Congressional Budget Office

Testimony

CONGRESSIONAL BUDGET OFFICE

SECOND AND D STREETS, S.W.

WASHINGTON, D.C. 20515

Statement of 

Eric J. Labs

Senior Analyst for Naval Forces and Weapons

An Analysis of the Navy’s Shipbuilding Plans

before the 

Subcommittee on Seapower and Projection Forces

Committee on Armed Services

U.S. House of Representatives

March 9, 2011

This document is embargoed until it is delivered at 

3:00 p.m. (EST) on Wednesday, March 9, 2011. The 

contents may not be published, transmitted, or otherwise 

communicated by any print, broadcast, or electronic media before that time.
Notes

Unless otherwise indicated, all dollar amounts in this study are in 2010 dollars, and all years 

are federal fiscal years (which run from October to September).

Numbers in the text and tables may not add up to totals because of rounding.
CBO

Chairman Akin, Ranking Member McIntyre, and Members of the Subcommittee, thank you 

for the opportunity to testify on the Navy’s plans for its shipbuilding programs and corresponding budget. My submitted statement today reprises the Congressional Budget Office’s 

(CBO’s) May 2010 study entitled An Analysis of the Navy’s Fiscal Year 2011 Shipbuilding Plan, 

which addresses the most recent long-term plan released by the Navy. The Navy’s budget submission for 2012 (including information on the intentions for 2013 through 2016) makes 

only minor changes to the 2011 plan and does not change the basic information included in 

CBO’s study or even most of the details of the analysis.

Until this year, the Navy has been required by law to submit a report to the Congress each 

year that projects the service’s shipbuilding requirements, procurement plans, inventories, and 

costs over the coming 30 years. Since 2006, CBO has been performing an independent 

analysis of the Navy’s latest shipbuilding plan at the request of this Subcommittee. After 

summarizing the ship requirements and purchases described in the Navy’s 2011 plan, CBO’s 

latest study assessed their implications for the Navy’s funding needs and ship inventories 

through 2040.

According to its most recent 30-year plan, the Navy envisions buying a total of 276 ships over 

30 years at an average annual cost of about $16 billion (in 2010 dollars) for new construction 

alone, or roughly $18 billion for total shipbuilding (which includes new-ship construction, 

refueling of nuclear-powered aircraft carriers, and other costs related to shipbuilding). By 

comparison, CBO’s estimates of the costs of the Navy’s plan are about $3 billion a year 

higher—an average of $19 billion per year for new construction or $21 billion per year for 

total shipbuilding. There is nothing in the Navy’s 2012 budget request that suggests those 

numbers will change significantly.

Contents

CBO

Summary vii

Changes in Ship Requirements Under the 2011 Plan 1

Ship Purchases and Inventories Under the 2011 Plan 2

Combat Ships 4

Logistics and Support Ships 6

Ship Costs Under the 2011 Plan 6

The Navy’s Estimates 6

CBO’s Estimates 8

Changes from the 2009 Plan 9

Outlook for Individual Ship Programs 11

Aircraft Carriers 11

Submarines 13

Large Surface Combatants 17

Littoral Combat Ships 19

Amphibious Ships 20
VI AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Tables

S-1. Comparison of the Navy’s Long-Term Shipbuilding Plans for 

Fiscal Years 2009 and 2011 viii

1. The Navy’s Evolving Force-Structure Requirements 2

2. Average Annual Shipbuilding Costs Under the Navy’s 2011 Plan, by Decade 9

3. Comparison of the Navy’s and CBO’s Estimates for Major New Ships 14

4. Shipbuilding Costs, by Major Category, 1981 to 2040 15

Figures

S-1. Average Annual Cost of New-Ship Construction Under the Navy’s 2011 Plan x

1. Annual Ship Purchases and Inventories Under the Navy’s 2011 Plan 3

2. Inventories Versus Requirements for Selected Categories of Ships 

Under the Navy’s 2011 Plan 5

3. Estimates of Annual Spending for New-Ship Construction 

Under the Navy’s 2009 and 2011 Plans 7

4. CBO’s Estimate of Annual Costs Implied by the Navy’s 2011 Plan 10

5. Cost per Thousand Tons for the Lead Ship of Various Classes of Submarines 17

Boxes

S-1. The Roles of Major Types of Ships in the Navy’s Fleet ix

1. Inflation in Shipbuilding 12
CBO

Summary

At the direction of the Congress, the Department 

of the Navy issues annual reports that describe its plans 

for ship construction over the coming 30 years. The latest 

report—issued in February and covering fiscal years 2011 

to 2040—contains some significant changes in the Navy’s 

long-term goals for shipbuilding.1

 The new plan appears 

to increase the required size of the fleet compared with 

earlier plans, while reducing the number of ships to be 

purchased—and thus the costs for ship construction—

over the next three decades. Despite those reductions, the 

total costs of carrying out the 2011 plan would be much 

higher than the funding levels that the Navy has received 

in recent years, according to analysis by the Congressional 

Budget Office (CBO). Specifically: 

 Language in the 2011 shipbuilding plan and in related 

briefings by the Navy implies that the service’s requirement for battle force ships (aircraft carriers, submarines, surface combatants, amphibious ships, and 

some logistics and support ships) now totals 322 or 

323—up from 313 in the Navy’s three previous longterm plans.2

 The battle force fleet currently numbers 

286 ships. (Summary Box 1 describes the major ships 

in the Navy’s fleet.) 

 The 2011 plan calls for buying a total of 276 ships 

over the 2011–2040 period: 198 combat ships and 78 

logistics and support ships (see Summary Table 1). 

That construction plan is insufficient to achieve a 

322- or 323-ship fleet. 

 In comparison, the previous shipbuilding plan (for 

2009) envisioned buying 40 more combat ships and 

20 fewer support ships over 30 years.3

 Under that 

plan, the Navy would have purchased 238 combat 

ships and 58 logistics and support ships between 2009 

and 2038, for a total of 296.4

 If the Navy receives the same amount of funding for 

ship construction in the next 30 years as it has over the 

past three decades—an average of about $15 billion a 

year in 2010 dollars—it will not be able to afford all of 

the purchases in the 2011 plan.5

1. Department of the Navy, Report to Congress on Annual Long-Range 

Plan for Construction of Naval Vessels for FY 2011 (February 2010), 

www.militarytimes.com/static/projects/pages/2011shipbuilding.

pdf.

2. The alternative totals result from the Navy’s current requirement—10 or 11 ships—for aircraft carriers. The timing of its purchases to fulfill that requirement would enable the Navy to have a 

force of at least 11 carriers most of the time through 2040, except 

in 2013 and 2014, when the number would drop to 10. 

3. The Navy did not release a long-term shipbuilding plan for fiscal 

year 2010.

4. Of the nine Maritime Prepositioning Force (Future), or MPF(F), 

ships included in the 2009 plan, CBO categorized two of them 

(aviation ships) as combat ships and the rest as logistics and support ships. In the 2011 plan, purchases of multiple landing platform ships are included in the category of support ships, whereas 

in the 2009 plan, a much larger and more expensive version of 

the multiple landing platform ship was included in the MPF(F) 

category.

5. For a broader discussion of historical cost trends in Navy shipbuilding, see the statement of Eric J. Labs, Senior Analyst for 

Naval Forces and Weapons, Congressional Budget Office, before 

the Subcommittee on Seapower and Expeditionary Forces, House 

Committee on Armed Services, The Long-Term Outlook for the 

U.S. Navy’s Fleet (January 20, 2010).
2 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Summary Table 1.

Comparison of the Navy’s 

Long-Term Shipbuilding Plans for 

Fiscal Years 2009 and 2011

Sources: Congressional Budget Office; Department of the Navy.

Note: MPF(F) = Maritime Prepositioning Force (Future); n.a. = 

not applicable.

a. New-ship construction costs exclude the costs of refueling 

existing nuclear-powered aircraft carriers as well as outfitting 

and postdelivery costs (which include the purchase of many 

smaller tools and pieces of equipment needed to operate a ship 

but not necessarily provided by the manufacturing shipyard as 

part of ship construction). 

b. These estimates include CBO’s 2009 projections of the costs of 

ballistic missile submarines. The Navy’s estimate also reflects 

corrected data that the service released after publishing the 

2009 shipbuilding plan.

 The Navy estimates that buying the new ships in the 

2011 plan will cost an average of about $16 billion per 

year, or a total of $476 billion over 30 years (about 

33 percent less than its estimate for the 2009 plan).6

Those figures are solely for construction of new 

ships, the only type of costs reported in the Navy’s 

shipbuilding plans. However, other activities that are 

typically funded from the Navy’s budget accounts for 

ship construction—such as refueling nuclear-powered 

aircraft carriers and outfitting new ships with various 

small pieces of equipment after the ships have been 

built or delivered—will add about $2 billion to the 

Navy’s average annual shipbuilding costs under the 

2011 plan, in CBO’s estimation. 

 Using its own models and assumptions, CBO estimates that the cost for new-ship construction under 

the 2011 plan will average about $19 billion per year, 

or a total of $569 billion through 2040.7

 Including 

the expense of refueling aircraft carriers as well as outfitting and postdelivery costs raises that average to 

about $21 billion per year, CBO estimates. (Those figures are about 25 percent lower than CBO’s estimates 

of the Navy’s 2009 plan.) 

 CBO’s estimates of the costs of the 2011 shipbuilding 

plan are about 18 percent higher than the Navy’s estimates overall. That figure masks considerable variation over time, however: CBO’s estimates are 4 

percent higher than the Navy’s for the first 10 years of 

the plan, 13 percent higher for the following decade, 

and 37 percent higher for the final 10 years of the plan 

(see Summary Figure 1). Those differences result 

partly from different estimating methods and different 

assumptions about the design and capabilities of 

future ships. The estimates also diverge because CBO 

accounted for the fact that costs of labor and materials 

have traditionally grown much faster in the shipbuilding industry than in the economy as a whole, whereas 

the Navy does not appear to have done so. That difference becomes more pronounced over time. 

7 6

12 12

53 44

69 50

75 66

20 20

9 n.a.

