Navy’s Ray Mabus: ‘Sequestration Looms Over Everything’ On Shipbuilding

CAPITOL HILL: Sequestration is not the Navy’s only shipbuilding problem. In the near term, the automatic cuts to the 2013 budget are bedeviling efforts to save money by buying ships in bulk. Negotiators are racing the clock to salvage a multi-year procurement contract to buy 10 DDG-51 Aegis destroyers for the price of nine; Navy Secretary Ray Mabus told reporters today he was “optimistic.”

In the longer term, however, after the 10-year, $500 billion cut in defense spending required by sequestration, the Navy has dug a different hole for itself. The service has crafted a 30-year shipbuilding plan that requires massive increases in funding to levels that the Navy’s acquisition chief Sean Stackley admitted to Congress had not been seen since the Reagan build-up.

“Can you present… a scintilla of evidence” that the 30-year plan can be funded, an exasperated Rep. Randy Forbes, the chairman of the House Armed Services Committee’s panel on seapower, asked during a hearing this morning. 

“I am a little frustrated,” Forbes told me after the hearing. “The way you fund the shipbuilding plan is fantasyland.” Over the last 30 years, the non-partisan Congressional Budget Office calculates the Navy has had, on average, just under $15 billion a year to spend on ships; the Navy’s future plan requires an average of almost $19 billion — and CBO says a more accurate figure would be $22 billion. Groaned Forbes, “We’re about $7 billion off a year.”

While Forbes’ frustration was mounting, over on the other side of the Capitol, Mabus, Chief of Naval Operations, Adm. Jonathan Greenert, and Marine Corps Commandant Gen. James Amos detailed their fiscal woes before the defense panel of the almost all-powerful Senate Appropriations Committee.

The military is under “incredible fiscal stress,” said the sympathetic committee chairwoman, Sen. Barbara Mikulski, who opened the defense hearing (for the delayed subcommittee chairman, Sen. Richard Durbin). “We’re asking you to do more with less…. This isn’t just about statistics, it’s about readiness.”

“Pilots will get less flight time, ships will get less time at sea, and marines less time in the field,” Mabus agreed. On the upside, however, after a decade of overruns, delays, and simply too few ships being delivered to the fleet, he said, “We have 47 ships under contract today, 43 of which were contracted since I took office.”

This boast has become part of the secretary’s standard spiel, but, argued noted naval affairs blogger Raymond Pritchett in a tweet, “Mabus should be proud. It’s the most ships on a single SECNAV[‘s] watch since Lehman,” Reagan’s Secretary of the Navy during the drive for a (never quite achieved) 600-ship fleet.

The problem, however, is the Navy’s near-term plan for actually buying these ships ignores sequestration — as does the entire Defense Department budget — and the long-term plan requires Reaganesque levels of funding.

A particular problem on both timescales is the replacement for the aging Ohio-class nuclear-missile submarine, the SSBN(X). Long-term, the new boomer will be hugely expensive to build, crowding out other Navy programs unless the shipbuilding budget grows. (The Navy would love to do this by getting money from the rest of the Defense Department, arguing that SSBN(X) serves the nation’s strategic deterrence rather than a Navy-specific mission). Near-term, although SSNB(X) does not enter service until circa 2029, the Navy is already spending to develop it.

So far, “we are on track with R&D and all of the early development work,” Sec. Mabus told the Senators. “But…sequestration holds the potential to upset this timeline in a fairly dramatic way.”

“People ask me what is my No. 1 program of concern, and I will tell you it’s the Ohio replacement program,” added Adm. Greenert. “I look at that more than any other.” (He later told reporters he meant “no. 1 priority”: “I’m not concerned” in the sense of being worried, he said).

To control the cost of such long-term mega-programs, the Pentagon and defense contractors alike prefer to sign a multi-year procurement (MYP) contract, where industry gives the government a discount in return for agreeing to several years’ purchases at once instead of requiring the usual annual reauthorization. Congress is generally uneasy about committing itself beyond the current budget cycle, but in the legislation for fiscal year 2013, it approved MYPs for up to 10 Virginia-class attack submarines and up to 10 Arleigh Burke-class destroyers, aka DDG-51s. Both these deals, however, are yet to be sealed, and sequestration complicates closing them down.

“We risk throwing away significant savings,” lamented Maine’s Susan Collins. In particular, she noted, the Navy needs to update Congress on the destroyer deal “in the next two weeks in order to sign the contracts before the current bids from the shipbuilders expire, because they were submitted some ten months ago.”

(The sequester is also causing inefficiencies in the hitherto highly successful Virginia-class attack submarine program, said HASC seapower’s top Democrat, Rep. Joe Courtney, on his side of the Hill).

“Frankly, the culprit here is sequestration,” Mabus replied to Collins, “because you provided the correct amount of money in the appropriations bill for ’13 to accomplish this. Sequestration then took its percentage out.” The Navy is now working to transfer, or “reprogram,” money from other accounts to make up the shortfall — something that must be approved by both the Defense Secretary and Congress.

“Sequestration looms over everything in terms of these multi-year procurements and the ability to execute them because you have to take a percentage out of every program,” Sec. Mabus sighed to reporters after the hearing. “We’ve got Virginia-class, we’ve got DDG-51, we’ve got aircraft programs like the V-22 [Osprey tilt-rotor aircraft] that are in multi-years, the E-2D [Hawkeye reconnaissance aircraft] is in a multi-year.”

“I think both of us remain optimistic that we’re going to get the contracts done for the tenth ship,” not nine destroyers, Mabus said. But can the Navy get it done before the bids expire? “We’re working with the shipyards,” said the clearly uncomfortable Navy Secretary. “They understand the situation.”

“There’s alternatives,” interjected Adm. Greenert, looking much more confident. “There’s nine with an option [to buy a 10th later]; there’s try to get 10 [outright]. We’ve got the bids; we’ll lay it down, say ‘here’s the money we have, what do you think?'”

“Can we get them done on time?” the admiral asked. “Yeah, we can get them on time.”

Forbes was less sanguine about the situation. “Sequestration has all kinds of cancerous concerns,” he said. “It’ll make us rob from Peter to say Paul; it’ll increase the costs of some of the ships we buy” by undermining such efficiencies as multi-year deals.

But, Forbes went on, “I don’t want us to stop there, [just] looking at the current hot spots and not realizing that, unless we change these curves, we do not have a good outcome for the next decade or two.”