The full repercussions of canceling the Seawolf (SSN-21) submarine program are just now being felt in the fleet. Can the Navy afford the consequences if DD-21 follows the same path?
The cancellation of the 29-boat SSN-21 program in 1992 was a disaster for the submarine industrial base. The planned transition from series SSN-688 construction to series SSN-21 construction did not occur, leaving the Navy to support an industrial base capitalized to build three submarines per year, building only four new submarines in ten years. The impact of this decision now has gone far beyond the submarine shipbuilding community.
The Navy's operational submarine forces are just discovering the profound impact of that 1992 decision. The Navy's target submarine force level was cut from a just-achieved 100 SSNs in the late 1980s to 56 SSNs by 1993, supposedly driven by the Navy's emerging new mission area in littoral warfare. The 1997 Quadrennial Defense Review (QDR) codified the Navy's earlier target SSN force levels. This QDR-endorsed force level has sparked recent concerns that operational commanders cannot meet their worldwide SSN commitments. This "new" operational concern, flowing from a decade-old decision and an eight-year-old force level, has generated significant discussion and some recent action. The submarine community is now trying to arrest declining SSN force levels by refueling rather than decommissioning SSN-688-class boats and by trying to budget for more new Virginia (SSN-774)-class SSNs. It can be argued that the current SSN force-level, operational, and industrial-base angst can be traced directly to that 1992 decision to cancel the SSN-21 program.
The surface-combatant community is in an analogous situation today. Series construction of Arleigh Burke (DDG-51)-class ships is scheduled to wind down in 2004 and series DD-21 construction is supposed to resume in 2005. Surface-combatant force levels already are at QDR-endorsed levels and the surface force is relatively new. The new Navy mission area of theater ballistic missile defense (TBMD) is growing in prominence and the old "new" mission area of littoral warfare apparently is being eclipsed. DD-21 clearly is not a TBMD-capable ship, and the class may suddenly appear anachronistic. Budgets are tight and major decisions loom. Study of the current submarine industrial-operational affordability crisis can help clarify the long-term operational impact of short-term financial and industrial base decisions that face the Navy today.
Seawolf
In 1988, the submarine construction program of record preserved an average build rate of three boats per year, which ensured that two submarine shipbuilders stayed in business, enabling effective price competition for the Navy's submarine construction programs (see Table 1). This was intended to keep construction costs affordable and to meet growing SSN force levels. As SSN-21 costs escalated and its design and construction schedule began to slip, the Navy reacted by cutting both SSN-688- and SSN-21-class construction and extending remaining SSN-688 and follow-on SSN-21 buys. This was consistent with the Navy's policy of requiring the Chief of Naval Operations staff account managers to "pay their own bills." SSN-21 cost overruns were absorbed by cutting dollars from the SSN-688 program, keeping the overall SSN shipbuilding funding level stable without regard to the per-ship cost impact.
Table 1: Submarine Construction Program
| Fiscal Year | 1986 | 1987 | 1988 | 1989 | 1990 | 1991 | 1992 | 1993 | |
| 1988 | SSN-21 SSN-688 |
— 4 |
— 4 |
— 3 |
1 2 |
— 2 |
2 2 |
2 1 |
3 — |
| 1991 | SSN-21 SSN-688 |
— 4 |
— 4 |
— 3 |
1 2 |
— 1 |
1 1 |
1 1 |
1 1 |
| 1992 | SSN-21 SSN-688 |
— 4 |
— 4 |
— 3 |
1 2 |
— 1 |
1 — |
— — |
— — |
By 1991, just before the SSN-21 program was canceled, the submarine build profile established a new two-boat-per-year average build rate and cut five submarines from the combined programs. After the SSN-21 program was canceled in 1992, the resulting (actual) build profile was zero boats per year.
The effect on the submarine industrial base was clear and immediate: thousands of workers left Electric Boat and Newport News within five years. The effect on the operational forces was slower to become apparent. At the time, the Navy had just attained the 100 SSN target force level goal declared under President Ronald Reagan, the Soviet Union had collapsed, the submarine force was relatively new as a result of the successful SSN-688 program, and all parties were looking for a "peace dividend." Littoral warfare was emerging as a new Navy mission area, and SSN-21, designed for open-ocean counter-Soviet operations, was billed as anachronistic in both design and mission. Of course, SSN-688 boats, designed for exactly the same mission as SSN-21, were considered acceptable alternatives.
