The Navy’s new FFG(X) frigate program could cost 40 percent more than the Navy’s estimate, the Congressional Budget Office (CBO) said in a new report.
While the Navy estimates the first 10 frigates will cost $8.7 billion in FY 2020 dollars, at an average of $870 million per ship, CBO said its own estimate is they could be as much as $1.2 billion per ship for a total of $12.3 billion in FY 2020 dollars.
The CBO report, The Cost of the Navy’s New Frigate, was released on October 13.
CBO noted its analysis is partially based on its independent weight-based cost model. It said if the Navy is accurate, the frigate “would be the least expensive surface combatant program of the past 50 years” when measured in cost per thousand tons of an empty ship. This includes both lead ship and average cost of the first 10 ships.
The Navy awarded Fincantieri’s Marinette Marine a $795 million detail design and construction contract for the FFG(X) in April, covering DD&C of the first ship and additional options for the following nine ships. If all options are exercised the total contract will rise to $5.6 billion (Defense Daily, April 30).
The Navy plans to ultimately buy upward of 20 frigates.
Last week, Secretary of the Navy Kenneth Braithwaite announced the new FFG(X) frigates would be named the Constellation-class and the first ship will be FFG-62 (Defense Daily, Oct. 8).
CBO argued Constellation-class will be large for a frigate by current global standards and more densely packed than other ships. Its full-load displacement is set for about 7,300 tons compared to 9,100 tons for the Flight IIA Arleigh Burke-class destroyer and 3,400 tons for the Freedom-variant Littoral Combat Ship.
CBO said it reached its estimate by examining other surface combatant programs to devise a weight-based estimate for the first 10 and following 10 frigates the Navy plans to buy. It used the Arleigh Burke Flight III, Freedom-variant LCS, and DD-963 Spruance-class destroyer as analogies in order to derive the $1.6 billion procurement cost for the lead frigate.
Under the CBO estimate, the first 10 frigates “would cost $205 million for every thousand tons of lightship displacement” while it estimates the following 10 would cost an average of $1.1 billion per ship or another $10.9 billion, assuming the Navy uses the same design and shipbuilder.
Although the Navy has not reported how much it estimates the frigate to cost to operate and maintain over a 25-year service life, CBO noted these costs “typically represent most of the lifecycle cost of a weapon program.” Therefore, the office estimated if the FFG(X) was in service today its direct costs for operation and support would be $63 million per ship per year.
“If the indirect and overhead costs associated with operation and support of the FFG(X) were included, then the estimated amount would be $130 million per ship annually,” CBO added.
The report estimated the total direct cost of operating and supporting the planned 20 frigates over their service life lasting from 2026 to 2060 would cost nearly $40 billion. However, after adding indirect and overhead costs, that could rise to $90 billion, calculated in 2020 dollars.
Furthermore, CBO said since the FFG(X) is planned to eventually use a dual-crew system, like the LCSs, it will increase warship utility by being on deployment for more of the service life but also increase operations and support costs.
In contrast, the Navy’s FY ’21 budget request estimates the first ship will cost $1.2 billion in 2020 dollars and the second through 10th ships will cost about $835 million per ship, for a total $8.7 billion in 2020 dollars.
Whereas the Navy previously aimed for the frigates to cost $800 million to $950 million per ship in 2018 dollars including government-furnished equipment, in 2020 dollars the target range equates to $836 million to $1 billion.
“Thus, the cost estimates in the Navy’s 2021 budget for the additional FFG(X)s are at the very low end of the range the Navy established at the outset of the competition,” the report said.
However, CBO said according to information the Navy provided there is a 50 percent chance the first two ships will exceed estimated costs and a 60 percent chance the third through 10th ships will be more expensive than estimated too.
CBO noted several factors argued the Navy’s cost estimates are overly optimistic.
It said the Navy’s estimate for the frigate to cost $145 million per thousand tons is less than any other surface combatant but also less than a non-Navy warship, namely the Coast Guard’s National Security Cutter (NSC). The NSC is the only non-Navy ship CBO analyzed and found it 24 percent more expensive, $180 million per thousand tons, than the FFG(X) estimate.
This is “despite the fact that the NSC, as a Coast Guard ship, has a more limited collection of expensive combat-system equipment and is built to a lower survivability standard (that is, less rugged and with less system redundancy) than the FFG(X).”
The FFG(X) estimate is even less than the current Freedom-variant LCS ships being produced at the Fincantieri Marinette Marine shipyard now, even while the LCS is “much less capable” than the frigate is planned to be. That prime contractor for that LCS variant is Lockheed Martin [LMT].
CBO argued the LCSs also benefit from production efficiencies in having built 12 ships already and increased shipyard worker familiarity with the ship model.
Overall, CBO found the Arleigh Burke-class destroyers and Ticonderoga-class cruisers cost 57 to 175 percent more per thousand tons than Navy projections for the FFG(X ) while less capable ships like the Spruance-class destroyer, Oliver Hazard Perry-class frigate, National Security Cutters, and LCS with fewer weapons or less capabilities against air attacks cost 45 to 79 percent more by weight to build.
Notably, CBO found “the less the Navy estimated a ship would cost per thousand tons, the greater its percentage growth actually was.”
Indeed, the service estimated the first DDG-51 would cost 16 percent less per thousand tons than the first Ticonderoga-class cruiser but actual costs grew just over 10 percent over service estimates; it estimated the Zumwalt-class destroyer would cost 32 percent less than the DDG-51 while it was 44 percent higher; and the Navy estimated LCS-1 would cost 47 percent less than the first Perry-class frigate but costs grew almost 150 percent over the estimate.
CBO noted two more factors that suggest likely cost growth. First, the Navy’s experience with the DDG-51 has some similarities. At the time, the Navy argued the Arleigh Burke-class had reduced cost growth risk due to using familiar combat systems, weapons and power systems, like the FFG(X). Indeed, the Aegis combat system, vertical launch system cells, and propulsion equipment was already used in Ticonderoga-class cruisers. However, it still cost about 10 percent more than estimates.
Moreover, the FFG(X) is going to be more densely built than the base FREMM, with more steel reinforcement and compartmentalization.
CBO noted in the past the Navy said denser ships are more expensive to build., by weight, than less dense ones. FFG(X) will also be built with about the same survivability standards as the DDG-51 as well as similar combat and weapon systems.
“That suggests that the Arleigh Burke’s cost per thousand tons may be the most appropriate analogy for the FFG(X) in terms of cost.”
However, CBO still mentioned some factors that support the Navy estimate: the Italian FREMM design model is stable and has been in production for many years; while FFG(X) will carry U.S. weapons, the design is otherwise similar to the FREMM; little if any new technology is being developed for the ship; the ship’s main radar will be a smaller version of the SPY-6 being installed on Flight III Arleigh Burke-class destroyers but cost estimates for it have gone down since the start of the Flight III program; Fincantieri is an experienced builder of small surface combatants; and a DoD office of Cost Assessment and Program Evaluation (CAPE) independent was less than the Navy’s estimate.