The Navy’s proposed FY2013 budget requests $564.9 million for continued research and development work on the Ohio replacement program (ORP), a program to design and build a new class of 12 ballistic missile submarines (SSBNs) to replace the Navy’s current force of 14 Ohio- class SSBNs. The Ohio replacement program is also known as the SSBN(X) program.
Under the Navy’s FY2012 budget, the first Ohio replacement boat was scheduled to be procured in FY2019, and Ohio replacement boats were to enter service on a schedule that would maintain the Navy’s SSBN force at 12 boats. The Navy’s proposed FY2013 budget defers the procurement of the first Ohio replacement boat by two years, to FY202 l. As a result of this deferment, the Navy’s SSBN force will drop to 11 or 10 boats for the period FY2029-FY2041.
The Navy in 2011 estimated the average procurement cost of boats 2 through 12 in the Ohio replacement program at $5.6 billion each in FY20 IO dollars, and is working to reduce that figure to a target of $4.9 billion each in FY20 IO dollars. Even with this cost- reduction effort, observers are concerned about the impact the Ohio replacement program will have on the Navy’s ability to procure other types of ships at desired rates in the 2020s and early 2030s.
Potential oversight issues for Congress for the Ohio replacement program include the following:
- the reasons for deferring the start of SSBN(X) procurement by two years, to FY2021, the cost and operational impact of this decision, and whether it would be feasible
- and cost effective to restore the start of procurement to FY2019, as planned under the FY2012 budget;
- the plan to design the SSBN(X) with 16 SLBM tubes rather than 20;
- the likelihood that the Navy will be able to reduce the average procurement cost of boats 2-12 in the program to the target figure of $4.9 billion each in FY20 1O dollars;
- the accuracy of the Navy’s estimate of the procurement cost of each SSBN(X);
- the prospective affordability of the Ohio replacement program and its potential impact on funding available for other Navy shipbuilding programs; and
- the question of which shipyard or shipyards will build SSBN(X)s.
This report focuses on the Ohio replacement program as a Navy shipbuilding program. CRS Report RL33640, U.S. Strategic Nuclear Forces: Background, Developments, and Issues, by Amy F. Woolf, discusses the SSBN(X) as an element of future U.S. strategic nuclear forces in the context of strategic nuclear arms control agreements.
ISSUES FOR CONGRESS
Two-Year Deferral in Start of Procurement
One oversight issue for Congress concerns the reasons for deferring the start of SSBN(X) procurement by two years, to FY202 l, the cost and operational impact of this decision, and whether it would be feasible and cost effective to restore the start of procurement to FY2019, as planned under the FY2012 budget.
The two-year deferral reduced funding requirements for the Ohio replacement program within the FY2013-FY2017 Future Years Defense Program (FYDP); its effect on the program’s total research and development cost and its total procurement cost over the longer run is less clear. As shown in Table 2, the two-year deferral would reduce the SSBN force to 11 or 10 boats for the period FY2029-FY2041.
In explaining the two-year deferral, Secretary of Defense Leon Panetta stated on January 26, 2012, that “our review determined that we could achieve better cost control by delaying the next- generation ballistic missile submarine for two years without hanging the survivability of our nuclear deterrent.”
In a follow-on briefing that same day, Ashton Carter, the Under Secretary of Defense for Acquisition, Technology, and Logistics (i.e., DOD’s acquisition executive), stated that the two- year deferral
is not a strategic decision; this is a managerial decision made partly for budgetary reasons but mostly because that puts the Ohio class replacement on a more predictable and stable schedule ….
With respect to the schedule [for the program], the schedule as it was [under the FY2012 budget], was an aggressive one, maybe even verging on optimistic. So I- all I’m saying is this is a safer schedule; we’re sure we can make this schedule. So it’s a little more secure; so, from a managerial point of view, a better place to be.
At a February 16, 2012, hearing before the House Armed Services Committee on the Department of the Navy’s proposed FY2013 budget, the following exchange occurred:
REPRESENTATIVE MIKE MCINTYRE:
Admiral, I wanted to ask you, with the Ohio Class SSBNs scheduled to begin retiring in 2027, how will delaying the Ohio Class replacement program by two years affect the Navy’s ability to meet STRATCOM’s [U.S. Strategic Command’s] at-sea requirements [for nuclear deterrent forces]?
ADMIRAL JONA THAN GREENERT, CHIEF OF NA VAL OPERATIONS:
Well, what we’ll have to do, we- we owe a certain number of submarines in a certain number of time. [sic] I can’t give you those numbers specifically due to the classification. But the point here is we have to measure the ability to meet that operational availability during that timeframe. We’ve done that. We’ve evaluated it. And it is equivalent to that- the operational availability of SSBNs that we provide today. Today’s numbers are acceptable to Strategic Command. We’ll work with them in the future, but they look the same.
And would you say in all candor that the delay in the Ohio Class replacement program is being done solely for budget reasons?
Predominantly budget reasons, but there is an advantage to this, and that is the design feature will be much more mature when we get to construction.
Potential oversight questions for Congress include the following:
- What impact does the two-year deferral have on the Ohio replacement program’s estimated total research and development cost and its estimated total procurement cost?
- How much risk was there in the program’s development schedule under the FY2012 budget, and how much mitigation of that risk is achieved by the two- year deferral?
