 |
NAVY AIRCRAFT CARRIERS
Cost-Effectiveness of Conventionally and Nuclear-Powered Aircraft Carriers
GAO/NSIAD-98-1 -- August 1998 |
LIFE-CYCLE COSTS FOR
NUCLEAR-POWERED AIRCRAFT CARRIERS
ARE GREATER THAN FOR
CONVENTIONALLY POWERED CARRIERS
============================================================ Chapter 3
A nuclear-powered carrier costs about $8.1 billion, or about 58
percent, more than a conventionally powered carrier to acquire,
operate and support for 50 years, and then to inactivate. The
investment cost for a nuclear-powered carrier is more than $6.4
billion, which we estimate is more than double that for a
conventionally powered carrier. Annually, the costs to operate and
support a nuclear carrier are almost 34 percent higher than those to
operate and support a conventional carrier. In addition, it will
cost the Navy considerably more to inactivate and dispose of a
nuclear carrier (CVN) than a conventional carrier (CV) primarily
because the extensive work necessary to remove spent nuclear fuel
from the reactor plant and remove and dispose of the radiologically
contaminated reactor plant and other system components. (See table
3.1.)
Table 3.1
Life-Cycle Costs for Conventional and
Nuclear Aircraft Carriers (based on a
50-year service life)
(Fiscal year 1997 dollars in millions)
Cost category CV CVN
------------------------------------------------------ ------ ------
Investment cost\a
Ship acquisition cost $2,050 $4,059
Midlife modernization cost 866 2,382
Total investment cost $2,916 $6,441
Average annual investment cost $58 $129
Operating and support cost
Direct operating and support cost $10,43 $11,67
6 7
Indirect operating and support cost 688 3,205
Total operating and support cost $11,12 $14,88
5 2
Average annual operating and support cost $222 $298
Inactivation/disposal cost
Inactivation/disposal cost $53 $887
Spent nuclear fuel storage cost n/a 13
Total inactivation/disposal cost $53 $899
Average annual inactivation/disposal cost $1 $18
======================================================================
Total life-cycle cost $14,09 $22,22
4 2
Average annual life-cycle cost $282 $444
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a CVN investment cost includes all nuclear fuel cost; CV fuel is
included in operations and support activities.
Source: Our analysis of Navy data.
WHAT IS A LIFE-CYCLE COST
ANALYSIS?
---------------------------------------------------------- Chapter 3:1
One of the most persistent challenges facing DOD is the ability to
provide adequate resources for the acquisition, operations, and
support of its systems and equipment. A life-cycle cost analysis
provides managers with important information for a number of
purposes, including improved long-range planning and budgeting,
decisions about replacing aging equipment, and comparisons of
competing programs and systems. A keystone to sound acquisition
decisions is having an estimate of the total cost of a program or
equipment over its full life (i.e., life-cycle cost). For this
reason, a life-cycle cost analysis has been part of the DOD
acquisition system for many years.
The life-cycle cost is the sum total of direct, indirect, recurring,
and nonrecurring costs of a system over its entire life through its
disposal. The important point is that the total cost is not just the
initial near term cost. Typically, a life-cycle cost analyst will
focus attention on the annual operating and support cost because it
usually accounts for the largest share of the total cost. The most
common cost components that are included in a life-cycle cost
analysis are shown in figure 3.1.
Figure 3.1: Life-Cycle Cost
Components
Source: GAO.
We developed a life-cycle cost model to estimate the life-cycle cost
for a nuclear- and a conventionally powered aircraft carrier. We
used the Nimitz-class carrier as our baseline for the nuclear
carrier. We selected the Kennedy-class\1 as the baseline for a
conventional carrier because it is comparable in size to the
Nimitz-class carrier, it can employ an air wing that is similar to
that on a Nimitz-class carrier, and there was adequate historical
cost data available to build our cost estimates. Detailed
information about the methodologies we used to develop our cost
estimates is discussed in this chapter and appendix I.
--------------------
\1 For our analysis, the Kennedy-class includes the CV-63, CV-64,
CV-66, and CV-67 as these carriers are similar in size, displacement,
crew size, and maintenance plans, and are often grouped together.
INVESTMENT COSTS ARE HIGHER FOR
NUCLEAR-POWERED CARRIERS THAN
FOR CONVENTIONALLY POWERED
CARRIERS
---------------------------------------------------------- Chapter 3:2
Ship acquisition and midlife modernization costs for a
nuclear-powered carrier are double that estimated for a
conventionally powered carrier. (See table 3.2.)
Table 3.2
Investment Costs for Conventional and
Nuclear Aircraft Carriers
(Fiscal year 1997 dollars in millions)
Investment category CV CVN
------------------------------------------------------ ------ ------
Ship acquisition $2,050 $4,059
Midlife modernization 866 2,382
======================================================================
Total $2,916 $6,441
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
Source: Our analysis of Navy data.
ACQUISITION COST
-------------------------------------------------------- Chapter 3:2.1
Historically, nuclear carriers have cost more to acquire than
conventional carriers, for several reasons. First, they are larger
and heavier than conventional carriers. Second, the acquisition cost
for a nuclear carrier includes nuclear fuel cost. Finally, the
unique industrial base, specialized nuclear suppliers, and the Naval
Nuclear Propulsion Program's exacting and stringent environmental,
health, and safety standards add to this cost. For example, an
unavoidably high cost overhead structure (engineering, quality
assurance, and production control) and costly production work are
required in the naval nuclear propulsion industry. Shipbuilders must
follow šnon-deviationē plans (i.e., no deviation from the approved
plans without government approval).
