Summary
The Navy’s proposed FY2016 budget requests $1,390.7 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. The Navy wants to procure the first Ohio Replacement Boat in FY2021, with advance procurement (AP) funding starting in FY2017. The Navy has identified the Ohio replacement program as its top priority program.
A March 2015 GAO report assessing selected major DOD weapon acquisition programs states that the estimated total acquisition cost of the SSBN(X) program is about $95.8 billion in constant FY2015 dollars, including about $11.8 billion in research and development costs and about $84.0 billion in procurement costs.
The Navy as of February 2015 estimates the procurement cost of the lead boat in the program at $14.5 billion in then-year dollars, including $5.7 billion in detailed design and nonrecurring engineering (DD/NRE) costs for the entire class, and $8.8 billion in construction costs for the ship itself. (It is a traditional budgeting practice for Navy shipbuilding programs to attach the DD/NRE costs for a new class of ships to the procurement cost of the lead ship in the class.) In constant FY2010 dollars, these figures become $10.4 billion, including $4.2 billion in DD/NRE costs and $6.2 billion in construction costs for the ship itself. The Navy in January 2015 estimated the average procurement cost of boats 2 through 12 in the Ohio Replacement Program at about $5.2 billion each in FY2010 dollars, and is working to reduce that figure to a target of $4.9 billion each in FY2010 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:
x the likelihood that the Navy will be able to reduce the average procurement cost of boats 2 through 12 in the program to the target figure of $4.9 billion each in FY2010 dollars;
x the accuracy of the Navy’s estimate of the procurement cost of each SSBN(X);
x the prospective affordability of the Ohio replacement program and its potential impact on funding available for other Navy shipbuilding programs; and
x 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.
U.S. Navy SSBNs in General Mission of SSBNs
The U.S. Navy operates three kinds of submarines—nuclearpowered attack submarines (SSNs), nuclear-powered cruise
missile submarines (SSGNs), and nuclear-powered ballistic missile submarines (SSBNs). The SSNs and SSGNs are multimission ships that perform a variety of peacetime and wartime missions. They do not carry nuclear weapons.
The SSBNs, in contrast, perform a specialized mission of strategic nuclear deterrence. To perform this mission, SSBNs are armed with submarine-launched ballistic missiles (SLBMs), which are large, long-range missiles armed with multiple nuclear warheads. SSBNs launch their SLBMs from large-diameter vertical launch tubes located in the middle section of the boat. The SSBNs’ basic mission is to remain hidden at sea with their SLBMs, so as to deter a nuclear attack on the United States by another country by demonstrating to other countries that the United States has an assured second-strike capability, meaning a survivable system for carrying out a retaliatory nuclear attack. Navy SSBNs, which are sometimes referred to informally as boomers, form one leg of the U.S. strategic nuclear deterrent force, or triad, which also includes land-based intercontinental ballistic missiles (ICBMs) and land-based long-range bombers. At any given moment, some of the Navy’s SSBNs are conducting nuclear deterrent patrols. The Navy’s report on its FY2011 30- year shipbuilding plan states: “These ships are the most survivable leg of the Nation’s strategic arsenal and provide the Nation’s only day-to-day assured nuclear response capability.” The Department of Defense’s (DOD’s) report on the 2010 Nuclear Posture Review (NPR), released on April 6, 2010, states that “strategic nuclear submarines (SSBNs) and the SLBMs they carry represent the most survivable leg of the U.S. nuclear Triad.”
Current Ohio-Class SSBNs
The Navy currently operates 14 Ohio (SSBN-726) class SSBNs. The boats are commonly called Trident SSBNs or simply Tridents because they carry Trident SLBMs. A total of 18 Ohio-class SSBNs were procured in FY1974-FY1991. The ships entered service in 1981-1997. The boats were designed and built by General Dynamics’ Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI. They were originally designed for 30-year service lives but were later certified for 42-year service lives, consisting of two approximately 19- year periods of operation separated by an approximately fouryear mid-life nuclear refueling overhaul, called an engineered refueling overhaul (ERO). The nuclear refueling overhaul includes both a nuclear refueling and overhaul work on the ship that is not related to the nuclear refueling. Ohio-class SSBNs are designed to each carry 24 SLBMs, although by 2018, four SLBM launch tubes on each boat are to be deactivated, and the number of SLBMs that can be carried by each boat consequently is to be reduced to 20, so that the number of operational launchers and warheads in the U.S. force will comply with strategic nuclear arms control limits.
The first eight boats in the class were originally armed with Trident I C-4 SLBMs; the final 10 were armed with larger and more-capable Trident II D-5 SLBMs. The Clinton Administration’s 1994 Nuclear Posture Review (NPR) recommended a strategic nuclear force for the START II strategic nuclear arms reduction treaty that included 14 Ohio-class SSBNs, all armed with D-5s. This recommendation prompted interest in the idea of converting the first four Ohio-class boats (SSBNs 726-729) into SSGNs, so as to make good use of the 20 years of potential operational life remaining in these four boats, and to bolster the U.S. SSN fleet. The first four Ohio-class boats were converted into SSGNs in 2002-2008, and the next four (SSBNs 730-733) were backfitted with D-5 SLBMs in 2000-2005, producing the current force of 14 Ohio-class SSBNs, all of which are armed with D-5 SLBMs.
Eight of the 14 Ohio-class SSBNs are homeported at Bangor, WA, in Puget Sound; the other six are homeported at Kings Bay, GA, close to the Florida border.
Unlike most Navy ships, which are operated by single crews, Navy SSBNs are operated by alternating crews (called the Blue and Gold crews) so as to maximize the percentage of time that they spend at sea in deployed status. The Navy consequently maintains 28 crews to operate its 14 Ohio-class SSBNs. The first of the 14 Ohio-class SSBNs (SSBN-730) will reach the end of its 42-year service life in 2027. The remaining 13 will reach the ends of their service lives at a rate of roughly one ship per year thereafter, with the 14th reaching the end of its service life in 2040. The Navy has initiated a program to refurbish and extend the service lives of D-5 SLBMs to 2042 “to match the OHIO Class submarine service life.”
Summary of U.S. SSBN Designs
The Navy has operated four classes of SSBNs since 1959. Table 1 compares the current Ohio- class SSBN design to the three earlier U.S. SSBN designs. As shown in the table, the size of U.S. SSBNs has grown over time, reflecting in part a growth in the size and number of SLBMs carried on each boat. The Ohio class carries an SLBM (the D-5) that is much larger than the SLBMs carried by earlier U.S. SSBNs, and it carries 24 SLBMs, compared to the 16 on earlier U.S. SSBNs. In part for these reasons, the Ohio-class design, with a submerged displacement of 18,750 tons, is more than twice the size of earlier U.S. SSBNs.