- What is the potential for restoring the FY2019 procurement date for the first Ohio replacement boat, and how quickly would a decision need to be made on this issue be- fore the potential for restoring the FY2019 date would be lost? What would be the impact on Ohio replacement pro- gram funding requirements in FY2013 and within the FY2013-FY2017 FYDP of a decision to restore the FY2019 date?
A Design with 16 vs. 20 SLBM Tubes Overview
Another oversight issue for Congress concerns the plan to design the SSBN(X) with 16 SLBM tubes rather than 20- one of several decisions made to reduce the estimated average procurement cost of boats 2 through 12 in the program to $5.6 billion in FY2010 dollars. Some observers are concerned that designing the SSBN(X) with 16 tubes rather than 20 would create a risk that U.S. strategic nuclear forces might not have enough capability in the 2030s and beyond to fully perform their deterrent role. These observers note that to comply with the New Start Treaty limiting strategic nuclear weapons, DOD plans to operate in coming years a force of 14 Trident SSBNs, each with 20 operable SLBM tubes (4 of the 24 tubes on each boat are to be rendered inoperable), for a total of 240 tubes, whereas the Navy in the Ohio replacement program is planning a force of 12 SSBNs each with 16 tubes, for a total of 192 tubes, or 20% less than 240. These observers also cite the uncertainties associated with projecting needs for strategic deterrent forces out to the year 2080, when the final SSBN(X) is scheduled to leave service. These observers have asked whether the plan to design the SSBN(X) with 16 tubes rather than 20 is fully supported within all parts of DOD, including U.S. Strategic Command (STRATCOM).
In response, Navy and other DOD officials have stated that the decision to design the SSBN(X) with 16 tubes rather than 20 was carefully considered within DOD, and that they believe a boat with 16 tubes will give U.S. strategic nuclear forces enough capability to fully perform their deterrent role in the 2030s and beyond.
Testimony in 2011
At a March I, 2011 , hearing before the House Armed Services Committee, Admiral Gary Roughead, then-Chief of Naval Operations, stated:
I’m very comfortable with where we’re going with SSBN-X. The decision and the recommendation that I made with regard to the number of tubes- launch tubes are consistent with the new START treaty. They’re consistent with the missions that I see that ship having to perform. And even though it may be characterized as a cost cutting measure, I believe it sizes the ship for the missions it will perform.
At a March 2, 2011, hearing before the Strategic Forces subcommittee of the House Armed Services Committee, the following exchange occurred:
General Kehler, thank you so much for your continued thoughts and of course your leadership. One item that we had a discussion on was the triad, of looking to- of the Navy and the tube reductions of 20 to 16, as contained in other hearings on the Hill today. I would like your thoughts on the reduction of the tubes and what you see driving that, how you see it affecting our strategic posture and any other thoughts you have on that?
AIR FORCE GENERAL C. ROBERT KEHLER, COMMANDER, U.S. STRATEGIC COMMAND
Thank you, Mr. Chairman. Well, first of all, sir, let me say that the- in my mind anyway, the discussion of Trident and Ohio-class replacement is really a discussion in the context of the need to modernize the entire triad. And so, first of all, I think that it’s important for us to recognize that that is one piece, an important piece, but a piece of the decision process that we need to go through.
Second, the issue of the number of tubes is not a simple black-and-white answer. So let me just comment here for a minute.
First of all, the issue in my mind is the overall number of tubes we wind up with at the end, not so much as the number of tubes per submarine.
Second, the issue is, of course, we have flexibility and options with how many warheads per missile per tube, so that’ s another consideration that enters into this mixture. Another consideration that is important to me is the over- all number of boats and the operational flexibility that we have with the overall number of boats, given that some number will need to be in maintenance, some number will need to be in training, etcetera.
And so those and many other factors- to include a little bit of foresight here, in looking ahead to 20 years from now in antisubmarine warfare environment that the Navy will have to operate in, all of those bear on the ultimate sideways shape configuration of a follow-on to the Ohio.
At this point, Mr. Chairman, I am not overly troubled by going to 16 tubes. As I look at this, given that we have that kind of flexibility that I just laid out; given that this is an element of the triad and given that we have some decision space here as we go forward to decide on the ultimate number of submarines, nothing troubles me operationally here to the extent that I would oppose a submarine with 16 tubes.
I understand the reasons for wanting to have 20. I under- stand the arguments that were made ahead of me. But as I sit here today, given the totality of the discussion, I am- as I said, I am not overly troubled by 16. Now, I don’ t know that the gavel has been pounded on the other side of the river yet with a final decision, but at this point, I am not overly troubled by 16. At an April 5, 2011, hearing before the Strategic Forces subcommittee of the House Armed Services Committee, the following exchange occurred:
Admiral Benedict, we have had this discussion, not you and I, l am sorry. But the subcommittee has had a discussion in the past with regards to the Ohio-class replacement program. The new START, though, when it was negotiated, assumed a reduction from 24 missile tubes per submarine to, I think, a maximum of 20. The current configuration [for the SSBN(X)], as I under- stand it, would move from 24 to 16. Can you discuss, for the subcommittee here, the Navy’s rationale for that? For moving from 24 to 16 as opposed to the max of 20?
NAVY REAR ADMIRAL TERRY BENEDICT, DIRECTOR, STRATEGIC SYSTEMS PROGRAMS (SSP):
Sir, as part- excuse me, as part of the work-up for the milestone A [review for the SSBN(X) program] with Dr. Carter in OSD, SSP supported the extensive analysis at both the OSD level as well as STRATCOM’s analysis.
