Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress

Summary: The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years.

Summary: On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. The Navy states that a new FSA is now underway as the successor to the 2016 FSA. This new FSA, Navy officials state, is to be completed by the end of 2019. Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both.

Summary: The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year.

Summary: The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan includes 304 ships, or an average of about 10 per year. If the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan—an acceleration primarily due to a decision announced by the Navy in April 2018, after the FY2019 plan was submitted, to increase the service lives of all DDG-51 destroyers to 45 years. Although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA.

Summary: One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. Decisions that Congress makes regarding Navy force structure and shipbuilding plans can substantially affect Navy capabilities and funding requirements and the U.S. shipbuilding industrial base.

This report presents background information and issues for Congress concerning the Navy's force structure and shipbuilding plans. The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years.

The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships.

The issue for Congress is whether to approve, reject, or modify the Navy's proposed FY2020 shipbuilding program and the Navy's longer-term shipbuilding plans. Decisions that Congress makes on this issue can substantially affect Navy capabilities and funding requirements, and the U.S. shipbuilding industrial base.

Detailed coverage of certain individual Navy shipbuilding programs can be found in the following CRS reports:

CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S. Truman [CVN-75], and to retire CVN-75 around FY2024.) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke. CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke. (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9.) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke.

For a discussion of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered, see Appendix A .

Navy's 355-Ship Ship Force-Structure Goal

On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal replaced a 308-ship force-level goal that the Navy released in March 2015. The 355-ship force-level goal is the largest force-level goal that the Navy has released since a 375-ship force-level goal that was in place in 2002-2004. In the years between that 375-ship goal and the 355-ship goal, Navy force-level goals were generally in the low 300s (see Appendix B ). The force level of 355 ships is a goal to be attained in the future; the actual size of the Navy in recent years has generally been between 270 and 290 ships. Table 1 shows the composition of the 355-ship force-level objective.

355-Ship Goal Resulted from 2016 Force Structure Assessment (FSA)

The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. An FSA is an analysis in which the Navy solicits inputs from U.S. regional combatant commanders (CCDRs) regarding the types and amounts of Navy capabilities that CCDRs deem necessary for implementing the Navy's portion of the national military strategy and then translates those CCDR inputs into required numbers of ships, using current and projected Navy ship types. The analysis takes into account Navy capabilities for both warfighting and day-to-day forward-deployed presence. Although the result of the FSA is often reduced for convenience to single number (e.g., 355 ships), FSAs take into account a number of factors, including types and capabilities of Navy ships, aircraft, unmanned vehicles, and weapons, as well as ship homeporting arrangements and operational cycles. The Navy conducts a new FSA or an update to the existing FSA every few years, as circumstances require, to determine its force-structure goal.

355-Ship Goal Made U.S. Policy by FY2018 NDAA

Section 1025 of the FY2018 National Defense Authorization Act, or NDAA ( H.R. 2810 / P.L. 115-91 of December 12, 2017), states the following:

SEC. 1025. Policy of the United States on minimum number of battle force ships.

(a) Policy.—It shall be the policy of the United States to have available, as soon as practicable, not fewer than 355 battle force ships, comprised of the optimal mix of platforms, with funding subject to the availability of appropriations or other funds.

(b) Battle force ships defined.—In this section, the term "battle force ship" has the meaning given the term in Secretary of the Navy Instruction 5030.8C.

The term battle force ships in the above provision refers to the ships that count toward the quoted size of the Navy in public policy discussions about the Navy.

New FSA Now Being Done Could Change 355-Ship Figure and Force Mix

The Navy states that a new FSA is now underway as the successor to the 2016 FSA, and that this new FSA is to be completed by the end of 2019. The new FSA, Navy officials state, will take into account the Trump Administration's December 2017 National Security Strategy document and its January 2018 National Defense Strategy document, both of which put an emphasis on renewed great power competition with China and Russia, as well as updated information on Chinese and Russian naval and other military capabilities and recent developments in new technologies, including those related to unmanned vehicles (UVs).

Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. Some observers, viewing statements by Navy officials, believe the new FSA in particular might shift the Navy's surface force to a more distributed architecture that includes a reduced proportion of large surface combatants (i.e., cruisers and destroyers), an increased proportion of small surface combatants (i.e., frigates and LCSs), and a newly created third tier of unmanned surface vehicles (USVs). Some observers believe the new FSA might also change the Navy's undersea force to a more distributed architecture that includes, in addition to attack submarines (SSNs) and bottom-based sensors, a new element of extremely large unmanned underwater vehicles (XLUUVs), which might be thought of as unmanned submarines. In presenting its proposed FY2020 budget, the Navy highlighted its plans for developing and procuring USVs and UUVs in coming years.

Shifting to a more distributed force architecture, Navy officials have suggested, could be appropriate for implementing the Navy's new overarching operational concept, called Distributed Maritime Operations (DMO). Observers view DMO as a response to both China's improving maritime anti-access/area denial capabilities (which include advanced weapons for attacking Navy surface ships) and opportunities created by new technologies, including technologies for UVs and for networking Navy ships, aircraft, unmanned vehicles, and sensors into distributed battle networks.

Figure 1 shows a Navy briefing slide depicting the Navy's potential new surface force architecture, with each sphere representing a manned ship or a USV. Consistent with Figure 1 , the Navy's 355-ship goal, reflecting the current force architecture, calls for a Navy with twice as many large surface combatants as small surface combatants. Figure 1 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with a new third tier of numerous USVs.

Observers believe the new FSA might additionally change the top-level metric used to express the Navy's force-level goal or the method used to count the size of the Navy, or both, to include large USVs and large UUVs.

Navy's Five-Year and 30-Year Shipbuilding Plans

FY2020 Five-Year (FY2020-FY2024) Shipbuilding Plan

Table 2 shows the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan. The table also shows, for reference purposes, the ships funded for procurement in FY2019. The figures in the table reflect a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019.

As shown in Table 2 , the Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. If the Navy had listed CVN-81 as a ship procured in FY2019 rather than a ship to be procured in FY2020, then the total numbers of ships in FY2019 and FY2020 would be 14 and 11, respectively.

As also shown Table 2 , the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2019 budget submission also included a total of 55 ships in the period FY2020-FY2024, but the mix of ships making up the total of 55 for these years has been changed under the FY2020 budget submission to include one additional attack submarine, one additional FFG(X) frigate, and two (rather than four) LPD-17 Flight II amphibious ships over the five-year period. The FY2020 submission also makes some changes within the five-year period to annual procurement quantities for DDG-51 destroyers, ESBs, and TAO-205s without changing the five-year totals for these programs.

Compared to what was projected for FY2020 itself under the FY2019 budget submission, the FY2020 request accelerates from FY2023 to FY2020 the aircraft carrier CVN-81 (as a result of Congress's action to authorize the ship in FY2019), adds a third attack submarine, accelerates from FY2021 into FY2020 a third DDG-51, defers from FY2020 to FY2021 an LPD-17 Flight II amphibious ship to FY2021, defers from FY2020 to FY2023 an ESB ship, and accelerates from FY2021 to FY2020 a second TAO-205 class oiler.

FY2020 30-Year (FY2020-FY2049) Shipbuilding Plan

Table 3 shows the Navy's FY2020-FY2049 30-year shipbuilding plan. In devising a 30-year shipbuilding plan to move the Navy toward its ship force-structure goal, key assumptions and planning factors include but are not limited to ship construction times and service lives, estimated ship procurement costs, projected shipbuilding funding levels, and industrial-base considerations. As shown in Table 3 , the Navy's FY2020 30-year shipbuilding plan includes 304 new ships, or an average of about 10 per year.

Projected Force Levels Under FY2020 30-Year Shipbuilding Plan

Table 4 shows the Navy's projection of ship force levels for FY2020-FY2049 that would result from implementing the FY2020 30-year (FY2020-FY2049) 30-year shipbuilding plan shown in Table 3 .