51 78 ____ ____

296 276

718 b 476

775 b 569

Navy's estimate 23.9 15.9

CBO's estimate 25.8 19.0

2.4 1.7

2.6 2.1

Navy's estimate

CBO's estimate

Navy's estimate

CBO's estimate

Average Annual Cost of

New-Ship Constructiona

Average Price per Ship 

2009 Plan

(2009–2038)

2011 Plan

(2011–2040)

Number of Ships Purchased

(Billions of 2010 dollars)

Costs

Construction over 30 Yearsa

Littoral Combat Ships

Total Cost of New-Ship

Amphibious Ships

MPF(F) Ships

Combat Logistics and 

Support Ships

Total

Over 30 Years

Aircraft Carriers

Attack Submarines

Ballistic Missile Submarines

Large Surface Combatants

6. CBO calculated that 33 percent figure by adding its 2009 estimate 

of the cost of new ballistic missile submarines to the Navy’s 2009 

estimate of new-ship construction. If the cost of those submarines 

was not included in the calculation, the Navy’s estimate for ship 

construction under its 2011 plan would be 25 percent lower than 

the cost of new ships under the 2009 plan. 

7. Generally, CBO estimates the price of future naval vessels on the 

basis of the relationship between cost and weight of analogous 

ships. The estimated cost per ship is then adjusted for factors such 

as the number of ships of the same type being built at a given shipyard, production efficiencies that occur as more ships of the same 

class are produced, and the fact that prices of labor and materials 

in the naval shipbuilding industry tend to rise faster than prices in 

the economy as a whole.
SUMMARY AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 3

CBO

Source: Congressional Budget Office.

Note: Ship silhouettes are not to scale.

Summary Box 1.

The Roles of Major Types of Ships in the Navy’s Fleet

Nimitz Class 

Aircraft Carrier

The Navy’s 11 aircraft carriers are the heart of the battle force fleet. Each carries an air wing 

of about 60 aircraft, which can attack hundreds of targets per day for up to a month before 

needing to be rested. Carriers are by far the largest ships in the fleet, with a weight (displacement) of about 100,000 tons. Ten of the 11 current carriers belong to the Nimitz 

class.

Ohio Class Ballistic 

Missile Submarine

Strategic ballistic missile submarines carry the major part of the U.S. nuclear deterrent, up 

to 24 Trident missiles with four to eight nuclear warheads apiece. The Navy has 14 Ohio 

class ballistic missile submarines in the strategic role and has converted four more to a conventional guided missile (SSGN) configuration, each of which displaces about 19,000 tons 

submerged. Those SSGNs carry up to 154 Tomahawk missiles as well as special-operations 

forces.

Los Angeles Class 

Attack Submarine

Attack submarines are the Navy’s premier undersea warfare and antisubmarine weapon. 

Since the end of the Cold War, however, they have mainly performed covert intelligencegathering missions. They have also been used to launch Tomahawk missiles at inland targets in the early stages of conflicts. The Navy has 53 attack submarines, 44 of which belong 

to the Los Angeles class. At 7,000 tons, they are less than half the size of ballistic missile 

submarines. 

Arleigh Burke Class 

Destroyer

Large surface combatants—which include cruisers and destroyers—are the workhorses of 

the fleet. They defend the Navy’s aircraft carriers and amphibious ships against other surface ships, aircraft, and submarines. They also perform many day-to-day missions, such as 

patrolling sea lanes, providing overseas presence, and conducting exercises with allies. In addition, they are capable of striking land targets with Tomahawk missiles. Different types of 

surface combatants have displacements ranging from 9,000 to 14,000 tons.

Freedom Class 

Littoral Combat Ship

Small surface combatants are composed of frigates and, in the future, littoral combat ships. 

Frigates today are used to perform many of the same day-to-day missions as large surface 

combatants. Littoral combat ships are intended to counter mines, small boats, and diesel 

electric submarines in the world’s coastal regions. More routinely, they will also participate 

in patrolling sea lanes, providing overseas presence, and conducting exercises with allies. 

These ships range in size from 3,000 to 4,000 tons. 

Wasp Class Amphibious 

Assault Ship

The Navy’s two classes of amphibious assault ships (also known as helicopter carriers) are 

the second largest ships in the fleet at 40,000 tons. They form the centerpiece of amphibious ready groups and can each carry about half the troops and equipment of a Marine expeditionary unit. They also carry as many as 30 helicopters and six fixed-wing Harrier jump 

jets, or up to 20 Harriers.

Austin Class Amphibious 

Transport Dock 

The Navy has four other classes of amphibious warfare ships, and such ships are divided 

into two types: amphibious transport docks and dock landing ships. Two of those ships 

together provide the remaining transport capacity for a Marine expeditionary unit in an 

amphibious ready group. They range in size from 16,000 to 25,000 tons. 

Supply Class Fast Combat 

Support Ship

The many logistics and support ships in the Navy’s fleet provide the means to resupply, 

repair, salvage, or tow combat ships. The most prominent of those vessels are fast combat 

support ships, which operate with carrier strike groups to resupply them with fuel, dry 

cargo (such as food), and ammunition. These ships can be as small as 2,000 tons for an 

ocean-going tug or as large as 50,000 tons for a fully loaded fast combat support ship.
4 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Summary Figure 1.

Average Annual Cost of New-Ship Construction Under the Navy’s 2011 Plan

(Billions of 2010 dollars)

Sources: Congressional Budget Office; Department of the Navy.

Note: New-ship construction costs exclude the costs of refueling existing nuclear-powered aircraft carriers as well as outfitting and postdelivery costs (which include the purchase of many smaller tools and pieces of equipment needed to operate a ship but not necessarily 

provided by the manufacturing shipyard as part of ship construction). 

2011 to 2020 2021 to 2030 2031 to 2040

0

5

10

15

20

25

Navy's Estimate

CBO's Estimate

Average Annual

Funding Level,

2005 to 2010
CBO

An Analysis of the Navy’s Fiscal Year 2011 

Shipbuilding Plan

I hn February 2006, the Navy presented a long-term 

shipbuilding plan that called for expanding the battle 

force fleet from the then-current size of 285 ships to 

313 ships by 2020.1

 A few months later, the Congressional Budget Office (CBO) issued a study analyzing that 

plan and estimating its potential costs. Since then, the 

Navy has released several updates to its 313-ship plan, the 

most recent being the plans for 2009 and 2011.2

 (The 

Navy did not provide an update for 2010.) Those two 

plans differ sharply with respect to the Navy’s total inventory goal—in military parlance, its requirement—for 

battle force ships, the number and types of ships the Navy 

would purchase over 30 years, and the amount of money 

needed to implement the plans. 

As it has for each of the Navy’s long-term shipbuilding 

plans in recent years, CBO has examined the 2011 plan 

in detail and produced estimates of the costs of the proposed ship purchases using its own estimating methods 

and assumptions. CBO has also analyzed how those ship 

purchases would affect the Navy’s inventories of various 

types of ships over the next three decades.

Changes in Ship Requirements 

Under the 2011 Plan

The report that the Deputy Secretary of Defense submitted to the Congress on February 1, 2010, described the 

313-ship fleet as the “baseline” for the Navy’s 2011 goals 

for ship construction over the next 30 years. However, the 

report went on to describe changes to several categories of 

ships that would ultimately alter the requirement for battle force ships: 

 The number of aircraft carriers required to support the 

Navy’s operations was described as 10 to 11, compared 

with 11 in the previous plan (see Table 1).

 Plans for building 19 CG(X) future cruisers were canceled, but the requirement for destroyers was raised 

from 69 to at least 88.

 The Navy’s four guided missile submarines, which are 

due to reach the end of their service lives starting in 

2026, would not be replaced under the current plan 

(which was also the case under earlier plans).

 The requirement for ballistic missile submarines 

appears likely to fall from 14 to 12, consistent with the 

recommendation in the Department of Defense’s 

(DoD’s) recent Nuclear Posture Review.3

 The requirement for amphibious ships was increased 

from 31 to 33.

 The sea-basing ships of the Future Maritime Prepositioning Force, or MPF(F)—which were intended to 

help the Navy support and supply onshore Marine 

operations entirely from the sea—were eliminated 

from the plan. However, the Navy intends to buy a 

1. Department of the Navy, Report to Congress on Annual Long-Range 

Plan for Construction of Naval Vessels for FY 2007 (February 2006). 

Battle force ships comprise aircraft carriers, submarines, surface 

combatants, amphibious ships, and some logistics and support 

ships.

2. Department of the Navy, Report to Congress on Annual Long-Range 

Plan for Construction of Naval Vessels for FY 2009 (February 2008) 

and Report to Congress on Annual Long-Range Plan for Construction 

of Naval Vessels for FY 2011 (February 2010). 

3. Those submarines, which carry Trident ballistic missiles, are the 

sea-based leg of the U.S. strategic triad for delivering nuclear 

weapons. (The other two legs are land-based intercontinental missiles and manned strategic bombers.) 
2 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Table 1.

The Navy’s Evolving Force-Structure 

Requirements

Source: Congressional Budget Office.

Note: MPF(F) = Maritime Prepositioning Force (Future).

a. The minimum implied requirement. If the requirement for 

destroyers ended up being higher than 88, the total requirement for the fleet could exceed 322 to 323 ships.

b. Includes command ships, logistics ships, salvage ships, ocean 

tugs, surveillance ships, and tenders.

c. Includes three logistics ships and three scaled-down versions of 

the multiple landing platform ship to augment existing maritime 

prepositioning squadrons.

few other ships to enhance existing maritime prepositioning squadrons.

 Current command ships, which provide commandand-control capabilities for fleet commanders, will 

have their service lives extended but will not be 

replaced when they retire in 2029.

 The planned fleet of joint high-speed vessels (JHSVs), 

which are intended to transport troops and equipment 

quickly within a theater of operations, was expanded 

from 3 to 23 ships.4

Those changes—some of which resulted from decisions 

made as part of DoD’s recent Quadrennial Defense 

Review—would effectively increase the fleet requirement 

from 313 ships to 322 or 323 ships. 

The 2011 shipbuilding report also stated that the Navy 

plans to conduct a new force-structure analysis to officially determine what the future ship requirement will be. 

(The most recent force-structure analysis was conducted 

in 2005, and its results led to the 313-ship requirement.) 

This CBO study does not evaluate the force-structure 

requirements identified by the Navy. Rather, it assesses 

the costs of the Navy’s shipbuilding plan, its effects on the 

force structure, and the extent to which that plan would 

satisfy those requirements. 

