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Navy Estimates $14.5B Tab For Lead Ohio-Class Replacement Submarine
Posted: March 16, 2015
The Ohio-Class Replacement lead submarine will carry a $14.5 billion price tag -- a behemoth of a bill, even by Pentagon standards -- that the Navy must reckon with for the first time this spring as it drafts a new five-year spending plan that is supposed to pay for the first boat in fiscal year 2021, pitting the service's top modernization priority against its entire conventional modernization portfolio.
A recent Navy update of the Ohio-Class Replacement program presented to Pentagon acquisition executive Frank Kendall includes estimates of $8.8 billion in construction costs and $5.7 billion in non-recurring engineering work attributed to the first boat of the new class, according to a Navy spokeswoman, sums that account for inflation in accordance with DOD budgeting guidelines.
"I can tell you: lead ship [cost will be] $14.5 billion," Cmdr. Thurraya Kent, a spokeswoman for Navy acquisition executive Sean Stackley, said in a March 12 email to InsideDefense.com. Previously, the Navy has expressed cost estimates for the new strategic deterrence submarine program in constant-year 2010 dollars, updating on occasion to current fiscal year dollars.
In constant-year 2010 dollars, the Navy expects the lead ship to cost $10.4 billion, including $6.2 billion in new ship construction and $4.2 billion in non-recurring engineering work. When building a five-year budget plan, however, Defense Department guidelines stipulate the inclusion of “most likely or expected full costs,” and that figures be expressed using then-year cost estimates.
Last month, the Navy revealed a $139 billion total development and acquisition cost for the 12-boat Ohio-Class Replacement program, the first time the service had publicly tallied the new shipbuilding program in "then-year" dollars, accounting for the anticipated effects of future inflation (DefenseAlert, Feb. 27). That accounting consolidated non-recurring engineering and design costs for the entire class: $22.4 billion in then-year dollars, or $17.1 billion in constant-year 2010 dollars. Kent said the portion attributable to the lead boat is $5.7 billion in then-year dollars, $4.2 billion in constant-year 2010 dollars.
Follow-on ships two through 12 are projected to cost an average of $9.8 billion, or $5.2 billion in constant-year dollars.
Last July, the Navy warned Congress that its plan to simultaneously build a new ballistic missile submarine while modernizing the conventional fleet would require "funding at an unsustainable level" that would drive the annual shipbuilding budget to twice its historical average (DefenseAlert, July 7).
Over the last year, Chief of Naval Operations Adm. Jonathan Greenert has repeatedly warned that the Navy requires a larger budget to build the new strategic deterrent submarine fleet and continue to modernize the conventional arm of the service.
"CNO and I have been talking for some time now about when we begin to build the Ohio-Class replacement in 2021, if it is a pure Navy build it will devastate some part of the Navy, either our shipbuilding or readiness or something, because the high cost of these and because we don't recapitalize them very often," Navy Secretary Ray Mabus told the Senate Armed Services Committee on March 10.
This spring, the Navy is beginning work on its FY-17 budget plan and accompanying five-year program.
For perspective, the Navy's five-year plan outlined last month in FY-16 budget documents sent to Congress assumes a shipbuilding account of $15.2 billion in FY-20 to buy two Virginia-class attack submarines, two DDG-51 Arleigh Burke-class destroyers, three Littoral Combat Ships, a new oiler and a support vessel.
The Congressional Budget Office, in a December 2014 analysis of the Navy's FY-15 30-year shipbuilding plan, underscored concerns about the potential for a new, nuclear-armed submarine program to disrupt Navy plans.
"The design, cost, and capabilities of the Ohio Replacement submarine class are among the most significant uncertainties in the Navy's and CBO's analyses of the cost of future shipbuilding," according to the CBO report. "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."
The Navy is conducting an internal study examining future submarine plans. An assessment is expected to be complete this spring in time to inform the service's FY-17 to FY-21 five-year spending plan.
Among the issues the Navy is exploring is the capacity of the three industrial players to support current plans -- General Dynamics, Huntington Ingalls, and Babcock & Wilcox. Navy officials have previously discussed the possibility of bundling a future block buy of the Virginia-class attack submarine with Ohio Replacement Program boats; service officials said the study is also exploring whether work to develop a Virginia Payload Module can be accelerated.