Table 1. U.S. SSBN Classes
| George Washington (SSBN-598) class | Ethan Allen (SSBN-608) class | Lafayette/Benjamin Franklin (SSBN616/640) class | Ohio (SSBN726) class | |
|---|---|---|---|---|
| Number in class | 5 | 5 | 31 | 18/41 |
| Fiscal years procured | FY 1958-FY1959 | FY1959 and FY1961 | FY1961-FY1964 | FY1974/FY1977-FY1991 |
| Years in commission | 1959-1985 | 1961-1992 | 1963-2002 | 1981/1984 – present |
| Length | 381.7 feet | 410.5 feet | 425 feet | 560 feet |
| Beam | 33 feet | 33 feet | 33 feet | 42 feet |
| Submerged displacement | 6,700 tons | 7,900 tons | 8,250 tons | 18,750 tons |
| Number of SLBM launch tubes | 16 | 16 | 16 | 24 (to be reduced to 20 by 2018) |
| Final type(s) of SLBM carried | Polaris A-3 | Polaris A-3 | Poseidon C3/Trident I C-4 | Trident II D-5 |
| Diameter of those SLBMs | 54 inches | 54 inches | 74 inches | 83 inches |
| Length of those SLBMs | 32.3 feet | 32.3 feet | 34 feet | 44 feet |
| Weight of each SLBM (pounds) | 36,000 pounds | 36,000 pounds | 65,000/73,000 pounds | ~130,000 pounds |
| Range of SLBMs | ~2,500 nm | ~2,500 nm | ~2,500 nm/~4,000 nm | ~4,000 nm |
U.S.-UK Cooperation on SLBMs and the New UK SSBN
SSBNs are also operated by the United Kingdom, France, Russia, China, and India. The UK’s four Vanguard-class SSBNs, which entered service in 1993-1999, each carry 16 Trident II D-5 SLBMs. Previous classes of UK SSBNs similarly carried earliergeneration U.S. SLBMs. The UK’s use of U.S.-made SLBMs on its SSBNs is one element of a long-standing close cooperation between the two countries on nuclear-related issues that is carried out under the 1958 Agreement for Cooperation on the Uses of Atomic Energy for Mutual Defense Purposes (also known as the Mutual Defense Agreement). Within the framework established by the 1958 agreement, cooperation on SLBMs in particular is carried out under the 1963 Polaris Sales Agreement and a 1982 Exchange of Letters between the two governments. The Navy testified in March 2010 that “the United States and the United Kingdom have maintained a shared commitment to nuclear deterrence through the Polaris Sales Agreement since April 1963. The U.S. will continue to maintain its strong strategic relationship with the UK for our respective follow-on platforms, based upon the Polaris Sales Agreement.”
The first Vanguard-class SSBN was originally projected to reach the end of its service life in 2024, but an October 2010 UK defense and security review report states that the lives of the Vanguard class ships will now be extended by a few years, so that the four boats will remain in service into the late 2020s and early 2030s.
The UK plans to replace the four Vanguard-class boats with three or four next-generation SSBNs called Successor class SSBNs. The October 2010 UK defense and security review report states that each new Successor class SSBN is to be equipped with 8 D-5 SLBMs, rather than 12 as previously planned. The report states that “‘Initial Gate’—a decision to move ahead with early stages of the work involved—will be approved and the next phase of the project will start by the end of [2010]. ‘Main Gate’—the decision to start building the submarines—is required around 2016.” The first new boat is to be delivered by 2028, or about four years later than previously planned.
The UK has wanted the Successor SSBNs to carry D-5 SLBMs, and for any successor to the D-5 SLBM to be compatible with, or be capable of being made compatible with, the D-5 launch system. President George W. Bush, in a December 2006 letter to UK Prime Minister Tony Blair, invited the UK to participate in any program to replace the D-5 SLBMs, and stated that any successor to the D-5 system should be compatible with, or be capable of being made compatible with, the launch system for the D-5 SLBM.
The United States is assisting the UK with certain aspects of the Successor SSBN program. In addition to the modular Common Missile Compartment (CMC) discussed below (see “Common Missile Compartment (CMC)” in the following section on the Ohio replacement program), the United States is assisting the UK with the new PWR-3 reactor plant to be used by the Successor SSBN. A December 2011 press report states that “there has been strong [UK] collaboration with the US [on the Successor program], particularly with regard to the CMC, the PWR, and other propulsion technology,” and that the design concept selected for the Successor class employs “a new propulsion plant based on a US design, but using next-generation UK reactor technology (PWR-3) and modern secondary propulsion systems.” The U.S.
Navy states that Naval Reactors, a joint Department of Energy/Department of Navy organization responsible for all
aspects of naval nuclear propulsion, has an ongoing technical exchange with the UK Ministry of Defence under the
US/UK 1958 Mutual Defence Agreement. The US/UK 1958 Mutual Defence Agreement is a Government to Government Atomic Energy Act agreement that allows the exchange of naval nuclear propulsion technology between the US and UK.
Under this agreement, Naval Reactors is providing the UK Ministry of Defence with US naval nuclear propulsion technology to facilitate development of the naval nuclear propulsion plant for the UK’s next generation SUCCESSOR ballistic missile submarine. The technology
exchange is managed and led by the US and UK Governments, with participation from Naval Reactors prime
contractors, private nuclear capable shipbuilders, and
several suppliers. A UK based office comprised of about 40 US personnel provide full-time engineering support for the exchange, with additional support from key US suppliers and other US based program personnel as needed. The relationship between the US and UK under the 1958 Mutual Defence Agreement is an ongoing relationship and the level of support varies depending on the nature of the support being provided. Naval Reactors work supporting the SUCCESSOR submarine is reimbursed by the UK Ministry of Defence.
U.S. assistance to the UK on naval nuclear propulsion technology first occurred many years ago: To help jumpstart the UK’s nuclear-powered submarine program, the United States transferred to the UK a complete nuclear propulsion plant (plus technical data, spares, and training) of the kind installed on the U.S. Navy’s six Skipjack (SSN-585) class nuclear-powered attack submarines (SSNs), which entered service between 1959 and 1961. The plant was installed on the UK Navy’s first nuclear-powered ship, the attack submarine Dreadnought, which entered service in 1963. The December 2011 press report states that “the UK is also looking at other areas of cooperation between Successor and the Ohio Replacement Programme. For example, a collaboration agreement has been signed off regarding the platform integration of sonar arrays with the respective combat systems.”