Ship Purchases and Inventories 

Under the 2011 Plan

The Navy intends to buy nine ships in 2011 (see 

Figure 1) and a total of 50 ships between 2011 and 2015 

(the period covered by DoD’s current Future Years 

Defense Program, or FYDP).5

 Thereafter, under the 2011 

shipbuilding plan, the Navy would buy another 226 vessels through 2040—for a total of 276 ships over 30 years, 

or an average of 9.2 per year. The pace of shipbuilding 

would be faster than that in the near term: The Navy 

plans to purchase an average of 10.2 ships annually 

between 2011 and 2020, with production of littoral combat ships increasing to four per year and production of 

joint high-speed vessels rising to two per year.6

If implemented as described above, the 2011 plan would 

enable the Navy to reach its earlier 313-ship goal by 

2020. However, the fleet would remain at or above that 

number for only seven years. After that, as older ships 

were retired faster than new ones were brought into service, the fleet would fall to a low of 288 ships in 2032 

before increasing to 301 ships by 2040. Thus, the current 

plan would never achieve its implied goal of 322 or 

323 ships.7

11 10–11

48 48

4 0

14 12

19 0

69 88 a

55 55

31 33

12 0

30 30

3 23

17 23 c ____ ________

Total 313 322–323 a

Requirements

2011 Plan

Aircraft Carriers

Large Surface Combatants

Littoral Combat Ships

 Requirements

Fleet in Implied in

 for a 313-Ship 

the Navy's

Submarines

Attack

Guided missile

Ballistic missile

Combat Logistics Ships

the Navy's

Amphibious Ships

MPF(F) Ships

Cruisers

Destroyers

Joint high-speed vessels

Otherb

Support Ships

2009 Plan

4. A force of 23 JHSVs was implied by the ship purchases in the 

2011 plan, and that number was explicitly mentioned in slides 

that the Navy used to brief Members of Congress and their staffs, 

the Congressional Budget Office, and the Congressional Research 

Service.

5. The FYDP is a five- or six-year funding plan that DoD updates 

annually.

6. Littoral combat ships are small surface combatants designed to 

operate in coastal waters.

7. If the expected service life of ships in the fleet is 35 years, the Navy 

needs to purchase an average of 9.2 ships per year to maintain a 

322- or 323-ship fleet. Over the past 18 years, however, the Navy 

has acquired ships at the rate of 6.4 per year, which would result 

in a fleet of 224 ships at the end of 35 years. Thus, after 18 years, 

the Navy is now 51 ships short of being able to sustain a 322- or 

323-ship fleet. 
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 3

CBO

Figure 1.

Annual Ship Purchases and Inventories Under the Navy’s 2011 Plan

Source: Congressional Budget Office based on data from the Department of the Navy.

Notes: The category of small surface combatants includes mine countermeasures ships.

SSBNs = ballistic missile submarines; SSGNs = guided missile submarines.

Altogether, the Navy would buy 20 fewer ships over 

30 years under the 2011 plan than it would have bought 

under the previous plan.8

 In addition to the decline in 

total purchases, the composition of ship purchases—

particularly the number of combat ships versus logistics 

and support vessels—has changed substantially with the 

latest plan.

2005 2010 2015 2020 2025 2030 2035 2040

0

2

4

6

8

10

12

14

Aircraft 

Carriers

Ballistic Missile 

Submarines

Attack 

Submarines

Large Surface 

Combatants

Small Surface 

Combatants

Amphibious 

Warfare Ships

Combat Logistics 

and Support Ships

Purchases

SSNs and SSGNs

2005 2010 2015 2020 2025 2030 2035 2040

0

50

100

150

200

250

300

350

400

Amphibious Warfare Ships

Inventory

Small Surface Combatants

Attack Submarines and SSGNs

Implied 322-Ship Requirement

Large Surface Combatants

Combat Logistics and Support Ships

SSBNs

Aircraft

Carriers

Actual Under Navy's Plan

Actual Under Navy's Plan
4 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Combat Ships 

The Navy now envisions buying 198 combat ships—aircraft carriers, submarines, large and small surface combatants, and amphibious ships—between 2011 and 2040. 

That total represents a reduction of 40 ships, or 17 percent, from the 2009 plan.9

 Those purchases would leave 

the Navy short of its requirements for attack submarines, 

large surface combatants (cruisers and destroyers), and 

amphibious ships for parts of the 2011–2040 period. In 

addition, those shortfalls would be greater than under the 

2009 plan. 

With aircraft carriers, by contrast, the Navy would meet 

or exceed its new implied requirement of 10 or 11 ships 

throughout the 2011–2040 period. With respect to small 

surface combatants, the Navy plans to replace its frigates 

and mine countermeasures ships with 55 littoral combat 

ships, although it will not reach that number until 2035. 

Attack Submarines. Under the 2011 plan, the Navy 

would purchase 44 attack submarines through 2040, 

which would not be enough to keep that force at or above 

the stated requirement of 48 after 2024 (see Figure 2). 

The number of attack submarines would reach a low of 

39 in 2030 and then increase to about 45 for the last five 

years of the plan. The reason for the decline is that in 

2015, the Navy expects to begin retiring Los Angeles class 

attack submarines (SSN-688s)—which were generally 

built at rates of three or four per year during the 1970s 

and 1980s—as they reach the end of their service lives. It 

would then replace them with Virginia class attack submarines (SSN-774s) and their successors at rates of one 

or two per year. 

In comparison, the Navy’s previous plan would have 

bought 9 more attack submarines (a total of 53) over 

30 years. At its smallest, the force of attack submarines 

under that plan would have numbered 41 between 2028 

and 2030. After that, the force would have grown, 

exceeding the 48-submarine requirement in 2034 and 

beyond. 

Large Surface Combatants. The Navy has decided not to 

develop the CG(X) future cruiser, which was supposed to 

replace existing cruisers that are due to be retired in the 

2020s. Instead, the current shipbuilding plan calls for 

buying 50 destroyers, most of them based on the existing 

Arleigh Burke class destroyers (DDG-51s). Those purchases would allow the Navy’s inventory of large surface 

combatants to meet the implied requirement of at least 

88 ships between 2015 and 2026. After that, however, 

the inventory of large surface combatants would fall to a 

low of 67 in 2034 before increasing to the mid-70s by 

2040. As with the attack submarine force, the decline in 

the number of large surface combatants would occur 

because the Navy would begin retiring Ticonderoga class 

cruisers (CG-47s) in the early 2020s and DDG-51s in 

the late 2020s at a faster pace than their replacements 

would be commissioned. 

That plan for large surface combatants represents a major 

departure from the Navy’s 2009 plan. Under that earlier 

proposal, the Navy would have purchased 69 cruisers and 

destroyers over 30 years, which would have kept the service at or above the 88-ship requirement after 2015. In 

addition, the Navy has changed some of its assumptions 

about the service lives of large surface combatants. The 

2009 plan assumed that all Arleigh Burke class destroyers 

would have a service life of 40 years, whereas the current 

plan assumes that only destroyers commissioned after 

2000 will be in service that long.10

Amphibious Ships. The current long-term plan calls for 

buying 20 amphibious ships through 2040, which would 

8. The change in the time frame covered by the two plans—2009 to 

2038 versus 2011 to 2040—accounts for a difference of only two 

ships. The 2009 plan called for buying 15 ships in 2009 and 

2010, whereas the 2011 plan includes the purchase of 17 ships in 

2039 and 2040.

9. In characterizing the 2009 plan, CBO classified the plan’s two 

MPF(F) aviation platforms as combat ships and the rest of the 

MPF(F) squadron as support ships.

10. The Navy built the Arleigh Burke class destroyers to last 35 years. 

However, the average retirement age of the past 13 classes of cruisers and destroyers has been well below that, and many ships 

(including, in recent years, Spruance class destroyers and some 

Ticonderoga class cruisers) have been retired after 25 years of service or less. See the statement of Eric J. Labs, Senior Analyst for 

Naval Forces and Weapons, Congressional Budget Office, before 

the Subcommittee on Seapower and Expeditionary Forces, House 

Committee on Armed Services, The Navy’s Surface Combatant 

Programs (July 31, 2008).
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 5

CBO

Figure 2.

Inventories Versus Requirements for Selected Categories of Ships 

Under the Navy’s 2011 Plan

Source: Congressional Budget Office.

Note: SSN = attack submarine; DDG = guided missile destroyer; CG = guided missile cruiser; LSD = dock landing ship; LHA, LHD, and 

LH(X) = amphibious assault ships; LPD = amphibious transport dock. 

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

0

10

20

30

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50

60

Attack Submarines

48-Ship Requirement

SSN-688

SSN-688 Improved

SSN-21

SSN-774

SSN-774 Improved

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

0

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Amphibious Ships

33-Ship Requirement

LPD-4 LHA-1 and LHD-1

LSD-41 and LSD-49

LPD-17 LHA-6 and LH(X)

LSD(X)

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

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100 Large Surface Combatants

88-Ship Requirement

CG-47

DDG-51 Flights I, II, IIA

DDG-1000

DDG-51 Flight III

DDG(X)
6 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

increase the amphibious force from 31 ships today to the 

new requirement of 33 by 2016. The force would stay at 

that size or greater through 2031 and then decline to 29 

or 30 ships after 2034. 

Under the 2009 plan, the Navy would also have purchased 20 amphibious ships over three decades, but it 

assumed that many existing ships would stay in service 

longer than 40 years. As a result, the 2009 plan would 

have kept the amphibious force at 32 or 33 ships for virtually the entire 30-year period from 2009 to 2038.

One of the changes in plans is the cancellation of nine of 

the 12 ships envisioned for the Maritime Prepositioning 

Force (Future) squadron. In their place, the Navy now 

plans to buy three support ships (in addition to three others bought in recent years) to augment existing maritime 

prepositioning squadrons (which store cargo at sea for use 

by Marine Corps and Navy units in various theaters). 

The three new ships are multiple landing platforms, 

which are intended to be similar to—but less capable 

than—the ones envisioned for the MPF(F) squadron.

Logistics and Support Ships

The Navy’s 2011 plan envisions buying 78 logistics and 

support ships in the next three decades—20 more than in 

the 2009 plan, or an increase of about one-third. Those 

planned purchases include 19 new oilers (which provide 

fuel and other supplies to ships at sea) and 41 joint highspeed vessels (relatively small, fast ships with a large cargo 

area that are designed for intratheater transport). According to the Navy, the JHSVs are in great demand by 

regional combatant commanders. They may also be useful for other missions, such as engagement with friendly 

nations (through visits, training, and joint exercises) and 

some kinds of maritime security operations. The 2011 

plan implies a new requirement for JHSVs of 23, compared with only 3 previously. (Purchases under that plan 

would exceed the new requirement because the JHSVs 

are expected to have a service life of only 20 years, meaning that the Navy would need to begin buying replacements in 2030.) 