As shown in Table 4 , if the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan. This is not primarily because the FY2020 30-year plan includes more ships than did the FY2019 plan: The total of 304 ships in the FY2020 plan is only three ships higher than the total of 301 ships in the FY2019 plan. Instead, it is primarily due to a decision announced by the Navy in April 2018, after the FY2019 budget was submitted, to increase the service lives of all DDG-51 destroyers—both those existing and those to be built in the future—to 45 years. Prior to this decision, the Navy had planned to keep older DDG-51s (referred to as the Flight I/II DDG-51s) in service for 35 years and newer DDG-51s (the Flight II/III DDG-51s) for 40 years. Figure 2 shows the Navy's projections for the total number of ships in the Navy under the Navy's FY2019 and FY2020 budget submissions. As can be seen in the figure, the Navy projected under the FY2019 plan that the fleet would not reach a total of 355 ships any time during the 30-year period.

Adjustment Needed for Withdrawn Proposal Regarding CVN-75 RCOH

The projected number of aircraft carriers in Table 4 , the projected total number of all ships in Table 4 , and the line showing the total number of ships under the Navy's FY2020 budget submission in Figure 2 all reflect the Navy's proposal, under its FY2020 budget submission, to not fund the mid-life nuclear refueling overhaul (called a refueling complex overhaul, or RCOH) of the aircraft carrier Harry S. Truman (CVN-75), and to instead retire CVN-75 around FY2024. On April 30, 2019, however, the Administration announced that it was withdrawing this proposal from the Navy's FY2020 budget submission. The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 in service past FY2024.

As a result of the withdrawal of its proposal regarding the CVN-75 RCOH, the projected number of aircraft carriers and consequently the projected total number of all ships are now one ship higher for the period FY2022-FY2047 than what is shown in Table 4 , and the line in Figure 2 would be adjusted upward by one ship for those years. (The figures in Table 4 are left unchanged from what is shown in the FY2020 budget submission so as to accurately reflect what is shown in that budget submission.)

355-Ship Total Attained 20 Years Sooner; Mix Does Not Match FSA Mix

As shown in Table 4 , although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. Among other things, the Navy will have more than the required number of large surface combatants (i.e., cruisers and destroyers) from FY2030 through FY2040 (a consequence of the decision to extend the service lives of DDG-51s to 45 years), fewer than the required number of aircraft carriers through the end of the 30-year period, fewer than the required number of attack submarines through FY2047, and fewer than the required number of amphibious ships through the end of the 30-year period. The Navy acknowledges that the mix of ships will not match that called for by the 2016 FSA but states that if the Navy is going to have too many ships of a certain kind, DDG-51s are not a bad type of ship to have too many of, because they are very capable multi-mission ships.

Whether New FSA Will Change 355-Ship Goal and, If So, How

One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. As discussed earlier, Navy officials have suggested in their public remarks that this new FSA could shift the Navy toward a more distributed force architecture, which could change the 355-ship figure, the planned mix of ships, or both. The issue for Congress is how to assess the appropriateness of the Navy's FY2020 shipbuilding plans when a key measuring stick for conducting that assessment—the Navy's force-level goal and planned force mix—might soon change.

Affordability of 30-Year Shipbuilding Plan

Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. This issue has been a matter of oversight focus for several years, and particularly since the enactment in 2011 of the Budget Control Act, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011). Observers have been particularly concerned about the plan's prospective affordability during the decade or so from the mid-2020s through the mid-2030s, when the plan calls for procuring Columbia-class ballistic missile submarines as well as replacements for large numbers of retiring attack submarines, cruisers, and destroyers.

Figure 3 shows, in a graphic form, the Navy's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2020 30-year shipbuilding plan. The figure shows that during the period from the mid-2020s through the mid-2030s, the Navy estimates that implementing the FY2020 30-year shipbuilding plan would require roughly $24 billion per year in shipbuilding funds.

Concern Regarding Potential Impact of Columbia-Class Program

As discussed in the CRS report on the Columbia-class program, the Navy since 2013 has identified the Columbia-class program as its top program priority, meaning that it is the Navy's intention to fully fund this program, if necessary at the expense of other Navy programs, including other Navy shipbuilding programs. This led to concerns that in a situation of finite Navy shipbuilding budgets, funding requirements for the Columbia-class program could crowd out funding for procuring other types of Navy ships. These concerns in turn led to the creation by Congress of the National Sea-Based Deterrence Fund (NSBDF), a fund in the DOD budget that is intended in part to encourage policymakers to identify funding for the Columbia-class program from sources across the entire DOD budget rather than from inside the Navy's budget alone.

Several years ago, when concerns arose about the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs, the Navy's shipbuilding budget was roughly $14 billion per year, and the roughly $7 billion per year that the Columbia-class program is projected to require from the mid-2020s to the mid-2030s (see Figure 3 ) represented roughly one-half of that total. With the Navy's shipbuilding budget having grown in more recent years to a total of roughly $24 billion per year, the $7 billion per year projected to be required by the Columbia-class program during those years does not loom proportionately as large as it once did in the Navy's shipbuilding budget picture. Even so, some concerns remain regarding the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs.

If one or more Navy ship designs turn out to be more expensive to build than the Navy estimates, then the projected funding levels shown in Figure 3 would not be sufficient to procure all the ships shown in the 30-year shipbuilding plan. As detailed by CBO and GAO, lead ships in Navy shipbuilding programs in many cases have turned out to be more expensive to build than the Navy had estimated. Ship designs that can be viewed as posing a risk of being more expensive to build than the Navy estimates include Gerald R. Ford (CVN-78) class aircraft carriers, Columbia-class ballistic missile submarines, Virginia-class attack submarines equipped with the Virginia Payload Module (VPM), Flight III versions of the DDG-51 destroyer, FFG(X) frigates, LPD-17 Flight II amphibious ships, and John Lewis (TAO-205) class oilers, as well as other new classes of ships that the Navy wants to begin procuring years from now.

The statute that requires the Navy to submit a 30-year shipbuilding plan each year (10 U.S.C. 231) also requires CBO to submit its own independent analysis of the potential cost of the 30-year plan (10 U.S.C. 231[d]). CBO is now preparing its estimate of the cost of the Navy's FY2020 30-year shipbuilding plan. In the meantime, Figure 4 shows, in a graphic form, CBO's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2019 30-year shipbuilding plan. This figure might be compared to the Navy's estimate of its FY2020 30-year plan as shown in Figure 3 , although doing so poses some apples-vs.-oranges issues, as the Navy's FY2019 and FY2020 30-year plans do not cover exactly the same 30-year periods, and for the years they do have in common, there are some differences in types and numbers of ships to be procured in certain years.

CBO analyses of past Navy 30-year shipbuilding plans have generally estimated the cost of implementing those plans to be higher than what the Navy estimated. Consistent with that past pattern, as shown in Table 5 , CBO's estimate of the cost to implement the Navy's FY2019 30-year (FY2019-FY2048) shipbuilding plan is about 27% higher than the Navy's estimated cost for the FY2019 plan. ( Table 5 does not pose an apples-vs.-oranges issue, because both the Navy and CBO estimates in this table are for the Navy's FY2019 30-year plan.) More specifically, as shown in the table, CBO estimated that the cost of the first 10 years of the FY2019 30-year plan would be about 2% higher than the Navy's estimate; that the cost of the middle 10 years of the plan would be about 13% higher than the Navy's estimate; and that the cost of the final 10 years of the plan would be about 27% higher than the Navy's estimate.

The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is due in part to a technical difference between CBO and the Navy regarding the treatment of inflation. This difference compounds over time, making it increasingly important as a factor in the difference between CBO's estimates and the Navy's estimates the further one goes into the 30-year period. In other words, other things held equal, this factor tends to push the CBO and Navy estimates further apart as one proceeds from the earlier years of the plan to the later years of the plan.

