Rising procurement costs for Navy ships are a matter of concern for both Navy officials and Members of Congress who track Navy-related issues. The Congressional Budget Office (CBO) estimates that executing a 30-year Navy shipbuilding plan submitted to Congress in early 2006 may require annual funding levels about 33% higher than the Navy plans, and about 76% more than the Navy has received on average in recent years. Combined with constraints on ship-procurement funding, rising ship procurement costs have caused the Navy in recent years to reduce planned ship procurement rates. Some Members of Congress have expressed concern about the effects these reduced rates would have on the future size of the Navy and on the shipyards that build the Navy's ships. The issue for Congress is how to respond to rising Navy ship procurement costs. Congress's decisions on this issue could affect future Navy capabilities, Navy funding requirements, and the shipbuilding industrial base. Aside from reducing planned ship procurement rates, options for responding to rising Navy ship procurement costs include the following: increasing annual Navy ship-procurement funding; changing the way Navy ships are funded in the budget; making greater use of multiyear procurement (MYP) in Navy ship-procurement; changing the acquisition strategy for building certain Navy ships; taking steps to reduce the amount of shipyard fixed overhead costs that are incorporated into the procurement costs of Navy ships; improving the operating efficiency of yards building Navy ships; building ships without some of their planned equipment (or with less expensive substitute equipment); and building ships in foreign shipyards where construction costs may be lower to due lower wages and material prices or other factors. For additional comments relating to these options, see Appendix . An additional option, particularly if the above options are not implemented or prove insufficient, would be to reduce Navy ship procurement costs by shifting from currently planned designs to designs with lower unit procurement costs. This report focuses on this option. The following section of the report provides background information on notional options for lower-cost attack submarines, aircraft carriers, larger surface combatants, and smaller surface combatants. The section that follows discusses issues that Congress may consider in assessing the merits—the potential advantages and disadvantages—of shifting to lower-cost designs. The final section of the report reviews recent legislative activity relating to rising Navy ship procurement costs. Lower-cost designs for attack submarines, aircraft carriers, larger surface combatants, and smaller surface combatants have been proposed in recent reports on the future of the Navy by the CBO, DOD's Office of Force Transformation (OFT), and an independent policy-research organization called the Center for Strategic and Budgetary Assessments (CSBA). Several of the lower-cost ship designs discussed below are taken from these reports. Options for lower-cost Navy ship designs can be generated by starting with currently planned Navy ship designs and making one or more of the following changes: Reducing ship size. For a given type of ship, procurement cost tends to be broadly proportional to ship size. Reducing ship size can thus reduce procurement cost. The Navy can be viewed as using this strategy for the Littoral Combat Ship (LCS), which is to be considerably smaller than existing major Navy surface combatants, but the strategy can be applied more widely. Shifting from nuclear to conventional propulsion. This is a strategy that can be considered for the Navy's submarines and aircraft carriers, whose current designs are nuclear-powered. Equipping a Navy ship with a conventional (i.e., fossil-fuel) propulsion plant rather than a nuclear propulsion plant can reduce the ship's procurement cost by several hundred million dollars. Shifting from a hull built to military survivability standards to a hull built to commercial-ship survivability standards. A hull built to military survivability standards has more armoring and internal compartmentalization than a hull built to commercial-ship standards, making it more expensive to build than a commercial-like hull. The Navy is considering building ships for its planned Maritime Prepositioning Force (Future), or MPF(F), squadron, with commercial-like hulls, but the strategy can be applied more widely. Using a common hull design for multiple ship classes. Using a common hull design for multiple ship classes avoids the cost of designing a new hull for each new class of ship, and permits ship classes sharing a common hull to benefit from improved production economies of scale regarding their hulls. The Navy plans to use the hull design for its planned DDG-1000 (formerly DD(X)) destroyer as the hull for its planned CG(X) cruiser, but the strategy can be applied more widely. The OFT report proposes building four large surface ships—an aircraft carrier, a