Throughout that process, we provided, from the SWS [strategic weapon system] capability, our perspective. Ultimately that was rolled up into both STRATCOM and OSD and senior Navy leadership and in previous testimony, the Secretary of the Navy, the CNO, and General Chilton have all expressed their confidence that the mission of the future, given their perspectives, is they see the environment today can be met with 16. And so, as the acquisition and the SWS provider, we are prepared to support that decision by leadership, sir.
REPRESENTATIVE LARSEN: Yes.
And your analysis supports- did your analysis that fed into this, did you look at specific numbers then? REAR ADMIRAL BENEDICT: Sir, we looked at the ability of the system, again, SSP does not look at specific targets with … REPRESENTATIVE LARSEN: Right. Yes, yes, yes. REAR ADMIRAL BENEDICT: Our input was the capability of the missile, the number of re-entry bodies and the throw weight that we can provide against those targets and based on that analysis, the leadership decision was 16, sir.
At an April 6, 2011, hearing before the Strategic Forces sub- committee of the Senate Armed Services Committee, the following exchange occurred:
SENA TOR SESSIONS:
Admiral Benedict, according to recent press reports, the Navy rejected the recommendations of Strategic Com- mand to design the next generation of ballistic missile submarines with 20 missile tubes instead of opting for only 16 per boat.
What is the basis for the Navy’s decision of I 6? And I’m sure cost is a factor. In what ways will that decision im- pact the overall nuclear force structure associated with the command?
NAVY REAR ADMIRAL TERRY BENEDICT, DIRECTOR, STRATEGIC SYSTEMS PROGRAMS (SSP):
Yes, sir. SSP supported the Navy analysis, STRATCOM’s analysis, as well as the OSD analysis, as we proceeded forward and towards the Milestone A decision [on the SSBN(X) program] that Dr. Carter conducted.
Based on our input, which was the technical input as the- as the director of SSP, other factors were considered, as you stated. Cost was one of them. But as the Secretary, as the CNO, and I think as General Kehler submitted in their testimony, that given the threats that we sec today, given the mission that we see today, given the upload capability of the D-5, and given the environment as they saw today, all three of those leaders were comfortable with the decision to proceed forward with 16 tubes, sir.
And is that represent your judgment? To what extent were you involved- were you involved in that?
REAR ADMIRAL BENEDICT:
Sir, we were involved from technical aspects in terms of the capability of the missile itself, what we can throw, our range, our capability. And based on what we understand the capability of the D-5 today, which will be the baseline missile for the Ohio Replacement Program, as the director of SSP I’m comfortable with that decision.
Section 242 Report
Section 242 of the FY2012 National Defense Authorization Act (H.R. 1540/P.L. I 12-81 of December 31, 201 I) required DOD to submit a report on the Ohio replacement program that includes, among other things, an assessment of various combinations of boat quantities and numbers of SLBM launch tubes per boat. The text of the section is as follows: SEC. 242. REPORT AND COST ASSESSMENT OF OPTIONS FOR OHIO-CLASS REPLACEMENT BALLISTIC MISSILE SUBMARINE.
(a) Report Required- Not later than 180 days after the date of the enactment of this Act, the Secretary of the Navy and the Commander of the United States Strategic Command shall jointly submit to the congressional defense committees a report on each of the options described in subsection (b) to replace the Ohio-class ballistic submarine program. The report shall include the following:
(1) An assessment of the procurement cost and total life- cycle costs associated with each option.
(2) An assessment of the ability for each option to meet- (A) the at-sea requirements of the Commander that are in place as of the date of the enactment of this Act; and (B) any expected changes in such requirements.
(3) An assessment of the ability for each option to meet- (A) the nuclear employment and planning guidance in place as of the date of the enactment of this Act; and (B) any expected changes in such guidance.
(4) A description of the postulated threat and strategic environment used to inform the selection of a final option and how each option provides flexibility for responding to changes in the threat and strategic environment. (b) Options Considered- The options described in this subsection to replace the Ohio-class ballistic submarine program are as follows: (I) A fleet of 12 submarines with 16 missile tubes each. (2) A fleet of I 0 submarines with 20 missile tubes each. (3) A fleet of 10 submarines with 16 missile tubes each. (4) A fleet of eight submarines with 20 missile tubes each. (5) Any other options the Secretary and the Commander consider appropriate. (c) Form- The report required under subsection (a) shall be submitted in unclassified form, but may include a classified annex.
Subsection (c) above states the report 04 shall be submitted in unclassified form, but may include a classified annex.” The report as submitted was primarily the classified annex, with a one-page unclassified summary, the text of which is as follows (underlining as in the original):
The National Defense Authorization Act (NOAA) for Fiscal Year 2012 (FY 12) directed the Secretary of the Navy and the Commander of U.S. Strategic Command (USSTRA TCOM) to jointly submit a report to the congressional defense committees comparing four different options for the OHIO Replacement (OR) fleet ballistic missile submarine (SSBN) program. Our assessment considered the current operational requirements and guidance. The four SSBN options analyzed were:
1. 12 SSBNs with 16 missile tubes each
2. 10 SSBNs with 20 missile tubes each
3. 10 SSBNs with 16 missile tubes each
4. 8 SSBNs with 20 missile tubes each
The SSBN force continues to be an integral part of our nuclear Triad and contributes to deterrence through an assured second strike capability that is survivable, reliable, and credible. The number of SSBNs and their combined missile tube capacity are important factors in our flexibility to respond to changes in the threat and uncertainty in the strategic environment. We assessed each option against the ability to meet nu- clear employment and planning guidance, ability to satisfy at-sea requirements, flexibility to respond to future changes in the postulated threat and strategic environment, and cost. In general, options with more SSBNs can be adjusted downward in response to a diminished threat; however, options with less SSBNs are more difficult to adjust upward in response to a growing threat. .