Ohio Replacement Program
Program Origin and Early Milestones
Although the eventual need to replace the Ohio-class SSBNs has been known for many years, the Ohio Replacement Program can be traced more specifically to an exchange of letters in December 2006 between President George W. Bush and UK Prime Minister Tony Blair concerning the UK’s desire to participate in a program to extend the service life of the Trident II D-5 SLBM into the 2040s, and to have its next-generation SSBNs carry D-5s. Following this exchange of letters, and with an awareness of the projected retirement dates of the Ohio-class SSBNs and the time that would likely be needed to develop and field a replacement for them, DOD in 2007 began studies on a next-generation sea-based strategic deterrent (SBSD). The studies used the term sea-based strategic deterrent (SBSD) to signal the possibility that the new system would not necessarily be a submarine.
An Initial Capabilities Document (ICD) for a new SBSD was developed in early 2008 and approved by DOD’s Joint Requirements Oversight Committee (JROC) on June 20, 2008. In July 2008, DOD issued a Concept Decision providing guidance for an analysis of alternatives (AOA) for the program; an acquisition decision memorandum from John Young, DOD’s acquisition executive, stated the new system would, barring some discovery, be a submarine. The Navy established an Ohio Replacement Program office at about this same time.
The AOA reportedly began in the summer or fall of 2008. The AOA was completed, with final brief to the Office of the Secretary of Defense (OSD), on May 20, 2009. The final AOA report was completed in September 2009. An AOA Sufficiency Review Letter was signed by OSD’s Director, Cost Assessment & Program Evaluation (CAPE) on December 8, 2009. The AOA concluded that a new-design SSBN was the best option for replacing the Ohio-class SSBNs. The program’s Milestone A review meeting was held on December 9, 2010. On February 3, 2011, the Navy provided the following statement to CRS concerning the outcome of the December 9 meeting:
The OHIO Replacement Program achieved Milestone A and has been approved to enter the Technology Development Phase of the Dept. of Defense Life Cycle Management System as of Jan. 10, 2011.
This milestone comes following the endorsement of the Defense Acquisition Board (DAB), chaired by Dr.Carter (USD for Acquisition, Technology, and Logistics) who has signed the program’s Milestone A Acquisition Decision Memorandum (ADM).
The DAB endorsed replacing the current 14 Ohioclass Ballistic Missile Submarines (SSBNs) as they reach
the end of their service life with 12 Ohio Replacement Submarines, each comprising 16, 87-inch diameter missile tubes utilizing TRIDENT II D5 Life Extended missiles (initial loadout). The decision came after the program was presented to the Defense Acquisition Board (DAB) on Dec. 9, 2010.
The ADM validates the program’s Technology Development Strategy and allows entry into the Technology
Development Phase during which warfighting requirements will be refined to meet operational and affordability
goals. Design, prototyping, and technology development efforts will continue to ensure sufficient technological maturity for lead ship procurement in 2019.
Planned Procurement Quantity: 12 SSBN(X)s to Replace 14 Ohio-Class Boats
Navy plans call for procuring 12 SSBN(X)s to replace the current force of 14 Ohio-class SSBNs. In explaining the planned procurement quantity of 12 boats, the Navy states that 10 operational SSBNs—meaning boats not encumbered by lengthy maintenance actions—are needed to meet strategic nuclear deterrence requirements for having a certain number of SSBNs at sea at any given moment. The Navy states that a force of 14 Ohioclass boats was needed to meet this requirement because, during the middle years of the Ohio class life cycle, three and sometimes four of the boats are non-operational at any given moment on account of being in the midst of lengthy mid-life nuclear refueling overhauls or other extended maintenance actions. The Navy states that 12 rather than 14 SSBN(X)s will be needed to meet the requirement for 10 operational boats because the mid-life overhauls of SSBN(X)s, which will not include a nuclear
refueling, will require less time (about two years) than the mid-life
refueling overhauls of Ohio-class boats (which require about four
years from contract award to delivery), the result being that only
two SSBN(X)s (rather than three or sometimes four) will be in the
midst of mid-life overhauls or other extended maintenance actions
at any given moment during the middle years of the SSBN(X)
class life cycle.
Procurement and Replacement Schedule
Table 2 shows the Navy’s proposed schedule for procuring 12 SSBN(X)s, and for having SSBN(X)s replace Ohio-class SSBNs. As shown in Table 2, 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. As also shown in Table 2, the Navy’s FY2013 budget deferred the procurement of the first Ohio replacement boat by two years, to FY2021. As a result of the deferment of the procurement of the lead boat from FY2019 to FY2021, the Navy’s SSBN force will drop to 11 or 10 boats for the period FY2029-FY2041. The Navy states that the reduction to 11 or 10 boats during this period is acceptable in terms of meeting strategic nuclear deterrence requirements, because during these years, all 11 or 10 of the SSBNs in service will be operational (i.e., none of them will be in the midst of a lengthy mid-life overhaul). The Navy acknowledges that there is some risk in having the SSBN force drop to 11 or 10 boats, because it provides little margin for absorbing an unforeseen event that might force an SSBN into an unscheduled and lengthy maintenance action. (See also the discussion above in “Planned Procurement Quantity: 12 SSBN(X)s to Replace 14 Ohio-Class Boats.”)
The minimum level of 10 boats shown in Table 2 for the period FY2032-FY2040 can be increased to 11 boats (providing some margin for absorbing an unforeseen event that might force an SSBN into an unscheduled and lengthy maintenance action) by accelerating by about one year the planned procurement dates of boats 2 through 12 in the program. Under this option, the second boat in the program would be procured in FY2023 rather than FY2024, the third boat in the program would be procured in FY2025 rather than FY2026, and so on. Implementing this option could affect the Navy’s plan for funding the procurement of Virginia-class attack submarines during the period FY2022- FY2025.
SSBN(X) Design Features
The design of the SSBN(X), now being developed, will reflect
the following:
x The SSBN(X) is to be designed for a 42-year expected service life.
x Unlike the Ohio-class design, which requires a mid-life nuclear refueling, the SSBN(X) is to be equipped with a life-of-the-ship nuclear fuel core (a nuclear fuel core that is sufficient to power the ship for its entire expected service life). Although the SSBN(X) will not need a mid-life nuclear refueling, it will still need a mid-life non-refueling overhaul (i.e., an overhaul that does not include a nuclear refueling) to operate over its full 40-year life.
x The SSBN(X) is to be equipped with an electric-drive propulsion train, as opposed to the mechanical-drive propulsion train used on other Navy submarines. The electricdrive system is expected to be quieter (i.e., stealthier) than a mechanical-drive system.
x The SSBN(X) is to have SLBM launch tubes that are the same size as those on the Ohio class (i.e., tubes with a diameter of 87 inches and a length sufficient to accommodate a D-5 SLBM).
x The SSBN(X) will have a beam (i.e., diameter) of 43 feet, compared to 42 feet on the Ohio-class design, and a length of 560 feet, the same as that of the Ohio- class design.
x Instead of 24 SLBM launch tubes, as on the Ohio-class design, the SSBN(X) is to have 16 SLBM launch tubes.
x Although the SSBN(X) is to have fewer launch tubes than the Ohio-class SSBN, it is to be larger than the Ohio-class SSBN design, with a reported submerged displacement of 20,815 tons (as of August 2014), compared to 18,750 tons for the Ohio-class design.
x The Navy states that “owing to the unique demands of strategic relevance, [SSBN(X)s] must be fitted with the most up-to-date capabilities and stealth to ensure they are survivable throughout their full 40-year life span.”