Once the initial JHSVs were built, the Navy would meet 

its implied requirements for most types of logistics and 

support ships through the end of the 30-year period. The 

exception would be for combat logistics ships: T-AKE dry 

cargo ships, T-AO oilers, and AOE fast combat support 

ships. Those vessels operate with, or directly resupply, 

combat ships that are on deployment. The 2011 plan 

includes a requirement for 30 combat logistics ships, but 

the force would fall below that number after 2022, 

declining to as few as 24 ships in 2031 before increasing 

to 28 by 2040.

Under the 2009 plan, by comparison, the Navy 

would have purchased 58 support ships over 30 years, 

including 15 oilers and only 14 JHSVs (7 initial ships 

and 7 replacements). Unlike with the current plan, however, the Navy would have kept its force of combat logistics ships at or above the required size of 30 continuously 

beginning in 2015. 

Ship Costs Under the 2011 Plan

In the new shipbuilding report, the Navy states that carrying out those planned purchases would cost an average 

of $15.9 billion per year through 2040—33 percent less 

than the $23.9 billion average under its 2009 plan (see 

the top panel of Figure 3).11 For estimating purposes, the 

Navy divided the time frame of the 2011 plan into three 

periods: near term (2011 to 2020), midterm (2021 to 

2030), and far term (2031 to 2040). Using its own cost 

assumptions about Navy ships, which are explained in 

detail later in this study, CBO estimated the costs of the 

2011 plan. Overall, CBO’s estimates are about 18 percent 

higher than the Navy’s, but the differences are smaller for 

the near term and much larger for the far term (see the 

bottom panel of Figure 3).

The Navy’s Estimates

The 2011 shipbuilding report offers a frank discussion of 

the difficulties in estimating the types of capabilities that 

ships might need to have—and thus their costs—over the 

three estimating periods. The Navy says that it will need 

an average of $14.5 billion per year in the near term to 

build new ships and that “given known ship capability 

and quantity requirements, the cost estimates are judged 

to be accurate in this period” (see Table 2). In the midterm period, replacing the Navy’s current Ohio class ballistic missile submarines drives up the average cost of new 

11. Like most other dollar figures in this study, those numbers are in 

2010 dollars. The Navy reported the costs of the 2009 plan in 

2007 dollars and excluded funding for the next generation of ballistic missile submarines. CBO added its 2009 estimate for those 

submarines to the Navy’s number and inflated the total to 2010 

dollars.
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 7

CBO

Figure 3.

Estimates of Annual Spending for New-Ship Construction Under the 

Navy’s 2009 and 2011 Plans

(Billions of 2010 dollars)

Source: Congressional Budget Office based on data from the Department of the Navy.

Notes: The estimates shown here cover only construction of new ships; they exclude the costs of refueling existing nuclear-powered aircraft 

carriers as well as outfitting and postdelivery costs (which include the purchase of many smaller tools and pieces of equipment needed 

to operate a ship but not necessarily provided by the manufacturing shipyard as part of ship construction).

SSBN(X)s = next-generation ballistic missile submarines.

a. Unlike the 2011 plan, the 2009 plan did not include the cost of building new ballistic missile submarines. To make the Navy’s estimates for 

the two plans comparable, CBO added its 2009 estimate of the cost of the SSBN(X)s to the Navy’s estimate for the 2009 plan.

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

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30

35

40

Navy's Estimate for

2009 Plana

Navy's Estimate for

SSBN(X)s Under 2011 Plan

Navy's Estimate for

All Other Ships Under 2011 Plan

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

0

5

10

15

20

25

30

35

40

Navy's Estimate for

All Other Ships Under 2011 Plan

Navy's Estimate for

SSBN(X)s Under 2011 Plan

Near Term

Near Term

Midterm

Midterm

Far Term

Far Term

CBO's Estimate for

2011 Plan

The Navy's Estimates for the 2009 and 2011 Plans

The Navy's and CBO's Estimates for the 2011 Plan
8 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

construction to $17.9 billion per year. However, the 

Navy says that “the accuracy of the cost estimates diminishes for the force structure estimates in this timeframe.” 

In the far term, the Navy’s estimated costs fall to an average of $15.3 billion, although “the cost estimates are 

notional due to the uncertainty of business conditions 

affecting the shipbuilding industry.”12

The Navy’s 2009 shipbuilding plan excluded the cost of 

replacing Ohio class ballistic missile submarines. That 

decision was criticized by Members of Congress and outside analysts. The current plan includes that cost—an 

estimated $86 billion, according to the Navy—which is 

one of the biggest differences between the two plans. 

(The Navy’s 2007 and 2008 plans included funding to 

replace those submarines, but the average cost per submarine was about half the Navy’s current estimate.)13

As in the three previous shipbuilding plans, the Navy’s 

latest cost estimates exclude other items that the service 

would need to fund from its budget accounts for ship 

construction:14

 Refueling of nuclear-powered aircraft carriers, whose 

reactors are replaced midway through the ships’ service 

life; and

 Outfitting and postdelivery costs, which cover various 

activities and small items, such as tools and equipment, that a ship needs to become operational but 

that are not provided by the manufacturing shipyard.15 Over the past 15 years, outfitting and postdelivery costs have equaled about 3.2 percent of the 

Navy’s total budget for new construction and for 

refueling of submarines and aircraft carriers. 

Including the costs of refueling carriers would increase 

the Navy’s budget estimate for the 2011 plan to an average of $17.2 billion a year through 2040, CBO estimates.16 Adding outfitting and postdelivery costs would 

raise that amount to $17.8 billion per year. Those figures 

are higher than the average funding that the Navy has 

received in the past three decades—about $15 billion per 

year for all items in its shipbuilding accounts.

CBO’s Estimates

The full cost of the 2011 shipbuilding plan, in CBO’s 

estimation, would average $20.9 billion over the 2011–

2040 period—about 18 percent more than the Navy’s 

estimate of $17.8 billion. CBO’s numbers are only about 

4 percent higher than the Navy’s for the first 10 years of 

the plan but nearly 37 percent higher for the last 10 years 

of the plan. Looking at the 30-year period as a whole and 

adding up the various cost components, CBO estimated 

the following:

 Costs for new-ship construction alone would average 

$19.0 billion per year, 20 percent greater than the 

Navy’s figure of $15.9 billion.

 New-ship construction plus refueling of nuclearpowered aircraft carriers would cost an average of 

$20.3 billion per year.

 Outfitting and postdelivery would add annual costs of 

about $600 million (see Figure 4), raising CBO’s estimate to an average of $20.9 billion per year through 

2040.

For the near term, CBO’s and the Navy’s cost estimates 

are similar because most of the ships that the Navy plans 

to buy are already under construction, and their costs 

are reasonably well known. Looking farther ahead, CBO 

and the Navy made different assumptions about the size 

12. The statements quoted in this paragraph come from Department and capabilities of future ships that led to different cost 

of the Navy, Report to Congress on Annual Long-Range Plan for 

Construction of Naval Vessels for FY 2011, pp. 9–10. 

13. See Congressional Budget Office, “Resource Implications of the 

Navy’s Fiscal Year 2009 Shipbuilding Plan,” attachment to a letter 

to the Honorable Gene Taylor (June 9, 2008), p. 28.

14. The Navy funds shipbuilding through two accounts: Ship Construction, Navy (commonly called the SCN account) and the 

National Defense Sealift Fund, which, among other things, 

includes funding for procurement of some types of logistics ships.

15. Outfitting costs exclude the costs of fuel, food, and ammunition.

16. That number represents the Navy’s estimate for new construction 

plus CBO’s estimate for refueling aircraft carriers. (It also includes 

CBO’s estimate of the costs to extend the service lives of existing 

air-cushion landing craft—known as LCACs—and to buy their 

replacements; together, those costs average about $200 million per 

year.) In 2010, the Navy transferred funding for refueling nuclearpowered submarines to a procurement account (Other Procurement, Navy, or OPN) that is not used to purchase ships. Thus, 

CBO did not include the refueling costs for submarines in its 

shipbuilding estimates. 
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 9

CBO

Table 2.

Average Annual Shipbuilding Costs Under the Navy’s 2011 Plan, by Decade

Source: Congressional Budget Office based on data from the Department of the Navy.

Notes: Actual costs for the Navy’s shipbuilding accounts over the past 30 years averaged $14.8 billion per year for all items. More recently, 

between 2005 and 2010, costs for new-ship construction averaged $12.0 billion per year; new-ship construction and nuclear refuelings 

averaged $12.5 billion; and new-ship construction, nuclear refuelings, and outfitting and postdelivery averaged $12.9 billion per year.

Outfitting and postdelivery costs include the purchase of many smaller tools and pieces of equipment needed to operate a ship but not 

necessarily provided by the manufacturing shipyard as part of ship construction.

a. These numbers represent the Navy’s estimate for new-ship construction plus CBO’s estimates for additional costs (including an average of 

about $0.2 billion per year to extend the service lives of existing air-cushion landing craft, known as LCACs, and buy new ones as well).

estimates. In addition, CBO incorporated the fact that 

costs for labor and materials have traditionally grown 

much faster in the shipbuilding industry than in the 

economy as a whole, whereas the Navy does not appear to 

have accounted for the higher growth rates (see Box 1 on 

page 12). That difference is much more pronounced in 

the last decade of the plan, after 20 or more years of compounded inflation, than in the early years.