Clearly, a smaller SSBN force would be less expensive than a larger force, but for the reduced force options we assessed, they fail to meet current at-sea and nuclear employment requirements, increase risk in force survivability, and limit flexibility in response to an uncertain strategic future. Our assessment is the program of record, 12 SSBNs with 16 missile tubes each, provides the best balance of performance, flexibility, and cost meeting commander’s requirements while supporting the Nation’s strategic deterrence mission goals and objectives. The classified annex contains detailed analysis that is not releasable to the public.
Likelihood That Navy Will Reach $4.9 Billion Target Cost
Another oversight issue for Congress is the likelihood that the Navy will be able to achieve DO D’s goal of reducing the average unit procurement cost of boats 2-12 in the program to $4.9 billion each in FY20 I 0 dollars. As mentioned earlier, as of early 2011, the Navy estimated that its cost-reduction efforts had reduced the average unit procurement cost of boats 2-12 to $5.6 billion each in FY20 I 0 dollars, leaving another $700 million or so in cost reduction to reach the $4.9 billion target cost. Measures that the Navy has taken to reduce the average unit procurement cost of boats 2-12 to about $5.6 billion include, among other things, reducing the number of SLBM launch tubes from 20 to 16, and making the launch tubes no larger in diameter than those on the Ohio-class design. The Navy is examining potential further measures to bring the cost of boats 2-12 closer to the $4. 9 bi ilion target cost. An October 19, 2012, press report quoted Rear Admiral David Johnson, the Program Executive Officer for Submarines, as stating that in achieving the additional $700 million reduction in per-boat procurement cost, “I think one of the biggest effects we can do is buying the ship smartly …. We can probably get somewhere in the range of $300 million-plus per ship out [of the estimated cost], just by buying the ships smartly, encouraging a long production run in industry and the vendor base.”
Potential oversight questions include the following:
- How did DOD settle on the figure of $4.9 billion in FY20 10 dollars as the target average unit procurement cost for boats 2-12 in the program? On what analysis was the selection of this figure based?
- How difficult will it be for the Navy to reach this target cost? What options is the Navy examining to achieve the additional $700 million or so in unit procurement cost savings needed to reach it?
- Would a boat costing $4.9 billion have sufficient capability to perform its intended missions?
- What, if anything, does DOD plan to do if the Navy is unable to achieve the $4.9 billion target cost figure? If $4.9 billion is the target figure, is there a corresponding ceiling figure higher than $4.9 billion, above which DOD would not permit the Ohio replacement program to proceed? If no such figure exists, should DOD establish one?
Accuracy of Navy’s Estimated Unit Procurement Cost
Another oversight issue for Congress concerns the accuracy of the Navy’s estimate of the procurement cost of each SSBN(X). The accuracy of the Navy’s estimate is a key consideration in assessing the potential affordability of the Ohio replacement program, including its potential impact on the Navy’s ability to procure other kinds of ships during the years of SSBN(X) procurement. Some of the Navy’s ship designs in recent years, such as the GERALD R. FORD (CVN- 78) class aircraft carrier, the SAN ANTONIO (LPD-17) class amphibious ship and the Littoral Combat Ship (LCS), have proven to be substantially more expensive to build than the Navy originally estimated.
The accuracy of the Navy’s estimate can be assessed in part by examining known procurement costs for other recent Navy submarines- including VIRGINIA (SSN-774) class attack submarines (which are currently being procured), SEA WOLF (SSN-21) class attack submarines (which were procured prior to the Virginia class), and Ohio (SSBN-726) class ballistic missile submarines- and then adjusting these costs for the Ohio replacement program so as to account for factors such as differences in ship displacement and design features, changes over time in submarine technologies (which can either increase or reduce a ship’s procurement cost, depending on the exact technologies in question), advances in design for reproducibility (i.e., design features that are intended to make ships easier to build), advances in shipyard production processes (such as modular construction), and changes in submarine production economies of scale (i.e., changes in the total number of attack submarines and ballistic missile submarines under construction at any one time).
The Navy’s estimated unit procurement cost for the program at any given point will reflect assumptions on, among other things, which shipyard or shipyards will build the boats, and how much Virginia-class construction will be taking place in the years when SSBN(X)s are being built. Changing the Navy’s assumption about which shipyard or shipyards will build SSBN(X)s could reduce or increase the Navy’s estimated unit procurement cost for the boats. If shipbuilding affordability pressures result in Virginia-class boats being removed from the 30-year shipbuilding plan during the years of SSBN(X) procurement, the resulting reduction in submarine production economies of scale could make SSBN(X)s more expensive to build than the Navy estimates. A July 2012 Congressional Budget Office (CBO) report on the cost of the Navy’s shipbuilding programs stated (with cost figures expressed in constant FY2012 dollars):
The design, cost, and capabilities of the SSBN(X)- the submarine slated to replace the Ohio class- are among the most significant uncertainties in the Navy’s and CBO’s analyses of future shipbuilding …. The recent cost history of the program illustrates the uncertainty. The Navy’s [FY]2007 and [FY]2008 ship- building plans included an assumption that the first SSBN(X) would cost $4.8 billion (in 2012 dollars) and that subsequent ships in the class would cost $3.6 billion apiece. The (FY]2012 plan, in contrast, estimated the costs of the SSBN(X) class at an average of $6.5 billion, which was down from an estimated $7.7 billion apiece under the 2011 plan. That cost history highlights the uncertainty that remains in determining how much a future class of SSBNs will cost.. ..