In an article published in June 2012, the program manager for the Ohio replacement program stated that “the current configuration of the Ohio replacement is an SSBN with 16 87-inchdiameter missile tubes, a 43-foot-diamater hull, electric-drive propulsion, [an] X-stern, accommodations for 155 personnel, and a common submarine radio room tailored to the SSBN mission.”
Acquisition Cost
A March 2015 GAO report assessing selected major DOD weapon acquisition programs states that the estimated total acquisition cost of the SSBN(X) program is $95,775.7 million (about $95.8 billion) in constant FY2015 dollars, including $11,801 million (about $11.8 billion) in research and development costs and $83,974.7 million (about $84.0 billion) in procurement costs.
The Navy as of February 2015 estimates the procurement cost of the lead boat in the program at $14.5 billion in then-year dollars, including $5.7 billion in detailed design and nonrecurring engineering (DD/NRE) costs for the entire class, and $8.8 billion in construction costs for the ship itself. (It is a traditional budgeting practice for Navy shipbuilding programs to attach the DD/NRE costs for a new class of ships to the procurement cost of the lead ship in the class.) In constant FY2010 dollars, these figures become $10.4 billion, including $4.2 billion in DD/NRE costs and $6.2 billion in construction costs for the ship itself.
The Navy in February 2010 preliminarily estimated the procurement cost of each Ohio replacement boat at $6 billion to $7 billion in FY2010 dollars. Following the Ohio replacement program’s December 9, 2010, Milestone A acquisition review meeting (see “Program Origin and Early Milestones”), DOD issued an Acquisition Decision Memorandum (ADM) that, among other things, established a target average unit procurement cost for boats 2 through 12 in the program of $4.9 billion in constant FY2010 dollars. The Navy is working to achieve this target cost. In January 2015, the Navy stated that its cost-reduction efforts had reduced the estimated average unit procurement cost of boats 2 through 12 to about $5.2 billion each in constant FY2010 dollars. The Navy continues examining potential further measures to bring the cost of boats 2 through 12 closer to the $4.9 billion target cost. The above cost figures do not include costs for refurbishing D5 SLBMs so as to extend their service lives to 2042.
Operation and Support (O&S) Cost
The Navy is working to reduce the estimated operation and support (O&S) cost of each SSBN(X) from $124 million per year to $110 million per year in constant FY2010 dollars.
Common Missile Compartment (CMC)
Current U.S. and UK plans call for the SSBN(X) and the UK’s Successor SSBN to use a missile compartment—the middle section of the boat with the SLBM launch tubes—of the same general design. As mentioned earlier (see “U.S.-UK Cooperation on SLBMs”), the UK’s SSBN is to be armed with eight SLBMs, or half the number to be carried by the SSBN(X). The modular design of the CMC will accommodate this difference. Since the UK’s first Vanguard-class SSBN was originally projected to reach the end of its service life in 2024—three years before the first Ohio- class SSBN is projected to reach the end of its service life— design work on the CMC began about three years sooner than would have been required to support the Ohio replacement program alone. This is the principal reason why the FY2010 budget included a substantial amount of research and development funding for the CMC. The UK is providing some of the funding for the design of the CMC, including a large portion of the initial funding.
A March 2010 Government Accountability office (GAO) report stated:
According to the Navy, in February 2008, the United States and United Kingdom began a joint effort to design a common missile compartment. This effort includes the participation of government officials from both countries, as well as industry officials from Electric Boat Corpora-tion and BAE Systems. To date, the United Kingdom has
provided a larger share of funding for this effort, totaling just over $200 million in fiscal years 2008 and 2009.
A March 2011 GAO report stated:
The main focus of OR [Ohio Replacement program] research and development to date has been the CMC. The United Kingdom has provided $329 million for this effort since fiscal year 2008. During fiscal years 2009 and 2010, the Navy had allocated about $183 million for the design and prototyping of the missile compartment.
A May 2010 press report stated that “the UK has, to date, funded the vast majority of [the CMC’s] upfront engineering design activity and has established a significant presence in Electric Boat’s Shaw’s Cove CMC design office in New London, CT.”
Under the October 2010 UK defense and security review report (see “U.S.-UK Cooperation on SLBMs”), the UK now plans to deliver its first Successor class SSBN in 2028, or about four years later than previously planned.
Program Funding
Table 3 shows funding for the Ohio replacement program. The table shows U.S. funding only; it does not include funding provided by the UK to help pay for the design of the CMC. As can be seen in the table, the Navy’s proposed FY2016 budget requests $1,390.7 million for continued research and development work on the program.
Table 3. Ohio Replacement Program Funding
(Millions of then-year dollars, rounded to nearest tenth; totals may not add due to rounding)
| FY 15 | FY 16 (req.) | FY 17 (proj.) | FY 18 (proj.) | FY 19 (proj.) | FY 20 (proj.) | |
|---|---|---|---|---|---|---|
| Research and development (R&D) funding | ||||||
| PEO603570N/Project 3219 | 370.0 | 419.3 | 408.1 | 398.7 | 289.0 | 276.7 |
| PEO603595N/Project 3220 | 816.8 | 971.4 | 712.4 | 766.5 | 484.9 | 206.0 |
| PEO603595N/Project 3237 | 0 | 0 | 0 | 0 | 0 | 0 |
| Subtotal R&D funding | 1,223.3 | 1,390.7 | 1,120.5 | 1,165.2 | 773.9 | 482.7 |
| Military Construction (MilCon) funding | 24.3 | 0 | 0 | 0 | 0 | 0 |
| Procurement funding | 0 | 0 | 777.8 | 791.8 | 2,771.3 | 1,316.3 |
| TOTAL | 1,247.6 | 1,390.7 | 1,898.3 | 1,957.0 | 1,547.8 | 965.4 |
Notes: PE means Program Element, that is, a research and development line item. A Program Element may include several projects. PE0603570N/Project 3219 is SSBN(X) reactor plant project within the PE for Advanced Nuclear Power Systems. PE0603561N/Project 3220 is Sea-Based Strategic Deterrent (SBSD) Advanced Submarine System Development project within the PE for Ohio Replacement. PE0603595N/Project 3237 is Launch Test Facility project within the PE for Ohio Replacement. Military Construction (MilCon) funding for FY2015 is for an Ohio replacement program launch test facility (MilCon/0805376N) ($23.985 million) and Ohio Replacement Power and Propulsion Facility (MilCon/0901211N, design funds) ($0.364 million). Procurement funding shown in FY2017 through FY2020 is advance procurement funding for first SSBN(X), which is scheduled to be procured in FY2021.