We obtained acquisition cost data for 27 carriers that were
authorized or built since 1942. Figure 3.2 shows, in constant
dollars, the acquisition cost per ton\2 of conventionally and
nuclear-powered carriers. Acquisition costs for the Nimitz-class
nuclear-powered carriers have averaged about $3.9 billion\3 while the
last conventionally powered carrier, the
U.S.S. John F. Kennedy (CV-67), cost $2.1 billion. Regardless of
the year the ship was commissioned, nuclear carriers cost more than
conventional carriers.
Figure 3.2: Acquisition Cost
per Ton for Conventional and
Nuclear Carriers (fiscal year
1997 dollars)
Source: Navy.
The acquisition costs of about $2.1 billion for the conventional
carrier and $4.1 billion for the nuclear carrier were based on an
estimating methodology similar to one used by us in an earlier
study\4 and by the Center for Naval Analyses. Historical acquisition
cost per ton and the ship's displacement tonnage were used to provide
rough order of magnitude estimates for the acquisition costs of a
Kennedy-class and a Nimitz-class ship. (See table 3.3 and app. I
for a detailed discussion of the methodology.)
Table 3.3
Acquisition Cost Estimates for the
Conventionally and Nuclear-Powered
Carrier
(Fiscal year 1997 dollars)
Ship
Cost per ton\a displacement\b Estimated cost
---------------------- -------------- -------------- --------------
CV $35,191 58,268 $2,050,500,000
CVN $51,549 78,741 $4,059,000,000
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a We determined the ratio between the cost per ton of CV-67 and
CVN-68 (less any nuclear fuel related cost) and applied this ratio to
the average cost per ton for the CVN-68 class to estimate the cost
per ton for a newly acquired conventional carrier. We used the
average cost per ton for the CVN-68 class as the estimated cost per
ton for the nuclear carrier.
\b Displacement as measured in light tons.
Source: Our analysis of Navy data.
--------------------
\2 To allow for increases in both ship weight and cost, the
acquisition cost per ton is produced by dividing the ship's
acquisition cost by its tonnage. We used the ship's light
displacement tonnage that did not include weight due to the ship's
fuel, water, or ammunition.
\3 Includes nuclear fuel cost.
\4 Navy's Aircraft Carrier Program: Investment Strategy Options
(GAO/NSIAD-95-17, Jan. 1995).
MIDLIFE MODERNIZATION
-------------------------------------------------------- Chapter 3:2.2
Our analysis shows that it will cost the Navy nearly three times as
much to refuel, overhaul, and modernize a nuclear carrier than it
will a conventional carrier. Both carrier types require some level
of midlife modernization to allow the Navy to use the ships for
nearly 50 years. When a nuclear carrier has been in service for
nearly 24 years,\5 it will undergo a 2-1/2 year refueling complex
overhaul (RCOH), which includes refueling the reactor plant,
repairing the propulsion plant, restoring the ship's material
condition, and performing modernization efforts. The nuclear carrier
is expected to operate another 24 years after the RCOH. Similarly,
at about
age 30, a conventional carrier can undergo a 2-1/2 year Service Life
Extension Program (SLEP) which includes restoring the ship's
condition, installing system upgrades and performing modernization
efforts. After a SLEP, the conventional carrier should operate an
additional 15 years or more. In both cases, the actual work required
for midlife modernization will vary for each individual ship,
depending on the ship's condition.
Figure 3.3 shows the estimated RCOH cost for the first two
Nimitz-class carriers and the actual cost for SLEPs performed on the
Kennedy-class\6 conventional carriers. We used the Navy's best
estimate for the RCOH planned for the CVN-68 as the estimated midlife
modernization cost for the nuclear carrier. For our cost model, we
used the average historical cost for SLEPs performed on the
Kennedy-class conventional carriers as the estimated midlife
modernization cost for the conventional carrier.
Figure 3.3: Midlife
Modernization Cost for CVN-68,
CVN-69 and Kennedy-class
Conventional Carriers
Note: We used estimated cost for nuclear carriers and actual cost
for the conventional carriers.
Source: Navy.
--------------------
\5 Given current operating tempo, its nuclear fuel is expected to
last about 24 years before it needs to be replaced. Midlife
modernization will take place at the time of refueling.
\6 The CV-66 did not undergo a SLEP.
NUCLEAR CARRIERS ARE MORE
EXPENSIVE TO OPERATE AND
SUPPORT THAN CONVENTIONAL
CARRIERS
---------------------------------------------------------- Chapter 3:3
We estimate that it will cost about $14.9 billion to operate and
support a nuclear carrier over its lifetime, which is nearly 34
percent more than the $11.1 billion we estimate it will cost to
operate and support a conventional carrier. As shown in table 3.4,
the cost for a conventionally powered carrier's fossil fuel is more
than offset by the added cost for a nuclear-powered carrier's
personnel and depot maintenance. A major cost difference between the
two carrier types is in the indirect cost category for support
activities provided by DOE to the nuclear carriers.
Table 3.4
Life-Cycle Direct and Indirect Operating
and Support Costs for a Conventionally
and Nuclear-Powered Carrier
(Fiscal year 1997 dollars in millions)
Cost category CV CVN
------------------------------------------------------ ------ ------
Direct operating and support costs
Personnel $4,636 $5,206
Fossil fuel 738 n/a
Depot maintenance\a 4,130 5,746
Other\b 933 724
Total direct operating and support costs $10,43 $11,67
6 7
Indirect operating and support costs
Training $161 $1,107
Fossil fuel delivery 469 n/a
Nuclear support activities n/a 2,045
Other\c 58 53
Total indirect operating and support costs $688 $3,205
======================================================================
Total operating and support costs $11,12 $14,88
5 2
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a Includes routine maintenance, repairs, and ship modernization work
but not the cost of midlife modernization.