The Navy currently estimates the cost of the lead SSBN(X) at $11.7 billion. The average cost of follow-on ships is $6.0 billion, and the Navy has stated an objective of reducing that cost to $5.0 billion. All told, the Navy estimates that building 12 of the submarines will cost $78 billion, or an average of $6.5 billion each. In comparison, CBO estimates that the lead SSBN(X) will cost $13.3 billion on the basis of its scheduled purchase in [FY]202 l . Estimating the cost of the first submarine of a class is particularly difficult because it is not clear how much the Navy will need to spend on nonrecurring engineering and detail design. The Navy spent about $2 billion on those items for the lead Virginia class attack submarine. The historical track record for the lead ship of new classes of submarines in the 1970s and 1980s indicates that there is little difference in those items on a per-ton basis between a lead attack submarine and a lead SSBN. In addition, CBO assumed that the cost of nonrecurring items is proportional to the weight of submarines. There- fore, CBO estimated that nonrecurring items would cost about $5 billion for the lead SSBN(X), which will be approximately the size of an Ohio class submarine and thus about 21/2 times the size of a Virginia class submarine. The Navy’s estimate for the lead SSBN(X) reflects the fact that the service estimates that nonrecurring costs will be $4.5 billion.
Overall, 12 SSBN(X)s would cost a total of about $90 billion in CBO’s estimation, or an average of $7.5 billion each. That average includes the $13.3 billion estimated cost of the lead ship and a $7.0 billion average estimated cost for the 2″ 11 through 1th ships. Research and development would cost an additional $10 billion to $I 5 billion, for a total program cost of $100 billion to $110 billion. (Note that CBO’s estimate under the [FY]2012 plan was an average of $7.4 billion per submarine; the estimate for the [FY]2013 plan is higher primarily because the pur- chases occur two years later than under the [FY]2012 plan, thus incurring two additional years of cost growth.)
Program Affordability and Impact on Other Navy Shipbuilding Programs
Another oversight issue for Congress concerns the prospective affordability of the Ohio replacement program and its potential impact on funding available for other Navy shipbuilding programs. Even with the Navy’s current effort to reduce the estimated unit procurement cost of the SSBN(X) toward DOD’s target figure, observers are concerned that the Ohio replacement program could crowd out funding for other Navy shipbuilding programs in the 2020s and early 2030s. The Navy’s March 2012 report on its FY2013 30-year (FY20 l 3-FY2042) shipbuilding plan acknowledges the issue, stating: This high cost for replacing the nation’s secure, second- strike nuclear deterrent force will have a disproportionate impact on DoN [Department of the Navy] shipbuilding plans and associated costs throughout the mid-term planning period [FY2023-FY2032] and into the early years of the far-term planning period [FY2033-FY2042] …. Obviously, spending $5-68 [billion] per year for a single ship over a 10 to 12-year period will strain the DoN’s yearly shipbuilding accounts, since the Department must continue to build other ships through this period to maintain the overall battle force inventory at about 300 ships.
An October 19, 2012, press report stated:
The Navy admiral overseeing submarine construction said Thursday [October 18) that if the price tag for building the newest vessels remains where it is today, there will have to be cutbacks to the Virginia-class [attack submarine] program. Newport News Shipbuilding and General Dynamics Electric Boat, along with the Navy, have already brought down the cost to build Virginia-class fast-attack subs and are in the process of doubling their production, from one sub a year to two.
But when another program to replace the nation’s aging fleet of Ohio-class ballistic missile subs ramps up, there won’t be as much money to go around. “I don’t think we get Virginia and Ohio replacement at the same time if we don’t continue to press down on the cost of Virginia and keep pressing on the cost of Ohio replacement,” said Rear Adm. David Johnson, who spoke to reporters at the Naval Submarine League’s annual symposium just outside of Washington, D.C.
A March 2012 GAO report assessing major DOD weapon acquisition programs states:
Affordability has been an early focus of the [Ohio Re- placement (OR)] program. Due to its high cost, Navy officials have stated the OR program could stress Navy shipbuilding budgets in the 2020 to 2030 time frame. Program officials stated that they are trying to reduce the average procurement unit cost from an estimated $5.6 billion to $4.9 billion (in fiscal year 20 I 0 dollars). The program is considering procuring OR [boats] as part of a block buy with the Virginia-class [attack] submarine to reduce procurement costs by an estimated 13 percent, and is lining up its production schedule to match that program in case this option is pursued. The Navy also decided to use 16 87-inch diameter tubes per submarine, which, while fewer than the Ohio-class, is expected to reduce costs while meeting the anticipated future strategic requirement based on arms reduction trends. According to the [OR] program [office], a four-way competition is ongoing to develop prototype tubes and efficient manufacturing processes for outfitting these tubes into the hull, including the use of a “quad pack” configuration that could reduce cost and construction time ….[OR] Program officials said they plan to have the three- dimensional design [for the boat] complete prior to starting construction on the lead ship to minimize rework, delays, and the potential for cost growth.
