Navy's shipbuilding challenges loom large in the 2020s.

• Author: Jean, Grace V.
• Position: Shipbuilding

Builders of U.S. Navy ships are attempting to rein in costs that have doubled over the last 20 years. They are pursuing capital improvements, streamlining construction methods and lowering overhead expenses. But whether their efforts are enough to help close the $3 billion gap between the Navy's projected budgets and estimated ship costs remains to be seen.

Congressional watchdogs predict growing shortfalls in the Navy's fleet numbers as defense budgets tighten. The Navy projects an annual shipbuilding budget of about $16 billion, but analysts at the Congressional Budget Office report that the sea service needs to average closer to $19 billion to afford all the new vessels naval leaders want to buy in the next 30 years.

Shipyard officials on the other hand remain confident that their cost-cutting measures will help the Navy boost the fleet size to 313 ships from 287 ships.

The Navy, for its part; is keeping a watchful eye on the industrial base.

"The biggest issue is the decade of the '20s," says Chief of Naval Operations Adm. Gar' Roughead.

Ships that were constructed during the Reagan-era weapons build-up in the 1980s--including many submarines and surface combatants--will begin reaching the end of their service lives in the next decade. The Ohio-class ballistic missile submarine fleet is due to be replaced, so the nation will be building several multibillion-dollar replacement boats throughout the decade. At costs estimated to be nearly $6 billion per ship, it will be a "significant piece of the shipbuilding plan," Roughead pointed out.

The 2020s also will mark the first time the Navy will be decommissioning nuclear aircraft carriers. Nimitz-class flat tops will begin hitting the end of their 50-year service lives. To decommission those carriers will cost the Navy a couple billion dollars, Roughead said.

"We add all those up in the '20s, and the nation is looking at a challenge to shipbuilding that 1 believe we need to start thinking about now. We need to start working on ways to address that/' he told reporters.

The Navy's shipbuilding enterprise still faces a series of challenges, said David J. Berteau, senior adviser and director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies. Those hurdles include uncertain force structure requirements, unpredictable future missions, disconnects between shipyard capacity and funded programs and potentially declining budgets.

"We face a drawdown of indefinite length and unspecified proportions/' Berteau said. The Navy has contended with economic downturns and defense draw downs before. But in previous situations, its efforts to expand the fleet yielded many ships before the decline occurred. This time around, the latest cycle of defense expenditures has not produced a remarkably larger Navy, so "we actually start with a weak spot," he pointed out at a defense industry conference.

That means the Navy must climb the proverbial slippery slope to boost its fleet numbers on fewer dollars than before. Its limited purchasing power will relegate industry to shoulder more of the burden.

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"If the budgets are going to go down and you have lower volume, then you have to learn how to be as efficient as you can at that low volume," Ronald O'Rourke, specialist in national defense at the Congressional Research Service, told industry representatives at the same conference. The Virginia-class submarine program demonstrates how that can be done, he added. Two shipyards are constructing the fast-attack boat: General Dynamics Electric Boat in Groton, Conn., and Huntington Ingalls Industries, formerly Northrop Grumman Shipbuilding, in Newport News, Va. That teaming arrangement is aimed at preserving two yards in submarine construction even though the volume is relatively low, O'Rourke said.

The Navy is moving out of a decade where it pursued new warship designs and built a number of first-of-class ships. This decade the service will commence serial production of those maturing designs. Yards are angling to capture that business.

At Huntington Ingalls' Gulf Coast operation in Pascagoula, Miss., the focus is shifting back to serial production, said Mike Petters, the company's president and CEO. "That's a different mindset than building lead ships. That requires different management processes and different management techniques," he said.

At Pascagoula, where many of the production facilities were replaced and recapitalized after...