\b Includes a number of direct unit cost categories such as spare
parts, supplies, and intermediate maintenance.
\c Includes a number of indirect support cost categories such as
publications, ammunition handling, and technical services.
Source: Our analysis of Navy data.
DIRECT OPERATION AND SUPPORT
COSTS
-------------------------------------------------------- Chapter 3:3.1
Nuclear carriers have higher personnel costs than conventional
carriers primarily because they require additional personnel and
their nuclear personnel receive special pay and bonuses. Depot
maintenance costs are greater for a nuclear carrier because more
labor is needed to maintain it than is needed for a conventional
carrier. In a separate analysis, we found that the total cost
related to nuclear fuel over a nuclear carrier's lifetime exceeded
the lifetime cost for a conventional carrier's fossil fuel. We did
not review the reasons for the cost differences for other elements in
the direct cost category because it included costs from a number of
subcategories such as travel, spare parts, and intermediate
maintenance. In most cases, the cost difference for each individual
subcategory was not significant enough to warrant detailed review.
PERSONNEL COSTS
------------------------------------------------------ Chapter 3:3.1.1
The personnel cost for a nuclear carrier is estimated at about $5.2
billion over its lifetime compared to about $4.6 billion for a
conventional carrier (see table 3.5). Our estimated personnel cost
is based on historical personnel cost reported by the Navy's
Visibility and Management of Operating and Support Cost (VAMOSC)
Management Information System database for the CV-67 class and CVN-68
class carriers as well as an additional 30.6 percent to account for
accrued retirement cost, which is not captured by that database.
Table 3.5
Personnel Costs for Conventionally and
Nuclear-Powered Carriers
(Fiscal year 1997 dollars in millions)
CV CVN
------------------------------------------------------ ------ ------
Annual personnel cost $71 $80
Annual accrued retirement 22 24
Total annual $93 $104
Life-cycle cost $4,636 $5,206
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
Source: Our analysis of Navy data.
To determine why the nuclear-powered carrier's personnel cost is
higher, we analyzed ship manpower documents. On the basis of our
work, we are reasonably certain that most of the cost difference can
be attributed to the different propulsion plants and not some other
ship characteristic. Our work further indicates that the higher cost
are the result of three factors: increased personnel needed to
operate the nuclear propulsion plant, higher grade structure for
propulsion plant personnel and bonuses, and special duty pay for
nuclear personnel.
A nuclear carrier has a requirement for nearly 3,400 personnel
compared to about 3,200 for a conventional carrier. A majority of
the added personnel can be traced to the departments that operate the
propulsion plant.\7 Table 3.6 provides a comparative summary of the
required propulsion plant personnel for nuclear and conventional
carriers.
Table 3.6
Propulsion Plant Personnel for
Conventional and Nuclear Carriers
Personnel CV CVN Difference
------------------------------------------ ------ ------ ----------
Officers\a 22 33 11
Enlisted 597 716 119
======================================================================
Total 619 749 130
----------------------------------------------------------------------
\a Includes warrant officers.
Source: Navy.
Some of the higher personnel cost for the nuclear carrier can be
attributed to the grade structure of propulsion plant personnel.
Nuclear propulsion plant personnel are a higher grade level than
propulsion plant personnel for a conventional carrier. As shown in
figure 3.4, nearly 50 percent of a nuclear carrier's enlisted
propulsion plant personnel are E-5 and above whereas 75 percent of a
conventional carrier's propulsion personnel are E-4 and below.
Figure 3.4: Grade Structure
for the Enlisted Propulsion
Plant Personnel for
Conventionally and
Nuclear-Powered Carriers
Source: Our analysis of Navy data.
The higher personnel cost for a nuclear carrier can also be
attributed to special pay and bonuses. The Navy uses a variety of
incentive pay and bonuses to attract and retain nuclear personnel
(see table 3.7).
Table 3.7
Special Pay and Bonus Incentives
Available for Nuclear Personnel in
Fiscal Year 1997
Enlisted
---------------------------------- ----------------------------------
Enlistment bonus Up to $4,000
Selective reenlistment bonus Up to $30,000\a
Special duty assignment pay Up to $275 per month\b
Officers
Accession bonus Up to $8,000
Annual incentive Up to $12,000\c
----------------------------------------------------------------------
\a Variable bonus based on award level. Nominal bonus of $22,000 for
a 6-year reenlistment of an E-5 with 24 months in service.
\b An E-5 would receive $150 per month.
\c Variable bonus based on active duty commitment length.
Source: Navy.
--------------------
\7 This includes the Engineering Department for the conventionally
powered carrier and the combination of the Engineering and Reactor
Departments for the nuclear-powered carrier.
FUEL COSTS
------------------------------------------------------ Chapter 3:3.1.2
We estimate it costs $738 million to provide fossil fuel over a
conventional carrier's 50-year life. Historical data indicate that a
conventional carrier uses about 500,000 barrels of fossil fuel each
year or about 25 million barrels over its lifetime. Our estimate was
developed by multiplying the estimated barrels of fuel consumed by
$29.52, which was the average per barrel price the Navy paid for
fossil fuel from fiscal year 1991-95. Because of historical interest
and speculation as to escalation in fossil fuel prices, we examined
trends in fossil fuel prices and performed a sensitivity analysis of
a conventional carrier's life-cycle cost if fuel prices were to
double (see app. I).
