Monday, November 14, 2016

Shipbuilding Buying Power

I’ve long had the sense that carriers and ships, in general, are becoming more expensive on a relative basis and, if true, I can’t explain why.  The basic modern carrier hasn’t changed much since the Nimitz was built.  Yes, the design is continually being tweaked with rearrangements of gear and whatnot but that would have no major impact on the cost of a ship.  So, is the carrier more expensive today, on an inflation adjusted basis, than it used to be?  Here’s some data.


Carrier             Cost    Year          Inflation Adj.

CVN-69 (Eisenhower) $679M (FY1970) (4) /  $4.2B (FY2016)
CVN-72 (Lincoln)    $4.7B (FY2010) (5) /  $5.2B (FY2016)
CVN-76 (Reagan)     $4.4B (FY1995) (2) /  $7.0B (FY2016)
CVN-77 (Bush)       $6.0B (FY2006) (2) /  $7.2B (FY2016)
CVN-78 (Ford)      $12.9B (FY2016) (3) / $12.9B (FY2016)

Note: Costs adjusted to FY2016 dollars using CPI Inflation Calculator

Note:  Solid data is hard to come by for individual carriers.  Many sources cite a single, averaged price for the entire Nimitz class which is obviously not true for any individual member of the class.  My references for each cost cited are listed so you can check for yourself.



We see that the inflation adjusted cost of a carrier has risen steadily since 1970.  Given that the basic carrier hasn’t changed, the cost ought to have remained steady or even dropped due to the oft claimed, but almost never realized, serial production savings.  In reality, however, the costs have increased.  Why?  I have no good answer for that.

Here’s another way to look at it.  Below is the Navy’s annual shipbuilding budget (SCN) for 1986 and 2015 and their inflation adjusted 2016 equivalents along with the quantity of ships built under that budget.  You’ll instantly note the huge difference in quantity between the 23 ships that were built under the 1986 budget and the meager 9 ships built under the 2015 budget. 

On an average cost basis in 1986, we built 23 ships for $21.8B (infl. adj.) which is an average of $0.95B per ship.  Compare that to the 9 ships built under the 2015 $16.2B (infl. adj.) budget which is an average of $1.8B per ship.


Year  Qty            SCN             Inflation Adj. SCN

1986   23    $ 9.9B (FY1986) (1)  /  $21.8B  (FY2016)
2015    9    $15.9B (FY2015) (6)  /  $16.2B  (FY2016)



So, our shipbuilding buying power has decreased markedly.  The average ship used to cost $0.95B but now costs $1.8B.  That’s a doubling in inflation adjusted costs!!!!  Our buying power is vanishing!

Here’s yet another way of looking at it.  Interpolating the data, a single carrier in 1986 would have cost around $6B from an annual shipbuilding budget of $9.9B in 1986 dollars.  Thus, the carrier consumed 61% of a single year’s shipbuilding budget back then.  Today, a carrier costs $12.9B from an annual shipbuilding budget of $16.2B, consuming 80% of the budget.  Our aircraft carrier buying power has decreased.  It takes more of the budget to buy a carrier – 80% now, versus 61% then. 

Yes, the Ford is a departure, to an extent from the Nimitz and, therefore, costs more, you say.  While that’s true, we haven’t actually gained anything from the greater expense.  The Ford offers no improvements.  We’ve debunked the increased sortie myth.  The Dual Band Radar has been abandoned and offered no tactically useful benefit, anyway.  The EMALS catapult, if it works, offers no actual advantage and is an unshielded electromagnetic beacon which is a significant liability.  The AAG arresting gear also offers no advantage.  In terms of buying power, we’ve spent enormously greater money on the Ford for little or no gain.  That’s a huge loss in buying power.

This post is not just about the Ford.  The trend in decreasing buying power for both ships, in general, and carriers, in particular, was evident before the Ford.  This general loss of buying power is the point of the post. 



