As the Biden administration prepares to release a fiscal year (FY) 2022 ‘skinny’ budget and lawmakers on Capitol Hill begin to discuss the annual defense policy bill, stakeholders should heed the recent warnings of two government watchdogs before green-lighting additional spending for the U.S. Navy to grow their ship fleet.
By way of background, in December 2016 the Navy set a goal for growing its fleet size to 355 ships. This goal would have the fleet grow from 301 ships in FY 2020 to 355 by FY 2034, around 18-percent fleet growth, and would have the Navy maintain the fleet at 355 ships between FY 2034 and FY 2049.
Last December, the outgoing Trump administration upped the ante with a significantly larger goal for Navy fleet growth, to between “382 to 446 manned ships and 143 to 242 large [unmanned vehicles or] UVs.” As the nonpartisan Congressional Research Service (CRS) points out, this would grow the total size of the fleet to anywhere from 74 percent to 129 percent above FY 2020 fleet levels, when accounting for new unmanned ships.
Unsurprisingly, these plans to build more ships are expensive propositions for taxpayers. According to the Congressional Budget Office (CBO):
...buying the new ships specified in the 2020 plan would cost $865 billion over 30 years, or an average of $28.8 billion per year. The Navy estimates a lower cost—$660 billion over 30 years, or an average of $22.0 billion per year—$0.6 billion more per year than it estimated new-ship construction would cost under its 2019 plan.
CBO further breaks down increasing costs for the shipbuilding plan over time, comparing its cost estimates to the more bullish Navy estimates and to average shipbuilding costs over the past 30 years:
Average Annual Cost of New-Ship Construction (Navy Estimate)
Annual New-Ship Construction Costs vs. 30-Year Historical Average (Navy)
Total Cost of New-Ship
Average Annual Cost of New-Ship Construction (CBO Estimate)
Annual New-Ship Construction Costs vs. 30-Year Historical Average (CBO)
Total Cost of New-Ship Construction (CBO Estimate)
+$6.5 billion (+47%)
$101.5 billion over five years
+$6.9 billion (+50%)
$103.5 billion over five years
+$10.6 billion (+77%)
$122 billion over five years
+$15.9 billion (+115%)
$148.5 billion over five years
+$8 billion (+58%)
$436 billion over 20 years
+$16.9 billion (+122%)
$614 billion over 20 years
30-Year Avg. (2020-2049)
+$8.2 billion (+59%)
$660 billion over 30 years
+$15 billion (+108%)
$864 billion over 30 years
In short, the Navy’s shipbuilding plan may cost between $660 billion and $864 billion over 30 years, an average of $22 billion to $28.8 billion per year. Those per-year costs are around the same as either the entire discretionary Department of Agriculture budget ($23.4 billion in FY 2021) or the entire discretionary Financial Services and General Government spending bill ($24.4 billion in FY 2021). The latter bill encompasses the entire budgets of the Department of the Treasury, the Executive Office of the President, the federal judiciary, the Federal Communications Commission (FCC), the Small Business Administration (SBA), and more. We raise these examples to demonstrate just how expensive the Navy’s shipbuilding plan is to taxpayers.
It’s also worth noting how expensive the Navy’s shipbuilding plans are compared to its historically average costs for developing and maintaining its fleet. Even the Navy’s more generous estimate of its per-year costs under the 355-ship plan would have it spend 59 percent more on new-ship construction than its 30-year historical average. The CBO estimate finds the Navy more than doubling its annual new-ship construction costs (a 108-percent increase), compared to 30-year averages.
Recent reporting from two government watchdogs, though, the Congressional Budget Office (CBO) and the Government Accountability Office (GAO), should give lawmakers pause before they green-light an expensive fleet expansion plan. Maintenance delays and backlogs at the Navy’s shipyards, and unfulfilled recommendations from GAO to fix these issues should be addressed by the Navy before Congress gives it a boatload -- or several dozen boatloads -- of cash for new ships. CBO even includes reduction of the Navy’s fleet as one option that would both mitigate maintenance delays and reduce deficits. This option should be on the table for lawmakers as they look to responsibly reduce discretionary spending in FY 2022 and beyond.