The fuel cost for a conventional carrier is clearly visible as an
operating and support cost. Conversely, the fuel cost for a nuclear
carrier is included within the investment cost (e.g., acquisition,
midlife modernization) and, therefore, is not clearly identified. We
compared the costs of fossil and nuclear fuel and found that the
life-cycle cost for nuclear fuel is greater than for fossil fuel.
Given current operating tempo, the nuclear fuel cores for the
Nimitz-class carrier are expected to provide enough power for about
24 years. When the initial fuel cores are depleted, the cores are
removed and replacement fuel cores are installed. Replacement cores
will be removed when the ship is inactivated at the end of its
service life. To provide a comparison of fuel cost, the Navy
identified portions of the investment costs that directly relate to
the initial and replacement cores (see table 3.8).
Table 3.8
Nuclear Fuel Cost for a Nimitz-class
Carrier
(Fiscal year 1997 dollars in millions)
Total cost
------------------------------------------------------ --------------
Initial core
----------------------------------------------------------------------
Uranium $24
Fuel core procurement 308
Fuel installation 12
Fuel removal at midlife 150
Replacement core
----------------------------------------------------------------------
Uranium 24
Fuel core procurement 308
Fuel installation 64
Fuel removal at inactivation 85
======================================================================
Life-cycle nuclear fuel cost $975
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
Source: Navy.
The uranium costs shown were based on what it cost to manufacture
during the late 1980s, when it was last manufactured for the Navy.
The uranium used to fuel nuclear reactors is supplied by DOE.\8 DOE
ceased production of defense grade uranium in 1991. There is
sufficient uranium to operate the Navy's nuclear force for decades.
Excess uranium can be reconfigured and sold to private utility
companies for use in commercial reactor plants. An alternative cost
methodology based on the opportunity cost for the uranium appears in
appendix I.
Table 3.9 provides a comparative summary of fuel costs for
conventionally and nuclear-powered carriers.
Table 3.9
Comparison of Life-Cycle Fuel Cost for
Conventionally and Nuclear-Powered
Carriers
(Fiscal year 1997 dollars in millions)
Total Annual
life ized
Fuel type cost cost
------------------------------------------------------ ------ ------
CVN nuclear fuel $975 $19.5
CV fossil fuel $738 $14.8
----------------------------------------------------------------------
Source: Our analysis of Navy data.
--------------------
\8 All domestic enrichment services were handled by DOE until 1993,
when these operations were transferred to the United States
Enrichment Corporation.
DEPOT MAINTENANCE COST
------------------------------------------------------ Chapter 3:3.1.3
We estimate that the life-cycle cost for depot maintenance for a
conventional carrier is about $4.1 billion compared to about $5.7
billion for a nuclear carrier. Depot maintenance activities include
routine maintenance, repairs, alterations, and fleet modernization
expected to be performed over the life of the carrier. Midlife
modernization activities, although performed at the depot-level, are
not included in our estimated depot maintenance cost. Rather, they
are included as part of investment costs.
Our cost estimates were not based on the historical depot maintenance
costs captured by the Navy's VAMOSC database for several reasons.
First, the cost data collected for the nuclear carriers reflected
depot maintenance performed under the Engineered Operating Cycle
(EOC) maintenance plan. Since the Navy is changing its depot
maintenance strategy for nuclear carriers, we did not believe that
historical costs would provide the best estimate for depot
maintenance costs. Second, the VAMOSC data, which captured costs for
each fiscal year between 1985 and 1994 and the 10-year average cost,
could lead to over- or underestimating this cost because of the
carriers' age. For instance, the average depot maintenance cost for
nuclear carriers reflected maintenance and fleet modernization work
performed on nuclear ships that had been in commission, on average,
10 years or less. Conversely, the average depot maintenance cost for
conventional carriers reflected maintenance and fleet modernization
work performed on carriers that had been in commission for an average
25 years.
Because of these reasons, we developed depot maintenance cost
estimates based on the Navy's notional plans for routine maintenance
and fleet modernization for conventionally and nuclear-powered
carriers. Estimates of how often depot maintenance will be needed
(interval), how many months the ship will be in maintenance
(duration), and how much shipyard labor (labor workdays) will be
needed for the carrier are guided by the Chief of Naval Operations.
Figure 3.5 shows the notional depot maintenance cycle for the two
carrier types.
Figure 3.5: Notional Depot
Maintenance Cycle for
Conventionally and
Nuclear-Powered Carriers (in
months)
Source: Navy.
To estimate depot maintenance cost, we determined the number and
types of depot maintenance periods that would occur over each of the
carrier's 50-year service life. Based on the Navy's notional plans,
we determined that the nuclear carrier would need about 38 percent
more workdays of labor for anticipated depot-level maintenance and
fleet modernization over its 50-year life than the conventional
carrier. Next, we developed an estimated cost for each type of depot
maintenance by multiplying the number of labor workdays\9 by the
composite labor workday rates\10 for public and private shipyards.
We estimated additional depot costs for materials, centrally procured
equipment, spare parts, and other miscellaneous items based on our
analysis of historical costs for these items. Table 3.10 summarizes
the estimated depot maintenance and fleet modernization costs for
nuclear and conventional carriers.