_____________________________

(1)CBO, Future Budget Requirements For The 600-Ship Navy: Preliminary Analysis, Staff Working Paper, April 1985

(2)Congressional Research Service, “Navy CVN-21 Aircraft Carrier Program:
Background and Issues for Congress”, Ronald O’Rourke, 17-Jan-2007

(3)Congressional Research Service, “Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress”, Ronald O'Rourke, May 27, 2016

(4)Wikipedia, retrieved 25-Oct-2016,

(5)Wikipedia, retrieved 25-Oct-2016,





46 comments:

  1. For me this ties in with the requirement that a military be economically efficient in order to be effective.

    The only things I could think of as variables were: Competition, labor, and political environment.

    Competition: Brooklyn Navy yard closed in the mid '70's; Mare Island in '93(?), Philedelphia in '95.... Admittedly, some of these hadn't been in ship building for awhile, but they were in the repair business, and that might make graving dock space cheaper due to competition.
    On top of that, in the '90's I believe there was some defense contractor mergers.

    From the labor side of things; I'm not sure how that would work out. Unions were stronger then, but now with the reduced shipbuilding and the age of our workforce the workers may be more valuable.

    Politically.... I honestly think the defense contractors have perfectly figured out the game. They lobby and align their programs with enough congressional support that I'm willing to bet that takes a significant amount of pressure off of the producers to lower the costs.

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    1. So, what is the long term implication of this trend? What can we do about it? How does it impact the Navy's (fantasy) 30 year plan to reach 300+ ships? How does a smaller Navy impact our geopolitical aspirations?

      Take us beyond the superficial!

      Delete
    2. Long Term implication? To paraphrase Clubber Lang from Rocky III; my prediction is pain.

      The real crux lies in Congress and our shrunken defense contractor base. The contractors are sunken deep into the system. They don't want to be broken up, and they don't want to make less money.

      For their parts, the Congress critters don't want to lose the money paid to them by the defense contractors; or the appearance of doing something by having those high publicity jobs in their districts.
      The Navy goes along with this because the flags often end up working for the contractors and the Navy itself wants the money spigot to keep flowing.

      And those, the flags and the congress people, are the people who are responsible for making any changes.

      In order for this to change we'd have to have a Teddy Roosevelt type person come in and not be afraid to break up these contractors and/or take a hard line on contracts.

      I'm sorry, but I don't see it happening. I see no counter force that works against what we are seeing. Someone who will speak out against what is happening threatens to break the triangle Gravy train of Flags/Congress/Contractors. So they won't be heard long.

      How does this affect the Navy's 30 year plan? The future Navy will be smaller and less capable. 300 ships won't happen, or if they do, they'll be neutered hulls for hulls sake. Maintenance will continue to give way to new build construction, and new build construction will continue to disappoint. Air wings might experience a slight resurgence with F-35 range and stand off weapons, but I doubt we can afford the F-35 en masse. There are no plans on the boards for long range strike other than vaporware. So NAVAIR will live and die with the SuperHornet and F-35.
      The one bright spot might be the SSN's. I'm not convinced of their obsolesence in the face of AIP subs, and their numbers should tick up a bit. But they'll be sorely needed and heavily used.

      How will this impact our geopolitical aspirations? This will lead to less influence on geopolitical events. Nations in the Pacific will start to spiral away; and not without good reason as we won't be able to easily honor our treaty obligations. Our SLOCS should be maintainable to some extent, but we will risk a far greater chance of them being cut.

      Its not good. We'll continue to pay champagne prices, but we'll be getting closer and closer to billy beer.

      Delete
    3. A fair analysis.

      I think we all understand how/why Congress is corrupt. While many people get into low level politics with idealistic aspirations, only the corruptible advance. You have to have loose ethics in order to advance. Thus, it's no surprise that the top of the heap, Congress, is the most corrupt. The political selection process assures that result.

      The mystery is the Navy. The vast majority of people entering the Navy do so for extremely idealistic and patriotic reasons. What happens to those people over time to lose their idealism and become corrupt? I can't explain that.

