The High Cost of Shipbuilding Instability

In the 1990s, the Navy began working on a new surface combatant program. The Navy was looking at the world following the end of the Cold War, and there was a lot of debate at the time regarding how best to build towards the future.

The program was called the SC-21 (Surface Combatant for the 21st Century), which at that time included a new destroyer called DD-21 and a new cruiser called CG-21. On November 1, 2001, the Navy announced it was replacing the DD-21 program with a new Future Surface Combatant Program that included three new classes of surface combatants.

The plan began with a destroyer called DD(X) intended to provide precision long-range strike and naval gunfire support. The plan also included a cruiser called CG(X) intended to provide the fleet air defense and ballistic missile defense. Finally, the Navy would develop a small combatant called the Littoral Combat Ship (LCS) to counter submarines, small surface attack craft, and mines in the littoral.

The numbers of ships in the plan evolved over time, and with the release of the 313-ship plan, the Navy decided the right number was 7 DD(X), 19 CG(X), and 55 LCS. The DD(X) has been since been renamed the DDG-1000.

Clearly things have not gone well. The Navy has purchased five Littoral Combat Ships to date, and yet only two are under construction, and two have been canceled. The Navy has purchased two DDG-1000s, and now plans to halt production on more in favor of an older ship design. The Navy recently held an industry conference called The Road to the CG(X), where according to some news reports, several discussions regarding the CG(X) were off limits.

Congress has called industry leaders to Capitol Hill to discuss shipbuilding stability a number of times. Does this look like stability in shipbuilding?

Despite the various angles discussed in the House hearing last week, Congress only has two decisions to make for FY2009. Does Congress fund the 3rd DDG-1000, or not. Does Congress tamper with the previously purchased two DDG-1000s, or not. Everything else is determined by those decisions.

This is really not a difficult decision. What is interesting about the hearing is that the cost data provided by the CBO (PDF) and the construction schedule data provided by the GAO both give better arguments against building the 3rd DDG-1000 this year. The Navy's position is that they can support the construction of the third DDG-1000 in FY09, but the DDG-1000 does not meet a new strategic requirement going forward. Vice Admiral Barry McCullough also suggested the fire support mission requirements had been met, and in an interesting twist, it was the only analysis he specifically cited that he had prepared to show Congress. No details of that analysis was disclosed publicly.

This blog has long maintained the Navy should fully fund, including all spiral development, the first two DDG-1000s. By fully developing the 10 new technologies, Congress invests in the 21st century Navy. It doesn't do much for the shipbuilding industry, although it does keep the R&D part of that development strong with the spiral developments. This option, from our point of view, represents a strategic choice for investing in the future fleet, and an industrial choice in support of the R&D towards a future fleet. It will be an expensive choice, but fully developed, there is a good case to be made it would be a cost effective investment over time.

$13 billion dollars is already invested. If we look at $13 billion dollars, we note that is almost the entire LPD-17 program. That is almost the total cost of the Ford class CVN (which depends on some of the DDG-1000 technologies), and had the Navy bought more Burkes instead of the new Future Surface Combatant Program, $13 billion dollars would have purchased the eight DDG-51 Flight IIAs the Navy now says they need.

As long as the R&D is fully funded for the DDG-1000 in FY2009, there is no compelling case to build a surface combatant in FY2009, and plenty of incentive to go with what the appropriations committee decided to do and build one LPD-17, two additional T-AKEs, and partially fund another SSN instead. Another option instead of the submarine money might be to purchase a third Littoral Combat Ship, that way the Navy can get into a buy of 2-2 for each LCS model. The extra LCS could help towards stabilizing at least one part of the current SC-21 shipbuilding mess.

The costs of doing nothing is much lower than the costs of doing something without a more stable situation for the DDG-1000, and better analysis than what the Navy has given regarding the DDG-51. Rep. Joe Sestak (D-PA) usually doesn't represent himself very well in these hearings, at least in our opinion. However, on Thursday he was on target with his entire time during the hearing. He asked some important questions.

Where is the analysis of alternatives for CG(X)? Where is the analysis of alternatives for the new plan? Where is the strategic analysis? Where is the cost analysis of the new direction? Where is the JROC analysis? Then he raised an important point...

If you go through the various costs that you have had in things like BMD upgrade costs in your president's budget, or the radar upgrade costs on the Zumwalt presentation to NAVSEA in February of '08 and I can give you the rest of the documents and you work out the figures, those costs that the Navy has provided, it appears that if you wanted to have a baseline DDG 51 restart that the cost, according to your figures, would be about $3.1 billion, with a SPY-1D Victor with BMD capability versus VSR with BMD for the Zumwalt of about $2.6 billion.