GAO Report Includes Dozens of Unfulfilled Recommendations
GAO has reported several times on maintenance delays at the Navy’s shipyards. To sum up, the Navy conducts the bulk of its work maintaining the fleet’s 81 nuclear-powered ships at one of four Navy-owned and Navy-operated shipyards. Those shipyards are in Portsmouth, Virginia; Pearl Harbor, Hawaii; Kittery, Maine; and Bremerton, Washington. GAO notes the Navy spent around $2.8 billion on capital investments in shipyards from FYs 2015-2019, an average of $700 million per year. Unfortunately, these investments appear not to have materially improved the maintenance delay concerns. According to GAO:
- From FYs 2015-2019, the Navy had total combined maintenance delays of 7,424 (an average of 145 days per maintenance period);
- There was an average delay of 113 days for aircraft carrier maintenance and 225 days for submarine maintenance;
- Two factors were major contributors to most delays: 1) unplanned work, and 2) workforce capacity, capability, and prioritization issues, along with issues surrounding experience level and shipyard/contractor performance; and
- Overall, the Navy’s four shipyards were late on 75 percent of maintenance periods.
GAO notes in their latest report on shipyard maintenance, from August 2020, that they have made 37 unclassified recommendations to either the Navy or the broader Defense Department (DoD) since 2015 regarding shipyard improvements. The Navy or DoD agreed with 35 of those 37 recommendations, but as of June 2020 had only implemented 10 (or 28.6 percent).
In this 2020 report GAO included three recommendations to the Navy to improve their maintenance delays: 1) updating its workforce planning to avoid excessive (and expensive) use of overtime; 2) develop consistent shipyard performance metrics, and 3) develop and implement goals, action plans, milestones, and monitoring of results.
All three recommendations are open as of April 2021, but the Navy reported it planned to complete action on the latter two recommendations by the end of the second quarter of FY 2021 (i.e., March 31), so Congress and GAO should ask for updates before moving forward with any fleet increases recommended by Members of Congress or the Biden administration.
CBO Report Suggests Navy Can Withstand Fleet Reductions
In a more up-to-date March 2021 CBO report on Navy shipyards, the nonpartisan government watchdog reports concerns with the ability of the Navy to handle both its existing fleet maintenance and future demands. CBO projects that submarine maintenance demand will exceed Navy shipyard capacity in 25 of the next 30 years. That accounts for the Navy’s projected “efficiency gains” (which may not come to pass), a $21 billion Navy shipyard infrastructure program over the next 20 years, and delays in 2020 and 2021 due to the COVID-19 pandemic.
Like GAO, CBO points to two major causes for the historical (and projected) delays: 1) the amount of maintenance required of Navy shipyards has increased, and 2) the Navy does not have enough workers to keep pace.
CBO offers up four options the Navy could consider, either in isolation or in combination with one another, to address the 30-year projected backlog. The first is for the Navy to essentially improve the accuracy of their maintenance projections, so that the service branch can better predict when to take submarines off deployment time and into months-long maintenance. CBO projects this option would come at minimal cost.
The second and third options involve spending more money, either on increasing the workforce at Navy shipyards or hiring more private contractors to do maintenance work on submarines. There’s a time lag for either of these options since “hiring and training workers at shipyards” takes about five years from the authorization of spending to the development of a “Productive” workforce. These options may not completely eliminate backlogs, either, because the Navy shipyard workforce has grown 76 percent over the last 20 years even as maintenance delays have become worse over that time period.
CBO projects either hiring more workers (by increasing the shipyard workforce by nearly seven percent) or hiring more contractors would cost around $275 million per year, or $2.75 billion every 10 years.
The fourth option, reducing the fleet size, may be the best path forward for the Navy, the Biden administration, and Congress.
CBO suggests the Navy can reduce the size of its fleet by five attack submarines (or a 9.4-percent reduction from the 53 the Navy currently has), and the consequent maintenance improvements would allow the Navy to have the same number of submarines available during peacetime as it does currently. As for where the reduction will come from, CBO offers two plausible options:
- The Navy could retire five Los Angeles class submarines over several years, eventually leading to $1.6 billion in refueling savings and $250 million per year in operations costs; these savings would partially be offset by the costs of disposing with the five subs; or
- The Navy could purchase five fewer Virginia class submarines in the 2030s and 2040s, saving $16 billion in procurement costs and eventually $290 million per year in operations costs.
The latter option comes with more savings for taxpayers, but those savings are realized much later in the 30-year horizon than retiring five submarines now. These are some of the tradeoffs Congress must consider. A broader point is that either option would relieve maintenance pressures at Navy shipyards while saving taxpayers money, rather than further increasing the budget taxpayers need to fund.
It is unclear whether the Biden administration will support the Trump December 2020 plan for a significantly larger Navy fleet, or the December 2016 plan for a 355-ship fleet, or develop a new shipbuilding goal of his own. Before Congress green-lights an expansion of the Navy fleet though, lawmakers should ensure maintenance delays at Naval shipyards are fully addressed -- without major cost increases for taxpayers. To that end, they may even want to consider reducing the fleet size.