A December 3, 2012, press report stated: The Navy is looking at a range of solutions to funding the expensive SSBN(X) Ohio-class replacement program in the coming years- including the possibility of buying other ships earlier to free up funds later on, the Navy’s resources chief said last week …. Service officials are mulling the option of buying some ships earlier to free up money once the Navy needs to start allocating funds for SSBN(X), Vice Adm. Terry Blake, deputy chief of naval operations for the integration of capabilities and resources (NS), said at a Nov. 27 Surface Navy Association luncheon.
In addition to making further changes and refinements in the design of the SSBN(X), options for reducing the cost of the Ohio replacement program and the program’s potential impact on funding available for other Navy shipbuilding programs include the following: reducing the planned number of SSBN(X)s; altering the schedule for procuring the SSBN(X)s so as to create additional opportunities for using incremental funding for procuring the ships; and • funding the procurement of SSBN(X)’s outside the Navy’s shipbuilding budget. Each of these options is discussed below.
Reducing the Planned Number of SSBN(X)s
Some observers over the years have advocated or presented options for an SSBN force of fewer than l 2 SSBNs. CBO, for example, has at times in the past presented options for reducing the SSBN force to l 0 boats as a cost-reduction measure. A June 20 l 0 report by a group known as the Sustainable Defense Task Force recommends reducing the SSBN force to seven boats; a September 20 I 0 report from the Cato Institute recommends reducing the SSBN force to six boats.
Views on whether a force of fewer than 12 SSBN(X)s would be adequate could depend on, among other things, assessments of strategic nuclear threats to the United States and the role of SSBNs in deterring such threats as a part of overall U.S. strategic nuclear forces, as influenced by the terms of strategic nuclear arms control agreements. Reducing the number of SSBNs below 12 could also raise a question as to whether the force should continue to be homeported at both Bangor, WA, and Kings Bay, GA, or consolidated at a single location.
U.S. strategic nuclear deterrence plans require a certain number of strategic nuclear warheads to be available for use on a day- to-day basis. After taking into account warheads on the other two legs of the strategic nuclear triad, as well as the number of warheads on an SSBN’s SLBMs, this translates into a requirement for a certain number of SSBNs to be on station (i.e., within range of expected targets) in Pacific and Atlantic waters at any given moment. The SSBN force is sized to support this requirement. Given the time needed for at-sea training operations, restocking SSBNs with food and other consumables, performing maintenance and repair work on the SSBNs, and transiting to and from deterrent patrol areas, only a fraction of the SSBN force can be on patrol at any given moment. The Navy’s position is that the requirement for having a certain number of SSBNs on patrol at any given moment translates into a need for a force of 14 Ohio- class boats, and that this requirement can be met in the future by a force of 12 SSBN(X)s.
Altering Procurement Schedule to Make More Use of Incremental Funding
Another option for managing the potential impact of the Ohio replacement program on other Navy shipbuilding programs would be to stretch out the schedule for procuring SSBN(X)s and make greater use of split funding (i.e., two-year incremental funding) in procuring them. This option would not reduce the total procurement cost of the Ohio replacement program- to the contrary, it might increase the program’s total procurement cost somewhat by reducing production learning curve benefits in the Ohio replacement program. This option could, however, reduce the impact of the Ohio replacement program on the amount of funding available for the procurement of other Navy ships in certain individual years. This might reduce the amount of disruption that the Ohio replacement program causes to other shipbuilding programs in those years, which in tum might avoid certain disruption-induced cost increases for those other programs. The annual funding requirements for the Ohio replacement program might be further spread out by funding some of the SSBN(X)s with three- or foursquare incremental funding.
Table 4 shows the Navy’s currently planned schedule for procuring 12 SSBN(X)s and a notional alternative schedule that would start two years earlier and end two years later than the Navy’s currently planned schedule. Although the initial ship in the alternative schedule would be procured in FY2019, it could be executed as it if were funded in FY202 I. Subsequent ships in the alternative schedule that are funded earlier than they would be under the Navy’s currently planned schedule could also be executed as if they were funded in the year called for under the Navy’s schedule. Congress in the past has funded the procurement of ships whose construction was executed as if they had been procured in later fiscal years. The ability to stretch the end of the procurement schedule by two years, to FY2035, could depend on the Navy’s ability to carefully husband the use of the nuclear fuel cores on the last two Ohio-class SSBNs, so as to extend the service lives of these two ships by one or two years. Alternatively, Congress could grant the Navy the authority to begin construction on the 11th boat a year before its nominal year of procurement, and the 12’h boat two years prior to its nominal year of procurement.
A December 19, 2011, press report states: The Office of Management and Budget’s Nov. 29[, 2011,] passback memorandum to the Defense Department [re- garding the FY2013 DOD budget] warns that the effort to build replacements for aging Ohio-class submarines is not exempt from rules requiring each new vessel to be fully funded in a single year ….
Spreading the cost of a big-ticket ship over more than one year- an approach referred to as “incremental funding”- is only allowed when a program meets three criteria, OMB writes ….”OMB does not anticipate that the OHIO Replacement program wilt meet these criteria,” the passback memo states.