In truth, SSN-21 costs were growing substantially (100% growth in design costs, 50% growth in production costs), and the program was beset with near-term technical problems. SSN-21 affordability issues loomed far larger than operational issues in the minds of Navy and Department of Defense planners looking for immediate cost savings. The long-term viability of the submarine industrial base may have appeared to be of minor concern in relation to the other pressing financial issues active at the time.
Most consider the SSN-21 cancellation to be an outgrowth of the changed operational environment and emerging littoral mission areas of the U.S. Navy. One should ask if the SSN-688 building program would have been canceled in mid-production if there had been no pending transition to the higher-cost SSN-21 class in process. DDG-51-class series construction was not canceled or substantially curtailed. F/A-18C/D series production was not canceled. Both of these platforms had been designed for blue-water, open-ocean operations against a powerful Soviet opponent, just like SSN-21. Savings from the cancellation of affordable, series-built SSN-688 submarines with their design fully paid for would have been low, relative to the operational value of the submarines. The submarine community might then have chosen the path of the surface community in early 1990—which continued production of affordable DDG-51-class ships and relied solely on forced attrition to reduce force levels—had SSN-21 not already been under construction. In essence, the reason SSN-21 was canceled had more to do with its perceived lack of affordability and high short-term savings potential than with its perceived lack of operational utility or functionality in an emerging mission area. As Todd Davies wrote in Navies and Shipbuilding Industries (Praeger Publishers, 1996), "affordability, the catchword denoting a country's ability to pay for warships . . . is the ultimate regulator, short of military disaster, of the size of naval forces."
Within a year of the cancellation of the SSN-21 program, the target SSN force levels had declined to 56 SSNs. As it became clear that mere cancellation of SSN-21 construction was not enough to reduce Navy budgets, the Navy initiated a rapid decommissioning program for older SSNs and for newer SSNs in need of expensive refuelings. The net new-construction submarine losses between 1988 and 1992 were 4 SSN-688 boats and 27 SSN-21 boats. One, SSN-23, later was fully funded to help keep the submarine industrial base active until the new Virginia-class SSN could be fully funded in 1998. Also increasing the drama during this period, Newport News turned to the courts to object to the Navy's attempts to manage the submarine industrial base.1
A follow-on submarine class, variously called the "Centurion," New SSN (NSSN), and now the Virginia, was started through the design process in 1992, guaranteeing a decade-long hiatus for series SSN construction. Ten years later, that program is now entering construction. Using publicly available material, it is difficult to discern the key operational differences between the "blue water" SSN-688 and SSN-21-class boats and the "littoral warfare" SSN-774 class boats, except to note that SSN-774 clearly is billed as an "affordable SSN-21." However, one can easily count the billions of dollars in costs avoided by taking a ten-year submarine construction holiday and by cutting submarine force levels by 50%.
SSN-688-class submarines tended to cost between $600 and $800 million each when bought at a rate of three or four boats per year, but at the current rate of one boat per year, submarines run in the $1.5 to $2.5 billion range.2 The Navy cannot afford to buy more than one SSN-774 per year, which obviates any attempt to make the boats more affordable using any of several methods successfully used to reduce costs in other shipbuilding programs.3 In effect, the SSN community is at the bottom of a shipbuilding sandpit composed of unaffordable ships and inadequate budgets, and no amount of affordable scrambling can get it out. This will have a substantial long-term impact on SSN force levels. A build rate of one submarine per year equates to a 30-40 unit SSN force, well below the current 50-boat force level, and barely half of the fleet's emerging operational requirement.
DD-21
When the DD-21 program was approved for development in 1997, the planned surface combatant build profile maintained a seamless production transition between Arleigh Burke (DDG-51)-class destroyers and DD-21 at a rate of three ships per year (see Table 2). Aggressive competition was planned to ensure affordable prices, and surface combatant industrial capacity was optimized. Faced with more requirements and better cost estimates, projected DD-21 research and development costs began to rise, and, working against a fixed budget, the schedule started to slip. As with the SSN program in 1988, OpNav stretched the DDG-51 program (and added a ship), while also delaying DD-21 to cover costs internally (see Table 2). This drove up DDG costs (seven ships over four years are more expensive than six in two years, on a unit cost basis).