      We're not talking about just a few. There is not a single flag officer in the Navy with any integrity. If there were, they'd be standing up and calling out all the others but all we hear is deafening silence.

      It's not just flag ranks either. The next level down, the commanders, appear to be every bit as corrupt. The 30 or so CO's that are relieved each year indicate a systemic problem. The CO's that the Navy trots out to extol the virtues of the LCS or LPD or Ford or whatever, in the face of overwhelming evidence to the contrary, demonstrate an utter lack of integrity. The commanders and officers that populate NavSea and knowingly accept badly flawed ships demonstrate the depth of corruption systemic in the Navy. I can go on but you should be able to see from this how widespread the corruption is. How we go from bright young, idealistic officers to widespread corruption and loss of integrity in a few short years is a complete mystery to me.

      It's all very discouraging.

      Delete
    4. Admirals are also political animals although it feels like a very painful thing to admit. The blue water navy has had 20 years of post Cold War thinking. Admirals promoted in this time are far removed from the days of seeing another ship as a possible enemy. They have no war accolades to recommend them, not even the relatively peaceful ones of the soviet era. So they don't have to think tactics or strategy, just long term employment.

      Delete
    5. "The one bright spot might be the SSN's. I'm not convinced of their obsolesence in the face of AIP subs, and their numbers should tick up a bit."

      Ummm .... Not to rain on your party but are you aware that there is a looming shortfall of SSN's coming? The SSN fleet will decline from the current 54(?) to around 45-48, depending on early retirements. There's no "tick up" on the horizon!

      The sad tragic part is that this shortfall has been known for many years and nothing has been done about it. No matter what, though, we'll build all our LCS so you can rest easy!

      Delete
    6. "Admirals are also political animals ... So they don't have to think tactics or strategy, just long term employment."

      I think that assessment is a bit too simplistic. These people all joined the service for idealistic reasons (no one joins the Navy to become an Admiral and make money in the defense industry after retirement). What happened? Sure, a few might succumb to greed and materialistic desires but the vast majority ought to still be motivated by idealism and patriotism. What changes? Certainly, they behave as you describe but I don't have an answer that explains why this behavior universally develops.

      Think a little deeper and see if you have any further thoughts. How do a bunch of young idealists become a bunch of money-grubbing incompetents?

      Delete
    7. ""The one bright spot might be the SSN's. I'm not convinced of their obsolesence in the face of AIP subs, and their numbers should tick up a bit."

      Ummm .... Not to rain on your party""

      My pity party? ;-)

      You are correct. I was thinking in the back of my head that they had planned to go from 1 SSN/yr to 2. That will help. A very little. But I'll take what I can get right now.

      Delete
    8. I'm going to skirt some boundaries here... so if you need to delete I totally understand.

      I think that both parties are also to blame. During the cold war there was a certain amount of general consensus between the parties. Reps might want X+1, and Dems just X, but both recognized by and large the need to have a strong military to both fulfill our NATO commitments and to balance the USSR.

      You had guys on both sides who were defenders of a decent military: Reagan; Stennis, etc. Whether you agree or disagree with their policies they both seemed, to me, to have a strong defense at heart.

      Since then....

      It seems like both parties have turned the military into their plaything. From the 'transformational' stance of Rumsfeld and Cheney's nuking of the Tomcat/pressure to combine contractors to this Administrations using the Navy as a social science experiment...

      Its created an environment where you don't get ahead necessarily by saying the emperor has no clothes, but rather than his clothes are transformational and gender neutral.

      Just my $0.02 theory.

      Delete
    9. "How do a bunch of young idealists become a bunch of money-grubbing incompetents?"

      They haven't. They have, however, become very loyal to the Navy as an institution. This makes them conform to what it's doing as an organisation, even if that that seems flawed.

      This organisational conformity seems to be near-universal in the US armed services. It's what makes their inter-service rivalry so severe.

