CBO Says Navy Shipbuilding Plan $76 Billion Short

The Navy's 30-year shipbuilding plan is projected to be $76 billion short of funding and will leave the Navy struggling to meet its goal of increasing the size of the fleet to 306 battle force ships, according to a report by the Congressional Budget Office.

The Navy's 2014 shipbuilding plan also failed to take into account the possible impact on the budgets of all the military services of the sequester process under the Budget Control Act of 2011, the non-partisan CBO said in the Oct. 18 report.

"The Navy's 2014 shipbuilding plan, like its 2013 plan, does not address the caps on defense funding from 2014 to 2021 that stem from the Budget Control Act," the CBO report said.

To meet its shipbuilding goals under sequester, the Navy would likely have to make major cuts in other areas, the CBO said. 

"Funding for new-ship construction will probably be well below the amounts required for the 2014 shipbuilding plan, unless such funding is protected at the expense of funding for other military activities," the report said.

"In particular, the plan would lead to temporary shortfalls relative to the Navy's goals for ballistic missile submarines, attack submarines, large surface combatants, and amphibious warfare ships," the report said.

In response, the Navy said in a statement that "Our current shipbuilding plan balances anticipated future demands for naval forces with expected resources and anticipated fiscal realities."

"Not unlike previous CBO reports on Navy shipbuilding, there are differences in our estimates, especially in the far term," the statement said. "CBO uses different estimating methods and assumptions to calculate costs associated with shipbuilding, which yield variations in the overall costs for ship procurement."

In Fiscal Year 2013, sequestration cut $37 billion from the Defense Department budget, and the projected cut of $52 billion in FY 2014 could force more civilian furloughs and layoffs, major cutbacks in training, the de-commissioning of aircraft carriers, and the elimination of air wings, DoD officials have warned.

The CBO report and the impacts of sequester on the Navy were to be examined Wednesday at a hearing of the House Armed Services Subcommittee on Seapower and Projection Forces.

The CBO report -- "An Analysis of the Navy's Fiscal Year 2014 Shipbuilding Plan" -- said the Navy projected that the shipbuilding plan would cost $504 billion over 30 years, or about $16.8 billion per year.

Analysis done by the CBO put the cost at about $580 billion over 30 years, or $76 billion more, at a rate of about $19.3 billion per year.

The CBO said that a factor in explaining the difference between the two estimates was that "the Navy, in contrast with CBO, does not appear to have accounted for the fact that costs of labor and materials have traditionally grown faster in the shipbuilding industry than in the economy as a whole; that difference produces a widening gap between the two estimates over time."