**[House Armed Services Projection Forces Subcommittee
Update]{.underline}**

The Navy\'s FY2006 request includes funding for just four new ships \--

-   one Virginia-class nuclear attack submarine,

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-   one Littoral Combat Ship (LCS),

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-   one LPD-17-class amphibious transport ship, and

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-   one T-AKE auxiliary dry cargo ship.

Last year, the Navy\'s plan for FY2006 called for six ships. In
addition, in December 2004, in order to meet budget limits established
by the Office of Management in Budget, the Defense Department announced
some longer-term changes in Navy shipbuilding in Program Budget Decision
753 (PBD-753). Specifically PBD-753

-   reduced the planned procurement rate of DD(X) destroyers in
    FY2007-FY2011 to one per year;

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-   cut planned Virginia-class submarine production in FY2006-FY2011 to
    one per year rather than increasing to two per year starting in
    FY2009;

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-   eliminated funds for an LPD-17 amphibious ship from the FY2008 plan;
    and

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-   delayed by one year to FY2008 planned procurement of a new aircraft
    carrier, CVN-21.

The four-ship FY2006 request falls far short of the annual procurement
rate the Navy has, in the past, said is needed to maintain the size of
the fleet. The math is straightforward. Assuming an average service life
of 35 years for each ship, a Navy of 300 ships requires building 300 ÷
35 = 8.6 ships per year on average. Recently the Navy has tried to get
away from judging its needs on the basis of numbers of ships, saying
that capabilities, rather than numbers, are what matters. But that
argument has not been persuasive in Congress, and, recently, the Navy
responded to a congressionally mandated requirement that it provide an
estimate of long-term shipbuilding requirements with a report that
showed two alternatives for FY2035, one with 260 ships and one with 325
ships.

Planned production appears to lead closer to the lower end of that
range, if that much. Projected production rates grow over the next few
years, but only because the Navy plans to ramp up production of the
relatively small Littoral Combat Ship to five per year by FY2009.
Retiring Chief of Naval Operations, Admiral Vernon Clark, has pointed to
long-term rising shipbuilding costs as the main reason for the Navy\'s
difficulties.

Many Members of Congress, particularly from shipbuilding states, have
expressed alarm about the low rate of Navy shipbuilding. A particular
issue has been a Navy proposal, which was deferred by the Under
Secretary of Defense for Acquisition, to hold a winner-take-all
competition between the two surface combatant construction shipyards for
the right to build all DD(X) destroyers, rather than to divide the ships
between two yards, as for DDG-51 destroyers. Legislators fear that one
shipyard would be forced to close under such a strategy.

One possible response is for Congress to increase the FY2006
shipbuilding budget by shifting funds from other programs. Navy
officials and some legislators have also discussed using alternative
funding mechanisms for Navy ships as a means of allowing more new ship
construction to start within a limited budget. Defense acquisition
guidelines generally require \"full funding\" of weapons procurement \--
appropriations are required to be sufficient to finance the number of
complete, useable end items of systems Congress has approved. There are
alternatives to the full funding policy, however, and these are now
being discussed actively for Navy shipbuilding.

One possibility, which Congress has used for some ships in the past, is
\"incremental\" or \"split\" funding, in which Congress appropriates
only part of the money needed to complete a ship and plans to
appropriate the remainder in future years. Another is advance
appropriations, in which Congress appropriates funds for the full cost
of a ship, but delays the availability of part of all of the funds until
the start of the next fiscal year. While these alternative funding
mechanisms may smooth out annual Navy shipbuilding numbers, they will
not allow significantly more ships to be procured, and they may simply
trade a budget problem this year for at least equally severe problems in
the future.

During Senate consideration of the FY2006 congressional budget
resolution ([S.Con.Res.
18](http://www.congress.gov/cgi-lis/bdquery/z?d109:S.Con.Res.18:)),
Senator Warner proposed an amendment, SA 146, to increase the
resolution\'s limit on the total amount of advance appropriations by
\$14 billion and to allow advance appropriations to be used for Navy
shipbuilding. The amendment was never brought up on the floor, however.
The conference report on the budget resolution, [H.Con.Res.
95](http://www.congress.gov/cgi-lis/bdquery/z?d109:H.Con.Res.95:), does
not provide an increase in the original limit on advance appropriations,
though it does include Navy shipbuilding in a list of accounts for which
advance appropriations may be provided in the Senate. Congress may still
provide advance appropriations for ships, but only if other advance
appropriations are reduced, or if there is no objection in the Senate,
or if 60 Senators vote to waive the limit.

