations and can pay the right people, you don't have to worry about them. Now on the other hand, if you don't want your designs ripped off, good luck with that.

      Most of the ship building costs in the US have to do with volume and competition. Overall there is little volume in US ship building due to being undercut heavily over the last 30+ years on prices. All the non-gov biz has gone out to the lowest bidder which the US shipyards are not. So they are soaking the gov for everything they can get.

      Labor costs are certainly a part of it, but not for anything that generally affects naval vessel building for the most part except interior fitment. That's generally low-skill or unskilled. The people putting together high quality metal hulled ships tend to actually be pretty skilled and well paid regardless of where they are.

      Delete
    4. TrT, I'm still not sure I get your point. Are you saying that the reason carriers are continuing to get bigger is because planes are getting bigger? If so, the modernized Midway operated an air wing of Hornets and, at least on one occasion, a pair of Tomcats.

      Today's biggest plane, the Super Hornet is a bit shorter than the Tomcat, quite a bit narrower, and 11,000 lbs lighter. So, today's air wing planes are smaller than the Nimitz air wings and the wing, itself, has many fewer planes. Today's air wings are smaller in plane size and smaller in numbers yet the Ford class is bigger than the Nimitz. Unless the Navy is planning for truly giant unmanned aircraft in the future, I don't get the size increase of the Ford.

      Delete
    5. TrT, I forgot to add that the F-35 is smaller and lighter than even the Super Hornet. So, again, the planes are getting smaller and the air wings are shrinking yet we're building bigger carriers in a time of budget challenges. That's hard to understand.

      Delete
    6. The F-35 is definitely not lighter than the SH. In fact it is somewhat heavier. I haven't been able to find the folded dimensions of the F-35C, so I can't compare deck spot factors, but I don't think we will see much difference. The F-35 is a few meters stubbier.

      Delete
    7. B.Smitty, Wiki lists the Super Hornet at 32,081 lbs empty and the F-35A at 29,300 lbs empty. I don't have a weight for the F-35C version.

      Delete
    8. Given the difference in material and construction technology, if the F35C isn't lighter than the SH then LM aviation should be immediate disbanded.

      Delete
    9. F-35C is 34,000lbs empty.

      It really shouldn't suprise anyone.

      Delete
  3. I've heard for years that the US has transitioned to a "service based economy". You know, the old "we think, they sweat" maxim that was going around in the 80's and 90's. So I've gotta' wonder if we've simply lost our industrial and technical base, including skilled people at all levels, including machinists, welders, electricians, metallurgists, engineers, ...., basically the whole set of skills required to design and build quality ships.

    ReplyDelete
    Replies
    1. We've lost the volume, the skills, not really. There are a variety of other industries that are employing the machinists, welders, electricians, metallurgists, engineers, etc, that either pay more or have enough volume to keep them employed.

      Delete