Table 3.10
Life-Cycle Cost for Depot Maintenance of
a Conventionally and a Nuclear-Powered
Carrier
(Fiscal year 1997 dollars in millions)
Number
in Cost Life-
lifeti per cycle
Depot maintenance type me type cost
---------------------------------------------- ------ ------ ------
CV
SRA 17 $51.3 $872
COH 6 543.0 3,258
======================================================================
Total $4,130
CVN
PIA1 2 $188.3 $377
PIA2 4 214.6 858
PIA3 9 240.8 2,167
DPIA1 1 327.7 328
DPIA2 2 376.8 754
DPIA3 3 421.2 1,263
======================================================================
Total $5,746
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
Source: Our analysis of Navy data.
The actual depot maintenance cost for the nuclear carrier could be
more than our estimate and lower than our estimate for the
conventional carrier because we used composite or average shipyard
labor rates. However, our earlier work\11 showed that the actual
labor cost for nuclear work was higher than the labor cost for
nonnuclear work. Specifically, we found that the average cost of
$213 per workday for nuclear labor (then-year dollars) was 25 percent
more than the average cost for nonnuclear labor, which was about $170
per workday. We also found that the applied overhead for nuclear
work was an average of $303 per workday, nearly 60 percent more than
the average overhead of $189 per workday for nonnuclear work.
Maintenance of nuclear ships costs more due to the complex nature of
nuclear work. Shipyards must provide a greater level of service, pay
higher costs for specially trained and skilled workers, and maintain
specialized shipyard departments that support nuclear work, such as
radiological controls, nuclear engineering, nuclear planning, and
nuclear quality assurance. In addition, shipyards must make
provisions to package and dispose of nuclear waste that is generated
during maintenance. The cost to process low-level waste generated
during maintenance was included in the depot maintenance cost
estimate. Parts and other materials used in nuclear systems are
often of a unique design and require specialized material.
--------------------
\9 The Navy provided labor workdays estimated for both maintenance
and fleet modernization for each type of depot maintenance.
\10 The Navy provided composite public and private shipyard rates
that are the average cost for labor and overhead.
\11 Nuclear-powered Ships: Accounting for Shipyard Costs and Nuclear
Waste Disposal Plans (GAO/NSIAD-92-256, July 1, 1992).
INDIRECT OPERATION AND
SUPPORT COSTS
-------------------------------------------------------- Chapter 3:3.2
A significant sustaining base is needed to support both the nuclear
and the conventional carriers. Some examples include logistics
services, training, engineering, and software support. The VAMOSC
database captures many of the costs for these activities and reports
a portion of the costs as an indirect operating and support cost for
each ship. However, we identified several supporting activities and
functions that were not captured or were partially captured by that
database, such as training, fossil fuel delivery and nuclear support
activities.
Indirect support costs for a nuclear carrier are significantly more
than those for a conventional carrier. We estimate a nuclear
carrier's indirect support cost--$3.2 billion--is nearly five times
more than the estimated $0.69 billion for a conventional carrier.
This difference is primarily due to several expensive activities that
support the nuclear carrier but are not needed for the conventional
carrier.
TRAINING COST
------------------------------------------------------ Chapter 3:3.2.1
We estimate that the Navy spends nearly $1 billion more to provide a
steady flow of trained personnel to operate and maintain a nuclear
carrier's propulsion plant than it does to train personnel to operate
and maintain a conventional carrier's propulsion plant. The primary
reason is the nuclear carrier has a greater requirement for personnel
with specialized skills than a conventional carrier does.
Our estimate was not based on the historical VAMOSC database because
it does not capture certain training costs that are central to the
differences in the propulsion system, nor does its allocation method
provide visibility to reasons for the cost difference. Therefore, we
developed estimates for initial and specialized training pipeline
costs for both carrier types.
To estimate indirect training cost, we used a methodology similar to
one developed by the Navy's Center for Cost Analysis. The
methodology is based on determining the annual training requirement
needed to provide a steady flow of skilled personnel that are
required in the propulsion plant departments for each carrier type.
The annual training requirement is determined by the number of
billets, crew turnover, and attrition.\12 For our analysis, we
determined the annual training requirement initial skills training
for four enlisted ratings (machinist's mates, electrician's mates,
electronics technicians and boiler technicians)\13 and the annual
training requirement for additional specialized\14 training beyond
the initial level. We selected these skill types because they
accounted for most of the difference between the required skills for
propulsion plant departments of the two types of carriers. We also
determined the annual training requirement for specialized officers
skills.\15 Using information provided by the Navy, we identified the
training courses required for these skills, and the Chief of Naval
Education and Training provided the cost per graduate for each
course. The Chief of Naval Education and Training did not have cost
information for the required 26 weeks for practical training required
for specialized officer and enlisted nuclear skills. Therefore, we
estimated the cost per officer and enlisted student based on Navy
budget data.
Table 3.11 compares the indirect training costs.
Table 3.11
Propulsion Plant Pipeline Training Costs
for a Conventionally and Nuclear-
Powered Carrier
(Fiscal year 1997 dollars in millions)
Initia Specia
l l Life-
traini traini Annual cycle
ng ng cost cost
-------------------------------------- ------ ------ ------ ------
Conventional carrier
Enlisted $2.50 $0.71 $3.21 $160.6
2
Officers \a
======================================================================
Total $2.50 $0.71 $3.21 $160.6
2
Nuclear carrier
Enlisted $4.28 $16.47 $20.75 $1,037
.57
Officers \a 1.38 1.38 69.10
======================================================================
Total $4.28 $17.85 $22.13 $1,106
.67
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a Our model assumed the training cost for officer's initial training
would be the same for both carriers.