Issues for Congress
Likelihood That Navy Will Reach $4.9 Billion Target Cost
One potential oversight issue for Congress regarding the Ohio replacement program is the likelihood that the Navy will be able to achieve DOD’s goal of reducing the average unit procurement cost of boats 2 through 12 in the program to $4.9 billion each in FY2010 dollars. As mentioned earlier, as of January 2015, the Navy estimated that its cost-reduction efforts had reduced the average unit procurement cost of boats 2 through 12 to about $5.2 billion each in FY2010 dollars, leaving another $300 million or so in cost reduction to reach the $4.9 billion target cost.
A January 26, 2015, press report quoted Rear Admiral David Johnson, the program executive officer for submarines, as stating that in achieving the targeted reduction in per-boat procurement cost, “I’m confident we’ll get to the $4.9 billion number that we have [as a target], we just have to keep working at it and we’ll need the help of Congress with multiyear authorities in how we’ll actually fund the ships.”
Potential oversight questions include the following:
x How did DOD settle on the figure of $4.9 billion in FY2010 dollars as the target average unit procurement cost for boats 2 through 12 in the program? On what analysis was the selection of this figure based?
x How difficult will it be for the Navy to reach this target cost? What options is the Navy examining to achieve the additional $300 million or so in unit procurement cost savings needed to reach it?
x Would a boat costing $4.9 billion have sufficient capability to perform its intended missions?
x 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 Overview
Another potential 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), SEAWOLF (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 producibility (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. October 2015 CBO Report An October 2015 Congressional Budget Office (CBO) report on the cost of the Navy’s shipbuilding programs stated:
The design, cost, and capabilities of the 12 Ohio Replacement submarines in the 2016 shipbuilding plan are
among the most significant uncertainties in the Navy’s and CBO’s analyses of the cost of future shipbuilding…. The Navy currently estimates the cost of the first Ohio Replacement submarine at $12.1 billion in 2015 dollars, and it estimates an average cost for follow-on ships of $5.7 billion (the Navy has stated an objective of reducing that cost to $5.6 billion). The implied total cost for the 12 submarines is $75 billion, or an average individual cost of $6.2 billion….
The Navy’s estimate represents a 12 percent reduction in the cost per thousand tons for the first Ohio Replacement submarine compared with the first Virginia class submarine— an improvement that would affect costs for the entire new class of ballistic missile submarines. The main reason for those purported improved costs by weight for the Ohio Replacement is that the Navy will recycle, to the extent possible, the design, technology, and components used for the Virginia class. Furthermore, because ballistic missile submarines (such as the Ohio Replacement) tend to be larger and less densely built ships than attack submarines (like the Virginia class), they will be easier to build and therefore less expensive per thousand tons, the Navy asserts.
However, the historical record for the lead ships of new classes of submarines in the 1970s and 1980s pro-vides little evidence that ballistic missile submarines are cheaper by weight to build than attack submarines…. The first Ohio class submarine was more expensive than the lead ships of the two classes of attack submarines built during the same period—the Los Angeles and the Improved Los Angeles. (The design of the Improved Los Angeles included the addition of 12 vertical launch system cells.) In addition, the average cost by weight of the first 12 or 13 ships of the Ohio, Los Angeles, and Improved Los Angeles classes was virtually identical. By the 1990s, the cost of lead ships for submarines had grown substantially. The first Virginia class submarine, which was ordered in 1998, cost about the same per thousand tons as the first SEAWOLF submarine, even though the SEAWOLF is 20 percent larger and was built nine years earlier.
Using data from the Virginia class submarine program, CBO estimates that the first Ohio Replacement
submarine will cost $13.2 billion in 2015 dollars. Estimating 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. All told, 12 Ohio Replacement submarines would cost $88 billion, in CBO’s estimation, or an average of $7.3 billion each—$1.1 billion more per submarine than the Navy’s estimate. That average includes the $13.2 billion estimated cost of the lead submarine and a $6.8 billion average estimated cost for the 2nd through 12th submarines. Research and development would cost between $10 billion and $15 billion, for a total program cost of $98 billion to $103 billion, CBO estimates.
Overall, the Navy expects a 22 percent improvement in the cost-to-weight relationship of the Ohio Replacement class compared with the first 12 submarines in the Virginia class. Given the history of submarine construction, however, CBO is less optimistic that the Navy will realize as large an improvement in the cost-to-weight relationship
of the Ohio Replacement class compared with the Virginia class. CBO estimates a 9 percent improvement, based in part on projected savings attributable to the concurrent production of the Ohio Replacement and Virginia class submarines.
As the Navy develops its acquisition strategy, costs for the Ohio Replacement could decline. For example, if lawmakers authorized and the Navy used a block-buy strategy to purchase a group of submarines over a specified period (effectively promising a steady stream of work for the shipyard to achieve better prices for those submarines, as it does for some other ship types)—and if that action also authorized the Navy to purchase submarines’ components and materials in batches—the savings could be considerable. Similarly, if the Congress funded the purchase of the Ohio Replacement submarines through the National Sea-Based Deterrence Fund, which was established in the fiscal year 2015 National Defense Authorization Act, the Navy could potentially save several hundred million dollars per submarine by purchasing components and materials for several submarines at the same time. A disadvantage of that acquisition strategy is that if the Congress decided not to build all of the submarines for which the Navy purchased some materials, those materials might go unused.
Program Affordability and Impact on Other Navy Shipbuilding Programs
Overview
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. It has been known for some time that the Ohio replacement program, if funded through the Navy’s shipbuilding account, could make it considerably more difficult for the Navy to procure other kinds of ships in desired numbers, unless the shipbuilding account were increased to accommodate the additional funding needs of the Ohio replacement program.
On February 26, 2015, Admiral Jonathan Greenert, the Chief of Naval Operations, testified that In the long term beyond 2020, I am increasingly concerned about our ability to fund the Ohio Replacement ballistic missile submarine (SSBN) program—our highest priority program—within our current and projected resources. The Navy cannot procure the Ohio Replacement in the 2020s within historical shipbuilding funding levels without severely impacting other Navy programs.