Changes from the 2009 Plan

Despite its cost, the 2011 shipbuilding plan is substantially less expensive than the Navy’s previous plan, which 

would have required average funding of $27.8 billion a 

year (in 2010 dollars), CBO estimates. The reduction of 

$6.9 billion per year—or about 25 percent—in the full 

cost of the current plan stems mainly from three factors:

 Changes in the items included in CBO’s estimates—For 

its estimate of the costs of the 2011 plan, CBO 

excluded several activities or items that it had included 

in its estimate of the previous plan: specifically, modernization of existing cruisers and destroyers, refueling 

of nuclear-powered submarines, and mission modules 

for littoral combat ships. The Navy pays for those 

things from budget accounts other than the two shipbuilding accounts, and CBO excluded them to bring 

its current estimate more in line with the expected 

14.5 17.9 15.3 15.9

Aircraft Carriersa 15.9 19.1 16.6 17.2

Aircraft Carriers, and Outfitting and Postdelivery Costsa 16.4 19.7 17.2 17.8

15.2 20.4 21.4 19.0

Aircraft Carriers 16.6 21.6 22.7 20.3

Aircraft Carriers, and Outfitting and Postdelivery Costs 17.1 22.3 23.4 20.9

Littoral Combat Ships 0.3 0.3 0.2 0.3

5 14 40 20

Aircraft Carriers 4 13 37 18

Aircraft Carriers, and Outfitting and Postdelivery Costs 4 13 37 18

Navy's Estimates (Billions of 2010 dollars)

New-Ship Construction plus Refueling of Nuclear-Powered

New-Ship Construction, Refueling of Nuclear-Powered 

Additional Costs of Mission Packages for 

Memorandum:

CBO's Estimates (Billions of 2010 dollars)

Percentage Difference Between CBO's and the Navy's Estimates

New-Ship Construction

New-Ship Construction

New-Ship Construction

New-Ship Construction plus Refueling of Nuclear-Powered

New-Ship Construction, Refueling of Nuclear-Powered 

New-Ship Construction plus Refueling of Nuclear-Powered

New-Ship Construction, Refueling of Nuclear-Powered 

(2011–2040)

Near Term Midterm

(2031–2040)

Far Term Total

(2011–2020) (2021–2030)
10 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Figure 4.

CBO’s Estimate of Annual Costs Implied by the Navy’s 2011 Plan

(Billions of 2010 dollars)

Source: Congressional Budget Office.

Notes: New-ship construction costs exclude the costs of refueling existing nuclear-powered aircraft carriers as well as outfitting and postdelivery costs (which include the purchase of many smaller tools and pieces of equipment needed to operate a ship but not necessarily 

provided by the manufacturing shipyard as part of ship construction). Total shipbuilding costs include those amounts.

SSNs = attack submarines; SSGNs = guided missile submarines; SSBNs = ballistic missile submarines; LCSs = littoral combat ships.

a. Costs for SSGNs refer only to the 2005–2010 period. 

contents of the shipbuilding accounts.17 Removing 

those costs is responsible for about $800 million of the 

difference in CBO’s estimates of the average annual 

costs of the 2009 and 2011 plans.

 Changes in the number and types of ships that the Navy 

plans to buy—The 2011 plan envisions purchasing 

20 fewer ships over 30 years than the 2009 plan did 

(276 instead of 296). In addition, compared with the 

previous plan, more of the new ships would be support ships, which cost an average of about $400 million apiece, and fewer would be combat ships, which 

cost an average of about $3 billion each. Those 

changes account for about half of the remaining 

2005 2010 2015 2020 2025 2030 2035 2040

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Amphibious

Ships

LCSs

SSNs and SSGNsa

Aircraft Carriers and Carrier Refueling Support Ships

Large Surface Combatants

SSBNs

Outfitting and

Postdelivery Costs

Amphibious

Ships

LCSs

SSNs and SSGNsa

Support Ships

Aircraft Carriers

Large Surface Combatants

SSBNs

New-Ship Construction Costs

Total Shipbuilding Costs

Under Navy's Plan

Under Navy's Plan

Actual

Actual
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 11

CBO

$6 billion difference in the average annual costs of the 

two plans.

 Effects on the per-ship cost of various classes—Since 

2009, the Navy has altered a number of its assumptions about the size and capabilities of ships in some of 

its key programs. Most notably, the current plan 

assumes that the submarines intended to replace 

today’s Virginia class submarines will be about the 

same size as their predecessors, whereas the 2009 plan 

assumed that they would be about 50 percent larger. 

Likewise, the 2011 plan now assumes that the LH(X) 

and LSD(X)—replacements for existing amphibious 

assault ships and dock landing ships, respectively—

will be smaller than the 2009 plan had assumed. In 

addition, the cancellation of the CG(X) cruiser 

program and the planned procurement of more 

DDG-51 destroyers mean that the Navy will buy 

smaller, less expensive surface combatants under the 

2011 plan than under the 2009 plan and those ships 

will have more predictable construction costs—

because the manufacturing shipyards have already 

built 62 destroyers similar to the new versions of the 

DDG-51. Together, those changes (which are discussed in more detail later) and several smaller changes 

in assumptions account for the other half of the 

remaining $6 billion difference in the average yearly 

costs of the two plans.

Outlook for Individual Ship Programs

To estimate the costs of implementing the 2011 plan, 

CBO calculated the cost of each of the 276 ships that the 

Navy intends to purchase through 2040. For ships under 

construction, the estimates were based in part on data 

from the Navy on actual costs; for ships yet to be built, 

they were based on relationships between the cost and 

weight of past ships. (Specifically, CBO used the cost per 

thousand tons of lightship displacement—the weight of 

the ship itself without its crew, materiel, weapons, or 

fuel.) CBO then adjusted its estimates to incorporate the 

effects of “rate” (the reduction in average overhead costs 

that occurs when a shipyard builds more than one of the 

same type of ship at a time) and “learning” (the efficiencies that shipyards gain as they produce additional units 

of a given type of ship). To apply the effects of rate and 

learning to ships for which the Navy has yet to develop 

even a notional design, CBO had to make assumptions 

about the size and capabilities of future ships.

Aircraft Carriers

The 2011 shipbuilding plan slightly reduced the Navy’s 

requirement for aircraft carriers: from 11, which was the 

standard under the 2009 plan, to a force of 10 to 11. The 

Navy intends to buy six CVN-78 Gerald R. Ford class 

aircraft carriers over the 2011–2040 period. Building one 

carrier every five years (commonly referred to as “five-year 

centers”) would enable the Navy to have a force of at least 

11 carriers most of the time through 2040. The exceptions would be in 2013 and 2014, when the number of 

carriers would drop to 10. That temporary decline would 

occur because the U.S.S. Enterprise (CVN-65) is scheduled to be retired in 2013—after 52 years of service—

but the next new carrier, the U.S.S. Gerald R. Ford

(CVN-78), would not be commissioned until 2015. Any 

delays in building the new CVN-78 class would extend 

the period during which the Navy had only 10 carriers.

The Navy’s projected cost of the lead ship of the CVN-78 

class grew by 10 percent between the President’s 2008 

and 2011 budget requests. The Navy now expects the 

lead ship’s cost to be about $11.7 billion (about what 

CBO estimated in its analysis of the Navy’s 2009 plan). 

Yet further increases appear likely. The CVN-78 is only 

about 10 percent complete, and cost growth in shipbuilding programs typically occurs when a ship is more 

than half finished—particularly in the later stages of construction, when all of a ship’s systems must be installed 

and integrated.

17. Even so, CBO’s estimate does not correspond exactly to what is 

included in those accounts; for example, CBO excluded the costs 

of service craft (such as tugboats, barges, and floating dry docks) 

as well as other small items that are purchased through the shipbuilding accounts. In all, the excluded items have represented less 

than 1 percent of the Navy’s shipbuilding budget in the past few 

years.
12 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Continued

To estimate the cost of the lead ship of the CVN-78 class, 

CBO used the actual costs of the previous carrier—the 

CVN-77—and then adjusted them for higher costs for 

government-furnished equipment and for more than 

$3 billion in costs for nonrecurring engineering and 

detail design (the plans, drawings, and other one-time 

items associated with the first ship of a new class). As a 

result, CBO estimates that the lead CVN-78 will cost 

about $12.5 billion once it is completed. Subsequent 

ships of the class will not require as much funding for 

one-time items; however, on the basis of higher projected 

inflation in shipbuilding costs, CBO estimates the average cost of the six carriers in the 2011 plan at $12.4 billion, whereas the Navy estimates their average cost at 

$10.6 billion (see Table 3).

There are several reasons to believe that the final cost of 

the CVN-78 could be even higher than CBO’s estimate. 

First, most lead ships built in the past 20 years have experienced cost growth of more than 40 percent. (CBO’s 

estimate for the lead CVN-78 already accounts for some 

of that historical cost growth.) Second, Navy officials

Box 1.

Inflation in Shipbuilding

An important factor affecting the Navy’s and the 

Congressional Budget Office’s (CBO’s) estimates is 

assumptions about future increases in the cost of 

building naval ships. The Department of Defense 

(DoD) has an overall estimate of future inflation 

(known as an inflator) that it uses to project increases 

in the costs of its procurement programs. However, 

according to the Navy, DoD’s inflator is lower than 

the actual inflation that occurred in the naval shipbuilding industry in the past decade. The Navy provided CBO with a shipbuilding index that reflects the 

growth in the costs of labor and materials that the 

industry has experienced in the past. The service 

developed that index using a weighted composite of 

annual percentage changes in the costs of labor and 

materials specific to shipbuilding, based on shipyards’ 

data about labor costs in the past, advance pricing 

agreements, vendor surveys, and projections of the 

cost of materials from the Bureau of Labor Statistics. 

From 2011 through at least 2017, the Navy’s index is 

projected to grow at an average annual rate of 3.3 

percent. By comparison, the gross domestic product 

(GDP) price index, which measures the prices of final 

goods and services in the economy, will grow at an 

average annual rate of 1.4 percent, in CBO’s estimation. The difference between the two rates implies 

that annual inflation will be 1.9 percentage points 

higher for shipbuilding programs during that period 

than for the economy as a whole, which is greater 

than the historical average gap of 1.4 percent since 

1980 (see the figure to the right).1

The Navy incorporated that higher rate of shipbuilding inflation into its budget request for 2011 

and into the associated Future Years Defense Program. In projecting its constant-dollar estimates for 

the 2011 shipbuilding plan, however, the Navy did 

not assume that the higher inflation rate would drive 

the costs of future shipbuilding programs. Instead, it 

assumed that, in constant dollars, a ship that cost 

$2.5 billion to build in 2011 would cost the same to 

build in 2020 or 2030. The estimates in its 2009 

plan, by contrast, did factor in higher shipbuilding 

inflation, which at that time the Navy projected to be 

about 3.5 percent per year. As a result, many of the 

Navy’s current estimates of unit (per-ship) costs are 

lower than its estimates under the 2009 plan for the 

same ships. 

1. That comparison represents a change from CBO’s report on 

the Navy’s 2009 plan (Congressional Budget Office, 

“Resource Implications of the Navy’s Fiscal Year 2009 Shipbuilding Plan,” attachment to a letter to the Honorable Gene 

Taylor, June 9, 2008), which compared shipbuilding inflation with inflation in DoD’s procurement programs in general. Using the GDP price index as the basis for comparison 

is consistent with CBO’s analyses in other economic sectors 

and better reflects the cost to the taxpayer of higher inflation 

in naval shipbuilding.
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 13

CBO

have told CBO that there is a 60 percent probability that 

the final cost of the CVN-78 will exceed the service’s estimate, compared with a 40 percent probability that the 

final cost will be less than that estimate. Third, a number 

of critical technologies that are supposed to be incorporated into the ship, such as a new electromagnetic catapult system for launching aircraft, remain under development. Difficulties in completing their development could 

arise and increase costs, which would affect the costs for 

subsequent ships of the class.

