The increasing costs of goods, in particular steel, is adding substantial costs to the Coast Guard’s shipbuilding and operations and threatens the procurement of one of two additional planned fast response cutters funded in fiscal year 2022, the service’s top official said on Thursday.
“Historic inflation” has increased the price of steel for shipbuilding by 48 percent in the past year, added 20 percent to fuel costs with a further increase coming, and certain parts to maintain medium endurance cutters are up 37 percent, Adm. Karl Schultz, the Coast Guard commandant, said in his written statement to the House Appropriations Homeland Security Subcommittee.
Rising costs mean a making a choice between conducting missions or recapitalizing aging assets, he said.
“With increased missions and historic inflation quickly outpacing budget growth, the Coast Guard finds itself in an all too familiar position, [either] remaining mission ready today or building service resilience for tomorrow,” Schultz said during his opening remarks.
Congress earlier this year in the FY ’22 omnibus spending bill for the federal government added $130 million for two additional fast response cutters (FRC), taking the program beyond the planned purchase of 64 of the 154-foot vessels that operate for up to five days at a time in the littorals. Schultz told the panel that the service is reviewing the impact of higher steel prices on the purchase of the two FRCs, saying he thinks there’s one more hull but “I don’t know if there’s two additional hulls.”
The Coast Guard will have to have a “conversation” with Congress about the $130 million, he said.
Moreover, the contract with Bollinger Shipyards, which builds the FRCs, includes an “equitable price adjustment clause,” and with 11 cutters currently under construction increased steel costs could add more than $100 million to these vessels, Schultz said.
The original program of record for the FRC was 58 boats, but that was amended to 64 based on Defense Department needs in the Persian Gulf region for patrol boat capacity. Four of six FRCs planned to be stationed in Bahrain are already there. Schultz said the Chief of Naval Operations hasn’t asked for FRCs but noted “that’s a rational conversation” to have given “we have a hot production line” for the vessels.
The Navy has already decommissioned five of its Cyclone-class patrol ships in the Gulf theater and next year plans to shed five more.
During hearing the subject of an additional high-endurance national security cutter (NSC) also came up.
Rep. Chuck Fleischmann (R-Tenn.), ranking member on the subcommittee, asked Schultz whether the Coast Guard needs a 12th NSC given the “increasing mission demand” on the service and the fact that the ships are replacing 12 Hamilton-class high-endurance cutters, all of which have been decommissioned. Congress previously appropriated long-lead funding for a 12th NSC but the Coast Guard has not spent any of this.
Schultz replied that because the Coast Guard is “constrained” by its “top-line” budget and doesn’t want to add another NSC at the expense of its other priorities, with the medium-endurance offshore patrol cutter (OPC) one of these. Current plans call for acquiring 25 OPCs, with the first ship due to be delivered in 2023 with operations to begin 16 to 18 months later, he said.
“If the Congress feels strongly that additional NSCs are there, I would say if we could do that not at the expense of our priority programs right now,” Schultz said.
HII [HII] builds the NSCs.
The first four OPCs are being built by Eastern Shipbuilding Group. The Coast Guard is hosting a competition and soon is expected to select a winner for the next 11 ships.
In addition to the OPC, the heavy icebreaker polar security cutter is another priority surface program for the Coast Guard.
Demand for Coast Guard assets increases every year. The service has stepped up support for U.S. defense forces globally and continues to monitor China’s national fishing fleet, which routinely violates territorial waters of other nations.