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Why Has The Cost of Navy Ships Risen?

A Macroscopic Examination of the Trends in U.S. Naval Ship Costs Over the Past Several Decades

by Mark V. Arena, Irv Blickstein, Obaid Younossi, Clifford A. Grammich

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Over the past several decades, the increases in acquisition costs for U.S. Navy amphibious ships, surface combatants, attack submarines, and nuclear aircraft carriers have outpaced the rate of inflation. To understand why, the authors of this book examined two principal source categories of ship cost escalation: economy-driven factors (which are outside the control of the Navy) and customer-driven factors (features for which the Navy has the most control). The authors also interviewed various shipbuilders to find out their views on other issues contributing to increasing costs. Based on their analysis, the authors propose some ways the Navy might reduce ship costs in the future, including limiting growth in features and requirements and reconsidering the mission orientation of ships. It is recognized, however, that such reductions come at a cost, since the nation and the Navy understandably desire technology and capability that is continuously ahead of their competitors.

Table of Contents

  • Chapter One

    The Growth of Ship Costs

  • Chapter Two

    Historical Cost Escalation for Ships

  • Chapter Three

    Sources of Cost Escalation for Navy Ships

  • Chapter Four

    Industry Views on Ship Cost Escalation

  • Chapter Five

    Options for the Navy to Reduce Ship Costs

  • Chapter Six

    Conclusion

  • Appendix A

    Ship Classes Included in the Multivariate Regression Analysis

  • Appendix B

    Multivariate Regression for Ship Cost

  • Appendix C

    RAND Questions to Each Firm

  • Appendix D

    Cost Escalation Over the Past 15 Years

  • Appendix E

    Passenger Ship Price Escalation

Research conducted by

The research described in this report was prepared for the United States Navy. The research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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