The Navy determines the number of sailors and the skills needed to operate its ships through a standardized manpower requirements process. The Navy then mans the ships by filling the required positions— to the extent that the number and type of positions are funded and the trained and qualified personnel are available to fill them—as summarized in figure 1. This manpower requirements process is based primarily on the documents that lay out a ship class’s required operational capabilities and projected operational environment (i.e., the missions the ship will fulfill and how it will operate to carry them out). The Navy Manpower Analysis Center is the chief agent in determining manpower requirements by validating a ship’s primary workload; applying allowances to account for working conditions, among other factors; and computing the manpower requirements—the number and mix of positions needed to meet the Navy’s operational expectations. The Navy Manpower Analysis Center develops manpower requirements for new ship classes either after a ship’s first deployment or about 1 year after the ship has become operational, and publishes the validated requirements in Ship Manpower Documents. Navy Manpower Analysis Center officials reassess a ship’s manpower requirements to ensure that they are up to date every 5 years or after major capability upgrades, changes to allowances, or other changes. After the manpower requirements are determined for a ship, the Navy mans the ship by filling the required positions to the extent that the number and type of positions are funded, and the trained and qualified personnel are available to fill them. After the budgeting and sailor distribution process, a ship’s manning level may be lower than the manpower level that the manpower requirements process has determined was needed. The process by which manpower requirements are determined for shore-based personnel is described in appendix II. The Navy has tried several ways to reduce the size of ship crews in order to reduce costs. The optimal manning initiative, introduced as a pilot program on a cruiser and destroyer in 2001 and implemented fleet-wide on other surface and amphibious ships beginning in 2003, was intended to improve efficiency. Initially, optimal manning levels were often derived by changing watchstanding requirements. As an example, the number of watchstanders required to serve as battle station phone operators and stretcher bearers was reduced, and, as a result, 10 positions were removed from ships with these positions. Other watchstations were consolidated or eliminated. Between 2003 and 2007, the Navy transferred some administrative workload from ship to shore personnel, which further reduced the size of ship crews. This corresponding effort, known as Pay and Personnel Ashore, had the effect of moving two-thirds of the personnel specialist positions responsible for these administrative functions from ship crews to shore support units. To further drive down ship crew sizes, the Navy changed workload assumptions and the equation used to determine manpower requirements in 2002. For example, it increased the Navy standard workweek from 67 to 70 productive hours per sailor, which further reduced shipboard manning by up to 4 percent. A time line of reduced manning initiatives that were implemented from 2001 to 2016 is included in figure 2. In addition to reducing crew sizes on legacy ships through the means described, the Navy also designed its newest ship classes to operate with smaller crew sizes, relying on new technologies, automation, and shore support to enable these reductions. Profiles of new ship classes designed to operate with reduced crew sizes are included in appendixes III, IV, V, and VI. As noted in the Navy’s 2010 Fleet Review Panel report, a primary lesson of the optimal manning period is that using unvalidated assumptions to reduce crews contributed to the erosion of the material condition of the fleet. In response to these findings, the Navy has partially restored crew sizes on its legacy ships and has increased the size of shore units to better support its ships (see app. VII for information on shore support personnel). In addition, the Navy took several other steps to address the declining material condition of the surface fleet, such as the following: Establishing the Surface Maintenance Engineering Planning Program in 2010 to provide centralized life-cycle maintenance engineering for surface ships, maintenance and modernization planning, and management of maintenance strategies. The Navy also established the Commander, Navy Regional Maintenance Centers (CNRMC) in 2010, to coordinate the depot- and intermediate-level maintenance of its surface fleet. The goal of these efforts is to improve the material condition and readiness of the surface fleet and to adhere to a more disciplined deployment and maintenance schedule. Navy officials told us that, as a result of these initiatives, the Navy has developed a better understanding of its ships’ material condition and maintenance needs, and maintenance requirements have generally increased. Creating the Surface and Expeditionary Warfare Training Committee in 2013, which is to inform leadership of surface manpower and training investments, resourcing, acquisition, and execution. Officials said that program offices for new ships are now required to annually update manpower estimates and adjust manpower requirements based on lessons learned. Introducing a revised operational schedule