U.S. shipbuilding costs takes toll on national security

by Michael Hansen, Hawaii Shippers Council, December 30, 2019

The Associated Press (AP) published on December 28, 2019, the news article “Navy considers shipbuilding cuts for upcoming budget,” describing proposed substantive cuts from the U.S. Navy’s planned shipbuilding program and early decommissioning of a class of existing ships.

The article’s dateline is Portland, Maine. This is significant because one of the shipbuilding yards that would be impacted by the cuts is General Dynamics Corporation (GD)’s Bath Iron Works located in Bath, Maine. The article focuses on the potential loss of shipbuilding work in Maine, to which both of that state’s U.S. Senators expressed their concern. The other shipbuilding yard that would be affected by cuts is Huntington Ingalls Industries Inc. (HHI)’s Ingalls Shipyard in Pascagoula, Mississippi.

The proposed shipbuilding cuts would reduce the number of planned Arleigh-Burke Class combatant ships, which are guided missile destroyers (DDG) built around the Aegis Combat System, from the originally planned twelve to seven saving U.S. $9.4 billion. Early decommissioning would remove four more existing Ticonderoga class guided-missile cruisers over the next five years than originally planned.

The Navy would use the savings from the shipbuilding cuts and decommissioning of existing surface ships to replace the ageing Ohio-Class of nuclear-powered submarines, which includes 14 ballistic missile submarines (SSBN) and four cruise missile submarines (SSGN). The Ohio-Class is to be replaced by the new Columbia-Class nuclear-powered ballistic missile submarine currently under development. GD’s Electric Boat Company in Groton, Connecticut, is the prime contractor developing the design for the Columbia-Class submarines and will almost certainly construct them.

What the article does not address is the escalating and extraordinary cost of naval shipbuilding in the U.S. which is crowding out the Navy’s shipbuilding budget. As the cost of each ship increases, the Navy’s budget becomes insufficient to build all the ships it needs to maintain an adequate forward deployed presence. As the article notes, the Navy’s stated goal is a fleet of 355 oceangoing combatant or capital ships, as compared to its current fleet of 293 capital ships. The proposed shipbuilding cuts and early decommissionings would reduce the Navy’s ability to achieve the goal of 355 capital ships.

In addition, is the status of the Ready Reserve Fleet (RRF) of government-owned noncombatant cargo ships, which are regulated as merchant ships. The RRF is the U.S. Military’s primary reserve sealift capacity and ageing out with most ships approaching or beyond forty years of age. These ships need to be replaced. However, the Navy testified earlier this year in Congress that they lack the resources to build RRF replacement ships domestically and suggested that foreign construction would be far more cost effective and better achievable.

The high cost of Naval ship construction is analogous to the situation for commercial ships to be used in domestic trade. Commercial ships used in domestic trade must be domestically built as required by what is commonly known as the Jones Act and formally in American jurisprudence as the coastwise laws of the U.S. The cost of building self-propelled oceangoing merchant ships is the U.S. is generally accepted to be four to five times the cost of constructing comparable ships in the main shipbuilding countries of Japan, South Korea and China.

The Jones Act only applies to commercial vessels in domestic trade, and does not apply to military vessels.

The acquisition of military vessels is regulated by statutes (other than the Jones Act) that require ships for the military (including the U.S. Coast Guard) be constructed in the U.S.

Despite the different laws and other considerations, both the U.S. military and commercial interests are facing the same issue: the extraordinarily high cost of domestic ship construction in the U.S.

One of the primary arguments that Jones Act proponents make is that it is essential for the nation’s national security to maintain the domestic build requirement for commercial vessels to support what is known as the “U.S. shipbuilding industrial base.” That is, by requiring the domestic construction of commercial vessels to be used in domestic trade, keeps the U.S. shipbuilding yards in business and competitive for the construction of naval vessels. It is patently obvious that this supposed relationship between commercial and military shipbuilding is no longer true, if it ever was.

It would be possible to address the extraordinarily high domestic build cost for commercial vessels by removing the domestic build requirement of the Jones Act for those vessels and possibly for RRF ships.

However, the issue of construction of naval capital ships is more complicated and thorny because of the national security issues involved with proprietary and sensitive technology involved including weapon systems, stealth design features, military imaging and surveillance technology (MIST) and advanced ship construction techniques. Transferring these technologies to foreign shipyards would be problematic.

Key excerpts from the AP news article:

The Navy is proposing construction cutbacks and accelerated ship retirements that would delay, or sink, the Navy’s goal of a larger fleet — and potentially hurt shipyards, according to an initial proposal.

The proposal would shrink the size of the fleet from today’s level of 293 ships to 287 ships, a far cry from the official goal of 355 ships established in the 2018 National Defense Authorization Act.

One of the proposed cuts would reduce the number of Arleigh Burke-class destroyers planned for construction from 12 to seven over the next five years, trimming $9.4 billion, or about 8%, from the shipbuilding budget, the official said.

Another potential cut would decommission Ticonderoga-class cruisers more quickly over the next five years, leaving nine in the fleet, rather than 13.

Defense analyst Norman Friedman said the proposal would represent a major reduction in anti-aircraft capability that is provided by destroyers and cruisers at a time when the Navy is facing more sophisticated threats from aircraft and missiles.

Republican Sen. Susan Collins and independent Sen. Angus King, of Maine, called the proposal “an abrupt reversal of the Navy’s plan to increase the size of the fleet.”

The proposed cost cutting comes as the Navy works to modernize its ballistic missile submarine fleet, replacing aging current Ohio-class subs with new Columbia-class nuclear subs. That program is putting pressure on the shipbuilding budget.

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