Monday, March 2, 2015

U.S. Navy: It'll cost $139 billion to replace Ohio Class submarines

Jason Sherman, Inside the Navy, Feb. 27

The Navy estimates the cost to develop and procure the Ohio Class Replacement submarine fleet -- accounting for anticipated future inflation -- will be $139 billion, the first time the service has disclosed an estimate for the new shipbuilding program in "then-year" dollars. The service also reports new success in reducing the estimated cost to build the fleet.
Sean Stackley, the Navy acquisition executive, submitted to Congress the figures -- previously provided in constant dollars that do not contain any adjustments for inflation that have occurred outside 2010 -- in testimony prepared for a Feb. 25 hearing of the House Armed Services seapower and projection forces subcommittee. In constant 2010 dollars, the Navy estimates the new 12-boat submarine fleet will cost $80.5 billion to develop and procure.
Using then-year dollars, Navy estimates the cost of the lead ship will be $8.8 billion, excluding non-recurring costs. In constant dollars, the Navy estimates the lead ship will cost $6.2 billion. That estimate improves on the Navy's previous forecast for the lead ship of $10 billion, or $6.8 billion in constant dollars, according to the service.
The true cost of the lead ship will also include a substantial portion of non-recurring engineering and design work that Stackley, in the accounting provided to lawmakers, reports will be $22.4 billion, or $17.1 billion in constant-year dollars.
The non-recurring funding is a combination of research and development costs for the ship class that can be amortized across the fleet, some unique to the lead ship, and ship construction funds dedicated to building the first boat of the new class.
Follow-on ships two through 12 are projected to cost an average of $9.8 billion, or $5.2 billion in constant dollars. This estimate would indicate the Navy has reduced the estimated cost of follow-on ships. The service previously estimated boats two through 12 would cost $10.5 billion, or $5.4 billion in constant-year dollars, according to figures Stackley provided lawmakers.
The Pentagon's acquisition executive in 2011 set a target cost of $4.9 billion in constant year 2010 dollars for boats two through 12.

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