The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is also due to differences between CBO and the Navy about the costs of certain ship classes, particularly classes that are projected to be procured starting years from now. The designs of these future ship classes are not yet determined, creating more potential for CBO and the Navy to come to differing conclusions regarding their potential cost. For the FY2019 30-year plan, the largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of SSNs that the Navy wants to begin procuring in FY2034 as the successor to the Virginia-class SSN design. This new class of SSN, CBO says, accounted for 42% of the difference between the CBO and Navy estimates for the FY2019 30-year plan, in part because there were a substantial number of these SSNs in the plan, and because those ships occur in the latter years of the plan, where the effects of the technical difference between CBO and the Navy regarding the treatment of inflation show more strongly.

The second-largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of large surface combatant (i.e., cruiser or destroyer) that the Navy wants to begin procuring in the future, which accounted for 20% of the difference, for reasons that are similar to those mentioned above for the new class of SSNs. The third-largest source of difference was the new class of frigates (FFG[X]s) that the Navy wants to begin procuring in FY2020, which accounts for 9% of the difference. The remaining 29% of difference between the CBO and Navy estimates was accounted for collectively by several other shipbuilding programs, each of which individually accounts for between 1% and 4% of the difference. The Columbia-class program, which accounted for 4%, is one of the programs in this final group.

CRS Reports Tracking Legislation on Specific Navy Shipbuilding Programs

Detailed coverage of legislative activity on certain Navy shipbuilding programs (including funding levels, legislative provisions, and report language) can be found in the following CRS reports:

Legislative activity on individual Navy shipbuilding programs that are not covered in detail in the above reports is covered below.

Summary of Congressional Action on FY2020 Funding Request

The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships:

1 Gerald R. Ford (CVN-78) class aircraft carrier; 3 Virginia-class attack submarines; 3 DDG-51 class Aegis destroyers; 1 FFG(X) frigate; 2 John Lewis (TAO-205) class oilers; and 2 TATS towing, salvage, and rescue ships.

As noted earlier, the above list of 12 ships reflects a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019. Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019.

The Navy's proposed FY2020 shipbuilding budget also requests funding for ships that have been procured in prior fiscal years, and ships that are to be procured in future fiscal years, as well as funding for activities other than the building of new Navy ships.

Table 6 summarizes congressional action on the Navy's FY2020 funding request for Navy shipbuilding. The table shows the amounts requested and congressional changes to those requested amounts. A blank cell in a filled-in column showing congressional changes to requested amounts indicates no change from the requested amount.

Appendix A. Strategic and Budgetary Context

This appendix presents some brief comments on elements of the strategic and budgetary context in which U.S. Navy force structure and shipbuilding plans may be considered.

Shift in International Security Environment

World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift over the past several years from the familiar post-Cold War era of the past 20-25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different strategic situation that features, among other things, renewed great power competition with China and Russia, and challenges to elements of the U.S.-led international order that has operated since World War II. This situation is discussed further in another CRS report.

Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U.S. security and foreign policy on grand strategy and geopolitics. From a U.S. perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia. In response to this basic feature of world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U.S. interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity. Although U.S. policymakers have not often stated this key national strategic goal explicitly in public, U.S. military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal.

U.S. Grand Strategy and U.S. Naval Forces

As noted above, in response to basic world geography, U.S. policymakers for the past several decades have chosen to pursue, as a key element of U.S. national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another. The traditional U.S. goal of preventing the emergence of a regional hegemon in one part of Eurasia or another has been a major reason why the U.S. military is structured with force elements that enable it to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. Force elements associated with this goal include, among other things, an Air Force with significant numbers of long-range bombers, long-range surveillance aircraft, long-range airlift aircraft, and aerial refueling tankers, and a Navy with significant numbers of aircraft carriers, nuclear-powered attack submarines, large surface combatants, large amphibious ships, and underway replenishment ships.

The United States is the only country in the world that has designed its military to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival. The other countries in the Western Hemisphere do not design their forces to do this because they cannot afford to, and because the United States has been, in effect, doing it for them. Countries in the other hemisphere do not design their forces to do this for the very basic reason that they are already in the other hemisphere, and consequently instead spend their defense money on forces that are tailored largely for influencing events in their own local region.

The fact that the United States has designed its military to do something that other countries do not design their forces to do—cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival—can be important to keep in mind when comparing the U.S. military to the militaries of other nations. For example, in observing that the U.S. Navy has 11 aircraft carriers while other countries have no more than one or two, it can be noted other countries do not need a significant number of aircraft carriers because, unlike the United States, they are not designing their forces to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival.

As another example, it is sometimes noted, in assessing the adequacy of U.S. naval forces, that U.S. naval forces are equal in tonnage to the next dozen or more navies combined, and that most of those next dozen or more navies are the navies of U.S. allies. Those other fleets, however, are mostly of Eurasian countries, which do not design their forces to cross to the other side of the world and then conduct sustained, large-scale military operations upon arrival. The fact that the U.S. Navy is much bigger than allied navies does not necessarily prove that U.S. naval forces are either sufficient or excessive; it simply reflects the differing and generally more limited needs that U.S. allies have for naval forces. (It might also reflect an underinvestment by some of those allies to meet even their more limited naval needs.)

Countries have differing needs for naval and other military forces. The United States, as a country located in the Western Hemisphere that has adopted a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, has defined a need for naval and other military forces that is quite different from the needs of allies that are located in Eurasia. The sufficiency of U.S. naval and other military forces consequently is best assessed not through comparison to the militaries of other countries, but against U.S. strategic goals.

More generally, from a geopolitical perspective, it can be noted that that U.S. naval forces, while not inexpensive, give the United States the ability to convert the world's oceans—a global commons that covers more than two-thirds of the planet's surface—into a medium of maneuver and operations for projecting U.S. power ashore and otherwise defending U.S. interests around the world. The ability to use the world's oceans in this manner—and to deny other countries the use of the world's oceans for taking actions against U.S. interests—constitutes an immense asymmetric advantage for the United States. This point would be less important if less of the world were covered by water, or if the oceans were carved into territorial blocks, like the land. Most of the world, however, is covered by water, and most of those waters are international waters, where naval forces can operate freely. The point, consequently, is not that U.S. naval forces are intrinsically special or privileged—it is that they have a certain value simply as a consequence of the physical and legal organization of the planet.

Uncertainty Regarding Future U.S. Role in the World

The overall U.S. role in the world since the end of World War II in 1945 (i.e., over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs. A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II. In addition to promoting and defending the open international order, the overall U.S. role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world.

Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the U.S. role in the world. Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U.S. role in one or more ways. A change in the overall U.S. role could have profound implications for DOD strategy, budgets, plans, and programs, including the planned size and structure of the Navy.

Declining U.S. Technological and Qualitative Edge

DOD officials have expressed concern that the technological and qualitative edge that U.S. military forces have had relative to the military forces of other countries is being narrowed by improving military capabilities in other countries. China's improving military capabilities are a primary contributor to that concern. Russia's rejuvenated military capabilities are an additional contributor. DOD in recent years has taken a number of actions to arrest and reverse the decline in the U.S. technological and qualitative edge.

Challenge to U.S. Sea Control and U.S. Position in Western Pacific

Observers of Chinese and U.S. military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U.S. Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U.S. Navy has faced since the end of the Cold War. More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific.

U.S. Navy officials have testified that fully meeting requests from U.S. regional combatant commanders (CCDRs) for forward-deployed U.S. naval forces would require a Navy much larger than today's fleet. For example, Navy officials testified in March 2014 that a Navy of 450 ships would be required to fully meet CCDR requests for forward-deployed Navy forces. CCDR requests for forward-deployed U.S. Navy forces are adjudicated by DOD through a process called the Global Force Management Allocation Plan. The process essentially makes choices about how best to apportion a finite number forward-deployed U.S. Navy ships among competing CCDR requests for those ships. Even with this process, the Navy has lengthened the deployments of some ships in an attempt to meet policymaker demands for forward-deployed U.S. Navy ships. Although Navy officials are aiming to limit ship deployments to seven months, Navy ships in recent years have frequently been deployed for periods of eight months or more.