      Delete
    10. I can't buy that. Loyalty is part of idealism, along with honor and integrity. The honor and integrity ought to cause these people to rise up in horror and protest at what they see and yet NONE do so.

      [Misplaced] loyalty will account for a small amount of "looking the other way" but the rest of what these people are doing flies in the very face of the idealistic principles they joined with. Something else is going on here and I don't know what it is.

      Delete
    11. Then it's time to ask some middle-ranked serving officers about this.

      Delete
  2. It is because there are some hard number cost yard, equipment, training, infrastructure setup, etc... that are the same regardless if you build one or ten ships in that yard annual. Also there is huge cost for retraining or rehiring so efficiency which is a multiplier is thrown away, even avoided because you want to retain your crews throughout the year which means way to many man hours per vessel which equals increased cost. Then of course you have R&D fixed cost regardless you build one or ten and finally you have corporate profit which is usually a percentage with base goals of the previous year plus, so if you have one instead of ten efficiency is actual killing your bottom line were as inefficiency is a profit driver.

    If you sell your domestic industrial base for short sighted international company profit margin at the expense of your national interest, then if you want a military industry you need numbers volume.

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    1. So what is the long term implication of this trend?

      Delete
    2. The long term implications in a simplistic model were very well described by Norman Augustine in 1986: “In the year 2054, the entire defense budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and the Navy three and one half days each per week except for leap year, when it will be made available to the Marines for the extra day.”

      However, if something can't persist, it won't. If the DoD can rid itself of before-the-fact rules and dispersed accountability, then the trends may change. However, more likely, the systems that accomplish missions will change to take advantage of productivity in the broader economy because the DoD suffers a persistent productivity crisis (more software, less hardware, and thus increasing fragility to the "fog of war")

      Delete
    3. "long term implications in a simplistic model were very well described by Norman Augustine"

      Well, yes, that's the ultimate, logical extension of the path we're on. However, I was referring to the more immediate geopolitical implications. How does a declining force structure impact our dealings with China? How does our reduced emphasis on firepower and armor impact our dealings with Russia? And so on.

      Delete
  3. A larger fleet is music to my ears...if it is the right ships. And those currently being flouted are not. LCS? Not an offensive platform. Zumwalt? Great concept...no ammo. Ford? What benefit added that Nimitz does not already provide?

    What concerns me is the part of having a fleet that continually gets the shaft. Ship repair. Hard dirty nasty work that is imperative to having a fleet. Not to mention having the skilled trades people that can do the work. The yard I work in has an average age of 55 for the workers here. Where is the young blood? They take one look at this dirty work and want nothing to do with it despite the fact that a good certified welder can make 6 figures a year easy. But, ship repair is subject to the whims and desires of the political climate. Ask me how sequestration went in the yard last winter.

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  4. You cover all the points re the new capabilities that really aren't working out for the Ford and its too late to go back to steam and legacy gear now. no one ever said no....

    Don't forget all the new plumbing and additional womens heads the Ford has integrated that the Bush was caught short on!

    Plus, I understand the Ford will embark an airwing of only 54 aircraft! In my day we went with 85-95 (F-14/A-6, S-3 A-7, etc.) aboard Nimitz and at least 89 on America class, today it is about 65.

    54 aircraft? YGBSM. BTW, a single airwing with 65 aircraft costs $3.5+ billion last I heard. When the F-35C cost stabilizes that will double that cost for 65 aircraft wing. That is probably why they go to 54. Its a shell game -of course they will say that the new jets are so deadly, GPS bombs and all we can operate with less. that is total B.S and is a bright shining lie, because even an F-35C can't be in two places at once....

    b2

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    1. "54 aircraft? YGBSM. BTW, a single airwing with 65 aircraft costs $3.5+ billion last I heard. When the F-35C cost stabilizes that will double that cost for 65 aircraft wing."

      Yes. That's pretty pathetic. And all that on a Carrier that costs way more.

      Again, what precisely does the Ford deliver that the Nimitz doesn't, in real terms? What is it that the Ford does that the Nimitz couldn't have evolved into?

