Congressional Budget Office

Presentation at the 2016 Defense Outlook Forum

January 6, 2016

Eric J. Labs Senior Analyst for Naval Forces and Weapons

This presentation presents data from and includes other information published in CBO's An Analysis of the Navy’s Fiscal Year 2016 Shipbuilding Plan (October 2015), www.cbo.gov/publication/50926.

2016 Outlook for Navy Shipbuilding

1 CO N GR ES S IO N A L B UDGE T O F F IC E

Outline

■ The Navy’s 2016 shipbuilding plan

■ CBO’s estimate of the cost of the 2016 plan

■ The problem of lead ships

■ A larger fleet or not?

■ A fleet that conforms with historical funding – Potential impact of the Ohio Replacement Program

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Ship Purchases Under the Navy’s 2016 Plan and Recent Actions by the Congress and the Department of Defense (DoD)

Ship Type Plan

2016–2020 Actions by the

Congress and DoD Plan

2016–2025 Actions by the

Congress and DoD

Aircraft Carriers 1 1 2 2

Ballistic Missile Submarines 1 1 2 2

Attack Submarines 10 10 18 18

Destroyers 10 11 20 21

Littoral Combat Ships and Guided Missile Frigates 14 6 29 17

Amphibious Ships 3 3 8 8

Other Support Ships 10 11–12 24 25–26 __________ __________________ __________ __________________

Total 48 43–44 103 93–94

Congressional action in fiscal year 2016: Added 4 ships in 2016 (some may have been brought forward from future years). DoD plans to buy 12 fewer littoral combat ships starting in 2017.

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The Navy’s Estimates of the Average Annual Costs of New-Ship Construction Under Its 2015 and 2016 Plans

Billions of 2015 Dollars

Average Annual Funding,1986 to 2015

Navy'sEstimate,2015 Plan Navy's

Estimate,2016 Plan

2016 to 2025 2026 to 2035 2036 to 2045 30-Year Average0

5

10

15

20

25

30

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The Navy’s Estimates for New-Ship Construction, 2016 to 2025

Billions of 2015 Dollars

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250

5

10

15

20

25

Average forFirst Five Years($14.9 billion)

Average forSecond Five Years

($18.9 billion)HistoricalAverage

($13.9 billion)

CongressionalAppropriation

Above thePresident's

Request

6 CO N GR ES S IO N A L B UDGE T O F F IC E

Requested and Appropriated Shipbuilding Budgets Under the Budget Control Act

Billions of 2015 Dollars

The white dashed line indicates the estimated shipbuilding budget, calculated as the historical share of the Department of Defense’s base budget under the BCA, as that act stood at the time of each year’s budget submission.

President'sRequest Appropriated

Funds

2012 2013 2014 2015 20160

5

10

15

20

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Average Annual Shipbuilding Costs Under the Navy’s Plan, by Decade

Near Term (2016–2025)

Midterm (2026–2035)

Far Term (2036–2045)

30-Year Average (2016–2045)

Navy Estimates (Billions of 2015 Dollars)

New Ship Construction 16.9 17.2 15.2 16.5

Plus Carrier Refuelings 18.3 18.2 15.9 17.5

Plus All Other Items 19.5 18.8 16.5 18.3

CBO Estimates (Billions of 2015 Dollars)

New Ship Construction 18.2 19.2 17.8 18.4

Plus Carrier Refuelings 19.6 20.2 18.4 19.4

Plus All Other Items 20.7 20.8 19.0 20.2

Percentage Difference

New Ship Construction 8 12 17 12

Plus Carrier Refuelings 7 11 16 11

Plus All Other Items 6 11 16 10

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Cost Growth in Lead Ships, 1985 to 2015

Percent

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Short- and Long-Term Challenges to Increasing the Size of the Fleet

■ Budget Control Act

■ Broad federal fiscal environment

■ Debate on amount of defense spending

■ High deployment rates may wear ships out faster

■ Renewed focus on Europe may reduce emphasis on naval forces

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Short- and Long-term Factors Favoring a Larger Fleet

■ Construction momentum

■ Rising tensions in the Asia-Pacific region

■ Congress has been increasing shipbuilding budgets

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The Impact of the Ohio Replacement Program on Navy Shipbuilding

Billions of 2015 Dollars

Historical average for Navy shipbuilding includes new ship construction, refueling of aircraft carriers, ship conversions, outfitting and postdelivery costs, and other items.

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CBO’s Estimates of Annual Shipbuilding Costs Under the Navy’s 2016 Plan

Billions of 2015 Dollars

2010 2015 2020 2025 2030 2035 2040 20450

5

10

15

20

25

30

AmphibiousWarfare

ShipsSmall SurfaceCombatants

SSNs

CombatLogistics andSupport Ships

Aircraft Carriers andCarrier Refuelings

Large SurfaceCombatants

SSBNs

OtherItems

Under theNavy's Plan

Actual

AverageAnnual

Funding,1986 to 2015

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A Fleet that Conforms With Historical Funding Levels

Purchases Inventory in 2045

Ship Navy’s Plan Historical Funding Navy’s Plan Historical Funding

Aircraft Carriers 6 6 10 10

Ballistic Missile Submarines 12 12 12 12

Attack Submarines 45 34 50 37

Destroyers 65 46 82 64

Littoral Combat Ships 67 44 57 34

Amphibious Warfare Ships 23 15 33 27

Support Ships 46 35 61 53 ______________ ______________ ______________ ______________

Total 264 192 305 237

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Definitions

AOE = fast combat support ship CVN = nuclear-powered aircraft carrier DDG = guided missile destroyer JHSV = joint high speed vessel LCS = littoral combat ship LHA = amphibious assault ship LPD = amphibious transport dock MHC = coastal mine hunter MLP = mobile landing platform SSBN = ballistic missile submarine SSN = attack submarine T-AKE = ammunition cargo ship