Limits on Defense Spending in Budget Control Act of 2011 as Amended

Limits on the "base" portion of the U.S. defense budget established by Budget Control Act of 2011, or BCA ( S. 365 / P.L. 112-25 of August 2, 2011), as amended, combined with some of the considerations above, have led to discussions among observers about how to balance competing demands for finite U.S. defense funds, and about whether programs for responding to China's military modernization effort can be adequately funded while also adequately funding other defense-spending priorities, such as initiatives for responding to Russia's actions in Ukraine and elsewhere in Europe and U.S. operations for countering the Islamic State organization in the Middle East.

Appendix B. Earlier Navy Force-Structure Goals Dating Back to 2001

The table below shows earlier Navy force-structure goals dating back to 2001. The 308-ship force-level goal of March 2015, shown in the first column of the table, is the goal that was replaced by the 355-ship force-level goal released in December 2016.

Appendix C. Comparing Past Ship Force Levels to Current or Potential Future Ship Force Levels

In assessing the appropriateness of the current or potential future number of ships in the Navy, observers sometimes compare that number to historical figures for total Navy fleet size. Historical figures for total fleet size, however, can be a problematic yardstick for assessing the appropriateness of the current or potential future number of ships in the Navy, particularly if the historical figures are more than a few years old, because

the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time; and the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year.

Regarding the first bullet point above, the Navy, for example, reached a late-Cold War peak of 568 battle force ships at the end of FY1987, and as of May 7, 2019, included a total of 289 battle force ships. The FY1987 fleet, however, was intended to meet a set of mission requirements that focused on countering Soviet naval forces at sea during a potential multitheater NATO-Warsaw Pact conflict, while the May 2019 fleet is intended to meet a considerably different set of mission requirements centered on influencing events ashore by countering both land- and sea-based military forces of China, Russia, North Korea, and Iran, as well as nonstate terrorist organizations. In addition, the Navy of FY1987 differed substantially from the May 2019 fleet in areas such as profusion of precision-guided air-delivered weapons, numbers of Tomahawk-capable ships, and the sophistication of C4ISR systems and networking capabilities.

In coming years, Navy missions may shift again, and the capabilities of Navy ships will likely have changed further by that time due to developments such as more comprehensive implementation of networking technology, increased use of ship-based unmanned vehicles, and the potential fielding of new types of weapons such as lasers or electromagnetic rail guns.

The 568-ship fleet of FY1987 may or may not have been capable of performing its stated missions; the 289-ship fleet of May 2019 may or may not be capable of performing its stated missions; and a fleet years from now with a certain number of ships may or may not be capable of performing its stated missions. Given changes over time in mission requirements, ship mixes, and technologies, however, these three issues are to a substantial degree independent of one another.

For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions. An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability. Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers.

Regarding the second of the two bullet points above, it can be noted that comparisons of the size of the fleet today with the size of the fleet in earlier years rarely appear to consider whether the fleet was appropriately sized in those earlier years (and therefore potentially suitable as a yardstick of comparison), even though it is quite possible that the fleet in those earlier years might not have been appropriately sized, and even though there might have been differences of opinion among observers at that time regarding that question. Just as it might not be prudent for observers years from now to tacitly assume that the 286-ship Navy of September 2018 was appropriately sized for meeting the mission requirements of 2018, even though there were differences of opinion among observers on that question, simply because a figure of 286 ships appears in the historical records for 2016, so, too, might it not be prudent for observers today to tacitly assume that the number of ships of the Navy in an earlier year was appropriate for meeting the Navy's mission requirements that year, even though there might have been differences of opinion among observers at that time regarding that question, simply because the size of the Navy in that year appears in a table like Table H-1 .

Previous Navy force structure plans, such as those shown in Table B-1 , might provide some insight into the potential adequacy of a proposed new force-structure plan, but changes over time in mission requirements, technologies available to ships for performing missions, and other force-planning factors, as well as the possibility that earlier force-structure plans might not have been appropriate for meeting the mission demands of their times, suggest that some caution should be applied in using past force structure plans for this purpose, particularly if those past force structure plans are more than a few years old. The Reagan-era goal for a 600-ship Navy, for example, was designed for a Cold War set of missions focusing on countering Soviet naval forces at sea, which is not an appropriate basis for planning the Navy today, and there was considerable debate during those years as to the appropriateness of the 600-ship goal.

Appendix D. Industrial Base Ability for, and Employment Impact of, Additional Shipbuilding Work

This appendix presents background information on the ability of the industrial base to take on the additional shipbuilding work associated with achieving and maintaining the Navy's 355-ship force-level goal and on the employment impact of additional shipbuilding work.

The U.S. shipbuilding industrial base has some unused capacity to take on increased Navy shipbuilding work, particularly for certain kinds of surface ships, and its capacity could be increased further over time to support higher Navy shipbuilding rates. Navy shipbuilding rates could not be increased steeply across the board overnight—time (and investment) would be needed to hire and train additional workers and increase production facilities at shipyards and supplier firms, particularly for supporting higher rates of submarine production. Depending on their specialties, newly hired workers could be initially less productive per unit of time worked than more experienced workers.

Some parts of the shipbuilding industrial base, such as the submarine construction industrial base, could face more challenges than others in ramping up to the higher production rates required to build the various parts of the 355-ship fleet. Over a period of a few to several years, with investment and management attention, Navy shipbuilding could ramp up to higher rates for achieving a 355-ship fleet over a period of 20-30 years.

all seven shipyards [currently involved in building the Navy's major ships] would need to increase their workforces and several would need to make improvements to their infrastructure in order to build ships at a faster rate. However, certain sectors face greater obstacles in constructing ships at faster rates than others: Building more submarines to meet the goals of the 2016 force structure assessment would pose the greatest challenge to the shipbuilding industry. Increasing the number of aircraft carriers and surface combatants would pose a small to moderate challenge to builders of those vessels. Finally, building more amphibious ships and combat logistics and support ships would be the least problematic for the shipyards. The workforces across those yards would need to increase by about 40 percent over the next 5 to 10 years. Managing the growth and training of those new workforces while maintaining the current standard of quality and efficiency would represent the most significant industrywide challenge. In addition, industry and Navy sources indicate that as much as $4 billion would need to be invested in the physical infrastructure of the shipyards to achieve the higher production rates required under the [notional] 15-year and 20-year [buildup scenarios examined by CBO]. Less investment would be needed for the [notional] 25-year or 30-year [buildup scenarios examined by CBO].

A January 13, 2017, press report states the following:

The Navy's production lines are hot and the work to prepare them for the possibility of building out a much larger fleet would be manageable, the service's head of acquisition said Thursday.

From a logistics perspective, building the fleet from its current 274 ships to 355, as recommended in the Navy's newest force structure assessment in December, would be straightforward, Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley told reporters at the Surface Navy Association's annual symposium.

"By virtue of maintaining these hot production lines, frankly, over the last eight years, our facilities are in pretty good shape," Stackley said. "In fact, if you talked to industry, they would say we're underutilizing the facilities that we have."

The areas where the Navy would likely have to adjust "tooling" to answer demand for a larger fleet would likely be in Virginia-class attack submarines and large surface combatants, the DDG-51 guided missile destroyers—two ship classes likely to surge if the Navy gets funding to build to 355 ships, he said.

"Industry's going to have to go out and procure special tooling associated with going from current production rates to a higher rate, but I would say that's easily done," he said.

Another key, Stackley said, is maintaining skilled workers—both the builders in the yards and the critical supply-chain vendors who provide major equipment needed for ship construction. And, he suggested, it would help to avoid budget cuts and other events that would force workforce layoffs.

"We're already prepared to ramp up," he said. "In certain cases, that means not laying off the skilled workforce we want to retain."

A January 17, 2017, press report states the following:

Building stable designs with active production lines is central to the Navy's plan to grow to 355 ships. "if you look at the 355-ship number, and you study the ship classes (desired), the big surge is in attack submarines and large surface combatants, which today are DDG-51 (destroyers)," the Assistant Secretary of the Navy, Sean Stackley, told reporters at last week's Surface Navy Association conference. Those programs have proven themselves reliable performers both at sea and in the shipyards.

