The National Security Strategy states that the defense agenda remains as security through strength and consists of four fundamental elements: Strategic Deterrence and Defense, Forward Presence, Crisis Response and Reconstitu-tion. The first three elements appear to be for defense roles which are executed with peacetime force levels. The usefulness of submarines to meet those requirements can be addressed in rigorous and convincing terms. What is not well understood is how submarines fit within the reconstitution strategy. Reconsti-tution means more than generalized activation of industry. There must be a potential within industry to respond to defense demand. The potential of the submarine industrial base defines the capability to support a future submarine force. Without continuing production the nuclear submarine industrial base is in danger of evaporation, thus removing credible potential for reconstitution.
Simplifying greatly, the lead time for a new submarine is 12 to 14 years (from design start to completion of the first unit). The lead time for manufacturing the major structural and large subsystems is 6 to 7 years. These times assume an operating industry. To be ready for an unknown threat, either we must have great foresight or we must maintain continued production even at a low rate. Force levels tend to show that there is no pressing military need to spend any money to continue construc-tion and that depending on the final resolution of the force level question new submarines are not required until about 2010. Because most of the manufacturing of subsystems is now complete for the remaining OHIO, Improved LOS ANGELES and SEA WOLF (even if three are built) classes, unique suppli-ers of submarine equipment now face a gap in production for 10-12 years.
What should the Submarine Force do to support the reconstitution strategy of our military force? How is defense industry capability related to reconstitution? The time to face these questions is now. Because of the various legal and administrative hurdles built into our current system of executive recommendation and legislative approval, any delay may well defer the problem beyond recovery. The submarine industry will disappear.
Throughout the defense industry, the dissolution of the Soviet Union as the primary threat and the nation’s economic strictures are causing a significant restructuring. This consolida-tion is in addition to significant downsizing that occurred during the 1980s. In spite of rising procurement budgets, the number of defense contractors in 1982 was 118,489 versus a number of 38,007 in 1987.1 For the ten years from 1987 to 1997 there is expected to be almost a 50% decrease in the procurement budget which means a further consolidation of the defense industry.1 This estimate is last year’s budget and future year’s defense plan. There will be more.
Additionally many studies by industry, think tanks and DoD have concluded that there are several areas ripe for acquisition reform. These areas apply to generic procurement and have varying applications to specific industrial sectors. Four areas commonly identified are: Accounting Requirements and Audits, Military Specifications and Standards, Technical Data Rights, and Unique Contract Requirements.3 Improvements in these areas definitely need application to defense acquisition as a whole but acquisition system reform will not by itself enable the submarine building industry to survive. It is unique. There are several aspects and demands in submarine construc-tion (quieting, shock resiliency and nuclear propulsion) that have no counterpart in other industries. The question becomes one of ensuring that the capability to build submarines in the future is maintained.
As a candidate, President Clinton said “Where I disagree with President Bush is on retroactively canceling two of the three SEAWOLFs on which work has already begun. Any savings are negated by the adverse impact on the submarine industrial base… I would wind down production in a way that will preseiVe our crucial submarine construction capability… The end of the Cold War means that we can save money by building fewer submarines. But we remain a maritime nation and the world is not yet so safe that we can prudently sacrifice our ability to build submarines at all.”4 President Clinton seems to understand that if submarine construction is terminated, the U.S. wiJI sacrifice an important component or our national military strategy to support our status as a leader and a mari-time nation. That component is reconstitution. The future loss Is submarines.
Reconstitution is preseiVing a credible capability to forestall any potential adversary from competing militarily with the United States. The President”s National Security Strategy amplifies reconstitution as “forming, training, and fielding new fighting units from cadres; mobilizing previously trained or new manpower; and activating the industrial base on a large scale.”5 Although these words are from President Bush, the essence of reconstitution is still valid. But it is more than redirecting or activating industry. In peacetime, the defense industry must support cost-efficient production. In a crisis it must surge as required for immediate needs. In a major conflict, it must convert and create as necessary to greatly expand manufactur-ing. Reconstitution is industry’s whole potential (whether producing or not) to support the needs of the military when required. The decision to reconstitute is difficult. For complex weapons and systems it requires the ability to forecast several (6-10) years ahead that a threat to the United States requires a larger military force. Because the time frame is so long and because the threat must take some drastic actions before America actually mobilizes, the decision will not be simple, easy or unique. For complex production and long-life items, reconstitution can mean little more than expansion of current production.
The military requirements-driven production rate for submarines is numerically dependent on the force level. By comparing with current levels one can estimate when new submarines will be required to maintain the appropriate level. If the industry (and budgetary & political considerations) were not a concern and if the force level goal was about 55, then scheduling a delivery rate of about 3 per year beginning in 2010 is a simple numerical answer. That means design starts about 1998 and actual manufacturing of the long lead items would be about 2004. Congressional authorization for the first submarine would be FY 02. See Chart 1.
