	Introduction and Issue For Congress

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. 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. Background

		Recent Reports Proposing Lower-Cost Designs

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). A medium-sized nuclear-powered carrier. A very small, high-speed VSTOL carrier. Options for a reduced-cost surface combatant include a roughly 11,000-ton cruiser-destroyer, a roughly 6,000-ton frigate, and a lower-cost gunfire support ship based on the basic LPD-17 amphibious ship hull design. Legislative Activity For FY2007

		FY2007 Defense Authorization Act (H.R. 5122/P.L. 5122 (conference report H.Rept. 109-702 of September 29, 2006) authorizes 4-year incremental funding for the CVN-21 class aircraft carriers CVN-78, CVN-79, and CVN-80. Section 122 establishes unit procurement cost caps for CVN-21 class aircraft carriers. Section 123 increases a previously legislated procurement cost cap for the CVN-77 aircraft carrier. Section 125 establishes a unit procurement cost cap for LHA(R) amphibious assault ships. Section 126 establishes unit procurement cost caps for four LPD-17 class amphibious ships. Section 215 authorizes $4 million for implementing or evaluating Navy shipbuilding technology proposals under the Defense Acquisition Challenge Program. Section 1016 directs the Navy to conduct an assessment of naval vessel construction efficiencies and of the effectiveness of special contractor incentives. The sections establishing new procurement cost caps allow the caps to be adjusted upward for inflation and other factors. 5631/P.L. Other Options for Responding to Rising Ship Costs

Aside from reducing planned ship procurement rates or shifting or shifting to lower-cost ship designs, one option for responding to rising Navy ship procurement costs would be to increase annual ship-procurement funding.
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 the 30-year shipbuilding plan that the Navy 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. The issue for Congress is how to respond to rising Navy ship procurement costs.
Aside from reducing planned ship procurement rates, one option would be to reduce Navy ship procurement costs by shifting from currently planned designs to designs with lower unit procurement costs. Lower-cost ship designs have been proposed in recent reports by the CBO, Department of Defense's Office of Force Transformation (OFT), and the Center for Strategic and Budgetary Assessments (CSBA).
Options for lower-cost submarines include a non-nuclear-powered submarine and a reduced-cost SSN design using new technologies now being developed. Options for lower-cost aircraft carriers include a medium-sized, conventionally powered carrier and a small, high-speed carrier. Options for lower-cost major surface combatants include a new-design 11,000-ton cruiser-destroyer, a 6,000-ton frigate (FFG(X)), or a lower-cost gunfire support ship. Options for a lower-cost smaller surface combatant include a 1,000- or 100-ton surface ship.
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364). Section 121 of P.L. 109-364 (conference report H.Rept. 109-702 of September 29, 2006) authorizes 4-year incremental funding for the CVN-21 class aircraft carriers CVN-78, CVN-79, and CVN-80. Section 122 establishes unit procurement cost caps for CVN-21 class aircraft carriers. Section 123 increases a previously legislated procurement cost cap for the CVN-77 aircraft carrier. Section 125 establishes a unit procurement cost cap for LHA(R) amphibious assault ships. Section 126 establishes unit procurement cost caps for four LPD-17 class amphibious ships. Section 215 authorizes $4 million for implementing or evaluating Navy shipbuilding technology proposals under the Defense Acquisition Challenge Program. Section 1016 directs the Navy to conduct an assessment of naval vessel construction efficiencies and of the effectiveness of special contractor incentives. The sections establishing new procurement cost caps allow the caps to be adjusted upward for inflation and other factors.
This CRS report will be updated when events warrant.