Submarines

Under the 2011 shipbuilding plan, submarines would 

overtake surface combatants as the largest source of 

demand for the Navy’s resources over the next 30 years 

(see Table 4). The Navy currently operates 14 Ohio class 

ballistic missile submarines (SSBNs), four Ohio class 

guided missile submarines (SSGNs) modified from the 

SSBN version, and 53 attack submarines (SSNs) of several classes. Over the next three decades, the Navy plans 

to buy 12 new SSBNs, starting in 2019; increase production of Virginia class attack submarines from one to 

Box 1. Continued

Inflation in Shipbuilding

Annual Rates of Shipbuilding Inflation and GDP Price Inflation

(Percent)

Sources: Congressional Budget Office; Department of the Navy.

Note: GDP = gross domestic product.

In its estimates, CBO assumed that a higher inflation 

rate for shipbuilding would continue for the next 

30 years—partly because price growth in the shipbuilding industry has exceeded general inflation for 

most of the past three decades and partly because 

CBO lacked an analytic basis for determining when 

and how the difference between the two growth rates 

would disappear. Specifically, CBO assumed that 

shipbuilding inflation would outpace inflation as 

measured by the GDP price index by 1.9 percentage 

points between 2011 and 2017 and by 1.5 percentage 

points thereafter. Thus, CBO estimated that a ship 

costing $2.5 billion to build in 2011 would cost 

$3.6 billion (in 2010 dollars) to build in 2030. However, shipbuilding costs cannot continue indefinitely 

to grow faster than the costs of goods and services in 

the economy as a whole. If that were to happen, the 

price of ships would eventually outstrip the Navy’s 

ability to pay for them, even in very small numbers.

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

0

2

4

6

8

10

12

GDP Price Inflation

Shipbuilding Inflation

Actual Projected
14 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Table 3.

Comparison of the Navy’s and CBO’s Estimates for Major New Ships

(Billions of 2010 dollars)

Sources: Congressional Budget Office; Department of the Navy.

Note: n.a.= not applicable; * = the Navy’s 2009 plan included purchases but not costs.

a. In CBO’s estimates for aircraft carriers, the total costs per class include remaining funds for the CVN-78 as well as advance procurement 

funding for the carrier that the Navy plans to buy in 2043, but the average cost per ship excludes that funding.

b. The Navy’s estimate of the average cost of a littoral combat ship is slightly less than $600 million. CBO’s estimate of the average cost of 

such a ship is $550 million for ships built during the 2011–2040 period and $560 million per ship for the entire class.

c. Also included under the Navy’s plan is the purchase of one LPD-17 amphibious transport dock in 2012. 

6 10.6 12.4 a 63 77 a 10.6

12 7.2 8.2 86 99 *

25 2.5 2.5 62 63 2.9

19 2.9 3.3 56 63 6.7

Flight IIA 8 1.6 1.8 13 14 n.a.

Flight III 24 2.0 2.4 48 57 n.a.

n.a. n.a. n.a. n.a. n.a. 3.4

18 2.4 4.0 44 71 1.8

Littoral Combat Ships 49 0.6 b 0.6 b 29 27 0.6

17 0.6 0.7 10 12 0.8

12 c 1.3 1.7 15 21 2.5

7 3.4 4.2 24 29 4.5

Memorandum:

Navy's Estimate of

Virginia Class Attack Submarines

Attack Submarines

Destroyers

2011–2040 Period

Average Cost per Ship

 Under the 2009 Plan

(Replacements for Virginia class)

(Replacements for Ohio class)

Assault Ships

Landing Ships

2011–2040 Period

Missile Submarines 

LHA-6/LH(X) Amphibious

LSD(X) Amphibious Dock

(Replacements for 

littoral combat ships)

Improved Virginia Class 

SSBN(X) Ballistic 

Total Costs per

Class over the

Estimate

CBO's

Estimate

Navy's

Estimate

CBO's

Average Cost per

Ship over the

LCS(X)s

Class Aircraft Carriers

(Replacements for 

Arleigh Burke class)

CVN-78 Gerald R. Ford 

DDG-51 Arleigh Burke Class

CG(X) Cruisers

DDG(X) Destroyers 

Navy's

Estimate

Number of 

Ships 

Purchased 

Under the 

2011 Plan
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 15

CBO

Table 4.

Shipbuilding Costs, by Major Category, 1981 to 2040

Source: Congressional Budget Office.

Note: The costs shown here cover construction of new ships, refueling of nuclear-powered aircraft carriers, and outfitting and postdelivery 

(which include the purchase of many smaller tools and pieces of equipment needed to operate a ship but not necessarily provided by 

the manufacturing shipyard as part of ship construction).

two per year, beginning in 2011; and redesign and 

improve on the Virginia class, with production of the 

new version to start in 2025. The Navy does not plan to 

replace its four SSGNs when they retire in the mid- to 

late 2020s. 

SSBN(X) Future Fleet Ballistic Missile Submarine. The 

design, cost, and capabilities of the SSBN(X), the submarine slated to replace the Ohio class, are among the most 

significant uncertainties in the Navy’s and CBO’s analyses 

of future shipbuilding. The Navy’s 2007 and 2008 plans 

assumed that the first SSBN(X) would cost $4.5 billion 

(in 2010 dollars) and that subsequent ships in the class 

would cost about $3.4 billion apiece.18 The 2009 plan 

explicitly excluded the costs of the SSBN(X) class, 

although it included 12 of those submarines in its projected inventories. The 2011 plan, in contrast, includes 

the costs of the SSBN(X) class—with an estimate that 

highlights the great expense of replacing current ballistic 

missile submarines and the effect that effort could have 

on other shipbuilding programs.

Specifically, the Navy now estimates that the lead 

SSBN(X) will cost about $9 billion and that building 

12 of the new submarines will cost $86 billion, or an 

average of about $7.2 billion apiece. The Navy’s 2011 

report states that those estimates are “consistent with the 

escalated cost of the OHIO class SSBN.”19 However, 

escalating (that is, inflating) the actual costs of the Ohio 

class submarines would produce an average cost of only 

about $3.1 billion per submarine in 2010 dollars. Navy 

officials subsequently clarified that the service’s estimate is 

based on the cost to build Ohio class submarines in 

today’s industry conditions and with today’s technology. 

Under the 2011 plan, however, the first SSBN(X) would 

be authorized in 2019 (although advance procurement 

money would be needed starting in 2015 for items with 

long lead times). The second submarine would be 

Aircraft Carriers 2.8 1.4 2.7 2.3 3.7 3.6 4.2 3.8

Submarines 7.0 2.4 3.8 4.4 6.2 10.2 6.8 7.7

Surface Combatants 7.6 4.9 4.0 5.5 5.1 4.7 9.2 6.3

Amphibious Ships 1.4 1.3 1.8 1.5 1.4 2.4 2.1 2.0

Support Ships 2.0 0.6 0.7 1.1 0.8 1.3 1.1 1.1 ____ ____ ____ ____ ____ ____ ____ ____

Total 20.9 10.5 12.9 14.8 17.1 22.3 23.4 20.9

Aircraft Carriers 13 13 21 15 22 16 18 18

Submarines 34 23 30 30 36 46 29 37

Surface Combatants 36 46 31 37 30 21 39 30

Amphibious Ships 7 12 14 10 8 11 9 9

Support Ships 10 6 5 8 5 6 5 5 ____ ____ ____ ____ ____ ____ ____ ____

Total 100 100 100 100 100 100 100 100

2021– 2031–

2020 2030 2040

Historical CBO's Estimate Under the Navy's 2011 Plan

Average Annual Costs (Billions of 2010 dollars)

Percentage of Average Annual Costs

1981–

1990

1991–

2000

2001–

2010

1981–

2010

2011–

2040

2011–

18. For more about how the Navy arrived at those estimates, see Congressional Budget Office, “Resource Implications of the Navy’s 

Fiscal Year 2008 Shipbuilding Plan,” attachment to a letter to the 

Honorable Gene Taylor (March 23, 2007), pp. 8–9.

19. Department of the Navy, Report to Congress on Annual Long-Range 

Plan for Construction of Naval Vessels for FY 2011, p. 20.
16 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

purchased in 2022, followed by one per year from 2024 

to 2033.

In most of its recent naval analyses, CBO assumed that 

the SSBN(X) would be smaller and would carry fewer 

weapons than existing ballistic missile submarines—

specifically, that it would have 16 missile tubes instead of 

the 24 on today’s SSBNs and would displace around 

15,000 tons submerged, compared with 18,750 tons for 

an existing Ohio class submarine.20 But in a recent briefing to CBO and the Congressional Research Service, the 

Navy stated that an SSBN(X) would probably be about 

the same size and have roughly the same displacement as 

an Ohio class submarine, even though it might have only 

16 or 20 missile tubes. Over time, technological advancements tend to add weight to a submarine design (compared with the same submarine produced 30 years earlier). If the Ohio class was being built today with the 

same capability to launch ballistic missiles, it would actually be much larger than 18,750 tons. Thus, a new SSBN 

with fewer than 24 missile tubes would probably still be 

equivalent in displacement to an Ohio class submarine. 

For those reasons, in its analysis, CBO adopted the 

Navy’s assumption about the size of the SSBN(X).21

CBO estimates that the lead SSBN(X) will cost about 

$13 billion if it is purchased in 2019. Estimating the cost 

of that submarine is particularly difficult because it is not 

clear how much the Navy will need to spend on nonrecurring engineering and detail design. The Navy spent 

about $2 billion on those items—out of a total of more 

than $5 billion—for the lead Virginia class attack submarine, which is about 60 percent smaller than the first 

Ohio class submarine. CBO assumed that the cost of 

nonrecurring items would be proportional to the weight 

of the new submarine, so it estimated more than $4 billion for those items. (The Navy appears to have assumed 

that nonrecurring items for the lead SSBN(X) would cost 

about $2 billion.) 