From today's fleet of 274 ships, "we're on an irreversible path to 308 by 2021. Those ships are already in construction," said Stackley. "To go from there to 355, virtually all those ships are currently in production, with some exceptions: Ohio Replacement, (we) just got done the Milestone B there (to move from R&D into detailed design); and then upgrades to existing platforms. So we have hot production lines that will take us to that 355-ship Navy."

A January 24, 2017, press report states the following:

Navy officials say a recently determined plan to increase its fleet size by adding more new submarines, carriers and destroyers is "executable" and that early conceptual work toward this end is already underway....

Although various benchmarks will need to be reached in order for this new plan to come to fruition, such as Congressional budget allocations, Navy officials do tell Scout Warrior that the service is already working—at least in concept—on plans to vastly enlarge the fleet. Findings from this study are expected to inform an upcoming 2018 Navy Shipbuilding Plan, service officials said.

A January 12, 2017, press report states the following:

Brian Cuccias, president of Ingalls Shipbuilding [a shipyard owned by Huntington Ingalls Industries (HII) that builds Navy destroyers and amphibious ships as well as Coast Guard cutters], said Ingalls, which is currently building 10 ships for four Navy and Coast Guard programs at its 800-acre facility in Pascagoula, Miss., could build more because it is using only 70 to 75 percent of its capacity.

A March 2017 press report states the following:

As the Navy calls for a larger fleet, shipbuilders are looking toward new contracts and ramping up their yards to full capacity....

The Navy is confident that U.S. shipbuilders will be able to meet an increased demand, said Ray Mabus, then-secretary of the Navy, during a speech at the Surface Navy Association's annual conference in Arlington, Virginia.

They have the capacity to "get there because of the ships we are building today," Mabus said. "I don't think we could have seven years ago."

Shipbuilders around the United States have "hot" production lines and are manufacturing vessels on multi-year or block buy contracts, he added. The yards have made investments in infrastructure and in the training of their workers.

"We now have the basis ... [to] get to that much larger fleet," he said....

Shipbuilders have said they are prepared for more work.

At Ingalls Shipbuilding—a subsidiary of Huntington Ingalls Industries—10 ships are under construction at its Pascagoula, Mississippi, yard, but it is under capacity, said Brian Cuccias, the company's president.

The shipbuilder is currently constructing five guided-missile destroyers, the latest San Antonio-class amphibious transport dock ship, and two national security cutters for the Coast Guard.

"Ingalls is a very successful production line right now, but it has the ability to actually produce a lot more in the future," he said during a briefing with reporters in January.

The company's facility is currently operating at 75 percent capacity, he noted....

Austal USA—the builder of the Independence-variant of the littoral combat ship and the expeditionary fast transport vessel—is also ready to increase its capacity should the Navy require it, said Craig Perciavalle, the company's president.

The latest discussions are "certainly something that a shipbuilder wants to hear," he said. "We do have the capability of increasing throughput if the need and demand were to arise, and then we also have the ability with the present workforce and facility to meet a different mix that could arise as well."

Austal could build fewer expeditionary fast transport vessels and more littoral combat ships, or vice versa, he added.

"The key thing for us is to keep the manufacturing lines hot and really leverage the momentum that we've gained on both of the programs," he said.

The company—which has a 164-acre yard in Mobile, Alabama—is focused on the extension of the LCS and expeditionary fast transport ship program, but Perciavalle noted that it could look into manufacturing other types of vessels.

"We do have excess capacity to even build smaller vessels … if that opportunity were to arise and we're pursuing that," he said.

Bryan Clark, a naval analyst at the Center for Strategic and Budgetary Assessments, a Washington, D.C.-based think tank, said shipbuilders are on average running between 70 and 80 percent capacity. While they may be ready to meet an increased demand for ships, it would take time to ramp up their workforces.

However, the bigger challenge is the supplier industrial base, he said.

"Shipyards may be able to build ships but the supplier base that builds the pumps … and the radars and the radios and all those other things, they don't necessarily have that ability to ramp up," he said. "You would need to put some money into building up their capacity."

Rear Adm. William Gallinis, program manager for program executive office ships, said what the Navy must be "mindful of is probably our vendor base that support the shipyards."

Smaller companies that supply power electronics and switchboards could be challenged, he said.

"Do we need to re-sequence some of the funding to provide some of the facility improvements for some of the vendors that may be challenged? My sense is that the industrial base will size to the demand signal. We just need to be mindful of how we transition to that increased demand signal," he said.

The acquisition workforce may also see an increased amount of stress, Gallinis noted. "It takes a fair amount of experience and training to get a good contracting officer to the point to be [able to] manage contracts or procure contracts."

"But I don't see anything that is insurmountable," he added.

At a May 24, 2017, hearing before the Seapower subcommittee of the Senate Armed Services Committee on the industrial-base aspects of the Navy's 355-ship goal, John P. Casey, executive vice president–marine systems, General Dynamics Corporation (one of the country's two principal builders of Navy ships) stated the following:

It is our belief that the Nation's shipbuilding industrial base can scale-up hot production lines for existing ships and mobilize additional resources to accomplish the significant challenge of achieving the 355-ship Navy as quickly as possible....

Supporting a plan to achieve a 355-ship Navy will be the most challenging for the nuclear submarine enterprise. Much of the shipyard and industrial base capacity was eliminated following the steep drop-off in submarine production that occurred with the cancellation of the Seawolf Program in 1992. The entire submarine industrial base at all levels of the supply chain will likely need to recapitalize some portion of its facilities, workforce, and supply chain just to support the current plan to build the Columbia Class SSBN program, while concurrently building Virginia Class SSNs. Additional SSN procurement will require industry to expand its plans and associated investment beyond the level today....

Shipyard labor resources include the skilled trades needed to fabricate, build and outfit major modules, perform assembly, test and launch of submarines, and associated support organizations that include planning, material procurement, inspection, quality assurance, and ship certification. Since there is no commercial equivalency for Naval nuclear submarine shipbuilding, these trade resources cannot be easily acquired in large numbers from other industries. Rather, these shipyard resources must be acquired and developed over time to ensure the unique knowledge and know-how associated with nuclear submarine shipbuilding is passed on to the next generation of shipbuilders. The mechanisms of knowledge transfer require sufficient lead time to create the proficient, skilled craftsmen in each key trade including welding, electrical, machining, shipfitting, pipe welding, painting, and carpentry, which are among the largest trades that would need to grow to support increased demand. These trades will need to be hired in the numbers required to support the increased workload. Both shipyards have scalable processes in place to acquire, train, and develop the skilled workforce they need to build nuclear ships. These processes and associated training facilities need to be expanded to support the increased demand. As with the shipyards, the same limiting factors associated with facilities, workforce, and supply chain also limit the submarine unique first tier suppliers and sub-tiers in the industrial base for which there is no commercial equivalency....

The supply base is the third resource that will need to be expanded to meet the increased demand over the next 20 years. During the OHIO, 688 and SEAWOLF construction programs, there were over 17,000 suppliers supporting submarine construction programs. That resource base was "rationalized" during submarine low rate production over the last 20 years. The current submarine industrial base reflects about 5,000 suppliers, of which about 3,000 are currently active (i.e., orders placed within the last 5 years), 80% of which are single or sole source (based on $). It will take roughly 20 years to build the 12 Columbia Class submarines that starts construction in FY21. The shipyards are expanding strategic sourcing of appropriate non-core products (e.g., decks, tanks, etc.) in order to focus on core work at each shipyard facility (e.g., module outfitting and assembly). Strategic sourcing will move demand into the supply base where capacity may exist or where it can be developed more easily. This approach could offer the potential for cost savings by competition or shifting work to lower cost work centers throughout the country. Each shipyard has a process to assess their current supply base capacity and capability and to determine where it would be most advantageous to perform work in the supply base....