"We're doing those studies right now in concert, frankly, with an overarching study that we're doing which is looking at how in fact are we going to build Ohio Replacement in concert with the ongoing Virginia submarine construction, in concert with the introduction of Virginia Payload Modules all within a couple of years window," Stackley said at a Feb. 25 hearing. -- Jason Sherman
Posted: March 16, 2015
The Ohio-Class Replacement lead submarine will carry a $14.5 billion price tag -- a behemoth of a bill, even by Pentagon standards -- that the Navy must reckon with for the first time this spring as it drafts a new five-year spending plan that is supposed to pay for the first boat in fiscal year 2021, pitting the service's top modernization priority against its entire conventional modernization portfolio.
A recent Navy update of the Ohio-Class Replacement program presented to Pentagon acquisition executive Frank Kendall includes estimates of $8.8 billion in construction costs and $5.7 billion in non-recurring engineering work attributed to the first boat of the new class, according to a Navy spokeswoman, sums that account for inflation in accordance with DOD budgeting guidelines.
"I can tell you: lead ship [cost will be] $14.5 billion," Cmdr. Thurraya Kent, a spokeswoman for Navy acquisition executive Sean Stackley, said in a March 12 email to InsideDefense.com. Previously, the Navy has expressed cost estimates for the new strategic deterrence submarine program in constant-year 2010 dollars, updating on occasion to current fiscal year dollars.
In constant-year 2010 dollars, the Navy expects the lead ship to cost $10.4 billion, including $6.2 billion in new ship construction and $4.2 billion in non-recurring engineering work. When building a five-year budget plan, however, Defense Department guidelines stipulate the inclusion of “most likely or expected full costs,” and that figures be expressed using then-year cost estimates.
Last month, the Navy revealed a $139 billion total development and acquisition cost for the 12-boat Ohio-Class Replacement program, the first time the service had publicly tallied the new shipbuilding program in "then-year" dollars, accounting for the anticipated effects of future inflation (DefenseAlert, Feb. 27). That accounting consolidated non-recurring engineering and design costs for the entire class: $22.4 billion in then-year dollars, or $17.1 billion in constant-year 2010 dollars. Kent said the portion attributable to the lead boat is $5.7 billion in then-year dollars, $4.2 billion in constant-year 2010 dollars.
Follow-on ships two through 12 are projected to cost an average of $9.8 billion, or $5.2 billion in constant-year dollars.
Last July, the Navy warned Congress that its plan to simultaneously build a new ballistic missile submarine while modernizing the conventional fleet would require "funding at an unsustainable level" that would drive the annual shipbuilding budget to twice its historical average (DefenseAlert, July 7).
Over the last year, Chief of Naval Operations Adm. Jonathan Greenert has repeatedly warned that the Navy requires a larger budget to build the new strategic deterrent submarine fleet and continue to modernize the conventional arm of the service.
"CNO and I have been talking for some time now about when we begin to build the Ohio-Class replacement in 2021, if it is a pure Navy build it will devastate some part of the Navy, either our shipbuilding or readiness or something, because the high cost of these and because we don't recapitalize them very often," Navy Secretary Ray Mabus told the Senate Armed Services Committee on March 10.
This spring, the Navy is beginning work on its FY-17 budget plan and accompanying five-year program.
For perspective, the Navy's five-year plan outlined last month in FY-16 budget documents sent to Congress assumes a shipbuilding account of $15.2 billion in FY-20 to buy two Virginia-class attack submarines, two DDG-51 Arleigh Burke-class destroyers, three Littoral Combat Ships, a new oiler and a support vessel.
The Congressional Budget Office, in a December 2014 analysis of the Navy's FY-15 30-year shipbuilding plan, underscored concerns about the potential for a new, nuclear-armed submarine program to disrupt Navy plans.
"The design, cost, and capabilities of the Ohio Replacement submarine class are among the most significant uncertainties in the Navy's and CBO's analyses of the cost of future shipbuilding," according to the CBO report. "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."
The Navy is conducting an internal study examining future submarine plans. An assessment is expected to be complete this spring in time to inform the service's FY-17 to FY-21 five-year spending plan.
Among the issues the Navy is exploring is the capacity of the three industrial players to support current plans -- General Dynamics, Huntington Ingalls, and Babcock & Wilcox. Navy officials have previously discussed the possibility of bundling a future block buy of the Virginia-class attack submarine with Ohio Replacement Program boats; service officials said the study is also exploring whether work to develop a Virginia Payload Module can be accelerated.
"We're doing those studies right now in concert, frankly, with an overarching study that we're doing which is looking at how in fact are we going to build Ohio Replacement in concert with the ongoing Virginia submarine construction, in concert with the introduction of Virginia Payload Modules all within a couple of years window," Stackley said at a Feb. 25 hearing. -- Jason Sherman