Beginning 2008 the rate of decline is about 3.5 submarines per year. One could then make the argument to begin deliver-ing the New Attack Submarine and maintain force levels near that level. This numerical solution exists. But is it a realistic solution or just a simple one? Can the industry survive the 10-12 year gap in production?
It is commonly believed that submarine new construction could not survive the 10-12 year gap and therefore the push for CENTURION is proceeding. If the commitment to initially fund the CENTURION in FY 98 holds, the gap is not that long. The long lead items would be appropriated in FY 96. This argument (probably being debated today in hearings) is comple-mented with completing the third and perhaps the fourth SEAWOLF to bridge that gap. Yet the solution is more than just waiting for the CENTURION.
There is a question of affordability. If money were the only consideration then the simple numerical solution might work. A disadvantage/advantage of submarines is that they require large initial investments and then small operating costs. Most major defense programs also call for large initial investments, but on a relative basis, there is more put into the submarine initially and less cost over its life. There are critical components with little commercial counterpart that are the major reasons for this large initial cost. The reactors are now expected to last the life of the ship. Other major systems and hardware installations (pumps, valves, etc.) are expected to last much longer than their predecessors. The high quality and investment in manufacturing over the last 30+ years have significantly improved ship performance. Most future expenses are tiny compared to the initial investment. There is little prospect for the industry to sustain itself with repair and maintenance work. Future expenses and life cycle costs (and savings) are bard to express in annual budgeting, but from interviews with Senate and House defense committee staffs, they understand these implications. Yet the pressure for near term savings is immense.
Some of the major structural work include hull fabrication and the reactor and propulsion plant structural manufacturing processes. This is the work that is essentially complete for all submarines on order today. To meet the simple numerical solution, this work for the New Attack Submarine would start in 2004. Just for the nuclear components, Admiral Watkins, as Secretary of Energy, concluded that “it would take at least ten years to restart the naval nuclear capability in this country – assuming it could be done at all.”7 The reasoning for this time period comes from the extensive quality control methods, high manufacturing standards, unique trade skills, and specific methodology and performance standards in addition to the basic machinery. Part of the consideration also are the federal regulatory requirements that would have to be reestablished.
Technically it could be done. Financially it could probably be shown to be more cost effective to continue an extremely low rate of production rather than commence a restart for a program ten years ahead of time (which would be now anyway). Politically it would be Dearly impossible to restart a similar program today.
Again as a candidate, President Bill Clinton said “…We must shape and support the industrial base· to support these key capabilities. We shall survey our needs at the start and fund the capabilities, such as the armored vehicles, submarines and high performance aircraft, that are crucial to future weapon develop-ment Special attention must be given to critical components that have no civilian counterpart, such as submarine propulsion, tank armor and large caliber gun tubes.”‘
At the prime level there are two new construction yards, General Dynamics/Electric Boat and Newport News Shipbuild-ing Company. At an extremely low rate of one boat every two years until the CENTURION is built, Electric Boat has said it could barely stay in business. If there were no new boats until CENTURION there is some prospect that one yard could disappear. Newport News does argue that it can sustain submarine new construction capability with the FY 95 carrier new construction, but that remains to be seen. If the numerical solution were taken and there were no new submarine deliver-ies until 2010, there is some probability that neither prime would be able to construct submarines. This is Dot a case for industrial policy but a case for credible poteDtial to build submarines in the future.
The prospects of the second and third tier suppliers remain-ing is in greater doubt The number of suppliers has declined similarly to the whole defense industry. Today there are about 30-35 sole source suppliers for submarine equipment. Table 1 shows some examples. For some, the submarine business is their only source of business. For other companies the prospects of covering the losses with other business temporarily is slim. For the good of national interest goes only so far before the ownership cuts its losses.
Thus reconstitution and the defense industrial base mean different things depending on the force and equipment involved. As stated above, it involves initially drawing on cadre-type assets at the same time activating the industrial base on a large scale. For equipment its meaning depends on type, substance and manufacturing complexity. There is a spectrum or time-frame to be considered based on the sophistication of the weapon system or equipment as well as the industry that creates the weapon. An illustrated example follows:
The division between time-frames is fuzzy and even the confines of a particular sector varies across the spectrum. For example the B-2 time-frame would be a lot longer than the Apache helicopter. Tomahawk missiles are a lot longer than artillery missiles. What is clear is that shipbuilding is one of the longest time-frames for manufacturing and thus for reconstitution.