Procuring SSBN(X)s Outside Navy’s Shipbuilding Budget
Some observers have suggested funding the procurement of SSBN(X)s outside the Navy’s shipbuilding budget, so as to preserve Navy shipbuilding funds for other Navy shipbuilding programs. Among those who have raised this idea was Admiral Gary Roughead, the Chief of Naval Operations (CNO) until September 2011. There would be some precedent for such an arrangement:
- DOD sealift ships and Navy auxiliary ships arc funded in the National Defense Sealift Fund (NDSF), a part of DOD’s budget that is outside the Shipbuilding and Con- version, Navy (SCN) appropriation account, and also out- side the procurement title of the DOD appropriations act.
- Most spending for ballistic missile defense (BMD) pro- grams (including procurement-like activities) is funded through the Defense-Wide research and development ac- count rather than through the research and development and procurement accounts of the individual military serv- ices.
A rationale for funding DOD sealift ships in the NDSF is that DOD sea lift ships perform a transportation mission that primarily benefits services other than the Navy, and therefore should not be forced to compete for funding in a Navy budget account that funds the procurement of ships central to the Navy’s own missions. A rationale for funding BMD programs together in the Defense- Wide research and development account is that this makes potential tradeoffs in spending among various BMD programs more visible and thereby helps to optimize the use of BMD funding.
As a reference tool for better understanding DOD spending, DOD includes in its annual budget submission a presentation of the DOD budget reorganized into 11 program areas, of which one is strategic forces. The FY2013 budget submission, for example, shows that the strategic forces program area received about $12.1 billion in funding in FY2012, and that about $10.8 billion is requested for the program area for FY2013.
Supporters of funding the procurement of SSBN(X)s outside the Navy’s shipbuilding budget might argue that this could help protect funding for other Navy shipbuilding programs. They could also argue that creating a new budget account for strategic nuclear forces of all kinds could help DOD better view potential tradeoffs in spending for various strategic nuclear forces programs and thereby help DOD better optimize the use of strategic forces funding.
Skeptics of funding the procurement of SSBN(X)s outside the Navy’s shipbuilding budget could argue that it might do little to protect funding for other Navy shipbuilding programs, because if DOD were to move the SSBN(X)s out of the Navy’s shipbuilding budget, DOD might also remove the funding that was there for the SSBN(X)s. They might also argue that shifting SSBN(X)s out of the Navy’s shipbuilding budget would make it harder to track and maintain oversight over Navy shipbuilding activities, and that creating a new budget account for strategic nuclear forces of all kinds could endanger the Ohio replacement program by making it more visible to those who might support reduced spending on nuclear-weapon-related programs. A March 11, 2010, press report stated: “The massive cost of replacing the Navy’s nuclear ballistic missile submarines will be shouldered in the coming years by diverting funds from other naval and Pentagon programs and perhaps by boosting the defense budget, but the program should not get its own special funding stream, according to Deputy Defense Secretary William Lynn.”
A March 28, 2011, press report stated that SSBN(X)s will be funded within the shipbuilding account, not in a separate account as the sea service’s top admiral has advocated, according to Pentagon acquisition chief Ashton Carter. “It’s been in the shipbuilding account and our plan is it’s going to stay in the shipbuilding account,” Carter told Inside the Pentagon March 21 in a brief interview. “We just have to make it so that it is digestible for the Navy in the context of other shipbuilding needs. And we want the same things they want. We can manage through that path for decades.”
At an April 13, 2011, hearing on DOD acquisition before the Defense subcommittee of the House Appropriations Committee, the following exchange took place:
REPRESENTATIVE CRENSHAW: Dr. Carter, I want to ask about Abrams tanks, kind of the modification of the start and stop. But – but real quick, we – we talked about the ballistic missiles submarines and was encouraged to hear that we’ve got a handle on the cost. We spent a lot of money on the development. I think we start construction in 2019.
But even- even if we- you end up with a boat that costs $5 billion and we have 12 of those, that’s $60 billion. And we talked about the difficult choices that’s going to present in terms of surface ships, I just want to pose the question, if- is it under consideration to consider those submarines like a national asset?
For instance, we- we fund the ballistic missile defense outside of the budget of the services because it’s truly a national asset. And I wondered, it’s a lot of money. And- and it’s- those- those submarines arc one-third of our nuclear triad. Is consideration being given to consider those being funded as a national asset outside the ship- building program which would take away some of the difficult choice in terms of the surface ships versus the submarines?
ASHTON CARTER, UNDER SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS: The- the best I can do is cite something that Secretary Gates said which is that he had considered that, then was not attracted to that idea. I’m paraphrasing, but I think their basic reason was, “Look, the money is going to show up somewhere anyway. And we’ re not going to hide $60 billion by re-labeling. So, let’s keep it in a way we’ve- we’ve done it.”
And I think it was the gist of the secretary’s response. So- so, Secretary Gates had considered it and was not attracted to the idea. Although he – he thoroughly recognizes the premise of your question which is there’s a Jot of money. And as a practical matter it will compete with those things in the defense budget. And that’s one of the reasons why we’ve got to get the cost down. An August I, 2011, press report stated: [Admiral Jonathan Greenert, who became the Chief of Naval Operations in September 2011, told] Sen. Jack Reed (D-R.l.) discussions are still underway in the Pentagon to have the defense-wide budget share with the Navy some of the costs of the Ohio-class SSBN(X) next- generation ballistic missile submarine, which is projected to dominate the Navy’s shipbuilding budget starting at the end of this decade. “If confirmed, I intend to try to continue those discussions,” Greenert [said] during his confirmation hearing. “In the [2020s], we have a phenomenon, an unfortunate one, where many of the ships built in the [1980s] will now come due for retirement. That’s right when the Ohio replacement comes in. So we’ II work very hard to make sure we got the requirements right. We’ll work very hard with the acquisition community to drive that cost down but we may even so need some assistance, I believe, in the shipbuilding budget if we’re going to meet our goals.”
