Brian Bradley
NS&D Monitor
12/19/2014
A report released this week by the Congressional Budget Office estimates the total production cost of the Ohio-class replacement submarine at $92 billion, compared with the Navy’s $79 billion estimate. While the Navy has asserted its estimate is partly explained by a would-be favorable cost-by-weight ratio generated through its plan to recycle the fast-attack Virginia-class sub’s design, technology and parts, the CBO report points to budget data from the fledgling development stages of the current ballistic missile sub—the Ohio-class—whose procurement occurred during the same period as the fast-attack Los Angeles- and Improved Los Angeles-class models.
CBO points to those procurements of the 1970s and 1980s, when the cost per thousand tons of the Ohio-class sub was slightly more than the cost of the fast-attack submarines, and is conservative about potential savings this time around. While Navy expects a 19 percent improvement in the cost-to-weight relationship of the Ohio-class replacement over the Virginia-class, CBO expects a 4 percent improvement. “[B]ecause ballistic missile submarines (like the Ohio Replacements) tend to be larger and less dense ships than attack submarines (like the Virginia class), they will be easier to build and therefore less expensive on a weight basis, the Navy argues,” according to the report. “Yet the historical record for the lead ships of new classes of submarines in the 1970s and 1980s provides little reason to believe that ballistic missile submarines are cheaper by weight to build than attack submarines.”
Ohio Replacement Among “Most Significant Uncertainties” in Navy’s Shipbuilding Budget
“An Analysis of the Navy’s Fiscal Year 2015 Shipbuilding Plan” acknowledges that the design, cost and capabilities of the Ohio-class replacement are among the “most significant uncertainties” in the Navy and CBO analyses of the U.S. shipbuilding budget, largely because of changing costs and inflation rates. CBO’s estimate accounted for an overall rising trend of shipbuilding costs vis a vis the national inflation rate, as inflation in the shipbuilding budget routinely outpaces GDP inflation, the report notes. “Since 1984, the difference between the rate of increase in the Navy’s shipbuilding cost index and the GDP price index has averaged about 1.3 percentage points per year,” the report notes.
CBO projects that shipbuilding costs will rise 1 percentage point faster per year than national inflation from 2014 to 2020, compared with the Navy’s prediction of 0.9 percent. The Navy on Dec. 16 refuted CBO’s Ohio-class replacement estimate and advocated its own, as service spokesperson Lt. Rob Myers noted that the Navy applies baseline estimates throughout its 30-year shipbuilding plan, and said the service cannot predict fluctuations in inflation rates 20-30 years ahead of time, according to a Breaking Defense article. The Navy did not respond to a request by NS&D Monitor this week for comment.
CBO used data from the Virginia-class submarine program to arrive at its estimate of $13.8 billion—in 2014 dollars—for the first Ohio-class replacement submarine, and the organization projects each subsequently produced SSBN to cost an average of $7.1 billion. “The cost of the first submarine of a class with an entirely new design is particularly difficult because of uncertainty about how much the Navy will spend on nonrecurring engineering and detail design,” the report states. The Navy estimates the cost of the first Ohio-class replacement at $12.4 billion, and projects the follow-ons to cost an average of $6 billion, the study notes.
Estimate Not Set in Stone
While the $92 billion estimate isn’t necessarily set in stone, Defense Department programs often run over armed services’ budgets, and the Ohio-class replacement might be no exception, Kingston Reif, Director for Disarmament and Threat Reduction Policy at the Arms Control Association, told NS&D Monitor this week. “Based on the track record of the Ohio boats and based on previous inflation, impacts on previous shipbuilding costs and what that might be in the future and just general cost growth of military programs, I think it’s a solid estimate,” he said. Reif also cited the Navy’s publicly stated concerns about funding the program within the current shipbuilding budget structure. “Whether it’s [$]79 [billion] or [$]92 [billion], it’s money that at this point isn’t foreseen to be available in the shipbuilding budget.”
Michaela Dodge, Policy Analyst for Defense and Strategic Policy at the Heritage Foundation, told NS&D Monitor during a phone interview this week that actual procurement costs often trump their estimates, but the increases can also be attributed to procedural factors outside the federal acquisition structure. “We’re building very complex weapon systems, and I think it goes more to … Congressional appropriations and delays,” she said. The potential return of sequestration in Fiscal Year 2016 could force immediate budget decisions that diverge from long-term policy goals, Dodge added. “Obviously, it is important to make sure that your programs are on cost, on budget, that you can afford them, that you can provide for them,” she said. “But at the end of the day, the policy issue is what kind of deterrence we want to have in the 21st Century.”
The Ohio-Class Replacement Program is currently undergoing research and development, a phase that CBO estimates will cost a total of $10 to $15 billion. Any Congressmen or Senators potentially opposed to development of the Ohio-class replacement have remained largely silent about the submarine, mainly because the program has not progressed to the meatier phases of the budget process, Reif said. “The Ohio costs aren’t really going to come due until the very end of [the Future Years Defense Program] and the five years after that,” he said. “So there isn’t an opening in Congress right now to call for changing the current plan for the Ohio Replacement, save for a few members.” But as time moves on, Reif said he expects more Congress members to tune in to the Ohio-class replacement. “I think that many more members are going to be paying attention to this in the coming years as the costs of the program rise,” Reif said. “We just don’t look out that far right now.”
This article was updated on 12/19/2014.