Achieving the increased rate of production and reducing the cost of submarines will require the Shipbuilders to rely on the supply base for more non-core products such as structural fabrication, sheet metal, machining, electrical, and standard parts. The supply base must be made ready to execute work with submarine-specific requirements at a rate and volume that they are not currently prepared to perform. Preparing the supply base to execute increased demand requires early non-recurring funding to support cross-program construction readiness and EOQ funding to procure material in a manner that does not hold up existing ship construction schedules should problems arise in supplier qualification programs. This requires longer lead times (estimates of three years to create a new qualified, critical supplier) than the current funding profile supports....

We need to rely on market principles to allow suppliers, the shipyards and GFE material providers to sort through the complicated demand equation across the multiple ship programs. Supplier development funding previously mentioned would support non-recurring efforts which are needed to place increased orders for material in multiple market spaces. Examples would include valves, build-to-print fabrication work, commodities, specialty material, engineering components, etc. We are engaging our marine industry associations to help foster innovative approaches that could reduce costs and gain efficiency for this increased volume....

Supporting the 355-ship Navy will require Industry to add capability and capacity across the entire Navy Shipbuilding value chain. Industry will need to make investment decisions for additional capital spend starting now in order to meet a step change in demand that would begin in FY19 or FY20. For the submarine enterprise, the step change was already envisioned and investment plans that embraced a growth trajectory were already being formulated. Increasing demand by adding additional submarines will require scaling facility and workforce development plans to operate at a higher rate of production. The nuclear shipyards would also look to increase material procurement proportionally to the increased demand. In some cases, the shipyard facilities may be constrained with existing capacity and may look to source additional work in the supply base where capacity exists or where there are competitive business advantages to be realized. Creating additional capacity in the supply base will require non-recurring investment in supplier qualification, facilities, capital equipment and workforce training and development.

Industry is more likely to increase investment in new capability and capacity if there is certainty that the Navy will proceed with a stable shipbuilding plan. Positive signals of commitment from the Government must go beyond a published 30-year Navy Shipbuilding Plan and line items in the Future Years Defense Plan (FYDP) and should include:

Multi-year contracting for Block procurement which provides stability in the industrial base and encourages investment in facilities and workforce development Funding for supplier development to support training, qualification, and facilitization efforts—Electric Boat and Newport News have recommended to the Navy funding of $400M over a three-year period starting in 2018 to support supplier development for the Submarine Industrial Base as part of an Integrated Enterprise Plan Extended Enterprise initiative Acceleration of Advance Procurement and/or Economic Order Quantities (EOQ) procurement from FY19 to FY18 for Virginia Block V Government incentives for construction readiness and facilities / special tooling for shipyard and supplier facilities, which help cash flow capital investment ahead of construction contract awards Procurement of additional production back-up (PBU) material to help ensure a ready supply of material to mitigate construction schedule risk....

So far, this testimony has focused on the Submarine Industrial Base, but the General Dynamics Marine Systems portfolio also includes surface ship construction. Unlike Electric Boat, Bath Iron Works and NASSCO are able to support increased demand without a significant increase in resources.....

Bath Iron Works is well positioned to support the Administration's announced goal of increasing the size of the Navy fleet to 355 ships. For BIW that would mean increasing the total current procurement rate of two DDG 51s per year to as many as four DDGs per year, allocated equally between BIW and HII. This is the same rate that the surface combatant industrial base sustained over the first decade of full rate production of the DDG 51 Class (1989-1999)....

No significant capital investment in new facilities is required to accommodate delivering two DDGs per year. However, additional funding will be required to train future shipbuilders and maintain equipment. Current hiring and training processes support the projected need, and have proven to be successful in the recent past. BIW has invested significantly in its training programs since 2014 with the restart of the DDG 51 program and given these investments and the current market in Maine, there is little concern of meeting the increase in resources required under the projected plans.

A predictable and sustainable Navy workload is essential to justify expanding hiring/training programs. BIW would need the Navy's commitment that the Navy's plan will not change before it would proceed with additional hiring and training to support increased production.

BIW's supply chain is prepared to support a procurement rate increase of up to four DDG 51s per year for the DDG 51 Program. BIW has long-term purchasing agreements in place for all major equipment and material for the DDG 51 Program. These agreements provide for material lead time and pricing, and are not constrained by the number of ships ordered in a year. BIW confirmed with all of its critical suppliers that they can support this increased procurement rate....

The Navy's Force Structure Assessment calls for three additional ESBs. Additionally, NASSCO has been asked by the Navy and the Congressional Budget Office (CBO) to evaluate its ability to increase the production rate of T-AOs to two ships per year. NASSCO has the capacity to build three more ESBs at a rate of one ship per year while building two T-AOs per year. The most cost effective funding profile requires funding ESB 6 in FY18 and the following ships in subsequent fiscal years to avoid increased cost resulting from a break in the production line. The most cost effective funding profile to enable a production rate of two T-AO ships per year requires funding an additional long lead time equipment set beginning in FY19 and an additional ship each year beginning in FY20.

NASSCO must now reduce its employment levels due to completion of a series of commercial programs which resulted in the delivery of six ships in 2016. The proposed increase in Navy shipbuilding stabilizes NASSCO's workload and workforce to levels that were readily demonstrated over the last several years.

Some moderate investment in the NASSCO shipyard will be needed to reach this level of production. The recent CBO report on the costs of building a 355-ship Navy accurately summarized NASSCO's ability to reach the above production rate stating, "building more … combat logistics and support ships would be the least problematic for the shipyards."

At the same hearing, Brian Cuccias, president, Ingalls Shipbuilding, Huntington Ingalls Industries (the country's other principal builder of Navy ships) stated the following:

Qualifying to be a supplier is a difficult process. Depending on the commodity, it may take up to 36 months. That is a big burden on some of these small businesses. This is why creating sufficient volume and exercising early contractual authorization and advance procurement funding is necessary to grow the supplier base, and not just for traditional long-lead time components; that effort needs to expand to critical components and commodities that today are controlling the build rate of submarines and carriers alike. Many of our suppliers are small businesses and can only make decisions to invest in people, plant and tooling when they are awarded a purchase order. We need to consider how we can make commitments to suppliers early enough to ensure material readiness and availability when construction schedules demand it.

With questions about the industry's ability to support an increase in shipbuilding, both Newport News and Ingalls have undertaken an extensive inventory of our suppliers and assessed their ability to ramp up their capacity. We have engaged many of our key suppliers to assess their ability to respond to an increase in production.

The fortunes of related industries also impact our suppliers, and an increase in demand from the oil and gas industry may stretch our supply base. Although some low to moderate risk remains, I am convinced that our suppliers will be able to meet the forecasted Navy demand....

I strongly believe that the fastest results can come from leveraging successful platforms on current hot production lines. We commend the Navy's decision in 2014 to use the existing LPD 17 hull form for the LX(R), which will replace the LSD-class amphibious dock landing ships scheduled to retire in the coming years. However, we also recommend that the concept of commonality be taken even further to best optimize efficiency, affordability and capability. Specifically, rather than continuing with a new design for LX(R) within the "walls" of the LPD hull, we can leverage our hot production line and supply chain and offer the Navy a variant of the existing LPD design that satisfies the aggressive cost targets of the LX(R) program while delivering more capability and survivability to the fleet at a significantly faster pace than the current program. As much as 10-15 percent material savings can be realized across the LX(R) program by purchasing respective blocks of at least five ships each under a multi-year procurement (MYP) approach. In the aggregate, continuing production with LPD 30 in FY18, coupled with successive MYP contracts for the balance of ships, may yield savings greater than $1 billion across an 11-ship LX(R) program. Additionally, we can deliver five LX(R)s to the Navy and Marine Corps in the same timeframe that the current plan would deliver two, helping to reduce the shortfall in amphibious warships against the stated force requirement of 38 ships.

Multi-ship procurements, whether a formal MYP or a block-buy, are a proven way to reduce the price of ships. The Navy took advantage of these tools on both Virginia-class submarines and Arleigh Burke-class destroyers. In addition to the LX(R) program mentioned above, expanding multi-ship procurements to other ship classes makes sense....