Later, in the version of supplemental appropriations bill ([H.R.
1268](http://www.congress.gov/cgi-lis/bdquery/z?d109:H.R.1268:)) that
the Senate Appropriations Committee reported to the floor, the committee
included a provision that prohibits funds made available in the
supplemental or in any prior acts, to be used to implement a
winner-take-all strategy to acquire the DD(X). The conference agreement
included the Senate measure. This did not, however, apply to future
appropriations, so the matter remains at issue in action on FY2006
bills.

During markup of the FY2006 defense authorization bill, the subcommittee
on Projection Forces took a number of dramatic steps to restructure Navy
shipbuilding. The subcommittee added funds for three additional ships,
including \$2.5 billion for 2 DDG-51 destroyers and \$384 million for an
additional T-AKE dry cargo ship. The subcommittee also provided \$418
million, an increase of \$268 million, to begin construction of a new
LHA(R) amphibious assault ship. The subcommittee also took steps to rein
in the costs of new ships. Most significantly, it imposed a cost ceiling
of \$1.7 billion on what it calls the \"next generation surface
combatant.\" Since this applies to the DD(X), the Navy will have to
design a less costly substitute destroyer. The subcommittee also put a
cost cap on the Logistics Combat Ship, Virginia-class submarines, and
LHA(R), and it required the Navy to develop a next-generation submarine
that, presumably, will cost less than Virginia-class boats.

Later, in full committee markup, the House Armed Services Committee took
steps to restore CVN-21 procurement to the FY2007 plan rather than delay
it to FY2008 as the Navy proposed. The committee approved an amendment
to add \$86.7 million for advanced procurement of the CNV-21, but with a
requirement that the Pentagon must certify that the extra money would
allow the Navy to begin production of the carrier in FY2007.

In stark contrast to the House, the Senate Armed Services Committee did
not radically restructure Navy shipbuilding. In its markup of the FY2006
authorization, the committee added \$175 million in partial funding for
the LHA(R) ship, but otherwise did not increase the number of ships
being built in FY2006. The committee also authorized CVN-21 construction
to begin in FY2007, the plan last year, rather than in FY2008, as the
Navy now plans, and provided an additional \$86.7 million for the
program. On the DD(X), the committee indicated continuing support for
the program by adding \$50 million for advance procurement of a second
ship, and it provided that the funds are only available for production
at a second shipyard. The committee specifically prohibited a
\"winner-take-all\" acquisition strategy for the DD(X).

The House Appropriations Committee generally followed the House
authorization, though with some adjustments. As in the authorization,
the committee cut funds for the DD(X) and it added money for one T-AKE.
It added only one rather than two DDG-51s, however, and it added funds
for two Littoral Combat Ships instead \-- so in all the committee added
4 ships to the request. The committee added \$50 million to the LHA(R)
request, less than the authorization, and urged the Navy to request full
funding for the cost of the ship in the future rather than spreading
funding across several years.

The Senate Appropriations Committee mainly followed the Senate
authorization. It added \$50 million for DD(X) for a second ship, added
\$86.7 million for CVN-21, but eliminated \$380 million for T-AKE
construction due to cost increases and construction delays.

The appropriations conference agreement adds \$62 million to accelerate
the start of the CVN-21 aircraft carrier to FY2007, provides funding as
requested for the DD(X) destroyer and adds \$50 million for advance
procurement for a second ship, does not add funds for additional DDG-51
destroyers, cuts \$100 million from the LHA (R) amphibious ship program,
and, as in the House, adds \$384 million for an additional T-AKE cargo
ship (funded in the \"National Defense Sealift Fund\" account). So, in
the end, Congress rejected the House effort to terminate the DD(X) and
build more DDG-51s, instead. The authorization conference agreement
includes a provision prohibiting acquisition of the DD(X) through a
single shipyard.

Congress, nonetheless, remains concerned about weapons cost growth. The
authorization conference agreement sets cost caps on the Virginia-class
submarine, DD(X), and LCS programs.