By 2001, the Chief of Naval Operations staff, having accepted higher DDG costs earlier because of a stretch-out, took back the DDG it just added in 1999, mirroring the earlier approach to the SSN-688/SSN-21 transition budget just before the SSN-21 program was canceled. This plan reduces surface combatant build rates to two per year for five years, although DD-21 rates are projected to return to three per year in fiscal year 2007. To date, the 1997-2001 DDG-51/DD-21 transition plan has followed precisely the course of the SSN-688/SSN-21 transition. DD-21 scope growth and cost increases are triggering production stretch-outs, deleting ships, generating schedule delays, and, most important, raising unit DDG costs, making that class progressively less and less affordable.
Table 2: Destroyer Construction Program
| Fiscal Year |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006 |
|
| 1997 |
DD-21 DDG-51 |
— 3 |
— 3 |
— 3 |
— 3 |
— 3 |
1 — |
3 — |
3 — |
| 1999 |
DD-21 DDG-51 |
— 3 |
— 3 |
— 3 |
— 2 |
— 2 |
— 2 |
1 1 |
2 — |
| 2000 |
DD-21 DDG-51 |
— 3 |
— 3 |
— 3 |
— 2 |
— 2 |
— 2 |
1 — |
2 — |
| Future | DD-21 DDG-51 |
— 3 |
— 3 |
— 3 |
— 2 |
— 1* |
— 1* |
1 1* |
—* 1* |
* Author's speculation
This places the DD-21 in a potentially precarious position. The likelihood that the program will complete all remaining development and start production with no significant cost or schedule changes is low. No other major shipbuilding program of the past 20 years has been able to complete the transition from design to construction without significant changes in both cost and schedule. SSN-21 design costs increased 100% over initial estimates, and construction costs for the lead ship increased more than 50% before the ship was completed, excluding program cancellation costs. Both the LPD-17 and SSN-774 program are facing similar problems today. Given, then, that some level of cost growth will occur, how will the Navy, the Department of Defense, and Congress react?
Options
It is unlikely that the Navy will fully fund all cost increases. Cutting capabilities as costs rise is an often discussed but rarely implemented strategy for controlling costs in major shipbuilding programs. However, it was successfully implemented, in a very formalized and structured manner, when the DDG-51 Flight IIA upgrade was approved in 1994. This allowed the Navy to introduce a new, littoral-capable ship at affordable prices, keeping build rates and force structure high. If the Navy could implement this innovative acquisition approach for DD-21 in the face of probable Department of Defense and congressional objections, then the DD-21 program would be able to move in a new direction as a shipbuilding program. DD-21 could break the standard paradigm of optimistic cost estimates (required to gain program approval), low contractor bids (the program's total budget is public information), followed by substantial cost growth during execution (reality intrudes).
The Navy's second option would require the surface combatant community to absorb all increased costs within existing shipbuilding budgets. This option would be most consistent with past practice. DDG-51-class ships would be cut from the near-term budget and/or stretched out, and DD-21 would probably be further stretched out and/or delayed (see Table 2).
Stretch-outs and slowdowns would reduce the effective surface combatant build rate to less than two ships per year, calling into question the Navy's ability to keep two viable surface combatant shipbuilders in place. As occurred with SSN-21, legal action likely would follow as the industry turned to the courts to resolve the Navy's industrial base management issues. Costs for ships already under contract would increase dramatically as the Navy was forced to absorb costs associated with supporting a three-ship-per-year shipbuilding infrastructure while building only one ship per year. This would tend to propel the surface community into the same sandpit currently occupied by the submarine community. The Navy would be trying to buy newly unaffordable ships with inadequate budgets. As with submarines, a build rate of one ship per year results in a 30-40 ship surface combatant force, well below the current QDR-endorsed 116 surface combatant force structure, and less than a third of the Navy's projected 134-170 surface combatant requirement.
A third option would be to generate alternative workload to act as a "gap filler" between the existing DDG-51 program and the DD-21 program to sustain price competition for DD-21 and keep DDG-51 class ships affordable. Several possibilities present themselves:
- One possibility, discussed in a recent Navy shipbuilding study, would add additional DDG-51-class ships to the budget to keep the DDG shipyards fully employed until DD-21 entered series production. This has the advantage of keeping DDG-51-class ships affordable (unit costs go down as procurement rates go up). It also adds TBMD-capable ships to the fleet. Foreign DDG sales would have the same affect. A key point is where the funds would come from, since a net increase in shipbuilding budgets would be required to fund more DDG-51-class ships.
