Challenging the Navy’s numbers
By Walter Pincus,
Since the Defense Department faces the need to reduce expenditures, here is one suggested new year’s resolution: Make the military services have a mandatory 80 percent confidence level in their estimated costs of a new weapons systems before major funding is approved.
What is a “confidence level?” the average taxpayer might ask. It is something the services have been doing for years but without much publicity. It is the percentage guesstimate by which the military service believes the cost it puts forward for a new, major acquisition will actually hit that figure.
Believe it or not, the services over the past decade have known that their original weapons systems estimates have a 50 percent chance or less of hitting that goal, which is why there are almost always cost overruns.
Here is another proposed resolution for the military: Take a second look at how many new-generation, high-tech ships, planes or vehicles are really needed given the threats to this country.
The Army’s multi-billion-dollar Future Combat System was reduced to several major components; the Air Force’s F-22 was sharply cut and plans are to reduce the original purchase of the F-35. So now is the time to look at the Navy’s new generation of costly nuclear aircraft carriers and their proposed numbers.
The USS Gerald R. Ford, known in Navy terms as CVN-78, will be the lead ship of six in a new generation of nuclear carriers scheduled to be built during the next 40 years under the Navy’s 2012 shipbuilding program. The Ford is about 25 percent completed and is expected to join the fleet in 2015.
The Navy budgeted CVN-78 “to the 40th percentile of possible cost outcomes,” according to former representative Joe Sestak (D-Pa.), who should know because he was at one time a vice admiral whose last major post was as deputy chief of Naval Operations for Warfare Requirements and Programs. Sestak further explained that the 40 percent confidence level meant “there is a 60 percent probability that the final cost of the CVN-78 will exceed the service’s estimate,” something he had written in an article in the Pittsburgh Post-Gazette in August.
Sestak, it should be noted, was removed from his policy post in 2005 because he pushed for budget cuts and further ruffled feathers in the Navy by calling for fewer ships, but more about that later.
There have long been complaints about the Navy’s failure to recognize the eventual cost of its ships. The Government Accountability Office pointed out in 2007 and again in 2008 that “the Navy tends to underestimate the costs needed to construct ships, resulting in unrealistic budgets and large cost increases after ship construction has begun.”
In 2008, the Navy projected $3.3 billion in research and development costs and $10.5 billion for procurement of CVN-78. The Congressional Budget Office put the procurement figure at $11.2 billion, while the GAO a year earlier said the “shipbuilder’s initial cost estimate for construction was 22 percent higher than the Navy’s cost target . . . [and] the actual costs to build the ship will likely increase above the Navy’s target.”
They have. The Navy’s projected cost for CVN-78 “grew by 10 percent between the president’s 2008 and 2012 budget requests” and is now $12 billion — the amount CBO estimated two years ago. And cost growth is not over. A GAO report in March said that the 2010 shifting of the Ford-class program from a four-year to a five-year building cycle could increase costs “by 9 to 15 percent.” But while increasing the cost of each ship, the Navy said the change “facilitates a reduced average yearly funding” over a longer period of time.
While a congressman, Sestak introduced legislation requiring disclosure of confidence levels for major defense acquisition programs. He included language that would require cost-estimation oversight if the confidence level was below 80 percent. It did not pass.
If the carrier costs are rising, why hasn’t the Navy recognized that the numbers may need to go down?
Defense Secretary Robert M. Gates touched that third rail in May 2010 when he told a Navy audience that although the plan was to use 11 carrier strike groups through 2040, the service should “consider the massive over-match the U.S. already enjoys.” He then asked: “Do we really need 11 carrier strike groups for another 30 years when no other country has more than one? Any future plans must address these realities.”
Gates drew back after an outburst occurred not only within the Navy but also on Capitol Hill. But Sestak, who studied ship needs while in the Pentagon, thinks that since the new generation of carriers will have eight times the fighting capacity of the old ones, it is time to reduce the 11 carrier groups down to eight or nine.
The United States will, in fact, be at 10 groups between 2013, when the old carrier USS Enterprise is to be decommissioned, and 2015, when the Ford joins the fleet. Other carriers could be taken out of service early, thus saving the cost of their operation.
Sestak also thinks that homeporting a carrier group in Guam along with the USS George Washington, now homeported in Yokosuka, Japan, would permit the active carrier numbers to go down with the avoidance of trips back and forth across the Pacific.
Other services adapt because of higher procurement costs and the changing international threat. The Navy should be no different.
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