REDUCING THE DEFICIT: SPENDING AND REVENUE OPTIONS
Congressional Budget Office - March 1997


DEF-05 CANCEL THE NEW ATTACK SUBMARINE


Annual Savings							Five-Year
Savings from			(Millions of dollars)		Cumulative
the 1997 Plan		1998	1999	2000	2001	2002	Total

Budget Authority	2,859	  248	2,240	  257	3,436	9,040

Outlays			  302	  867	  881	1,253	  971	4,274

NOTE: Savings relative to the Administration's 1998 plan appear in Appendix A.

As part of the overall reductions in military forces, the Navy is reducing its attack submarine force from 80 ships in 1996 to between 45 and 55 by 1999. To meet the overall force goal, the Navy is decommissioning some of its Los Angeles class (SSN-688) submarines before the end of their 30-year service life. At the same time, however, the Joint Chiefs of Staff (JCS) believe that the Navy will need 10 to 12 very quiet submarines by 2012 to compete with Russia's submarines, which have become quieter, making them harder to locate and track. To meet that goal and to maintain the industrial base for building submarines, the Navy is producing three Seawolf class submarines and is designing the New Attack Submarine (NSSN) to be their lower-cost successor.

The NSSN is the first submarine that will be less capable in many ways than its predecessor. It will be as quiet as the Seawolf but will be smaller and slower, carry fewer weapons, and not be able to dive as deep. Although the Seawolf was optimally designed for its primary mission of countering the more severe threat from Russia's submarines in the open ocean, the NSSN is being developed to operate in littoral waters close to potential regional foes.

Under the Clinton Administration's 1996 plan, the Navy purchased the third and last Seawolf in 1996 and planned to purchase the initial NSSN in 1998, the second in 2000, and two ships a year thereafter beginning in 2002. In the 1996 defense authorization act, the Congress instructed the Navy to gradually redesign the NSSN while producing one improved ship each year from 1998 to 2001. The design for producing the new submarine, which would cost less and be more capable than the NSSN, will not be selected before 2002. The Administration's 1997 plan incorporated but did not fund the two additional submarines in 1999 and 2001 that the Congress wanted. Its 1998 plan funds all four ships, but does so over a five-year period, skipping 2000. Procurement of more than one ship a year will begin no earlier than 2004.

The Congress revised the Administration's plan because it was concerned about both the design and the cost of the NSSN. The 1995 conference report on defense appropriations reflected the conferees' concern that the Navy could not afford the research, development, and production costs. The Navy projected that completing the research and development (R&D) program would cost $2.9 billion and that producing the first ship would cost $3.2 billion (in 1998 dollars), though the Navy believed it could lower that cost to $1.6 billion per ship by the time the fifth ship was purchased. The conference report also noted that the Navy would not need to proceed with the NSSN for nearly 10 years to meet its goal for submarines and that continuing to produce a limited number of Seawolf class ships during that period would be less expensive than buying the NSSN.

This option would cancel the NSSN and purchase Seawolf submarines at a low rate. To help maintain the submarine industrial base and modernize the fleet, the option would produce a Seawolf every other year from 1999 to 2002 and one in 2003 and every year thereafter.

Canceling the NSSN and producing the Seawolf at low annual rates would save about $2.9 billion in budget authority in 1998 and $9 billion during the 1998-2002 period compared with the Administration's plan as revised by the Congress. (In outlays, savings are $302 million in 1998 and $4.3 billion over five years.) Some of those savings would arise primarily from canceling the R&D program costing $1 billion. In addition, producing two more Seawolf ships in 1999 and 2001 would cost $8 billion less through 2002 than producing six NSSNs (one each year from 1998 to 2001 and two in 2002). Compared with the Administration's 1998 plan, which purchases four submarines through 2002, five-year savings in budget authority would be reduced to $4.5 billion during the 1998-2002 period.

The Navy's R&D program for the NSSN is expensive, particularly since it will produce a submarine that is in many ways less capable than the Seawolf. The Congress directed the Navy to redesign the ship using new technology to improve the design and further reduce the cost. The principal benefit of any lower-cost submarine--being able to buy more of them--may be nullified if unit costs for follow-on boats fail to decline as the Navy projects. The Navy projected that costs for the NSSN would decline by about 50 percent from the first ship to the fifth ship. Yet when the 688I (the improved version of the 688 submarine) began production, the costs dropped only 15 percent from the first to the fifth ship. Those two cases may not be entirely comparable, however, because costs for the detailed design of the first ship of a newly constructed class of ships may be higher than costs for the first ship of an improved class.

Continuing to produce the Seawolf submarine would allow the Navy to cancel the research and development program for the NSSN. The Navy could continue a low-level R&D program ($100 million a year) to develop new technologies as Seawolf ships were produced, thereby hedging against the need for a new- generation submarine if current projections of the threat should worsen.

During the Congressional debate on producing the third Seawolf, the Navy emphasized that Russia, although financially strapped and therefore unable to operate its nuclear submarine fleet up to its potential, is still investing money to buy new, very quiet attack submarines at low rates. As a result of Russia's investments, the JCS has set the requirement for 10 to 12 very quiet submarines by 2012. (The Seawolf, the NSSN, and presumably the next-generation submarine would all be quiet enough to meet the JCS standard.) Because the Seawolf's original mission was to fight such highly capable submarines, building additional Seawolf ships might be a hedge against any return by Russia as a hostile and strong military power. Procuring one Seawolf every other year from 1999 to 2002 and one every year from 2003 to 2007, plus the three already authorized, would enable the Navy to field a force of 10 very quiet ships by 2012, meeting the JCS requirement.

Although the Seawolf can perform missions in littoral areas, it might be less capable of carrying out those missions than submarines that are specifically designed for that purpose--the NSSN or the next-generation submarine. The NSSN has enhanced surveillance and special operations capabilities and may be able to get closer to shore in shallow water than the larger Seawolf. A larger ship, however, can carry greater numbers of special forces or Tomahawk missiles for attacking targets on land.

Continuing to produce Seawolf submarines at a low rate would also mitigate the effects on the submarine industrial base of canceling the NSSN. Although building Seawolf ships would do little to retain the capacity to design submarines, it would help maintain the industrial capacity to produce them. This alternative would probably provide enough work for only one of the two shipyards that can build nuclear submarines. If the alternative failed to provide the remaining yard with sufficient production work, that yard could take on some overhauls of existing submarines to help make up the difference. (Overhauls, which are usually done at public shipyards, use most of the skills required in building submarines.)

The low production rate might have a greater impact on subcontractors, but that effect could be mitigated in several ways: providing subcontractors with government subsidies, stockpiling critical components or shifting production of them to the shipyard, shifting other Navy work to the subcontractors, or using subcontractors to revitalize, modernize, or replace equipment on existing submarines. The industrial base for design (engineering and design teams) might be kept active by overhauling and modernizing existing submarines and developing additional technology to hedge against the need for a new-generation submarine. (The costs of those measures are not included in CBO's estimate of the savings for the option.)