On February 25, 2015, Department of the Navy officials
testified that The Navy continues to need significant increases in our topline beyond the FYDP [Future Years Defense Plan], not unlike that during the period of [the original] Ohio [class] construction [effort], in order to afford the OR [Ohio replacement] SSBN procurement costs. Absent a significant increase to the SCN [Shipbuilding and Conversion, Navy] appropriation [i.e., the Navy’s shipbuilding account], OR SSBN construction will seriously impair construction of virtually all other ships in the battle force: attack submarines, destroyers, and amphibious warfare ships. The shipbuilding industrial base will be commensurately impacted and shipbuilding costs would spiral unfavorably. The resulting battle force would fall markedly short of the FSA [Force Structure Assessment—the Navy’s force structure goal for the fleet as a whole], [and be] unable to meet fleet inventory requirements. The National Sea-Based Deterrence Fund [see discussion below] is a good first step in that it acknowledges the significant challenge of resourcing the OR SSBN, but the fund is unresourced [i.e., no funding has been placed into the
account].
Ohio Replacement Program Is Navy’s Top Priority Program
On September 18, 2013, Admiral Jonathan Greenert, the Chief of Naval Operations, testified that the Ohio replacement program “is the top priority program for the Navy.” Navy officials since then have reiterated this statement.
The Navy’s decision to make the Ohio replacement program its top program priority means that the Ohio replacement program will be fully funded, and that any resulting pressures on the Navy’s shipbuilding account would be borne by other Navy programs, including shipbuilding programs. At a September 12, 2013, hearing before the Seapower and Projection Forces subcommittee of the House Armed Services Committee on undersea warfare, a Navy official stated: The CNO has stated, his number one priority as the chief of Naval operations, is our— our strategic deterrent—our nuclear strategic deterrent. That will trump all other vitally important requirements within our Navy, but if there’s only one thing that we do with our ship building account, we—we are committed to sustaining a two ocean national strategic deterrent that protects our homeland from nuclear attack, from other major war aggression and also access and extended deterrent for our allies.
At this same hearing, Navy officials testified that the service is seeking about $4 billion per year over 15 years in supplemental funding—a total of about $60 billion—for the Ohio replacement program. The 15 years in question, Navy officials suggested in their testimony, are the years in which the Ohio replacement boats are to be procured (FY2021-FY2035, as shown in Table 2). The $60 billion in additional funding equates to an average of $5 billion for each of the 12 boats, which is close to the Navy’s target of an average unit procurement cost of $4.9 billion in constant FY2010 dollars for boats 2 through 12 in the program. The Navy stated at the hearing that the $60 billion
in supplemental funding that the Navy is seeking would equate to less than 1% of DOD’s budget over the 15-year period. The Navy also suggested that the 41 pre-Ohio class SSBNs that were procured in the 1950s and
1960s (see Table 1) were partially financed with funding that was provided as a supplement to the Navy’s budget.
The Navy officials stated at the September 12 hearing that if the Navy were to receive about $30 billion in supplemental funding for the Ohio replacement program—about half the amount that the Navy is requesting—then the Navy would need to eliminate from its 30-year shipbuilding plan a notional total of 16 other ships, including, notionally, 4 Virginia-class attack submarines, 4 destroyers, and 8 other combatant ships (which might mean ships such as Littoral Combat Ships or amphibious ships). Navy officials stated, in response to a question, that if the Navy were to receive none of the supplemental funding that it is requesting, then these figures could be doubled—that is, that the Navy would need to eliminate from its 30-year shipbuilding plan a notional total of 32 other ships, including, notionally, 8 Virginiaclass attack submarines, 8 destroyers, and 16 other combatant ships.
National Sea-Based Deterrence Fund
Fund Created by Section 1022 of P.L. 113-291
Congress, as part of its markup of the Navy’s proposed FY2015 budget, created the National Sea- Based Deterrence Fund (NDBDF), a fund in the DOD budget that will be separate from the Navy’s regular shipbuilding account (which is formally known as the Shipbuilding and Conversion, Navy, or SCN, appropriation account). The NSBDF was created by Section 1022 of the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 (H.R. 3979/P.L. 113-291 of December 19, 2014), which states: A. SEC. 1022. NATIONAL SEA-BASED
B. DETERRENCE FUND. (a) Establishment of Fund.—
(1) In general.—Chapter 131 of title 10, United States Code, is amended by inserting after section 2218 the following new section:
C. “Sec. 2218a. National Sea-Based Deterrence Fund
D. “(a) Establishment.—There is established in the Treasury of the United States a fund to be known as the ‘National Sea-Based Deterrence Fund’.
E. “(b) Administration of Fund.—The Secretary of Defense shall administer the Fund consistent with the provisions of this section.
F. “(c) Fund Purposes.—(1) Funds in the Fund shall be
available for obligation and expenditure only for construction (including design of vessels), purchase, alteration, and conversion of national sea-based deterrence vessels.
G. “(2) Funds in the Fund may not be used for a purpose or program unless the purpose or program is authorized by law.
H. “(d) Deposits.—There shall be deposited in the Fund all funds appropriated to the Department of Defense for construction (including design of vessels), purchase, alteration, and conversion of national sea-based deterrence vessels.
I. “(e) Expiration of Funds After 5 Years.—No part of an appropriation that is deposited in the Fund pursuant to subsection (d) shall remain available for obligation
more than five years after the end of fiscal year for which appropriated except to the extent specifically provided by law.
J. “(f) Budget Requests.—Budget requests submitted to Congress for the Fund shall separately identify the amount requested for programs, projects, and activities for construction (including design of vessels),
purchase, alteration, and conversion of national seabased deterrence vessels.
K. “(g) Definitions.—In this section:
“(1) The term ‘Fund’ means the National Sea-Based Deterrence Fund established by subsection (a).
“(2) The term ‘national sea-based deterrence vessel’ means
any vessel owned, operated, or controlled by the Department of Defense that carries operational intercontinental ballistic missiles.”
(2) Clerical amendment.—The table of sections at the beginning of chapter 131 of such title is amended by inserting after the item relating to section 2218 the following new item: “2218a. National Sea-Based Deterrence Fund.”
(b) Transfer Authority.—
(1) In general.—Subject to paragraph (2), and to the extent provided in appropriations Acts, the Secretary of Defense may transfer to the National Sea-Based Deterrence Fund established by section 2218a of title 10, United States Code, as added by subsection (a)(1), amounts not to exceed $3,500,000,000 from unobligated funds authorized to be appropriated for fiscal years 2014, 2015, or 2016 for the Navy for the Ohio Replacement Program. The transfer authority provided under this paragraph is in addition to any other transfer authority provided to the Secretary of Defense by law.