Defense industrial planning for reconstitution includes current manufacturing levels and current surge capacity with the industrial potential to activate in the face of a major crisis. For example, consumables would be a relatively low level of actual production with a large margin for surge production plus an even larger potential for industrial activation. Generally industry would be able to convert and respond to defense needs. Shipbuilding is at the other end of the spectrum. There would be relatively little margin for surge expansion and little potential for industry activation to support shipbuilding.
Because of the tighter margins between actual production, capacity and potential for shipbuilding, the reconstitution solution to shipbuilding revolves around the level of actual production to sustain. There is a basic acquisition strategy that continues technology improvement but no production. Design and technology advancement would occur but no production would start. If there are significant production gaps that might damage the ·industrial base, the next step would be low-rate production. This strategy sustains the production forces although not at an economically efficient rate which means unit costs are high. It does sustain the manufacturing processes and skills. Next is the economically efficient rate which means production near capacity and low unit costs.
A study by RAND Corporation descnbes a decision frame-work for production restarts. Discussing the potential for these restarts, it outlined similar options for production levels (described in Table 2). Although the study focused on aviation systems, the analysis made a pertinent reference to industrial capacity. “‘The industrial base for aircraft is sufficiently large so that the feasibility of production restart seems reasonably assured. The industrial base for production of large naval vessels appears subject to greater uncertainty…tt9 The analysis also notes that for very specialized items it could easily be ten years or more to reconstitute (activate) if the production line was completely shut down. The key is that similar options exist across the various sectors of defense industry. The solutions will not be similar as each sector has unique characteristics that must be considered.
What is the solution for the submarine industrial base? As seen above at least ten years could easily be the stretch that the prime(s) and suppliers must endure. But even with the assumption that the new attack submarine (CENTURION) will be funded in 1998 as planned, there would still be an estimated S-6 year gap in production. Whether it is 5 years or 12, the question to be faced is: what should be done today to enable the next submarine to be constructed without excessive costs or risks? There are three alternatives: 1) Do nothing, 2) Preserve the industry through continued production, 3) Shutdown and Restart of the industry when needed.
- Do Nothing. Always an alternative to be considered but rarely the answer. The long lead items by suppliers and hull fabrication manufacturing processes are today completing their tasks for the last submarines on order. They will have no business for at least five years. Granted some of the suppliers will have some business for repair, maintenance and overhaul but the volume of that business is significantly less than new construction. How does one convince a business to maintain people skills, keep manufacturing processes and tooling in working order, and invest in modernization? It is not by promising lots of business in five or more years.
- Preservation of industry through continued production. A hard solution in the near term due to budget constraints and political pressures, probably the easiest and best solution for the long term, and possibly the only practical answer. Its disadvan-tage is budgetary. The need for additional submarines now is nonexistent. At a cost of about $1.4 Billion dollars (if SEAWOLF is chosen) every two years when the near term budget priorities are everywhere else, the likelihood of getting it funded is slim. Yet when long term issues are brought forward such as how to provide a feasible solution to future submarine construction, then this solution becomes stronger and more cost effective. The long term affordability to sustain a submarine capability exists with low rate production.
- Shutdown and Restart. If we deliberately let the industry collapse yet ensure everything feasible is saved for an orderly restart, it may be technically feasible. But could the suppliers, subcontractors and prime(s) be (re)established? There are business and regulatory aspects in addition to incurring signifi-cant costs that must be addressed. What are the long term prospects of success? Can a fair profit be obtained in a reasonable time for the private investment? Can the long term commitment be made by government? Can the regulatory considerations such as environmental and social requirements be reestablished? Can the mere decision of government saying yes to restart overcome all of the legislative requirements (and public questions)? These problems are unanswerable today. Even so, the question is moot if the numerical example at the beginning is true, because the restart would have to begin now to be ready for authorization and construction to deliver in 2010. We are now back to the question of how to sustain the industry to support submarine construction.
Even as this articJe is published, congressional debate is probably considering these tough questions that prevent an obvious solution. A minimal rate of production will sustain the production base but costs a good deal of money in the budget years. (The third SEAWOLF wouldn’t cost as much due to previous appropriation and rescission. but the implications are still there.) The deficit issue is forcing further tightening of available f1,1nds. The prospects of CENTURION being ready for FY 98 funding must be considered. Defense acquisition programs are notorious for some delays. There is still much to be done. The question remains as to how long this production gap will exist and what will be enough to sustain the industry until CENTURION actually starts. As shown earlier the reconstitution stmtegy for submarines depends on the poten-tial of the industry. The answer is low mte production to sustain the production base and especially the suppliers. The result is future availability of submarines.
Captain John E. Dingwell, USN(Ret.)
Commander H. Lee Holthaus, USN(Ret.)
Commander W. A. Schoenfold, USN(Ret.)