      And with shrinking airwings with questionable reach, what is our return on investment for these monsters?

      Delete
    2. My information on the cost of the airwing and the number 54 for Ford have nothing to do with my view that the big angled deck aircraft carrier is obsolete or should not be the centerpiece of a Navy CSG. Not even close. That is the fodder of those Shoes, bubbleheads, MPA and air force types who have agendas....

      We must have big deck carriers, there is no viable or capable alternative with those jeep carriers and the F-35B... Following that makes us into a Sand Pebbles navy for sure...

      The problem/issue/tragedy is we keep shooting ourselves in the foot by venturing time and money for questionable improvements like the new AG/mag cats that are unproven and risky but the most egregious are the BS about smaller yet more capable airwings. For what is an aircraft carrier without sufficient and capable aircraft?

      IMO,the minimum size airwing should have ~75 aircraft aboard. Enough to project power and defend itself from air, surface and subsurface threats 24/7 for days on end, like in the 1980's. All it would take is the addition of a purpose built specialist fixed wing aircraft to take on the onerous tanking, outer zone ASW, long range surveillance and EW warfare missions going undone or at a reduced capability today. That is what I espouse.

      Delete
    3. "All it would take is the addition of a purpose built specialist fixed wing aircraft to take on the onerous tanking, outer zone ASW, long range surveillance and EW warfare missions going undone or at a reduced capability today."

      Of course we had that in the S-3 Viking!

      Delete
    4. "I understand the Ford will embark an airwing of only 54 aircraft"

      I haven't seen that. Where did you get that?

      Delete
    5. "My information on the cost of the airwing and the number 54 for Ford have nothing to do with my view that the big angled deck aircraft carrier is obsolete or should not be the centerpiece of a Navy CSG" IF you were in response to me, I don't think that the big deck carrier is obsolete.

      But there is a return on investment. Putting a big, increasingly expensive large deck carrier out there with a small, short ranged air wing is like building a Ticonderoga with Aegis but only able to be armed with ESSM.

      Sure you can do it, but the functionality you get isn't worth the money you put into it.

      The conclusion isn't that the ship is obsolete, it should be that you should give it the punch to be worth the money.

      Right now, I'm not sure that we are getting our money's worth out of the large deck carrier because of our short ranged air wing.

      Delete
    6. ComNav,

      I got the 54 number from recent articles on the Ford class issues- Norman Polmar maybe? Shocked me too but then, I was shocked when CVWs went from 90 to 65 with SuperHornet airwings. This must be a F-35C-SuperHornet only airwing on Ford Class, that would be at 54..

      You got it- an S-3 like aircraft would mitigate issues and make our F/A procurements more palatable/doable.

      Here is an interesting piece written recently:

      http://hrana.org/articles/2016/11/12-carriers-and-350-ships-a-strategic-path-forward-from-president-elect-donald-trump/

      b2

      JimW.,

      Couldn't agree more. We need numbers of aircraft and we need range/better performance/persistence from those aircraft on the carrier deck. Like now not 20 years from now. It won't happen based on our record this past 20 years...

      B2

      Delete
    7. "I got the 54 number from recent articles on the Ford class issues"

      I haven't seen this and it doesn't sound right. The current air wing has 4 squadrons that total around 44 Hornets/Super Hornets, 6 Growlers, 4 E-2C, and around 12 helos for a total of around 65 aircraft. When the F-35 reaches service, the squadrons will be reduced to 10 aircraft, according to the Navy. That would reduce the air wing by 4 aircraft to around 61. The number 54 is not right.

      I have read speculative articles that the Navy could disperse the helos to other ships to some degree which might reduce the total to the 54 range but that's not a Navy plan, at this time, just speculation by observers.

      If you find an article that cites 54, post a comment with a link!