known as the Optimized Fleet Response Plan in 2014, which was intended, among other things, to provide for the predictable scheduling of ship maintenance tasks and ensure that ship crews were manned with a sufficient number of sailors with the right qualifications. Ship operating and support costs—the total cost of operating, maintaining, and supporting a ship, including personnel, operations, maintenance, sustainment, and modernization—increased during the optimal manning period and have continued to increase for most ship classes, in part because increases in maintenance costs offset reductions in personnel costs. Since the end of the optimal manning period around 2010, the Navy has partially restored crew sizes, and personnel costs have increased for all ship classes. In addition, maintenance costs have increased for some ship classes and decreased for others, although maintenance costs are still above pre–optimal manning levels for all ship classes. Navy officials attributed maintenance cost increases to reduced crews, longer deployments, and other factors. Maintenance backlogs also increased during the optimal manning period for the same reasons and have continued to grow for most ship classes. During the optimal manning period—which varied among ship classes but generally was around fiscal years 2004 to 2010—the Navy reduced average crew sizes, as shown in figure 3, resulting in reductions in personnel costs. Since the end of optimal manning, the Navy has increased crew sizes, leading to increases in associated personnel costs. However, the crews and associated personnel costs for all ship classes— with the exception of dock landing ships (LSD 41/49–classes)—are still smaller than they were before the optimal manning initiative, in part because the Navy has retained the longer 70-hour workweek component for productive work that it had adopted during the optimal manning period, which results in a requirement for fewer crew members. Our analysis found that, at the same time that the Navy reduced crew sizes and personnel costs, average maintenance costs per ship increased for all ship classes. These increases more than offset the decreases in personnel costs that were achieved during the optimal manning period. Since the Navy ended the optimal manning initiative, the change in maintenance costs has varied; maintenance costs continued to increase for cruisers and destroyers, but have decreased for aircraft carriers, amphibious assault ships, and dock landing ships. In all cases, maintenance costs are above pre–optimal manning levels, as shown in figure 4. Further, our analysis found that overall operating and support costs increased for all classes during the optimal manning period and have continued to increase for most ship classes since optimal manning ended. This increase was driven in part by increases in maintenance costs offsetting decreases in personnel costs. Navy officials acknowledged that the reduced crew sizes during the optimal manning period, along with reductions in shore support, may have yielded short-term cost savings, but also increased maintenance costs over the longer term, in part because reduced crew sizes resulted in maintenance being deferred, which developed into more costly issues that had to be addressed later. Navy officials also attributed increases in maintenance costs to increased deployment lengths, increased reliance on contractors to perform maintenance, and some class-specific maintenance and modernization efforts. Other factors, such as the age of a ship, may also affect maintenance costs. Our analysis does not isolate the effects of these factors from the effect of the optimal manning initiative. Navy officials told us that shifts from organizational- and intermediate- level to depot-level maintenance increased overall maintenance costs. As noted above, this change occurred in part because reduced crew sizes resulted in minor maintenance being deferred, which developed into more costly issues that had to be addressed later at the depot level. Our analysis of Navy maintenance costs found that intermediate-level maintenance costs increased for most classes during the optimal manning period, and depot-level maintenance costs increased for all classes, as shown in figures 5 and 6. Depot maintenance costs have continued to increase for most classes and are above pre–optimal manning levels for all classes as of fiscal year 2015. Navy officials also acknowledged that reduced manning is enabled by an increased reliance on outside entities, such as contractors, to perform maintenance. Our analysis found that the cost of maintenance performed by contractors and in private shipyards increased for all ship classes during the optimal manning period and has continued to increase for most ship classes since crew sizes were restored. However, increases in contractor costs have been driven primarily by the increase in depot-level maintenance. The Navy generally contracts with private shipyards and other firms for the repair, maintenance, and modernization of nonnuclear surface ships. Private shipyards and contractors are generally focused on depot-level maintenance, and are responsible for most depot-level maintenance. As a result, increases in depot-level maintenance have driven increases in contractor maintenance costs. Contractor maintenance costs at the intermediate level decreased for most classes during the optimal manning period and have continued to decrease for most classes in the period since.