Big Decisions for Big Programs in FY08 Budget

On October 22nd, InsidetheNavy (subscription) ran an article called "Taylor Urging Senators to Agree to Nuclear Power, Larger Fleet" in which he had a few choice comments for the Navy and the industry.

“I think it’s time for Congress to step in and say this is what the Navy needs to do.”

The congressman commended Navy Secretary Donald Winter for accepting responsibility for the design of ships and the oversight of shipbuilding, but noted that “he’s one man -- he going to need some help.” Winter needs an acquisition executive that will help him convince the major shipyards that their major responsibility is to the fleet, Taylor said.

“He’s going to need some very capable help and quite frankly he’s going to need a head-knocker because the major shipbuilders -- they think their major responsibility is to their shareholders,” Taylor said. “I think their responsibility is to the fleet.”

These comments come among the backdrop of two very different spending bills for the Navy included in the FY08 Defense Budget. The House and Senate bills do a lot of things differently, and there are going to be some tough decisions hammered out in committee when they get together over the next few days. Below is a summery of the issues facing Congress.

Virginia Class Submarine

The House and the Senate both added additional funding to the FY08 budget for advanced procurement of a new Virginia class submarine. The House added $588 million which includes around $400 million to begin construction of the reactor, the item requiring the longest lead time in a new submarine. The Senate approved $470 million. Starting advance procurement in FY08 will allow an additional submarine to be added to the FY09 budget next year, perhaps starting a construction run of 2 Virginia class submarines per year 2 years earlier than intended in the 313-ship plan.

Lewis and Clark Class Dry Cargo Ships

Both the Senate and the House added 1 T-AKE to this years budget and authorized one more T-AKE for next year. The House went further though, adding an additional $1.4 billion to the National Sealift Defense Fund to buy two more T-AKE dry cargo ships on top of the 2 already mentioned above.

San Antonio Class Amphibious Ship

The House added around $1.7 billion for a 10th San Antonio class amphibious ship. The Senate did not include any provision for the 10th LPD-17. The Marines are eager for the ship and are lobbying for its inclusion.

UH-1Y/AH-1Z Marine Corps Helicopter Program

Both the House and the Senate recommended reductions to the program The House dropped $104 million from the $518 million request while the Senate killed dropped $78 million and eight aircraft. Since both bills were passed, the Navy has informed Bell Helicopter Textron to plan for the program to increase to acquiring around 123 UH-1Y utility helicopters and 226 AH-1Z attack helicopters as part of an initiative to grow the Marine Corps to 202,000 Marines. This is up from the original request of 100 UH-1Ys and 180 AH-1Zs. Currently, the average UH-1Y costs around $18 million, and the average AH-1Z costs around $21 million. It will be interesting to see if the Navy is able to influence either the Senate or the House regarding the program reductions given the program is expected to get larger to reflect other Congressional changes in the FY08 Defense Budget.

Littoral Combat Ship

The biggest debate is the LCS, and the entire program could hang in the balance of the decisions made in committee. All four versions of the appropriations and authorization bills are different in their recommendations regarding cuts to the LCS program. The LCS request is complicated by the Navy's April decision to drop one of the three ships it asked for in its original February budget submission to Congress, but it is further complicated by the ongoing contract negotiations with General Dynamics regarding the 2nd General Dynamics ship funded in FY07. The Navy hopes to have the GD contract negotiations concluded before the Senate and House bang out the final LCS program for FY08 in committee.

The House has recommended reducing the Navy's request for two ships to one, authorizing $339.5 million to buy one new LCS hull. The Senate has recommended no new ships and pulls funding for the GD LCS currently under contract negotiation, and moving up the timetable to pick one of two competing designs by the end of 2008 instead of 2010.

Of the original $910 million request in the Presidents original budget, the House cut $571 million and two ships, while the Senate dropped the entire $910 million request.

The Navy doesn't really like any of the options in either the House or the Senate, and is lobbying hard for $460 million to fund a single LCS in FY08 while hoping to keep funding for the 2nd General Dynamics LCS funded in FY07. According to those in Panama last week, Rear Adm. Charles Goddard said that if 1 LCS is funded in FY08, the Navy would hold a competition for the ship between General Dynamics and Lockheed Martin.

The contract renegotiation with GD over LCS3 is only part of the story though, unless the contract impresses the Senate, those negotiations may end up being a lot of effort for not. In asking around, I can't find anyone, and I mean nobody in the Navy, Industry, Congress... willing to predict what will happen with the LCS. That in itself says a lot.

2 more items of note. First, both the Senate and the House cut LCS mission module funding as well, citing LCS ship cuts as the primary reason. Second, the FY08 Budget has language in it that changes the name "Department of the Navy" to "The Department of the Navy and the Marine Corps." I'm thinking CDR needs to hold a new logo design contest.