Friday, July 27, 2012

CBO Shipbuilding Analysis Report

The Congressional Budget Office has published its analysis of the Navy’s current shipbuilding plan.  It’s worth noting several points from the report. 

First, the Navy’s cost estimates are, charitably, incompetent or, more realistically, intentionally misleading, bordering on fraudulent.  The Navy’s estimate is that it will build 268 ships over the next 30 years at an average yearly cost of $16.8B.  CBO estimates the yearly required cost will be $20.0B and even suggests that their estimates may be too low.  By comparison, the current actual yearly cost is $14.9B.  Does anyone believe that figure is going up in the foreseeable future, given the budget problems, looming cuts, and possible sequestration?

Setting aside the incredible unlikelihood of budget increases, does the Navy’s history of cost estimating inspire any confidence?  The LCS, LPD-17, CVN-78, Virginia, etc. all wound up costing 30% - 100% more than the Navy’s estimates.  So, it would seem that CBO’s estimates are likely to closer to reality than the Navy’s. 

300 Ship Fleet?  Not Likely!

Now, the interesting part of this cost estimating is that the Navy knows its own history of estimating failures and yet continues to insist on using the same methods it always has.  That’s either incompetent or fraudulent.  You decide for yourself.

Moving on, the Navy plans to build 268 ships to achieve a 300+ fleet.  However, using the CBO’s estimate of the average cost per ship of $2.2B, the build rate for new ships under the current budget is only 6.7 ships per year which gives a total of 203 over the 30 year period as opposed to the Navy’s goal of 268 ships.  The more realistic CBO numbers show that the Navy is not going come anywhere near a 300 ship fleet.  To be fair, no one knows what the yearly shipbuilding budget will be ten or twenty years from now.  It may be higher than now but, then again, it may well be smaller.  I’m guessing that it will remain unchanged for the next several years.

Speaking of achieving a 300+ ship fleet, CBO notes that the Navy is assuming that the Burke class destroyers will have a service life of 40 years even though no previous destroyer class has even come close to that.  If they have a more realistic life of 25-30 years, the 300+ ship fleet becomes even more of a fantasy.  And, of course, the Navy is now counting the Joint High Speed Vessel (JHSV) and ocean surveillance ships as part of the fleet.  Throw in the absolutely toothless LCS which will make up a quarter of the fleet and the fleet numbers may look better on paper but it illustrates how much less capable the future fleet will be.

Finally, CBO notes that the Navy’s cost estimates fail to include the costs for post-delivery fitting out, nuclear refuels, and various other things that come from the new construction account.  These push the actual construction costs up by about $2B per year which means the yearly construction budgets should actually be $18.8B (Navy) and $21.9B (CBO) which are even less likely to be achieved.

The CBO report makes it pretty clear that the Navy’s 30-year shipbuilding plan is just a fantasy of wishful thinking rather than a realistic plan.  To me, it looks like a political ploy to enable the current administration to be able to claim that they are maintaining the fleet even though it is actually shrinking.  The really sad part is that the uniformed Navy leadership is going along with this.

(1) Congressional Budget Office (CBO) – An Analysis of the Navy’s Fiscal Year 2013 Shipbuilding Plan, July 2012, Pub. No. 4456

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