National Defense Sealift Fund

ComNavOps stumbled across an interesting ship construction funding mechanism that isn’t part of the normal Shipbuilding and Conversion budget process.  Here’s a good description of the fund from Breaking Defense website (1).

“The legislation at issue is the decades-old National Defense Sealift Fund (NDSF), an account outside the regular Pentagon budget that pays for unarmed naval auxiliaries such as transports, supply ships, and oilers. Precisely because the NDSF operates outside the normal budget and procurement rules, it has always had its critics on Capitol Hill and in the Pentagon. Now that the Pentagon is striving to get its books straight enough to audit, the Navy has decided it needs to get rid of this particular complication, so its 2015 budget request would zero out the fund. Instead, the proposed T-AO(X) oiler and future support ships would be funded out of the regular Shipbuilding & Conversion, Navy (SCN) account that pays for warships.”

No, I’m not suggesting that there’s anything nefarious about this.  It’s just one of those accounting oddities that abound throughout government acquisition.  I was curious, though, as to the size of the fund and how much it produced in the way of vessels.  A quick search of the Navy budget justification documents revealed that the fund averaged about $1B per year over the recent seven year period and funded T-AKE and MLP vessels among others.  Those are significant vessels and a billion dollars is a noteworthy amount.

The key point here is what happens if the Navy zeroes out this fund, as stated in the article.  If the funds are simply transferred to the regular SCN then this is a simple accounting exercise and worth no further attention.  On the other hand, with Congress enforcing sequestration and all manner of budget limitations, if the SCN is not increased to compensate for the loss of the NDSF then the Navy is faced with trying to fund additional ships with no more money or having to cut some currently planned ships to meet the budget.

Of course, there is another possibility whose contemplation requires a more cynical view of the Navy (and I’m just the guy for that!).  The funds may be transferred to the SCN but instead of using the money to buy auxiliary ships, as intended, the Navy may opt to stop building the support ships and use the “extra” money for the shiny new carriers and Flt III’s that the Navy so desperately prefers over the unsexy but absolutely vital supply ships.  You’ll recall some previous posts in which we pointed out that the Navy is already early retiring those very types of support ships.  Is this possibility really that far-fetched?

We’ll have to keep an eye on this.

(1) Breaking Defense, "Engine Maker ‘At Risk;’ Wants Navy Help", Sydney J. Freedberg Jr., 14-Nov-2014,

http://breakingdefense.com/2014/11/domestic-diesel-builder-takes-on-navy-over-foreign-engines/