Source: Our analysis of Navy data.
--------------------
\12 Annual training requirement = ((billet /turnover) *attrition).
\13 As of October 1, 1996, the boiler technicians rating was merged
with the machinist's mates rating.
\14 We focused on Navy Enlisted Classifications (NECs) that are
earned after required training has been satisfied.
\15 We focused on additional qualification designation (AQD) for
officer billets, which indicated a requirement for skills and
knowledge beyond those implicit by the officer's billet
classification or submarine specialty.
FOSSIL FUEL DELIVERY
------------------------------------------------------ Chapter 3:3.2.2
We estimate that it costs about $469 million to deliver fossil fuel
to a conventional carrier over its lifetime. Our estimate is based
on a Navy methodology\16 that allocates a portion of the annual
operating and support cost for these facilities and ships to each
barrel of fossil fuel issued. For example, since Navy depots store
fuels other than fossil fuel, the total cost to operate and maintain
these facilities is allocated based on the proportion of fossil fuel
to total fuel issued from each depot. This cost is then divided by
the number of barrels of fossil fuel delivered to produce the
delivery cost per barrel. The same method was used to determine the
cost per barrel for the Navy ships and oilers operated by the
Military Sealift Command (MSC) that deliver fossil fuel. Table 3.12
shows how the fossil fuel delivery cost of $18.77 per barrel cost was
computed. Assuming a conventional carrier uses about 500,000 barrels
of fossil fuel per year, or 25 million barrels over its lifetime, we
estimate that it will cost about $469 million to deliver fuel to the
conventionally powered carrier.
Table 3.12
Cost to Deliver Fossil Fuel to a
Conventionally Powered Carrier
(Fiscal year 1997 dollars)
Portion Cost
Annual allocated allocated
Activity/ operating and to fuel for fuel Barrels of Cost per
ship type support delivery delivery fuel issued barrel
------------ -------------- ---------- ------------ ------------ ----------
Fleet supply $54,295,049 41.77% $22,679,042 10,526,000 $2.19
centers\a
Ships
Navy ships\b $294,480,540 45-65% $144,815,575
MSC oilers $273,057,960 100% $273,057,960
================================================================================
Total $567,538,500 $417,873,535 25,198,595 $16.58
================================================================================
Total per $18.77
barrel
delivery
cost
Number of 25,000,000
barrels
delivered
over a
conventiona
l carrier's
lifetime
================================================================================
Total cost $469,250,0
to deliver 00
--------------------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a The cost per barrel for the fleet supply centers also includes an
allocation of $0.04 for the annual operation of service craft.
\b Navy ships included are the AO, AOE, and AOR class ships. The
percentage of the ship cost allocated to the delivery of fossil fuel
varied from 45 to 65 percent.
Source: Our analysis of Navy data.
--------------------
\16 The Navy's cost methodology, which has been used for many years,
includes an annualized acquisition cost as well as the annual
operating and support cost. However, our analysis does not include
an allocation of acquisition cost because we did not have comparable
acquisition cost data for facilities (i.e., DOE laboratories) that
support the delivery of nuclear power to the Navy's fleet.
NUCLEAR SUPPORT
ACTIVITIES
------------------------------------------------------ Chapter 3:3.2.3
We estimate that it will cost about $2.04 billion to provide
supporting services to the nuclear carriers. Most of this cost is
due to the work performed by the activities of the Bettis and Knolls
Atomic Power Laboratories, large research and engineering facilities
that are solely dedicated to support the Navy's nuclear propulsion
program.
More than half of the laboratories' activities are funded through the
DOE appropriation for the Naval Nuclear Propulsion Program. DOE's
budget for the Program averaged $731 million annually during the
1990s. Program activities are primarily focused on operational
research, development, and testing\17 for the purpose of gaining a
better understanding of reactor behavior fundamentals, evaluating
reactor performance, and verifying and improving the accuracy of
models. The laboratories evaluate cladding, structural, and
component materials suitable for use in the operating nuclear plant
and develop and test nuclear fuel. The laboratories also evaluate
equipment and systems that transfer, convert, store, control, and
measure power that the naval reactor has created. The DOE-funded
activities are an integral and necessary component to providing
effective military nuclear propulsion plants to the Navy and to
ensure their safe and reliable operation.
In addition to the support provided by DOE, the Navy also budgets
about $200 million in operation and maintenance funds to provide
essential technical and logistical support for its operational
reactors. The types of activities include routine maintenance and
engineering support, inspection and refurbishment of reactor plant
components, safety surveillance at shipyards, and power plant safety
assessments.
Our cost estimate was based on allocating a portion of the annual
cost for these activities to a nuclear carrier. For the DOE-funded
activities, we allocated 5 percent of DOE's average funding between
fiscal year 1991 and 1997 and 2.08 percent of the Navy's average
funding between fiscal year 1994 and 1996 for Navy support activities
(see table 3.13).
Table 3.13
Cost to Provide Nuclear Support
Activities to a Nuclear Carrier
(Fiscal year 1997 dollars in millions)
Percen
t Allocated Life-
Annual alloca annual cycle
cost ted cost cost
---------------------------------- ------ ------ ---------- ------
Energy-funded $731.0 5.0\a $36.6 $1,828
Navy-funded 208.4 2.08\b 4.3 217
======================================================================
Total $2,045
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
\a DOE activities were allocated on the basis of a nuclear carrier's
demand for power in relationship to other nuclear ships in the Navy's
fleet. (See app. I for additional information regarding the
relative demand for power nuclear ships.)