Then if you bring it to the 15-plus..., the cost is about $4.8 billion for the DDG 51 restart and about $3 billion to get the plus-15 for the Zumwalt. My question is not that these figures are right or wrong. Why are your figures today correct, but these figures from your document aren't in the past? What has changed in the costing of the -- of these radars and these combat systems? Because again, I think it goes to the credibility of coming forward today and saying what you did, Admiral -- it's going to be unaffordable with the Zumwalt, and yet just back in February we were saying it was affordable.

It is easy to focus in on the costs of the specific ships, indeed the Navy would love Congress to do that, but there are costs outside this discussion where no analysis was done. Congress really needs to think clearly about this comment by Vice Admiral Barry McCullough, because this is one of the two the key statements in the entire hearing.

The DDG-1000 program is developing a capable ship which meets the requirements for which it was designed. The DDG-1000, with its Dual Band Radar and sonar suite design are optimized for the littoral environment. However, in the current program of record, the DDG-1000 cannot perform area air defense; specifically, it cannot successfully employ the Standard Missile-2 (SM-2), SM-3 or SM-6, and is incapable of conducting Ballistic Missile Defense. Although superior in littoral ASW, the DDG-1000 lower power sonar design is less effective in the blue water than DDG-51 capability. DDG-1000's Advanced Gun System (AGS) design provides enhanced Naval Fires Support capability in the littorals with increased survivability. However, with the accelerated advancement of precision munitions and targeting, excess fires capacity already exists from tactical aviation and organic USMC fires.

What Rep. Joe Sestak (D-PA) is talking about when comparing BMD between DDG-51 and DDG-1000 is a perfect example of the spin in the Navy. The Navy is absolutely right when it says the DDG-1000 cannot support the SM-2, ...sortof. Basically they are ignoring the spiral development process that would add SM2, add SPY-3, add SM-6, and further develop the combat capabilities of the DDG-1000. These spiral developments, while not part of the specific ship construction, would be completed before the ship was completed. They carry with them extra costs, but are not specific to the DDG-1000 program, rather specific to the new technologies. One analogy I heard fits well, the Navy's argument is like saying that a building under construction doesn't have running water.

The second key statement was this statement by Vice Admiral Barry McCullough.

Sir, the capability set I described for a DDG 51 that would restart as DDG 113 is based on the modernization program that we currently have funded in the DDG modernization program.

And that includes the COTS-based computer hardware, the open- architected computer program, the multimission signal processor with inherent ballistic missile defense capability, and the extended range antiair warfare capability with SM-6.

But that is misleading as well. Most people don't read about AEGIS ballistic missile defense, but there really is a lot of public information on it. All 17 of the current AEGIS BMD ships are Flight I and Flight II. Do you know why? It is an integration issue, software and hardware. The current versions of AEGIS BMD only works with certain baselines, and doesn't work with baseline 6 or baseline 7. In other words, the DDG-51 Flight IIAs the Navy wants to buy couldn't support AEGIS BMD even if they wanted to put it on them today, and they won't be able to support AEGIS BMD until AEGIS OA comes about. So essentially, while the Navy is making the argument that DDG-1000 cannot use SM-2, etc.. because those spiral developments haven't happened yet, the Navy is also suggesting that the DDG-51 Flight IIAs should be built because they can support AEGIS BMD, even though the development of AEGIS OA hasn't been completed either.

This type of confusing rhetoric sure sounds a lot like that lunchbag I was talking about the other day. While it is inaccurate to say McCullough is being dishonest, it is a fair characterization to suggest his wording is intentionally deceptive towards a position he favors. Understandable..., but the problem with that is it ignores Huntington's advice regarding speaking clearly to the American people, and by extension, Congress. When the Navy is ignoring Huntington to sell shipbuilding, that is a bad sign.

Rep. Joe Sestak (D-PA) is right to ask for the analysis, studies, and to ask why the Navy has bypassed a number of procedures to advocate a strategic change and a shipbuilding change. Congress has been watching the requirements for amphibious ships continuously be reduced, the requirements for submarines be continuously reduced, and the requirement for logistics be continuously reduced, and now the requirements for surface warfare at the very highest end increases... so that we can meet some new challenge and make a major shift in shipbuilding that is so critical that it failed to get OSD approval first? When you say it out loud, it just doesn't ring with wisdom.

Does the Navy make a strong case to change gears in FY2009 and start building Burke's? Depends on how convincing Congress finds arguments like this:

Unfortunately, the DDG-1000 design sacrifices capacity for increased capability in an area where the Navy already has, and is projected to have sufficient capacity and capability.

Ignoring how the projections shifted to support requirements the Navy is suggesting can only be solved by more battleships, does anyone else see the irony that the Navy is making the argument to build more DDG-51s because some 'other' platform is providing sufficient capacity and capability? Only in a world where the large surface combatant is the most capable platform for every possible mission profile would 62 battleships be insufficient.

The way we see it the cost of an impulsive action by Congress in FY09 will be very high. Hopefully, in FY09 the Navy builds 0 surface combatants, which given the available options, has the greatest chance of being the least expensive long term decision.