      Delete
  5. Maybe we're looking at this the wrong way.
    It could be endemic corruption. It could be shipyards simply taking advantage of the tax payer.
    Or, it could be that the items on the Carriers built in the last 10 years have far more expensive items in them then the ones built in the 70's. I can imagine crew amenities for a small city of 4000 people in the 70's would've been x amount of VCR's and 15" tv's.
    Today, I'm sure when they build these things, its a LOT more TV's, personal computers, much more power outlets and generation (consumption would be orders of magnitudes higher, and thats just on a personel level, not on the integrated systems one, which we all know are much higher.
    Networking the entire ship, which I'm sure hadn't yet been invented in the 70's would've likely been a standard fit on ships built in the 00's and on.
    You may simply be overlooking all these small things which fast add up.
    our households internal items these days would likely add up to about 10% of the value of the house (stupid example time) wheres when we were kids, the internal contents wouldn't have run to more than a percent or 2 of the value. We have far more nifty expensive gadgets. Im sure the Navy do too.

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    1. You are ignoring a lot of reality in that comment.

      Let's start with costs of the electronic entertainment devices you mention. Let's be ridiculous and say that a carrier has a crew of 5000 and every crew member has their own $1000 TV. That's a cost of $5M. Compare that to the $3B (BILLION ! ) dollar cost increase for a carrier from 1970 to 2006 (2016 infl. adj. cost) or the $9B cost increase from 1970 to 2016.

      All the electronic entertainment and networking in the Navy don't even remotely account for that kind of cost increase!!!!! Now, let's take that utterly ridiculous $5M TV cost and double it for all the other electronics and supporting networks. That would be $10M. That's still absolutely nothing in comparison to the billions of dollars of cost increase for the carriers.

      There's another reality here and that is that electronics are continually coming down in price. My family's first crude color TV with a 12 inch screen and no resolution or features cost several hundred dollars. Today, you can get a good TV for one to two hundred.

      You didn't really think this out did you?

      You need to up your game if you want to continue commenting.

      Delete
    2. What type of data is available for segmenting the carrier construction costs? Are certain systems like the reactors exploding in cost? Are we simply paying yard workers more?

      Delete
    3. That's exactly the right question. Unfortunately, I've never seen an itemized breakdown of costs so I can't answer.

      Delete
    4. That SCN report you link to has some breakdown, look starting on page 21 of the pdf. I think that's just for particular fiscal years, so you'd have to pull together a bunch of them to get a real picture. I'd love to do that, but already spend too much time on this rather than things that, you know, I earn a living doing.

      Still, interesting data there--the EMALS costs $777 million, which surprised me (and makes me rethink the small carrier idea).

      Delete
    5. CNO
      You rail against people being rude to you or one another, yet your replys are seldom polite.
      So, to answer you without getting personal. I think its you that hadn't thought out your response.
      As usual, you're referring to the facade. Whereis as a sys admin, i see the exact cost of running the infrastructure to provide (in this case a small standalone city) the 5000 crew with modern digital amenities.
      So, while a laptop/tv per sailor (obviously an exaggeration, lets press on none the less) may only run to a few 10's of millions of dollars (militarised/hardened/navalised electronics are orders of magnitudes more expensive, but again, lets press on) the infrastructure to house, run, facilitate their use is much much higher. Again, navalised/militariesed, what may only cost $50 mil for civilian use in terms of network hosting equipment, will be (at a guess) 4 times that for a CVN and at a guess, the cost of running and maintaining it will again be much much higher. Note the recent case where a guest on a CVN opened a phishing email, yet the onboard systems caught it. Thats many staff, specialised staff, using very expensive systems, and thats one tiny example of a tiny fraction of the things that exist on a modern CVN allowing modern technologies to be deployed and used which in the 70's weren't anywhere on the planet outside of a few labs in Burkley.

      Thats the rubbish that the sailors get to use on their down time.
      What about the systems in place to run the Radars, missile defence, air traffic control, etc, etc etc etc etc.
      All modernised, digitised, super computer hosting, huge electronic infrastructure replacing what could only have been a mix of kludge and mechanical nascent systems in the 70's.
      Have i made my point? Or am i still an idiot?