The most efficient approach to lower the cost of the Ford class and meet the goal of an increased CVN fleet size is also to employ a multi-ship procurement strategy and construct these ships at three-year intervals. This approach would maximize the material procurement savings benefit through economic order quantities procurement and provide labor efficiencies to enable rapid acquisition of a 12-ship CVN fleet. This three-ship approach would save at least $1.5 billion, not including additional savings that could be achieved from government-furnished equipment. As part of its Integrated Enterprise Plan, we commend the Navy's efforts to explore the prospect of material economic order quantity purchasing across carrier and submarine programs.

At the same hearing, Matthew O. Paxton, president, Shipbuilders Council of America (SCA)—a trade association representing shipbuilders, suppliers, and associated firms—stated the following:

To increase the Navy's Fleet to 355 ships, a substantial and sustained investment is required in both procurement and readiness. However, let me be clear: building and sustaining the larger required Fleet is achievable and our industry stands ready to help achieve that important national security objective.

To meet the demand for increased vessel construction while sustaining the vessels we currently have will require U.S. shipyards to expand their work forces and improve their infrastructure in varying degrees depending on ship type and ship mix – a requirement our Nation's shipyards are eager to meet. But first, in order to build these ships in as timely and affordable manner as possible, stable and robust funding is necessary to sustain those industrial capabilities which support Navy shipbuilding and ship maintenance and modernization....

Beyond providing for the building of a 355-ship Navy, there must also be provision to fund the "tail," the maintenance of the current and new ships entering the fleet. Target fleet size cannot be reached if existing ships are not maintained to their full service lives, while building those new ships. Maintenance has been deferred in the last few years because of across-the-board budget cuts....

The domestic shipyard industry certainly has the capability and know-how to build and maintain a 355-ship Navy. The Maritime Administration determined in a recent study on the Economic Benefits of the U.S. Shipyard Industry that there are nearly 110,000 skilled men and women in the Nation's private shipyards building, repairing and maintaining America's military and commercial fleets.1 The report found the U.S. shipbuilding industry supports nearly 400,000 jobs across the country and generates $25.1 billion in income and $37.3 billion worth of goods and services each year. In fact, the MARAD report found that the shipyard industry creates direct and induced employment in every State and Congressional District and each job in the private shipbuilding and repairing industry supports another 2.6 jobs nationally.

This data confirms the significant economic impact of this manufacturing sector, but also that the skilled workforce and industrial base exists domestically to build these ships. Long-term, there needs to be a workforce expansion and some shipyards will need to reconfigure or expand production lines. This can and will be done as required to meet the need if adequate, stable budgets and procurement plans are established and sustained for the long-term. Funding predictability and sustainability will allow industry to invest in facilities and more effectively grow its skilled workforce. The development of that critical workforce will take time and a concerted effort in a partnership between industry and the federal government.

U.S. shipyards pride themselves on implementing state of the art training and apprenticeship programs to develop skilled men and women that can cut, weld, and bend steel and aluminum and who can design, build and maintain the best Navy in the world. However, the shipbuilding industry, like so many other manufacturing sectors, faces an aging workforce. Attracting and retaining the next generation shipyard worker for an industry career is critical. Working together with the Navy, and local and state resources, our association is committed to building a robust training and development pipeline for skilled shipyard workers. In addition to repealing sequestration and stabilizing funding the continued development of a skilled workforce also needs to be included in our national maritime strategy....

In conclusion, the U.S. shipyard industry is certainly up to the task of building a 355-ship Navy and has the expertise, the capability, the critical capacity and the unmatched skilled workforce to build these national assets. Meeting the Navy's goal of a 355-ship fleet and securing America's naval dominance for the decades ahead will require sustained investment by Congress and Navy's partnership with a defense industrial base that can further attract and retain a highly-skilled workforce with critical skill sets. Again, I would like to thank this Subcommittee for inviting me to testify alongside such distinguished witnesses. As a representative of our nation's private shipyards, I can say, with confidence and certainty, that our domestic shipyards and skilled workers are ready, willing and able to build and maintain the Navy's 355-ship Fleet.

Building the additional ships that would be needed to achieve and maintain the 355-ship fleet could create many additional manufacturing and other jobs at shipyards, associated supplier firms, and elsewhere in the U.S. economy. A 2015 Maritime Administration (MARAD) report states,

Considering the indirect and induced impacts, each direct job in the shipbuilding and repairing industry is associated with another 2.6 jobs in other parts of the US economy; each dollar of direct labor income and GDP in the shipbuilding and repairing industry is associated with another $1.74 in labor income and $2.49 in GDP, respectively, in other parts of the US economy.

A March 2017 press report states, "Based on a 2015 economic impact study, the Shipbuilders Council of America [a trade association for U.S. shipbuilders and associated supplier firms] believes that a 355-ship Navy could add more than 50,000 jobs nationwide." The 2015 economic impact study referred to in that quote might be the 2015 MARAD study discussed in the previous paragraph. An estimate of more than 50,000 additional jobs nationwide might be viewed as a higher-end estimate; other estimates might be lower. A June 14, 2017, press report states the following: "The shipbuilding industry will need to add between 18,000 and 25,000 jobs to build to a 350-ship Navy, according to Matthew Paxton, president of the Shipbuilders Council of America, a trade association representing the shipbuilding industrial base. Including indirect jobs like suppliers, the ramp-up may require a boost of 50,000 workers."

Appendix E. A Summary of Some Acquisition Lessons Learned for Navy Shipbuilding

This appendix presents a general summary of lessons learned in Navy shipbuilding, reflecting comments made repeatedly by various sources over the years. These lessons learned include the following:

At the outset, get the operational requirements for the program right. Properly identify the program's operational requirements at the outset. Manage risk by not trying to do too much in terms of the program's operational requirements, and perhaps seek a so-called 70%-to-80% solution (i.e., a design that is intended to provide 70%-80% of desired or ideal capabilities). Achieve a realistic balance up front between operational requirements, risks, and estimated costs. Impose cost discipline up front. Use realistic price estimates, and consider not only development and procurement costs, but life-cycle operation and support (O&S) costs. Employ competition where possible in the awarding of design and construction contracts. Use a contract type that is appropriate for the amount of risk involved , and structure its terms to align incentives with desired outcomes. Minimize design/construction concurrency by developing the design to a high level of completion before starting construction and by resisting changes in requirements (and consequent design changes) during construction. Properly supervise construction work. Maintain an adequate number of properly trained Supervisor of Shipbuilding (SUPSHIP) personnel. Provide stability for industry , in part by using, where possible, multiyear procurement (MYP) or block buy contracting. Maintain a capable government acquisition workforce that understands what it is buying, as well as the above points.

Identifying these lessons is arguably not the hard part—most if not all these points have been cited for years. The hard part, arguably, is living up to them without letting circumstances lead program-execution efforts away from these guidelines.

Appendix F. Some Considerations Relating to Warranties in Shipbuilding and Other Defense Acquisition

This appendix presents some considerations relating to warranties in shipbuilding and other defense acquisition.

In discussions of Navy (and also Coast Guard) shipbuilding, one question that sometimes arises is whether including a warranty in a shipbuilding contract is preferable to not including one. The question can arise, for example, in connection with a GAO finding that "the Navy structures shipbuilding contracts so that it pays shipbuilders to build ships as part of the construction process and then pays the same shipbuilders a second time to repair the ship when construction defects are discovered."

Including a warranty in a shipbuilding contract (or a contract for building some other kind of defense end item), while potentially valuable, might not always be preferable to not including one—it depends on the circumstances of the acquisition, and it is not necessarily a valid criticism of an acquisition program to state that it is using a contract that does not include a warranty (or a weaker form of a warranty rather than a stronger one).

Including a warranty generally shifts to the contractor the risk of having to pay for fixing problems with earlier work. Although that in itself could be deemed desirable from the government's standpoint, a contractor negotiating a contract that will have a warranty will incorporate that risk into its price, and depending on how much the contractor might charge for doing that, it is possible that the government could wind up paying more in total for acquiring the item (including fixing problems with earlier work on that item) than it would have under a contract without a warranty.

