Friday, January 3, 2014

Burke Contracts

This slipped by me during the summer but better late than never.  As reported in multiple sources including the United States Naval Institute (1), contracts have been awarded for construction of nine Burke class DDGs.  As announced, five of the ships will be built by Huntington Ingalls (HII) for $3.3B and four will be built by Bath Iron Works (BIW) for $2.8B. 

Now, what’s wrong with this picture?  It’s the unit price.  The HII contract claims to be able to build Burkes for $660M each and the BIW contract claims $700M each.  I’m sorry but that’s not even remotely realistic.  That’s about the same amount as an LCS with a module (if there were any modules!).  According to Wiki (admittedly a suspect source) the unit cost for DDGs 113-115 was $1.8B.  A 2012 Congressional Research Service report states that two FY13 Burkes would cost $1.6B each (2).  The report further states that proposed Multi-Year Procurement (MYP) contracts would save 8.4% and yet the announced contracts represent around a whopping 60% decrease over previous prices!!  Does anyone believe that’s real?  Further, the FY14 SCN budget document shows prices for Burkes as $1.5B - $2.0B depending on year and quantity and I don’t even believe those numbers.

So, what do the announced contracts represent?  Clearly, a complete, fully outfitted DDG cannot be built for that amount.  I have no idea what the contracts represent.  For some time, now, the Navy has been playing accounting games that border on fraud and this is clearly more of the same.  They’re obviously trying to give the impression that ships are far cheaper than they really are.  Hey, we all understand good PR and positive spin but we also understand out and out lies and deception.  The Navy is afraid that if the true costs were known, Congress would balk at providing funding and with good reason!

Do any of you have an explanation for these contracts?

All of this is why we get into arguments about the true costs of the LCS or any other ship or aircraft.  It makes it very difficult to be a well informed citizen. 




(2) Congressional Research Service, “Navy DDG-51 and DDG-1000 Destroyer
Programs: Background and Issues for Congress”, Ronald O'Rourke, August 10, 2012

14 comments:

  1. Roughly half the cost of a DDG 51 is government-furnished equipment (GFE), which wouldn't be included in the contracts awarded to each yard. The cost of the GFE, however, is clearly identified in the Navy's annual budget submissions to Congress. GFE for a DDG 51 is mostly the AEGIS combat system (and associated equipment). If you want to compare apples to apples, look at the "basic construction" line of the budget submission. It should closely correspond with the contract prices for the ships.

    ReplyDelete
    Replies
    1. And the budget submissions -- in this case, Shipbuilding and Conversion, Navy (SCN) account -- are provided on the Navy Comptroller's website.

      Delete
  2. I for one wonder about the Burke III which was listed in the article in NIP.

    Do we need a Burke III , or do we need Super Burke? The Burke III has been described as a re-equipped version of the Burke II+, using the same basic hull, superstructure, and weapons. It will the same pushing 12 pound into the Burkes' 10 pound can.

    A Super Burke, on the other hand, like the Super Hornet, can be a larger ship, that has little in common with the original design but looks. It is in fact a political creature, as it avoids many of bureaucratic hurtles that plague all weapons production.

    Now by scaling up a Burke's hull by 10% in width, and 10% in length, we can increase the weight and space not only for AMDR, but adding larger generators for both powering the new radars and cruising electric motors.

    ReplyDelete
    Replies
    1. It would be nice to have a new-designed DDG that was somewhat larger.

      Cost drove us to the Flt III design.

      Delete
    2. Smitty,

      This is one of those cases where doing the job right from the start will save money in both the short term and long term.

      In the short term, since we are not having to squeeze the needed equipment into too small of space, we will not need a bunch of custom equipment to fit the space available. Better yet, by using off the shelf equipment, you can use existing design block, saving engineering time and money.

      In the long term, increasing the space around the equipment save money and time during maintains. This has been a persistent with the current Burkes designs, where access to various system is difficult sometimes require dismantling other system.