(2) Availability.—Funds transferred to the National Sea-Based Deterrence Fund pursuant to paragraph (1) shall remain available for the same period for which the transferred funds were originally appropriated.
Precedents for Funding Navy Acquisition Programs Outside Navy Appropriation Accounts Prior to the above legislation, some observers had 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. There was some precedent for such an arrangement:
x Construction of DOD sealift ships and Navy auxiliary ships has been funded in past years in the National Defense Sealift Fund (NDSF), a part of DOD’s budget that is outside the Shipbuilding and Conversion, Navy (SCN) appropriation account, and also outside the procurement title of the DOD appropriations act.
x Most spending for ballistic missile defense (BMD) programs (including procurement-like activities) is funded
through the Defense-Wide research and development and procurement accounts rather than through the research and
development and procurement accounts of the individual military services.
A rationale for funding DOD sealift ships in the NDSF has been that DOD sealift 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.
In addition, it can be noted that 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 FY2016 budget submission, for example, shows that about $11.9 billion is requested for strategic forces for FY2016. Potential Implications of NSBDF on Funding Available for Other Programs
The NSBDF has at least two potential implications for the impact that the Ohio replacement program may have on funding available in coming years for other DOD acquisition programs. The first potential implication concerns the impact the Ohio replacement program may have on funding available in coming years for other Navy programs, and particularly other Navy shipbuilding programs. A principal apparent intent in creating the NSBDF was to help preserve funding in coming years for other Navy programs, and particularly Navy shipbuilding programs other than the Ohio replacement program, by placing funding for the Ohio replacement program in a location within the DOD budget that is separate from the Navy’s shipbuilding account and the Navy’s budget in general. This separation, it might be argued, might encourage observers, in discussing defense budget issues, to consider funding for the Ohio replacement program separate from funding for other Navy shipbuilding programs, rather than add the two figures together to create a single sum representing funding for the procurement of all ships. In addition, referring to the fund as a national fund and locating it outside the Navy’s budget might encourage a view (consistent with an argument made by supporters of the Ohio replacement program that the program is intended to meet a national military need rather than a Navyspecific need) that funding for the Ohio replacement program should be resourced from DOD’s budget as a whole, rather than from the Navy’s budget in particular. A second potential implication of the NSBDF for funding available in coming years for other DOD programs concerns how DOD might be able to use funds appropriated for the procurement of Ohio replacement boats and the effect this use of funds might have in marginally reducing the procurement cost of those boats. As discussed in the CRS report on the Navy’s TAO(X) oiler program, the National Defense Sealift Fund is located in a part of the DOD budget that is outside the procurement title of the annual DOD appropriations act. Consequently, ships whose construction is funded through the NDSF are not subject to the DOD full funding policy in the same way as are ships and other DOD procurement programs that are funded through the procurement title of the annual DOD appropriations act.
For NDSF-funded ships, what this has meant is that although Congress in a given year would nominally fund the construction of an individual ship of a certain class, the Navy in practice could allocate that amount across multiple ships in that class. This is what happened with both the NDSF-funded Lewis and Clark (TAKE-1) class dry cargo ships and, before that, an NDSF-funded class of DOD sealift ships called Large, Medium-Speed Rollon/Roll-off (LMSR) ships. In both cases, the result was that although ships in these two programs were each nominally fully
funded in a single year, they in fact had their construction financed with funds from amounts that were nominally appropriated in other fiscal years for other ships in the class.
The Navy’s ability to use NDSF funds in this manner has permitted the Navy to, among other things, marginally reduce the procurement cost of ships funded through the NDSF by batchordering certain components of multiple ships in a shipbuilding program before some of the ships in question were fully funded— something that the Navy cannot do with a shipbuilding program funded through the Navy’s shipbuilding account unless the Navy receives approval from Congress to execute the program through a multiyear procurement (MYP) contract.
If the National Sea-Based Deterrence Fund is located outside the procurement title of the annual DOD appropriations act, the Navy might be able to do something somewhat similar in using funds appropriated for the procurement of Ohio replacement boats. If so, this might facilitate the partial batch-build construction strategy that the Navy may wish to employ as a cost-reducing measure for building the Ohio replacement boats (see discussion in next section), which in turn could marginally reduce the cost of the Ohio replacement boats, and thereby marginally increase the amount of funding that would remain available within a DOD budget of a certain size for other DOD programs.
Some Options for Further Addressing the Issue
In addition to creating the National Sea-Based Deterrent Fund and making further changes and refinements in the design of the SSBN(X), options for further reducing the cost of the Ohio replacement program and the program’s potential impact on funding available for other Navy programs (particularly shipbuilding programs) include the following:
x using a partial batch-building approach for building the Ohio replacement boats;
x using a joint block buy contract that would cover both the Ohio replacement program and the Virginia-class attack submarine program;
x altering the schedule for procuring the SSBN(X)s so as to create additional opportunities for using incremental funding for procuring the ships; and
x reducing the planned number of SSBN(X)s.
Each of these options is discussed below.
Partial Batch-Build Approach for Building Ohio Replacement Boats
As one means of reducing the procurement cost of the Ohio replacement boats, the Navy is considering a partial batch-build approach for building the boats. Under this approach, instead of building the boats in serial fashion, portions of several boats would be built together, in batch form, so as to maximize economies of scale in the production of those portions. Under this approach, the boats would still be finished and enter service one at a time, under the schedule shown in Table 2, but aspects of their construction would be undertaken in batch fashion rather than serial fashion. Implementing a partial batch-building approach for building the boats might be facilitated by
x using a multiyear procurement (MYP) contract whose built-in Economic Order Quantity (EOQ) authority might be expanded to cover not just batch-ordering of selected long leadtime components, but also batchbuilding of sections of the ships; or
x using a block buy contract that included an added EOQ authority of similar scope; or
x locating the National Sea-Based Deterrence Fund outside the procurement title of the DOD appropriations act and using funds in that account for the construction of Ohio replacement boats in a manner somewhat similar to how the Navy has used funds in the National Defense Sealift Fund to batch-order components for ships acquired through the NDSF (see discussion in previous section).
Joint Block Buy Contract Covering Both Ohio Replacement and Virginia-Class Programs To help reduce ship procurement costs, the Navy in recent years has made extensive use of multiyear procurement (MYP) contracts and block buy contracts in its shipbuilding programs, including the Virginia class attack submarine program. In light of this, the Navy will likely seek to use block buy and/or MYP contracting in the Ohio replacement program. Beyond that, the Navy is investigating the possibility of using a single, joint-class block buy contract that would cover both Ohio replacement boats and Virginia class boats. Such a contract, which could be viewed as precedent-setting in its scope, could offer savings beyond what would be possible using separate MYP or block buy contracts for the two submarine programs. A March 2014 GAO report stated that if the Navy decides to propose such a contract, it would develop a legislative proposal in 2017. The Navy reportedly plans to finalize its acquisition strategy for the Ohio replacement program, including the issue of the contracting approach to be used, in the fall of 2016 as part of DOD’s Milestone B decision for the program.
