LCS lifecycle costs

A couple of interesting articles about CBO reported lifecycle/fuel costs for the LCS ...

First, from DefenseNews

Report: Fuel Factors Less Than Price For LCS

By CHRISTOPHER P. CAVAS

Published: 28 Apr 2010 18:45

Fuel costs for the U.S. Navy's new Littoral Combat Ship (LCS) are calculated by a new Congressional report to be about 11 percent of total life-cycle costs - far less than the 64 percent figure represented by the price to buy the ship.

The relative insignificance of the fuel figure to the purchase price is at odds with claims by Alabama's Senate delegation that the Navy should give more weight to fuel efficiency in its pending choice of which LCS to buy. Navy officials have repeatedly said that the selection, expected sometime this summer, will be based largely on purchase price rather than lifecycle costs.

Sen. Jeff Sessions, R-Ala., asked the Congressional Budget Office (CBO) to study the effect of fuel costs and other factors on lifecycle costs. Sessions is supporting the aluminum-hulled trimaran LCS design built by Austal USA in Mobile, Ala. That ship is competing with a Lockheed Martin LCS built in Wisconsin.

Sessions and his Senate colleague, Richard Shelby, R-Ala., have repeatedly said the Austal USA ship is more fuel-efficient than the Lockheed ship, particularly at higher speeds.

Actual figures have yet to be gathered for both designs, for while the first Lockheed ship, USS Freedom (LCS 1), has been in service for over a year, the first Austal USA ship, USS Independence (LCS 2), only left her builder's yard a month ago and has yet to demonstrate a full range of operations.

The CBO based its analysis on several earlier classes of Navy ships and used Navy data for the new ships. The study was conducted by Eric Labs and Derek Trunkey.

The study, sent to Sessions on April 28, looked at three overall operating profiles for LCS 1 - low-fuel, where the ship operates most of the time at low speeds, running at 30 knots or more only about 3 percent of the time; moderate-fuel, where high-speed operations take place about 5 percent of the time; and high-fuel, where the ship spends about a fifth of its time at 30 knots or more.

Labs and Trunkey considered that the moderate-fuel ship is "the most likely of the three scenarios."

CBO concluded that, as a percentage of life-cycle costs, fuel costs made up 8 percent of the low-fuel ship, 11 percent for the moderate-fuel ship, and 18 percent of the high-fuel ship.

Comparatively, procurement cost for the low-fuel ship made up 66 percent of the life-cycle cost, 64 percent for the moderate-fuel ship and 58 percent of the high-fuel ship.

Undaunted, Sessions released a statement April 28 that read in part, "Based on the information released today, it is apparent to me that the Navy's calculation of lifecycle costs for the Littoral Combat Ship significantly undervalues the cost of fuel over the operating life of the vessel. This is a fundamental error in the Navy's evaluation criteria, and a failure to correct it could call into question the Navy's final selection in this important procurement program."

Sessions added that, "a failure to properly weigh fuel consumption … would disadvantage the more fuel-efficient ship, an unacceptable mistake given the impact that fuel consumption has on military operations, and the Navy's repeated call for energy efficient vessels."

"Given that the LCS program will make up nearly 20 percent of the Navy's fleet over the next 25 years, even small savings in fuel should be valued," Sessions added. "The report released by CBO today confirms my concerns."

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Next, from Defense Aerospace

Life-Cycle Costs of Selected Navy Ships (excerpt)

(Source: Congressional Budget Office; issued April 28, 2010)

The Congressional Budget Office (CBO) has analyzed the impact of operation and support (O&S) and other types of costs on the total life-cycle costs of four classes of Navy ships. The analysis—which aims to provide context for assessing the costs of the new littoral combat ship (LCS)—focuses on the following ship programs:

-- MCM-1 Avenger class mine countermeasures ships,

-- FFG-7 Oliver Hazard Perry class guided missile frigates,

-- DDG-51 Flight IIA Arleigh Burke class guided missile destroyers, and

-- CG-47 Ticonderoga class guided missile cruisers.

CBO chose those four classes because they have been in the fleet for decades, data for them are readily available, and they all conduct at least one mission that the LCS is also expected to perform. Using the Department of Defense’s (DoD’s) definitions of cost categories, CBO calculated costs over the life of each type of ship in the following six categories:

-- Research and development,

-- Procurement,

-- Personnel,

-- Fuel,

-- Other operations and support, and

-- Disposal.

The resulting total life-cycle cost is smaller than the total ownership cost of a ship, which would also include indirect personnel costs (such as for recruiting, training, and medical support) and long-term infrastructure costs (for changes in bases, housing, and other infrastructure associated with a large-scale change in the size of the Navy). CBO does not have a reliable method to estimate those additional costs, however, so it limited its analysis to a ship’s life-cycle cost.

CBO’s analysis indicates that O&S costs—for personnel, fuel, and other items— make up 49 percent to 56 percent of the life-cycle costs of the four types of ships listed above (see Table 1). Personnel is the largest single element of O&S costs.

For a small vessel with a relatively large crew, such as the MCM-1 class mine countermeasures ship, personnel costs represent 38 percent of the ship’s life-cycle cost, compared with 29 percent for a CG-47 class cruiser, which is seven times bigger but has only four times as large a crew. Fuel costs account for a much smaller share of the life-cycle cost: 8 percent to 11 percent in the case of the frigate, destroyer, and cruiser. For the mine countermeasures ship, fuel costs make up only 1 percent of the life-cycle cost, largely because that ship travels at very slow speeds during mine-clearing operations.

Procurement costs account for most of the rest of those four ships’ life-cycle costs, ranging from 43 percent to 50 percent. Disposal costs for destroyers and cruisers have averaged a little less than $1 million per ship. In the case of FFG-7 frigates, the Navy has often sold retired ships or given them away to other countries. The Navy has not disposed of MCM-1 ships yet. But when it removed 12 MHC-51 coastal mine hunters, which are similar to the MCM-1s, from the fleet several years ago, it sold one and gave three to other nations. (The remaining eight are awaiting disposal.) (end of excerpt)

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Full CBO report available here (PDF)