\b The Navy-funded activities were allocated based on our analysis of
the number of reactor plants supported by these funds.
Source: Our analysis of DOE and Navy data.
--------------------
\17 The Navy's research development test and evaluation budget is the
source for obtaining funds needed for specific development, test, and
evaluation of new reactors. For example, about $413 million
(then-year dollars) of the budget for fiscal years 1994 to 1998 will
fund the laboratories' development of the reactor for the New Attack
Submarine. These funds are not included in this discussion.
NUCLEAR CARRIERS ARE MORE
COSTLY TO INACTIVATE AND
DISPOSE OF THAN CONVENTIONAL
CARRIERS
---------------------------------------------------------- Chapter 3:4
Nuclear carriers are significantly more expensive to inactivate and
dispose of than conventional carriers. The cost to inactivate and
dispose of a nuclear carrier is estimated at $887 million. In
addition, it will cost the Navy an estimated additional $13 million
to provide long-term storage\18 of the spent nuclear fuel (SNF) after
it is removed from the carrier's reactor plant. On the basis of Navy
data, we estimate that the cost to inactivate and dispose of a
conventional carrier is $52.6 million.
--------------------
\18 Radioactive materials will need safe storage for thousands of
years. Our estimate is based on the radioactive materials storage
requirement during the first 100 years after a carrier is
commissioned.
CARRIER DISPOSAL COST
-------------------------------------------------------- Chapter 3:4.1
A conventional carrier can be placed in the reserve fleet or retained
as a mobilization\19
asset at the end of its service life. When the Navy no longer needs
a conventional carrier, it can transfer the carrier to the Maritime
Administration, sell the carrier to a private firm or foreign
government, or sell the carrier for its scrap value. Our estimate of
$52.6 million to inactivate and dispose of a conventional carrier is
based on Navy data and includes the cost to place the carrier in
reduced mobilization status,
3 years maintenance in a reduced mobilization status, and final
disposal cost less scrap value.
These are not realistic options for a nuclear aircraft carrier
because of its nuclear propulsion systems. A nuclear ship is
constructed with a nuclear power plant inside a section of the ship
called the reactor compartment. The components of the nuclear power
plant include a high-strength reactor vessel, heat exchangers (steam
generator), and associated piping, pumps, and valves. Each reactor
plant contains over 100 tons of lead shielding, part of which is made
radioactive by contact with the radioactive material. At the end of
its useful service life, the nuclear carrier and its radioactive
materials must be disposed of.
Although a nuclear carrier has never been disposed of, the basic
steps necessary to dispose of a carrier would be similar to those
performed on nuclear submarines and surface ships. The first step is
defueling the reactor plant. The highly radioactive SNF is removed
from the reactor and sent to the Naval Reactor Facility, located at
DOE's Idaho National Engineering and Environmental Laboratory for
examination and temporary storage. (Disposition of spent nuclear
fuel is discussed later in this chapter.) Next, piping systems,
tanks, and vessels are drained; the radioactive systems are sealed;
and the reactor compartment is sealed and enclosed in a high
integrity steel package. Reactor compartments removed from
submarines have been transported by barge from Puget Sound Naval
Shipyard to DOE's Hanford, Washington, site for final burial.
The Navy provided us with a cost range of between $818.6 million and
$955.5 million to dispose of the first Nimitz-class nuclear-powered
carrier. We used the mid-point cost in our analysis--$887 million.
Most of the cost can be attributed to defueling and removing
contaminated nuclear equipment and material. This estimate did not
include the cost associated with storing the SNF or any cost
associated with maintaining oversight of the reactor plant's burial
site in Hanford.
--------------------
\19 The Navy keeps three carriers in Mobilization B status. When a
carrier is taken out of active service, it is placed in a
Mobilization B status; the oldest carrier in Mobilization B status is
then disposed of.
SPENT NUCLEAR FUEL STORAGE
-------------------------------------------------------- Chapter 3:4.2
Spent nuclear fuel (SNF) will be removed from the carrier's reactor
plant twice during the Nimitz-class carrier's service life--at its
midlife and at inactivation. Because it is highly radioactive, SNF
will need to be safely stored for thousands of years. Based on
estimates recently provided in DOD's official comments on our draft
report, the Naval Nuclear Propulsion Program now estimates it will
cost about $13 million to safely store the SNF during the first 100
years after a nuclear-powered carrier is decommissioned using a new
dry storage method (see table 3.14). We were unable to verify the
accuracy and completeness of this estimate but we do know that the
new method promises to be significantly less expensive than the
method formerly used, called the wet storage method.
Table 3.14
Navy Cost Estimate for the Dry Storage
of a Nuclear-Powered Carrier's Spent
Nuclear Fuel
(Fiscal year 1997 dollars in millions)
Cost
-------------------------------------------------------------- ------
Initial cores
Hardware per ship set of cores $ 4.8
Operational costs for 75 years of dry storage 1.8
Replacement cores
Hardware per ship set of cores 4.8
Operational costs for 50 years of dry storage 1.7
======================================================================
Total cost $13.0
----------------------------------------------------------------------
Note: Numbers may not add due to rounding.
Source: Naval Nuclear Propulsion Program.