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 turn 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 fouryear 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 FY2021. 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 12th boat two years prior to its nominal year of procurement.
Notes: Notional alternative schedule could depend on 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 12th boat two years prior to its nominal year of procurement. Under Navy’s schedule, the boat to be procured in FY2033 might be particularly suitable for 4-year incremental funding, and boat to be procured in FY2034 might be particularly suitable for 3- or 4-year incremental funding.
A December 19, 2011, press report states:
The Office of Management and Budget’s Nov. 29[, 2011,] passback memorandum to the Defense Department [regarding 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 will meet these criteria,” the passback memo
states.
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 12 SSBNs. A November 2013 CBO report on options for reducing the federal budget deficit, for example, presented an option for reducing the SSBN force to eight boats as a cost-reduction measure. Earlier CBO reports have presented options for reducing the SSBN force to 10 boats as a cost-reduction measure. CBO reports that present such options also provide notional arguments for and against the options. A June 2010 report by a group known as the Sustainable Defense Task Force recommends reducing the SSBN force to 7 boats; a September 2010 report from the Cato Institute recommends reducing the SSBN force to 6 boats, and a September 2013 report from a group organized by the Stimson Center recommends reducing the force to 10 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 dayto-day basis. After taking into account warheads on the other two legs of the strategic nuclear triad, the number of warheads on an SSBN’s SLBMs, and factors independent of the number of warheads on the 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 (see “Planned Procurement Quantity: 12 SSBN(X)s to Replace 14 Ohio- Class Boats” in “Background”) 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.
Construction Shipyard(s)
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 nuclearpowered 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 (HII). 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. The Navy reportedly plans to finalize its acquisition strategy for the Ohio replacement program, including the issue of which shipyard or shipyards will build the boats, in the fall of 2016 as part of DOD’s Milestone B decision for the program.
Notes: GD/EB was the builder of the first boat in all four SSBN classes. The George Washington-class boats were procured as modifications of SSNs that were already under construction. A total of 18 Ohio-class SSBNs were built; the first four were converted into SSGNs in 2002-2008, leaving 14 in service as SSBNs.
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 FY1964 and entered service in 1966.
There are at least five basic possibilities for building SSBN(X)s:
x build all SSBN(X)s at GD/EB—the approach that was used for building the Ohio-class SSBNs;
x build all SSBN(X)s at NNS;
x build some SSBN(X)s GD/EB and some at NNS— the approach that was used for building the George Washington-, Ethan Allen-, and Lafayette/Benjamin Franklin-class SSBNs;
x 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
x 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:
x each yard’s share of SSBN(X) production work (if both yards are involved);
x the number of SSNs procured during the years of SSBN(X) procurement (which
x can affect economies of scale in submarine production);
x whether the current joint-production arrangement for the Virginia class remains in effect during those years; and
x 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.
At a July 30, 2015, hearing before the Senate Armed Services Committee on the nomination of Admiral John Richardson for the position of Chief of Naval Operations (CNO), Richardson stated, “We’re conducting a study right now to both mature the design and mature the build plan [for the Ohio replacement program]. We should get that completed by the fall timeframe, and I look forward to collaborating when we have that more mature.” (Richardson was confirmed by the Senate on August 5, 2015, and became the CNO on September 18, 2015.)
An October 5, 2015, press report states that
The Navy has yet to announce or sign off on its ORP acquisition strategy, and the shipyard that is expected to lead the effort, General Dynamics’ Electric Boat, would like some decisions soon. Among the leading reasons, said the company’s top shipbuilder, is the need to determine the right work “We’re within a year or so of needing to start, aside from what we already have started,” said John Casey, GD’s executive vice president for marine systems, which includes Electric Boat, the shipyard in Connecticut and Rhode Island that is expected to lead the ORP effort. GD expects to spend more than $2 billion to ready its facilities to build the submarines, Casey said….
The shipbuilders can’t move ahead, Casey said, until the Navy approves the work-sharing plan submitted in March by Electric Boat and Newport News.
“We do not have a commitment,” Casey said. “Until we have the details of an estimate of what it takes to build a particular building or the equipment that goes in it,” the work can’t begin. The Navy has said ORP will not replicate the 50-50 teaming arrangement used to build Virginia-class attack submarines….
With cost a major driving factor in the ORP production arrangement… it’s expected that Electric Boat will oversee the design and assemble and complete all 12 ORP submarines. But Newport News will make a major contribution to the new submarines and, at the Navy’s direction, the two shipyards got together last winter to hash out the details. Negotiations were tough, Casey said, but agreement was reached and the yards submitted their plan in March for approval.
But they’re still waiting for the Navy’s response….
Driving the sense of urgency, he said, is the need to have decisions in place before the middle of 2016, when a Milestone B decision on the program is due—a Pentagon review that decides if a program is ready to move into the engineering and manufacturing development phase.
“If the answer comes back, ‘We do not like your recommendation. We want you to do something different,’ then we have to start all over again,” Casey said. “We have to evaluate what is most important to us. Newport News has to evaluate what is most important to them. We have to re-estimate the cost of the ship. We have to re-define what we think the schedules of the ship are. “There is a lot of work to be done if the path we are on is disrupted. Frankly, we do not need any disruption. There is not any spare time in this program. We started a little late with the design as a result of the initial construction start being moved Experience from the Virginia program flowed into the proposed ORP build plan. “We tried to pick areas of the ship that were similar to areas that each person was already building for the most part,” Casey said.
Casey pointed out that it’s not just the two shipyards that need agreement on the ORP work plan. Britain has a significant interest, with a common Trident missile compartment designed for the SSBN(X) and the UK’s Successor submarine program.
“I think of the 5,000 suppliers, along with the U.K. suppliers, that are necessary to execute a successful global strategic deterrent,” Casey said. “I think the sooner we have alignment between the industrial base in the Navy, the better off we all will be.” A Capitol Hill source familiar with the issue agreed with much of what Casey had to say.
“The Navy agrees with 90 to 95 percent of this thing,” the source said. “Issues have been raised about fees—prime versus subcontractor. The Navy is doing deep dives on what elements of the work split they can agree with, and which have questions.”
In the absence of any public discussion of the submarine building plan, GD has been on the Hill in recent weeks briefing congressional delegations and staffers, the source said. According to the source, Newport News has not taken part in that process.