The historical track record for the lead ship of new classes 

of submarines in the 1970s and 1980s implies little difference on a per-ton basis between a lead attack submarine (SSN) and a lead SSBN (see Figure 5). If that pattern continued, the per-ton cost of the SSBN(X) would 

be about the same as that of the first Virginia class SSN. 

Overall, 12 SSBN(X)s would cost a total of about 

$99 billion in CBO’s estimation, or an average of 

$8.2 billion each. Another $10 billion to $15 billion 

would be needed for research and development, for a 

total program cost of more than $110 billion. Those 

estimates appear to differ from the Navy’s mainly because 

the Navy priced the SSBN(X) as though it were being 

built today, whereas CBO incorporated the effects that 

higher shipbuilding inflation would have on submarines 

built 10 to 20 years from now.

Attack Submarines. Under the 2011 plan, the Navy 

would buy two attack submarines per year beginning in 

2011 (up from one per year over the past decade). That 

procurement rate would continue in almost every year 

through 2022 and then change to one SSN annually in 

most years until 2040. With such a procurement schedule, the attack submarine force would remain at or above 

the Navy’s required size of 48 through 2023 but then fall 

to 39 to 46 submarines thereafter.

Senior Navy leaders have stated—and the 2011 plan 

assumes—that Virginia class SSNs would have to cost 

$2.5 billion or less for the Navy to be able to afford two 

per year.22 The President’s 2011 budget indicates a cost of 

about $2.4 billion. The Navy and CBO both estimate 

that the average cost for all of the Virginia class submarines purchased between 2011 and 2024 will be about 

$2.5 billion. Both of those estimates are lower than the 

estimates made under the 2009 shipbuilding plan. CBO 

reduced its estimate partly because of the myriad small 

cost-cutting strategies that the Navy has successfully 

incorporated into the Virginia class program in recent 

years.

20. Displacement figures for submarines refer to Condition A displacement, which is roughly analogous to lightship displacement 

(the weight of the ship itself without its crew, materiel, weapons, 

or fuel) for surface ships.

21. For more information, see Ronald O’Rourke, Navy SSBN(X) 

Ballistic Missile Submarine Program: Background and Issues for 

Congress, Report for Congress R41129 (Congressional Research 

Service, May 3, 2010); and the statement of Eric J. Labs, Senior 

Analyst for Naval Forces and Weapons, Congressional Budget 

Office, before the Subcommittee on Seapower and Expeditionary 

Forces, House Committee on Armed Services, The Long-Term 

Outlook for the U.S. Navy’s Fleet (January 20, 2010).

22. Specifically, the Navy says that to purchase two Virginia class submarines a year, their cost would have to decline to $2.0 billion 

each in 2005 dollars, which is equivalent to about $2.5 billion in 

2010 dollars.
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 17

CBO

Figure 5.

Cost per Thousand Tons for the Lead Ship of Various Classes of Submarines

(Millions of 2010 dollars)

Source: Congressional Budget Office based on data from the Department of the Navy.

Notes: The years shown here indicate the year in which each lead submarine (the first of each class to be built) was authorized.

Costs are per thousand tons of Condition A displacement (the weight of the submarine itself without its crew, materiel, weapons, or 

fuel), which is roughly analogous to lightship displacement for surface ships.

For the improved Virginia class, the first of which would 

be built starting in 2025, the Navy abandoned its previous cost-estimating assumption that this ship and the 

SSBN(X) would share a common hull design that would 

be about 50 percent larger than that of an existing 

Virginia class submarine. In the 2011 plan, the Navy 

apparently assumed that the improved Virginia would be 

a further evolution of the original Virginia class, which 

itself regularly receives technological upgrades to its systems and capabilities. Similarly, CBO assumed that the 

replacement for the Virginia class would incorporate 

some significant technological improvements that would, 

in essence, define the improved Virginia as a new class 

but would not constitute an entirely new design. On the 

basis of that assumption, CBO estimated that the average 

cost of the improved Virginia would be about $3.3 billion, or 14 percent more than the Navy’s estimate of 

$2.9 billion.

Large Surface Combatants

The Navy has made significant changes to its procurement goals for cruisers and destroyers since the 2009 plan 

was issued. The DDG-1000 destroyer program has been 

cut to 3 ships from 7 under the 2009 plan and from as 

many as 24 under earlier plans. Plans for the CG(X) 

future cruiser have been canceled outright. In place of 

those programs, the Navy is planning to restart production of DDG-51 destroyers, with the first ship funded in 

the 2010 budget and eight more planned for 2011 to 

2015. Beginning in 2016, new DDG-51s would have an 

upgraded design—a configuration known as Flight III. 

And in 2032, the Navy would start purchasing the 

DDG(X), an as-yet-undesigned destroyer intended to 

replace the DDG-51 class. Those programs, if implemented as planned, would allow the Navy to meet its 

implied requirement for 88 or more large surface combatants through 2027, although the force would fall below 

that number thereafter.

DDG-51 Flight IIA. The Navy’s existing DDG-51 destroyers were built in three configurations. The first 28 ships, 

designated Flight I or II, did not include a hangar for 

embarking helicopters (which play important roles in 

countering enemy submarines, mines, and small-boat 

attacks). The next 34 ships were designated Flight IIA, 

which included a hangar and thus the ability to carry two 

helicopters or several ship-launched unmanned aerial 

vehicles.23

Los Angeles

(SSN-688)

Ohio

(SSBN-726)

San Juan

(SSN-751)

Seawolf

(SSN-21)

Virginia

(SSN-774)

0

100

200

300

400

500

600

700

800

900

1970 1974 1983 1989 1998
18 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

Under the Navy’s 2011 plan, the new DDG-51s purchased through 2015 would use the Flight IIA configuration but also incorporate the latest ballistic missile 

defense capabilities.24 Those ships would have an average 

cost of a little less than $1.8 billion in CBO’s estimation—about $150 million more than the Navy’s per-ship 

estimate. CBO’s higher figure stems partly from the 

expectation that restarting a production line that last 

received an order in 2005 will cost more than the Navy 

anticipates.

DDG-51 Flight III. The Navy’s strategy to meet combatant commanders’ demand for the increased capabilities of 

ballistic missile defense ships—as well as to replace 

Ticonderoga class cruisers when they retire in the 

2020s—is to modify the DDG-51 destroyer substantially, 

creating a Flight III configuration. That configuration 

would incorporate the new Air and Missile Defense 

Radar (AMDR), now under development, which is larger 

and more powerful than the radars on earlier DDG-51s. 

Adding the AMDR would require increasing the amount 

of power and cooling available on a Flight III ship in 

order to operate the radar effectively.25 Those changes, 

and associated increases in the ship’s displacement, would 

make a DDG-51 Flight III at least $500 million, or 

about 30 percent, more expensive than a new Flight IIA, 

by CBO’s estimate.26

However, there appears to be some question as to whether 

the hull of the DDG-51 will be able to accommodate the 

changes envisioned for Flight III. In particular, if the 

AMDR proved too large to fit inside the deckhouse (the 

main superstructure above the hull) of a DDG-51 without raising the ship’s center of gravity and destabilizing it, 

the Navy would need to lengthen the ship, further 

increasing its displacement and cost substantially.

Overall, the Navy plans to buy 24 DDG-51 Flight III 

ships between 2016 and 2031. If the Navy does not need 

to lengthen the DDG-51’s hull, those Flight IIIs will cost 

an average of $2.4 billion, CBO estimates, compared 

with the Navy’s estimate of $2.0 billion.

DDG(X) Future Guided Missile Destroyer. Like the 

Navy’s 2009 shipbuilding plan, the current plan includes 

a future class of destroyers—the DDG(X)—intended to 

eventually replace the DDG-51s when they retire in the 

2030s.27 However, the 2011 plan has pushed back the 

start of the DDG(X) program from 2022 to 2032, which 

means it would be a successor to the DDG-51 Flight III 

program. Some Navy officials have suggested that the 

DDG(X) could be based on the hull and design of the 

DDG-51 class but incorporate technological improvements appropriate to the late 2020s and early 2030s. The 

Navy’s cost estimate for the DDG(X) averages $2.4 billion—20 percent more than for the DDG-51 Flight 

III—a figure that would not allow for a new design or 

much increase in size. 

CBO, in contrast, assumed that the DDG(X) would have 

a largely new design and would be about 10 percent 

larger than a DDG-51 Flight III. By 2032, when the first 

DDG(X) would be authorized under the current plan, 

the initial DDG-51 design would be about 50 years old. 

The Navy has made, and will continue to make, improvements to the DDG-51 class, as the plans for Flight III 

illustrate. Nevertheless, CBO considers it unlikely that a 

ship design that originated in the late 1970s and early 

1980s will prove robust enough to accommodate changes 

designed to counter threats at sea until the 2070s and 

2080s (when the DDG(X)s would be reaching the end of 

their notional 35-year service life). As an example, the 

Navy has limited ability to improve the stealthiness of the 

DDG-51 class if it does not redesign the hull—and if it 

does, it will, in effect, have designed an entirely new ship. 

23. For a detailed discussion of the differences between the DDG-51 

flights, see Norman Polmar, The Naval Institute Guide to the Ships 

and Aircraft of the U.S. Fleet (Washington, D.C.: Naval Institute 

Press, 2005), pp. 147–152.

24. The Navy has announced that all existing DDG-51s will eventually be equipped with improved ballistic missile defenses; up to 

16 of those upgrades will have been funded by the end of 2010. 

For more about the Navy’s plans for the DDG-51 program, see 

Ronald O’Rourke, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress, Report for Congress 

RL32109 (Congressional Research Service, April 8, 2010).

25. See Ronald O’Rourke, Navy Aegis Ballistic Missile Defense Program: Background and Issues for Congress, Report for Congress 

RL33745 (Congressional Research Service, April 26, 2010).

26. As a point of comparison, the Navy’s first Flight IIA ship, the 

DDG-79, which incorporated such changes as a helicopter hangar 

and a larger displacement, cost about 20 percent more than the 

DDG-78. The transition from the Flight IIA to Flight III ships is 

expected to involve much more extensive changes than the transition from the Flight I/II to Flight IIA ships.