- The DDG-51-class building yards could win CG-47-class conversion contracts or the Navy could direct that all CG-47-class conversions be completed in these yards. The volume of work involved (22-27 conversions), the scope of conversion (combat systems upgrades only), and the rate of conversion (1-4 ships per year) make this a marginal replacement for DDG-51 or DD-21 new construction work. The possibility of countervailing congressional or legal action opposing a directed award would be high. However, the CG conversion program is at least partially funded, and so less "new" money would be required to implement this course of action.
- The Navy could order non-Aegis variants of DDG-51-class ships by installing preliminary versions of DD-21 combat systems on new DDG-51 hulls built without Aegis systems. Unit costs would be substantially lower than any other new construction surface combatant4, and, based on the DDG-51 Class Flight IIA model, design costs could be very low. Such DDG-variant ships could be in the Navy's budget by 2003 alongside existing DDG-51-class ships, and could join the fleet by 2008. DDG-51 class construction costs still would be decreased, since the DD variant would share DDG hull, mechanical, and propulsion systems. This possibility reintroduces "evolution" into the surface combatant design spiral and could reduce risk for the DD-21 program. Additional funds would be required.
- An option that is much in the open press lately would be cancellation of the DD-21 program. This would presumably be followed by an immediate declaration to design and build a new, more affordable surface combatant, possibly with a different mission. This exactly mirrors the SSN-688/SSN-21/SSN-774 model. The surface community today, like the submarine community of 1991, has recently met all of its force level requirements and is engaged in a new mission area. Like the submarine community in 1991, the surface combatant fleet of 2001 has benefited from a long and effective shipbuilding program and the average age of ships in the fleet is low, and their combat systems are still operationally relevant. Loss of a future shipbuilding program within that context might seem to be an acceptable short-term solution to today's many vexing budget problems.
Conclusions
The core issue, as with SSN-21, is affordability, not fleet requirements or operational suitability. The effect on the surface combatant community of DD-21's cancellation would be dramatic, long term, and virtually impossible to reverse. The best possible result would be a one-ship-per-year building program begun after a wait of five to ten years for a new design (presumably CG-21 with some sort of upgraded Aegis system, designed to address the Navy's TBMD mission). The fleet would be forced to contend with ever-older CG-47- and DDG-51-class ships through 2050. As in the submarine community today, significant effort would be put into refurbishing older ships to keep them operationally relevant while the fleet waited for the few new ships commissioning after 2015. Despite this effort, the eventual surface combatant force structure would decline to 30-40 ships by 2030, driven exclusively by affordability concerns.
Unlike the submarine community, which was unable to predict the fall of the Soviet Union and react in time to make SSN-21 fit into the post-Cold War financial environment, the surface community has no such easy excuse. If DD-21 is canceled, or if the surface combatant shipbuilding industrial base is mismanaged, it will be because the Navy could not articulate or implement a strategy that keeps surface combatants affordable throughout the DDG-51/DD-21 transition period. Unlike the submarine community, which could not know what might happen to the operational SSN fleet as a result of SSN-21's cancellation, the surface community can predict what will happen to surface combatant force structure and future fleet capability if the DDG-51/DD-21 transition is mishandled.
Can the Navy afford another Seawolf?
Captain Lewis is Program Manager, Aegis Shipbuilding Program, in the Program Executive Office for Theater Surface Combatants.
1. Newport News Shipbuilding successfully sued to reverse the Navy's award of a sole source contract to Electric Boat to build SSN-21-class submarines in 1991, just before the program was terminated. back to article
2. Costs are stated in "then year" dollars, reflecting the projected cost at the time that funds were appropriated by Congress or actual costs at the time the boats were completed. By comparison, CG-47 and DDG-51 per-ship costs have remained remarkably consistent since the mid-1980s, due principally to effective competition, good industrial base management, and insightful Navy management. back to article
3. Increasing volume, incorporating direct head-to-head competition, reducing Navy-directed changes, innovative contracting and procurement methods, and buying material and components in bulk and in advance. back to article
4. Fiscal year 1998 DDG-51-class ships cost approximately $950 million each, but only $330 to $400 million of that buys the ship and propulsion system. The rest buys the combat system and associated support. A "land attack" DD based on DDG-51 hull and mechanical systems would cost $330 to $400 million plus the cost of a (presumably) lower cost combat system, possibly developed by the DD-21 program. back to article