Special Fund Could Save Billions On New Nuke Subs: Forbes, CBO

WASHINGTON: Paying for the Navy’s new nuclear missile subs through a special fund with special authorities “could potentially save several hundred million dollars per submarine,” according to a recent Congressional Budget Office study. House Armed Services seapower subcommittee chairman Randy Forbes, father of the National Sea-Based Deterrence Fund, is unsurprisingly touting this little noticed conclusion of the respected CBO at a hearing this afternoon with CBO lead author Eric Labs. The Congressional Research Service’s highly respected Ron O’Rourke is at the witness stand as well..

“This sea-based deterrence fund is acquisition reform at its finest,” Forbes told me before the hearing. “It’s not just us making the argument now.” CBO’s rough estimate of “several hundred million” in savings is about five percent of the $7.3 billion cost per sub, but other experts have suggested the savings could be 10 or 15 percent, Forbes said. Across the 12-sub Ohio Replacement Program, he said, “we’ve got the opportunity to save billions of dollars.”

The CBO figure is just one sentence of a 41-page study of Navy shipbuilding. But it gives Forbes a new weapon to change the debate over the submarine fund, which has been criticized as an accounting gimmick at best and a Navy budget grab at worst.

The Navy is profoundly nervous that the Ohio Replacement Program will eat up so much of its traditional “shipbuilding & construction, naval” (SCN) account that it has nothing left for carriers, destroyers, attack submarines and so on. So Forbes helped create the fund as a way to pay for the subs outside the Navy budget altogether. The critics immediately saw two problems. First, creating a new fund doesn’t create any new money to put in it. Second, moving the ORP expense outside the Navy budget implicitly raids the other services to pay for it.

But Congress didn’t just create the fund: It also gave it special acquisition authorities not available to traditional shipbuilding under SCN. It can begin construction in advance, fund a single sub incrementally over multiple years, and, most significantly, buy components for multiple subs in a single bulk purchase.

All these savings are possible for other shipbuilding programs, but it takes special authorization from Congress. Forbes argues that these measures don’t automatically translate.

“This is one of those areas where the planets line up just right,” Forbes told me. “We absolutely know we’re going to build 12 of these boats” — that number is considered a minimum to sustain constant deterrent patrols — which means you can plan advance purchases and bulk buys with greater precision. Most weapons programs will start out with one number of ships, aircraft, or vehicles to buy and end up with another, Forbes argued: not here.

Not everyone buys this argument. “My question is this: why can’t Congress provide the same authorities for ORP in an account within the Navy budget?” asked CSIS budget guru Todd Harrison. “I think they are conflating two separate issues into one.  Giving the ORP additional authorities to make the acquisition more efficient is one issue.  Putting the funding in a separate account outside of the Navy’s topline is a separate issue.”

Indeed, the CBO report itself notes that providing bulk-buy and other authorities to the regular SCN fund could produce significant savings, albeit without offering a figure.

“There are two big reasons why [we have] a special fund,” Forbes told me, “We not only want the cost savings — which is important — but we also get better cost visibility so we can watch it in this fund.”

And, though Forbes didn’t say it, there is of course the politics: pulling the ORP out of the Navy budget and giving it its own fund makes Congress’s priorities plain.