At a March 29, 2012, hearing before the Senate Armed Services Committee to consider the nominations of several people for various DOD positions, the following exchange occurred: SENA TOR JACK REED: Secretary Kendall, one of the issues that we have talked about is the nuclear infrastructure to create and maintain nuclear devices. There is another big part of that. That is the delivery platforms. And where you are facing a significant set of challenges, the lead procurement item is the Ohio class replacement submarine, but the Air Force is talking about the need ultimately to replace their fleet. You have to make, I presume, improvements in ground-based systems.
When the services look individually at the cost and have got more fidelity with respect to the Navy- these are very, very expensive platforms. They crowd out spending for other necessary ships in the Navy’s case. And I think there is a very compelling case because this is a strategic issue that the services alone should not fundamentally share the burden, that in fact there has to be some DOD defense money because of the strategic nature committed to help the services. And I think the most immediate situation is in the Navy. Can you reflect on that and share your views? Mr. FRANK KENDALL III. Yes, Senator Reed. The Department [of Defense] basically builds its budget as a budget for the entire Department, and we do make trade- offs that sometimes cut across the Services [sic] lines in order to do that. Last fall, what we went through was a period where we formulated the strategy, the Strategic Guidance that we published, and that was used to guide the budget process. So that was all done with regard to priorities to support the strategy. It was not about the service portfolio specifically. At the end, we came to a decision about the best mix of systems to do that, and we tried to take into account the long-term issues that you alluded to which include the 30-year shipbuilding plan which we just sent over which does show that the Ohio replacement does add substantially to that account. We are going to have to find some other way besides the ship- building account obviously to pay that bill.
We have put cost caps on both the SSBN- X, the Ohio replacement, and on the new bomber in order to try to control the costs and keep them within an affordable range. But there is going to be a challenge to us to do this, and it has to be done on a defense-wide DOD basis.
Another potential issue for Congress regarding the Ohio replacement program is which shipyard or shipyards would build SSBN(X)s. Two U.S. shipyards are capable of building nuclear- powered submarines- General Dynamics’ Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI, and Newport News Shipbuilding (NNS), of Newport News, VA, which forms part of Huntington Ingalls Industries (Hll). GD/EB’s primary business is building nuclear-powered submarines; it can also perform submarine overhaul work. NNS ‘s primary lines of business are building nuclear-powered aircraft carriers, building nuclear-powered submarines, and performing overhaul work on nuclear-powered aircraft carriers.
Table 5 shows the numbers of SSBNs built over time by GD/EB, NNS, and two government- operated naval shipyards (NSYs)- Mare Island NSY, located in the San Francisco Bay area, and Portsmouth NSY of Portsmouth, NH, and Kittery, ME. Mare Island NSY is no longer in operation . NSYs have not built new Navy ships since the early 1970s; since that time, they have focused solely on overhauling and repairing Navy ships.
As can be seen in the table, the Ohio-class boats were all built by GD/EB, and the three previous SSBN classes were built partly by GD/EB, and partly by NNS. GD/EB was the builder of the first boat in all four SSBN classes. The most recent SSBNs built by NNS were the George C. Marshall (SSBN-654) and George Washington Carver (SSBN-656), which were Lafayette/Benjamin Franklin-class boats that were procured in FY 1964 and entered service in 1966.
There are at least five basic possibilities for building SSBN(X)s:
- build all SSBN(X)s at GD/EB- the approach that was used for building the Ohio-class SSBNs;
- build all SSBN(X)s at NNS;
- build some SSBN(X)s GD/EB and some at NNS- thc approach that was used for building the George Washing- ton-, Ethan Allen-, and Lafayette/Benjamin Franklin-class SSBNs;
- build each SSBN(X) jointly at GD/EB and NNS, with final assembly of the boats alternating between the yards- the approach currently being used for building Virginia class SSNs; and
- build each SSBN(X) jointly at GD/EB and NNS, with one yard-either GD/EB or NNS performing final assembly on every boat.
In assessing these five approaches, policymakers may consider a number of factors, including their potential costs, their potential impacts on employment levels at GD/EB and NNS, and the relative value of preserving SSBN unique construction skills (such as those relating to the construction and installation of SLBM compartments) at one shipyard or two. The relative costs of these five approaches could depend on a number of factors, including the following:
- each yard’s share of SSBN(X) production work (if both yards are involved);
- the number of SSNs procured during the years of SSBN(X) procurement (which can affect economies of scale in submarine production);
- whether the current joint-production arrangement for the Virginia class remains in effect during those years; and
- the volume of non-submarine construction work performed at the two shipyards during these years, which would include in particular aircraft carrier construction and overhaul work at NNS.
A January 12, 2011, press report stated: While the [SSBN(X)] submarine-building contracts would likely be competitively bid, [Electric Boat President John] Casey says he doubts any other company- even its attack- submarine-building partner Northrop Grumman [now NNS]- can secure the work. Electric Boat built the existing Ohio-class fleet. “We have every intention of building every one of those ships,” he says. “There’s no one else [who was] involved in designing and building that [Ohio-class] platform. It’s up to us to convince people we can do it at the right price.”