27. That retirement date is based on CBO’s and the Navy’s assumption that all Flight IIA DDG-51s will be modernized midway 

through their service life and will operate for 40 years.
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 19

CBO

Under those assumptions, CBO projects the average cost 

of the DDG(X) at $4.0 billion. That figure is about twothirds greater than both the Navy’s current estimate and 

CBO’s previous estimate (under the 2009 plan). The 

difference between CBO’s estimates of the cost of the 

future destroyer under the 2011 and 2009 plans is largely 

attributable to two factors. First, because the current plan 

would delay the DDG(X) program for 10 years, those 

ships would be purchased in a period when the higher 

average inflation in naval shipbuilding would have a 

greater cumulative effect. Second, under that plan, the 

Navy would procure only two DDG(X)s per year, one 

each from two different shipyards, meaning that a shipyard’s full annual overhead costs for the destroyer would 

not be spread among multiple ships, so there would be no 

benefit from a rate effect. (Under the 2009 plan, the 

Navy would have purchased DDG(X)s at a rate of three 

per year using two shipyards, so each shipyard would 

have built an average of more than one ship per year, 

allowing for a rate effect.)

Littoral Combat Ships 

The 2011 plan envisions that the Navy will build a force 

of 55 littoral combat ships (LCSs) between 2005 and 

2031. Because those ships are assumed to have a service 

life of 25 years, the Navy will need to begin procuring 

their replacements in 2032. The LCS differs from past 

and present U.S. warships in that its production program 

is divided into two components—the sea frame (the ship 

itself) and mission packages (the main combat systems). 

The sea frame is being built with the ability to switch 

mission packages depending on what mission the ship is 

intended to carry out at a given time. Currently, the Navy 

expects to use three types of mission packages: for countering mines, submarines, or surface ships. It also expects 

that the LCS will be able to perform maritime security 

operations while equipped with any of those mission 

packages. In all, the service plans to buy 64 mission packages for the 55-ship program.28

The Navy wants the LCS to be a relatively affordable ship 

that will be fairly easy to design and build. However, the 

program has experienced significant cost growth since its 

inception. Originally, each sea frame was expected to cost 

about $270 million in 2010 dollars (or $220 million in 

2005 dollars). So far, two LCSs have been built, each by a 

different contractor using a different design. LCS-1, a 

semiplaning steel monohull, cost $570 million to build 

(not including $33 million invested by the contractor); 

LCS-2, an all-aluminum trimaran (basically, a threehulled ship), cost $626 million. With outfitting and postdelivery costs added in, as well as some nonrecurring 

costs to complete the designs (which normally are 

not considered part of a ship’s construction cost), the 

price tags of those ships rise to about $690 million and 

$750 million, respectively. 

In 2009, when the Navy was authorized to buy two more 

LCSs, it ordered one of each design. After that, however, 

it revamped its acquisition strategy in an attempt to 

counter the cost growth and turmoil in the LCS program. 

Earlier, the Navy had planned to continue building both 

designs and have the two contractors compete to see 

which one would produce the larger number of its type of 

ship. In the summer and fall of 2009, the Navy changed 

course and decided instead to select one design for the 

15 LCSs it expects to order between 2010 and 2014. The 

contractor whose design is chosen will get to build 

10 ships—2 per year—between 2010 and 2014. In 2012, 

the Navy will accept bids on 5 more ships of the same 

design (1 authorized in 2012 and 2 each in 2013 and 

2014) from any other shipbuilder except the one constructing the first group of 10 LCSs. The Navy hopes that 

strategy will lead to a competitive environment for LCS 

purchases in 2015 and beyond, thus lowering costs.

In the 2011 FYDP and shipbuilding plan, the Navy estimated the average cost of the LCS at about $600 million 

per ship. That figure is well above the Congressionally 

mandated cost cap for the LCS program ($480 million 

per ship, adjusted for inflation).29 However, in a briefing 

to CBO and the Congressional Research Service, Navy 

officials said that with the new acquisition strategy, they 

fully expect the first group of 10 new ships to cost an 

average of less than $600 million apiece. 

CBO estimates the average per-ship cost of the 49 LCSs 

in the plan at $550 million, not counting outfitting and 

28. Department of the Navy, Report to Congress: Littoral Combat Ship 

Mission Packages (May 2009).

29. The National Defense Authorization Act for Fiscal Year 2010 

(Public Law 111-84), which set the LCS cost cap to begin in 

2011, gave the Secretary of the Navy authority to waive compliance with the cap if doing so was considered in “the best interest 

of the United States,” if the ship was “affordable, within the context of the annual naval vessel construction plan,” or in certain 

other circumstances. 
20 AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN

CBO

postdelivery costs. That figure is slightly smaller than 

CBO’s previous estimates.30 The reduction is based on 

the Navy’s new acquisition strategy and on additional 

information about the construction costs of the first two 

LCSs. CBO expects that some of the ships in the first 

group of 10 LCSs will come in under the Congressional 

cost cap (because the cap is adjusted for inflation each 

year and excludes outfitting and postdelivery costs).

Besides the change in acquisition strategies that the Navy 

announced last year, the 2011 shipbuilding plan substantially slows the planned procurement rate for LCSs. 

Under the 2009 plan, the Navy would have bought 

55 LCSs by 2019, and all of them would have been in 

service by 2023. To achieve that, the Navy would have 

purchased the ships at a rate of 6 per year through most 

of the current decade. Under the 2011 plan, by contrast, 

the Navy would purchase up to 4 LCSs a year between 

2013 and 2015, 3 per year thereafter, and then 1 or 2 per 

year starting in 2020. As a result, the service would not 

achieve a force of 55 LCSs until 2035—12 years later 

than under the 2009 plan. 

The Navy would also buy fewer next-generation littoral 

combat ships—called LCS(X)s—under the 2011 plan 

because it would not need to replace the original ships as 

quickly as it would have with the faster procurement rate 

of the 2009 plan. The Navy’s current cost estimate for the 

LCS(X) is $600 million, the same as for the LCS, implying that the new class would have no improvements over 

the old one. CBO assumed, however, that the LCS(X) 

would have improvements compared with the LCS and 

thus estimated the average cost of the LCS(X) at about 

$700 million.

Amphibious Ships

In the 2011 shipbuilding report, the Navy implies that 

the new requirement for its amphibious force will be 

33 ships, up from 31 previously.31 The proposed force 

would consist of 11 LHA or LHD amphibious assault 

ships, 11 LPD amphibious transport docks, and 11 LSD 

dock landing ships. In pursuit of that force, the 2011 

plan calls for buying 3 LHA-6s (in 2011, 2016, and 

2021) as well as 4 LH(X)s (in the 2020s and 2030s) to 

replace LHD-1 class amphibious assault ships. The plan 

also envisions buying 1 more LPD-17 class amphibious 

transport dock (in 2012) and 12 LSD(X) dock landing 

ships (one every other year between 2017 and 2039) to 

replace existing LSD-41s and LSD-49s. With that procurement schedule, however, the total number of 

amphibious ships would be below the implied 33-ship 

requirement from 2011 to 2015 and again from 2032 

to 2040. 

The 2011 plan would also cancel the Navy’s proposed 

Maritime Prepositioning Force (Future) program. 

Instead, the service would acquire some of the capabilities 

associated with the MPF(F) and incorporate them into 

the three existing maritime prepositioning squadrons. 

The resulting formations would be hybrid squadrons: 

They would not have all of the capabilities of the MPF(F) 

that the Navy and Marine Corps have been calling for 

over the past decade, but they would have more flexibility 

to selectively unload certain kinds of equipment from the 

existing prepositioning squadrons.

The Navy’s cost estimates for amphibious ships have 

changed significantly since the 2009 plan. The most 

important underlying reason is that in that plan, the 

Navy assumed that the LSD(X) future dock landing ship 

would be based on the hull of the LPD-17, which costs 

about $1.8 billion today and displaces about 25,000 tons. 

In the 2011 plan, the Navy assumed that the LSD(X)s 

would instead be about the same size as existing LSDs—

that is, have a displacement of about 16,000 tons. Consequently, the Navy’s estimate for the LSD(X) fell from 

$2.5 billion per ship to $1.3 billion per ship. (The Navy’s 

apparent change in its treatment of inflation for the 2011 

plan and the assumption that a ship built in the future 

would cost the same amount as a ship built today proba30. CBO estimated, in “Resource Implications of the Navy’s Fiscal 

Year 2009 Shipbuilding Plan” and Options for Combining the 

Navy’s and the Coast Guard’s Small Combatant Programs (July 

2009), that LCSs would cost an average of $570 million per ship 

(or $550 million in 2009 dollars). That estimate included some 

outfitting and postdelivery costs.

31. Specifically, the report says that 33 is the minimum number of 

amphibious ships needed for the “Assault Echelon in a 2 Marine 

Expeditionary Brigade forcible-entry operation”; see Department 

of the Navy, Report to Congress on Annual Long-Range Plan for 

Construction of Naval Vessels for FY 2011, p. 15. The increase in 

the requirement for amphibious ships was not unexpected: The 

Navy’s 2009 plan had suggested that the requirement would be 

changed to 33 in the future.
AN ANALYSIS OF THE NAVY’S FISCAL YEAR 2011 SHIPBUILDING PLAN 21

CBO

bly played a role as well; a 32 percent reduction in weight 

alone does not explain a 48 percent reduction in cost.) 

CBO likewise assumed that the LSD(X) would be smaller 

than previously expected, but it estimated the ship’s average cost at $1.7 billion, 29 percent less than its estimate 

under the 2009 plan.

The Navy has also changed its cost estimates for LHA-6 

and LH(X) class amphibious assault ships from $4.5 billion in the 2009 plan to $3.4 billion now, a decrease of 

25 percent. The Navy currently assumes that the LH(X)s 

will be the same size as the LHA-6s, whereas the LH(X)s 

envisioned in the 2009 plan were slightly larger. As was 

the case with the LSD(X)s, the change in how the Navy 

treats shipbuilding inflation probably also had an effect 

on costs. However, it seems unlikely that both causes 

could account for the full $1.1 billion reduction in pership costs. 

CBO’s estimate for amphibious assault ships is higher 

than the Navy’s: an average of $4.2 billion per ship, about 

10 percent less than its estimate under the 2009 plan. 

CBO assumed that the LHA-6s and LH(X)s would be 

the same size as the first LHA-6, which was authorized in 

2007 and is currently under construction. CBO also 

assumed that the last LHA-6 and the LH(X)s would 

include well decks, necessitating some redesign to the 

LHA-6 class and thus additional costs. (Well decks are 

large floodable areas in the sterns of most amphibious 

ships that allow amphibious vehicles and craft to be 

launched directly from the ships.) The cost of that 

redesign is included in CBO’s estimate for the LHA-6 

to be purchased in 2021. In briefings to CBO, however, 

some Marine Corps officials have said they would like to 

see a well deck installed in the 2017 ship as well.