      Delete
  6. I know there are different inflation cost adjusters. the most common one is household purchasing power but there are others, such as shipyard earning indexes etc
    This Rand report looks into ship building price indexes and what it could be used for by US Navy, its a bit old now (2008)
    http://www.rand.org/content/dam/rand/pubs/technical_reports/2008/RAND_TR520.pdf

    This current look at shipbuilding costs from the CBO, shows the ship building inflation is always higher than ordinary inflation.
    Interestingly they calculate a much higher cost price for Ford than the $12.6 bill. $14.7 B!
    "The Navy’s current estimate of the total cost of the lead
    ship of the CVN-78 class is $12.9 billion in nominal dollars
    for the period from 2001 to 2016, an amount that is
    equal to the cost cap set in law.19 CBO used the Navy’s
    inflation index for naval shipbuilding to convert that figure
    to $14.7 billion in 2015 dollars, or 23 percent more
    than the amount requested in the President’s budget proposal
    when the ship was first authorized in 2008. The
    Navy’s estimate does not include $4.7 billion in research
    and development costs that apply to the entire class. "

    Other ship class costs are also analysed.
    https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/50926-Shipbuilding.pdf

    ReplyDelete
  7. Does the analysis take into consideration the rising cost of labor and materials? All things being equal, comparing costs based on inflation is fine. But, the cost of labor and materials are important to consider. Probably to a lesser extent, compliance with federal regulations is another factor that drives costs upwards.

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    1. In a general sense, inflation IS the rise in labor and material costs. Those increases are why consumer prices go up which is what inflation is.

      Delete
    2. I dont think thats right.
      Inflation is the devaluation of your currency, rising costs of labour aren't usually because of inflation, its the labour is worth more, its more highly skilled and produces a more expensive product.
      Concurrently, price of materials also increases, and not just because of inflation. Even at your most basic level, the steel we build ships from today isn't the steel that was used in 1945 to build ships, its much more corrosive resistant, made using techniques which are less harmful to the environment, etc. All these factors combined inflate the price of goods today above and beyond what can be accounted for by mere inflation.

      Delete
  8. As Ztev Konrad stated the CBO reports the inflation adjusted cost of the Ford is $14.7 billion in 2015 dollars, the $12.9 billion is in "nominal" dollars for the period from 2001 to 2016. The Navy's own inflation estimated cost of the Ford is $15 billion in 2013 dollars based on their own unique inflation index for aircraft carriers as noted in the CBO FY2014 Navy's shipbuilding plan .

    The above figures exclude the $4.7 billion R&D for the planned six build plus the costs after commissioning but before able to join the operational fleet, Outfitting and post-delivery costs, Cost changes related to the insertion of new technologies, Cost changes due to non-recurring design and engineering, Costs associated with the correction of deficiencies that would affect the safety of the ship and personnel or otherwise preclude safe ship operation and crew certification, Changes due to urgent and unforeseen requirements identified during shipboard testing.

    https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/44655-Shipbuilding.pdf p21 note 16

    ReplyDelete
  9. "...the inflation adjusted cost of a carrier has risen steadily since 1970.... Why?"

    Part of the reason may be that the oficial CPI calculations have been jiggered with over the years to understate the actual rate of inflation. John Williams at ShawdowStats explains the various tweaks that have been made...all of which, according to him, were purposefully designed to produce a lower rate of inflation than what was actually occuring in the economy.

    http://www.shadowstats.com/alternate_data/inflation-charts

    ReplyDelete
  10. Ah, Augustine's 16th law. Though if you compare the cost of the carriers to US GDP, the pattern isn't as clear.

    One question is: is this a matter of (optimistically) technology pushing us towards ever more expensive highly capable ships or (pessimistically) spending more for no good reason.

    The Navy claims the Ford brings about $100M/ship-year in savings, which works out to a present value of around $1.5 billion over 50 years. Take that with a large grain of salt, but lets say that leaves the Ford costing between 130% and 180% of a Nimitz over its lifetime.

