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Every year in response to a Congressional directive the Department of the Navy issues reports that describe its plans for ship construction over a 30-year period. In the report released in February 2006, the Navy presented its fiscal year 2007 plan, which called for expanding its fleet from 285 battle force ships in 2006 to 313 by 2020 and beyond. In May 2006, the Congressional Budget Office (CBO) issued a study analyzing that plan and estimating its potential costs. Today CBO released an analysis of the resource implications of the Navy’s fiscal year 2009 shipbuilding plan.
Since May 2006, the Navy has provided two updates to its 313-ship plan, one for fiscal year 2008 and one for fiscal year 2009. However, the plans differ in several ways. For instance, although the 2007 and 2008 plans both assumed annual costs of 16.1 billion for new construction, the 2008 plan increased the total number of ships scheduled for purchase over the 30-year period to 293, compared with 280 under the 2007 plan.
The 2009 plan envisions purchasing three more ships than indicated in the 2008 plan—296—and increases the Navy’s estimate of the costs to implement the plan by about 30 percent. Although the overall number of ships slated for purchase under the 2008 and 2009 plans differs only slightly, the Navy made significant changes in the types of ships it would purchase under the two plans.
CBO’s analysis found the following:
– The Navy’s 2009 budget request appears to depart from all of the budgetary assumptions used to develop the service’s 2007 and 2008 shipbuilding plans. The implication is that the Navy abandoned those assumptions, including its cost to target methodology for determining ship construction costs, in developing the 2009 plan.
– Executing the Navy’s most recent 30-year shipbuilding plan would cost an average of about $27 billion per year (2009 dollars), or more than double the $12.6 billion a year that the Navy has spent, on average, since 2003.
– CBO’s estimates of the Navy’s shipbuilding program through the period covered by the 2009-2013 Future Years Defense Program are about 30 percent higher than the Navy’s estimates.
– For the 2009-2020 “near term” period, CBO estimates that the new-ship construction alone would cost about 13% more than the Navy estimates
– For the “far term” period beyond 2020, CBO estimates that costs would be about 8% greater than the Navy projects.
These estimates are based on a number of assumptions that CBO made about the size and characteristics of various types of ships that the Navy would buy and about the timing of those purchases. Different assumptions could produce different estimates. The analysis was performed by Eric J. Labs and Raymond Hall of our Defense, International Affairs, and Veterans Affairs Cost Estimates Unit.
Full report in PDF format is available here
Congressional Budget Office