      Therefore going to a larger design from the start is very cost effective.

      Delete
    3. We tried a new design with the DDG 1000. Wasn't exactly a cost savings. :) Problem with new designs is the urge to add features.

      I agree though, I would've preferred a new design. We just need it to be a conservative step forward, not a revolutionary (risky) leap.

      Delete
  3. "Bureaucratic hurdles" are the least of the Navy's problems when it comes to shipbuilding. Starting construction of a hull before it has any clear, proven semblance of an idea of what the technology -- in this case, AMDR -- looks like and requires from a power/cooling/space/weight standpoint is the downfall. Don't worry, though. The mistakes of old are destined to once again be repeated on the Burke III variant and will drive cost growth that, had the program been properly executed with stable design before construction, could have afforded you the 10% growth margin Super Burke that you identify.

    ReplyDelete
  4. No drama - just government-furnished equipment omitted
    Prokhor Tebin
    http://prokhor-tebin.livejournal.com/

    ReplyDelete
  5. If that's true that the basic hull and engines? are between 600 to 700 million, then why the hell are we buying LCS for? Why not just buy basic bare bone DDG and out fit it with some different modules? Without some of the major system, your crew requirements would be lower and since you won't be buying a different ship and putting it in service with it's own support,etc...you probably be saving money by buying a "detuned" Burke with some communality with the other Burke flights....

    ReplyDelete
    Replies
    1. Nico,

      This has been my argument for a long time.

      Using a Burke hull for LCS would simply training and supply for the Navy and give us a better ship with far more capability.

      That said, the price of the base hull is not the final cost of the ship. Adding "government supplied equipment" (weapons and sensors) will add substantially for even for "frigate" capability. Even so, at ~$1 billion for a hull mounted sonar, a tail, VLS (or two) a 5" gun, RAM and probably the same LCS radar suite, we would get a much better ship.

      GAB

      Delete
    2. Completely agree GAB, a reduced flight Burke without AEGIS at $1 billion as you describe would be a far better deal in the long run when you factor in the same parts, maintenance,training costs,etc over 30 to 40 years, you would get that money back easy.

      Delete
  6. For sake of discussion, let's assume that the GFE is not included in the announced contracts. The problem with this contract is that the Navy implies that this is the cost of the ship. Further, in the future, people will reference this contract and cite these numbers as the cost of the ships. We're seeing this now with people citing the cost of the LCS as $350M or so.

    The real cost of the DDG is, apparently, the $600M or so for the bare hull, plus GFE bringing the cost to the $1.6B or so suggested in the SCN docs, plus post-delivery outfitting, modifications, and fixes which are not included in the SCN as far as I know which brings the actual completed cost to around $2B or so.

    On a related note, I flat out don't believe the cost numbers in the SCN for Aegis which are way below any estimate I've ever seen. The SCN numbers suggest a cost of $200M-$300M. Every estimate I've ever seen is in the range of $500M - $1B, typically in the several hundred million range.

    ReplyDelete
    Replies
    1. ComNavOps

      I believe your numbers are in the ballpark.

      I think that there is much confusion surrounding the costs of Aegis and AMDR. I think people are confusing the costs of the arrays with the costs of the system, which is wrong. Aegis is really about the processing and control and integration of data, sensors and weapons. AMDR adds a new S-band array, a new X-band radar, a new processor that feeds into Aegis… it is a lot more complicated, and my mantra is you really have to understand the contract before you leap to conclusions.

      The key take-away in this is that the real cost of procuring surface ships is in the sensors and computers, not in the hull mechanical and electrical. This has been true for decades, and has been noted by experts like Dr Freidman.

      The un-answered question in all of this: is there a point of diminishing returns on investing in sensors? Is there a point where surface ships are simply not viable until the submarines and airpower gain control of the skys, space, and the undersea environments?

      GAB

      Delete
    2. GAB, your last paragraph suggests a topic crying out for a guest post. Nudge ....

      Delete