    Is a Ford 1.3 or 1.8 times as good as a Nimitz? The claim is for a 33% increase in sortie rate, at the low end of the cost increase range. No idea how much the other goodies (better radar, lower RCS, more power) matter.

    There's a bit of a bet-hedging also going on, in that the Ford has a lot more available power and space. What are the odds that that enables something revolutionary (self defense lasers?) sometime over the next 50 years?

    So, not easy to draw any simple conclusion. Raises lots of good questions...
    - Is our procurement process broken/corrupt? Are we getting what we're paying for?
    - Are our naval construction plans out of touch with the reality of the decline in U.S. ship building capability?
    - Is building small numbers of high tech units the right strategy?




    ------
    Year Carrier ($M) GDP ($T) Carriers/GDP
    Eisen. 1970 679 1076 1585
    Lincoln 1988 2596 5253 2023
    Reagan 2010 4700 14960 3183
    Bush 2006 6000 13860 2310
    Ford 2016 12900 16770 1300




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  11. OK well I’m just going to devil’s advocate here for a bit.

    Because in general I think you have a very very good point here, and questions need to be asked, before we get to a stage where 1 ship IS the entire budget for a year.

    BUT, for Ford Class.

    They are going to maintain that the automation, meaning that you only require about 4000 people to run it vs. 6000 is justifying the extra cost. And THAT saving is certainly a significant amount in salary alone, before you consider hotel services and resupply logistics.

    Now “return on investment” is certainly a method of selling a product.

    However in this case, as it’s a publicly funded endeavour, you might hope it was more based on actual hardware, rather than the concept of, “we'll save you this much so pay us this much” type idea.

    Beno

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    1. Two things, Ben ... One is that the post was only concerned with the construction cost. The second is that it doesn't matter how cheap a ship is to operate (heck, it could be free!) if you can't afford to build it. We're already in the death spiral of increasing costs causing decreased numbers which, in turn, means higher costs which, in turn, means fewer numbers which, in turn ...

      There's a point beyond which no amount of operating cost savings can compensate for an unaffordable construction cost.

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  12. Why is the Nimitz rising rapidly in cost throughout its life?

    If the Ford class is actually over $15 billion USD, then assuming the same number are built, the final one could be in excess of $25 billion in inflation adjusted dollars!

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    1. "Why is the Nimitz rising rapidly in cost throughout its life?"

      That's the million (OK, billions) dollar question of the post and I have no answer. The Nimitz was a mature design in serial production. Yes, there were tweaks from one to the next but nothing that could remotely account for billions of dollars increase. In fact, some things, like electronics, have gotten steadily cheaper so each succeeding Nimitz should have been slightly cheaper, not hideously more expensive.

      The trend is clear. The explanation is not.

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  14. Whatever else goes on in these discussions, CNO, keep up the oversight and hammer away.

    Because
    http://www.combataircraft.net/2016/11/10/more-marine-hornet-woes/
    this.

    I had no idea things were this bad. Aside from the huge cost of the carriers, if you can't even field the damn birds theyre so expensively not carrying, then what the hell's the point of even funding them in the first place?!?

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  15. USS Theodore Roosevelt (the 4th Nimitz CVN) should also be on your list as it was the first CVN to break the $2b barrier and caused a great deal of pro/anti CVN discussion in 1978. Ironically, Captain John S. McCain (future Senator) led the Navy's fight to secure funding for the TR as the navy Office of Legislative Affairs officer (OLA.) McCain went door to door in the House and Senate office buildings begging for funding. Ironic, as now is the leading critic of large nuclear-powered carriers.

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    1. Nice historical reminder, there!

      My sense of it is that McCain is less a critic of carriers, per se, and more a critic of what he perceives as the runaway costs of carriers, the Ford in particular. If true, this mirrors my views. I'm 100% for carriers and 100% against the Ford because of what I see as excessive costs related to unproductive and immature technologies.

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