When a warranty is not included in the contract and the government pays later on to fix problems with earlier work, those payments can be very visible, which can invite critical comments from observers. But that does not mean that including a warranty in the contract somehow frees the government from paying to fix problems with earlier work. In a contract that includes a warranty, the government will indeed pay something to fix problems with earlier work—but it will make the payment in the less-visible (but still very real) form of the up-front charge for including the warranty, and that charge might be more than what it would have cost the government, under a contract without a warranty, to pay later on for fixing those problems.

From a cost standpoint, including a warranty in the contract might or might not be preferable, depending on the risk that there will be problems with earlier work that need fixing, the potential cost of fixing such problems, and the cost of including the warranty in the contract. The point is that the goal of avoiding highly visible payments for fixing problems with earlier work and the goal of minimizing the cost to the government of fixing problems with earlier work are separate and different goals, and that pursuing the first goal can sometimes work against achieving the second goal.

The Department of Defense's guide on the use of warranties states the following:

Federal Acquisition Regulation (FAR) 46.7 states that "the use of warranties is not mandatory." However, if the benefits to be derived from the warranty are commensurate with the cost of the warranty, the CO [contracting officer] should consider placing it in the contract. In determining whether a warranty is appropriate for a specific acquisition, FAR Subpart 46.703 requires the CO to consider the nature and use of the supplies and services, the cost, the administration and enforcement, trade practices, and reduced requirements. The rationale for using a warranty should be documented in the contract file....

In determining the value of a warranty, a CBA [cost-benefit analysis] is used to measure the life cycle costs of the system with and without the warranty. A CBA is required to determine if the warranty will be cost beneficial. CBA is an economic analysis, which basically compares the Life Cycle Costs (LCC) of the system with and without the warranty to determine if warranty coverage will improve the LCCs. In general, five key factors will drive the results of the CBA: cost of the warranty + cost of warranty administration + compatibility with total program efforts + cost of overlap with Contractor support + intangible savings. Effective warranties integrate reliability, maintainability, supportability, availability, and life-cycle costs. Decision factors that must be evaluated include the state of the weapon system technology, the size of the warranted population, the likelihood that field performance requirements can be achieved, and the warranty period of performance.

Appendix G. Some Considerations Relating to Avoiding Procurement Cost Growth vs. Minimizing Procurement Costs

This appendix presents some considerations relating to avoiding procurement cost growth vs. minimizing procurement costs in shipbuilding and other defense acquisition.

The affordability challenge posed by the Navy's shipbuilding plans can reinforce the strong oversight focus on preventing or minimizing procurement cost growth in Navy shipbuilding programs, which is one expression of a strong oversight focus on preventing or minimizing cost growth in DOD acquisition programs in general. This oversight focus may reflect in part an assumption that avoiding or minimizing procurement cost growth is always synonymous with minimizing procurement cost. It is important to note, however, that as paradoxical as it may seem, avoiding or minimizing procurement cost growth is not always synonymous with minimizing procurement cost, and that a sustained, singular focus on avoiding or minimizing procurement cost growth might sometimes lead to higher procurement costs for the government.

How could this be? Consider the example of a design for the lead ship of a new class of Navy ships. The construction cost of this new design is uncertain, but is estimated to be likely somewhere between Point A (a minimum possible figure) and Point D (a maximum possible figure). (Point D, in other words, would represent a cost estimate with a 100% confidence factor, meaning there is a 100% chance that the cost would come in at or below that level.) If the Navy wanted to avoid cost growth on this ship, it could simply set the ship's procurement cost at Point D. Industry would likely be happy with this arrangement, and there likely would be no cost growth on the ship.

The alternative strategy open to the Navy is to set the ship's target procurement cost at some figure between Points A and D—call it Point B—and then use that more challenging target cost to place pressure on industry to sharpen its pencils so as to find ways to produce the ship at that lower cost. (Navy officials sometimes refer to this as "pressurizing" industry.) In this example, it might turn out that industry efforts to reduce production costs are not successful enough to build the ship at the Point B cost. As a result, the ship experiences one or more rounds of procurement cost growth, and the ship's procurement cost rises over time from Point B to some higher figure—call it Point C.

Here is the rub: Point C, in spite of incorporating one or more rounds of cost growth, might nevertheless turn out to be lower than Point D, because Point C reflected efforts by the shipbuilder to find ways to reduce production costs that the shipbuilder might have put less energy into pursuing if the Navy had simply set the ship's procurement cost initially at Point D.

Setting the ship's cost at Point D, in other words, may eliminate the risk of cost growth on the ship, but does so at the expense of creating a risk of the government paying more for the ship than was actually necessary. DOD could avoid cost growth on new procurement programs starting tomorrow by simply setting costs for those programs at each program's equivalent of Point D. But as a result of this strategy, DOD could well wind up leaving money on the table in some instances—of not, in other words, minimizing procurement costs.

DOD does not have to set a cost precisely at Point D to create a potential risk in this regard. A risk of leaving money on the table, for example, is a possible downside of requiring DOD to budget for its acquisition programs at something like an 80% confidence factor—an approach that some observers have recommended—because a cost at the 80% confidence factor is a cost that is likely fairly close to Point D.

Procurement cost growth is often embarrassing for DOD and industry, and can damage their credibility in connection with future procurement efforts. Procurement cost growth can also disrupt congressional budgeting by requiring additional appropriations to pay for something Congress thought it had fully funded in a prior year. For this reason, there is a legitimate public policy value to pursuing a goal of having less rather than more procurement cost growth.

Procurement cost growth, however, can sometimes be in part the result of DOD efforts to use lower initial cost targets as a means of pressuring industry to reduce production costs—efforts that, notwithstanding the cost growth, might be partially successful. A sustained, singular focus on avoiding or minimizing cost growth, and of punishing DOD for all instances of cost growth, could discourage DOD from using lower initial cost targets as a means of pressurizing industry, which could deprive DOD of a tool for controlling procurement costs.

The point here is not to excuse away cost growth, because cost growth can occur in a program for reasons other than DOD's attempt to pressurize industry. Nor is the point to abandon the goal of seeking lower rather than higher procurement cost growth, because, as noted above, there is a legitimate public policy value in pursuing this goal. The point, rather, is to recognize that this goal is not always synonymous with minimizing procurement cost, and that a possibility of some amount of cost growth might be expected as part of an optimal government strategy for minimizing procurement cost. Recognizing that the goals of seeking lower rather than higher cost growth and of minimizing procurement cost can sometimes be in tension with one another can lead to an approach that takes both goals into consideration. In contrast, an approach that is instead characterized by a sustained, singular focus on avoiding and minimizing cost growth may appear virtuous, but in the end may wind up costing the government more.

Appendix H. Size of the Navy and Navy Shipbuilding Rate

Table H-1 shows the size of the Navy in terms of total number of ships since FY1948; the numbers shown in the table reflect changes over time in the rules specifying which ships count toward the total. Differing counting rules result in differing totals, and for certain years, figures reflecting more than one set of counting rules are available. Figures in the table for FY1978 and subsequent years reflect the battle force ships counting method, which is the set of counting rules established in the early 1980s for public policy discussions of the size of the Navy.

As shown in the table, the total number of battle force ships in the Navy reached a late-Cold War peak of 568 at the end of FY1987 and began declining thereafter. The Navy fell below 300 battle force ships in August 2003 and as of April 26, 2019, included 289 battle force ships.

As discussed in Appendix C , historical figures for total fleet size might not be a reliable yardstick for assessing the appropriateness of proposals for the future size and structure of the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time, and because the number of ships in the fleet in an earlier year might itself have been inappropriate (i.e., not enough or more than enough) for meeting the Navy's mission requirements in that year.

Table H-2 shows past (FY1982-FY2019) and requested or programmed (FY2020-FY2024) rates of Navy ship procurement.