The Navy has been temporarily storing its SNF using a wet storage
method. Under this method the nuclear propulsion program stores the
fuel in special pools located at DOE's Idaho National Engineering and
Environmental Laboratory. The water in the pools serves the dual
purpose of acting as the barrier for the radiation and dispersing the
heat in the SNF. Using this method, DOE estimated that it would cost
about $306 thousand to receive and place the Nimitz-class cores into
the storage pools and an additional $1.144 million for each year the
cores are stored. The storage cost begins to accumulate after the
first cores are removed during the carrier's refueling complex
overhaul near its 25th year of service. The storage cost will double
when the replacement cores are removed upon carrier inactivation.
Temporary storage costs for naval SNF are likely to change as the
Navy transitions\20 to the dry storage method. Table 3.14 reflects
the anticipated savings from adopting the new method of spent nuclear
fuel storage.
Ultimately, SNF will have to be permanently disposed of, which will
present an extremely difficult challenge because it will remain
dangerous for thousands of years. The national strategy focuses on
disposal of SNF generated by civilian nuclear power plants and
high-level waste in a geologic repository. DOE is responsible for
developing an underground repository. However, DOE does not expect
that the repository will be operational until about 2010,\21 more
than 10 years behind that envisioned. Thus, estimating the cost is
complicated because the current repository plans were not based on
disposing defense-grade SNF, such as that from naval reactor plants,
but on the high-level waste that is generated from reprocessing
defense-grade SNF. Thus, we did not estimate final disposal costs
for the carrier's SNF but instead focused on the current storage
practices.
--------------------
\20 In October 1995, the state of Idaho, the Navy, and DOE reached an
agreement regarding the shipment and storage of SNF in Idaho. As a
result, all SNF located at DOE's Idaho site will be placed in dry
storage by 2023 and all SNF will be removed from Idaho by 2035.
\21 Nuclear Waste: Foreign Countries' Approaches to High-Level Waste
Storage and Disposal (GAO/RCED-94-172, Aug. 4, 1994) and Nuclear
Waste: Comprehensive Review of the Disposal Program Is Needed
(GAO/RCED-94-299, Sept. 27, 1994).
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 3:5
DOD partially agreed with our life-cycle analysis. DOD agreed that a
thorough understanding of total life-cycle costs is key to allocating
scarce resources. However, DOD disagreed that comparing the
life-cycle costs of conventionally powered carriers such as the
U.S.S. John F. Kennedy with Nimitz-class nuclear-powered carriers
was appropriate because of differences in the age, size, and
capabilities of the carriers.
DOD agreed that the life-cycle cost of nuclear-powered carriers is
greater than conventionally powered carriers but that the premium is
not as large as estimated by us. DOD did not agree with our approach
of making cost-per-ton comparisons between nuclear-powered
Nimitz-class carriers and conventionally powered carriers such as the
Kennedy. DOD believed that it would be more appropriate to compare
conventionally and nuclear-powered carriers with equivalent
capabilities.
While the nuclear-powered Nimitz-class carrier and the conventionally
powered Kennedy-class carrier are not identical, we chose to compare
them because the Kennedy was the last and largest conventionally
powered carrier built, it employs an airwing of comparable size to
that of the Nimitz-class carriers, and there was adequate historical
data available. Further, both classes of carriers have performed the
same missions for more than two decades.
Our estimate of the difference in costs between the two types of
carriers is greater than DOD's estimate primarily because of
differing methodologies. Our acquisition cost estimate was based on
a cost-per-ton methodology, which is an accepted method for
estimating these costs and has been used by the Navy and others. The
actual acquisition cost for the Kennedy, adjusted for inflation, is
virtually the same as the acquisition costs used in our estimate.
According to the Navy, it estimated the cost for a "new"
conventionally powered carrier with the capabilities of the newest
Nimitz-class carriers and assumed the conventionally powered carrier
would have a larger displacement than a Nimitz-class carrier. It
stated that the conventionally powered carrier's cost was based on
actual manhours adjusted to reflect manhour and material growth over
30 years. Navy officials told us they assumed the conventionally
powered carrier would be constructed at Newport News Shipbuilding and
therefore used that company's cost factors (for example, labor rates,
overhead rates, and material rates). In addition, because the Navy
did not include the cost of the Kennedy's SLEP when it calculated the
average cost for a CV SLEP, its estimate was greater than ours.
Our operating and support costs were based on historical data for the
conventionally powered Kennedy-class and the nuclear-powered
Nimitz-class. The DOD estimate is based on estimates of a much
larger conventionally powered carrier as discussed above. We also
used different methodologies for estimating indirect costs (see app.
VII, comments 33, 34, and 35). The Navy chose to estimate personnel
cost using its Manpower Billet Cost Factor Model. This model is
intended to estimate the full manpower cost, including indirect cost,
such as training. We did not use this model because much of the
nuclear training costs are not captured by that model. Instead, we
used validated historical costs to estimate direct personnel costs.
We separately estimated training pipeline cost using a methodology
developed by the Navy's Center for Cost Analysis.
The Navy also used a different method for allocating the annual cost
of DOE's laboratories that support its nuclear fleet. We allocated
this cost based on the demand/consumption of nuclear power. Finally,
the Navy's new estimate to inactivate and dispose of the CVN is
nearly 40 percent less than the estimate used in our analysis. We
did not use the Navy's newer estimate because no evidence was
provided or found to support the significant reductions in cost to
the original estimate provided to us.
DOE concurred with DOD's comments addressing estimates of costs
associated with nuclear reactor plant support activities and the
storage of SNF. These comments and our evaluation of them are
discussed in appendix VII.
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