missile-and-rocket ship, an amphibious assault ship, and a small-craft "mother" ship—using a common merchant-like hull. The CSBA report proposes using hull design for the Navy's LPD-17 class amphibious ship for building other kinds of ships. Most of the lower-cost ship options presented below use one or more of these four approaches. Information on the estimated procurement costs of the lower-cost designs is presented when available. Lower-cost ship designs using these approaches will in most cases be individually less capable than the currently planned ship designs from which they are derived, and this is one of the assessment factors that is discussed in the final section of the report. For each category of ship below, the discussion describes the current design and then outlines potential lower-cost options. The discussions are descriptive only; the potential advantages and disadvantages of shifting to the lower-cost designs are discussed in the final section of the report. Current design : Virginia (SSN-774) class nuclear-powered submarine Potential lower-cost options: AIP-equipped non-nuclear-powered submarineReduced-cost " Tango Bravo " nuclear-powered submarine The Navy is currently procuring one Virginia (SSN-774) class nuclear-powered attack submarine (SSN) per year. Each submarine currently costs about $2.6 billion to procure. The FY2007-FY2011 Future Years Defense Plan (FYDP) maintains Virginia-class procurement at one per year through FY2011. The Navy is proposing to maintain in coming years a fleet of 313 ships, including 48 SSNs. Fully supporting the Navy's reportedly planned force of 48 boats could involve procuring a total of 35 boats during the 16-year period FY2007-FY2022, or an average of about 2.2 boats per year. A continuation beyond FY2011 of the current one-per-year rate, in contrast, could reduce the SSN force to fewer than 30 boats by about 2030, before recovering to a steady-state level of 33 boats. One option for a lower-cost attack submarine would be a non-nuclear-powered submarine equipped with an air-independent propulsion (AIP) system that could be procured in tandem with Virginia-class SSNs. Another option would be a reduced-cost SSN using new "Tango Bravo" technologies being developed by the Navy and the Defense Advanced Research Projects Agency (DARPA) that would be procured as a successor to the Virginia-class design. Non-nuclear-powered submarines are less expensive than nuclear-powered submarines not only because of the difference in propulsion systems, but also because non-nuclear-powered submarines tend to be smaller than nuclear-powered submarines. The OFT report proposed a future Navy consisting of several new kinds of ships, including air-independent propulsion (AIP)-equipped non-nuclear-powered submarines. An AIP system such as a fuel-cell or closed-cycle diesel engine extends the stationary or low-speed submerged endurance of a non-nuclear-powered submarine. AIP-equipped submarines are currently being acquired by certain foreign navies. AIP submarines could be procured in tandem with Virginia-class boats. One possibility, for example, would be to procure one Virginia-class boat plus one or more AIP submarines each year. The OFT report recommended substituting four AIP submarines for one Virginia-class submarine in each carrier strike group, suggesting that four AIP submarines might be procured for the same cost ($2.4 billion to $3.0 billion in the FY2006-FY2011 FYDP) as one Virginia-class submarine. This suggests an average unit procurement cost for an AIP submarine of roughly $600 million to $750 million each. Although AIP submarines being built by other countries might cost this much to procure, a U.S. Navy AIP submarine might be built to higher capability standards and consequently cost more to procure, possibly reducing the equal-cost ratio of substitution to three to one or possibly something closer two to one. If so, then the annual cost of procuring one Virginia-class SSN plus one, two, or perhaps three AIP submarines could be equal to or less than that of procuring two Virginia-class boats per year. The Virginia class was designed in the early to mid-1990s, using technologies that were available at the time. New technologies that have emerged since that time may now permit the design of a new SSN that is equivalent in capability to the Virginia class design, but substantially less expensive to procure. The Navy and DARPA are now pursuing the development of these technologies under a program called Tango Bravo, a name derived from the initial letters of the term "technology barriers." As described by the Navy, TANGO BRAVO will execute a technology demonstration program to enable design options for a reduced-size submarine with equivalent capability as the VIRGINIA Class design. Implicit in this focus is the goal to reduce platform infrastructure and, ultimately, the cost of future design and production. Additionally, reduced platform infrastructure provides the opportunity for greater payload volume.