The research described in this report was sponsored by the Office of the Secretary of Defense under RAND’s National Defense Research Institute, a federally funded research and development center supported by the Office of the Secretary of Defense, the Joint Staff, and the defense agencies, Contract MDA903-90-C-0004. ISBN: 0-8330-1548-6 RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND® is a registered trademark. RAND’s publications do not necessarily reflect the opinions or policies of its research sponsors. Cover design by Corrine Maier © Copyright 1994 RAND All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from RAND. Published 1994 by RAND 1700 Main Street, P.O. Box 2138, Santa Monica, CA 90407-2138 1200 South Hayes Street, Arlington, VA 22202-5050 201 North Craig Street, Suite 202, Pittsburgh, PA 15213-1516 RAND URL: http://www.rand.org/ To order RAND documents or to obtain additional information, contact Distribution Services: Telephone: (310) 451-7002; Fax: (310) 451-6915; Email: [email protected] PREFACE In January 1993, RAND’s National Defense Research Institute (NDRI) was asked by the Office of the Under Secretary of Defense for Acquisition (now Acquisition and Technology) to compare the practicality and cost of two approaches to fu- ture submarine production: (1) allowing production to shut down as currently programmed submarines are finished, then restarting production when more submarines are needed, and (2) continuing low-rate production. The research was motivated by concerns that the submarine production base might not be easily reconstituted if production is shut down and by the countervailing recognition that deferring new submarine starts might yield substantial savings, particularly over the short term. This report is a comprehensive record of the methods employed in RAND’s analyses and the results obtained. Those analyses were completed and briefed to the research sponsors and other interested parties in the summer of 1993. They reflect what was known then about cost, schedules, and so forth. (The text of this report includes some information that has come to our attention since then.) It is our intention that this report be understandable by someone with little knowledge of submarine production or cost and schedule analysis but that it satisfy those interested in the details of the assessments underlying the conclu- sions presented. It will be supplemented by two less comprehensive prod- ucts—a shorter report that emphasizes results and takes a more selective ap- proach to the supporting material offered and a “research brief,” a single-sheet stand-alone summary of findings. This research was carried out in NDRI’s Acquisition and Technology Policy Center. The National Defense Research Institute is a federally funded research and development center sponsored by the Office of the Secretary of Defense, the Joint Staff, and the defense agencies. iii CONTENTS Preface .................................................. iii Figures .................................................. ix Tables................................................... xv Summary ................................................ xvii Acknowledgments.......................................... xxvii Chapter One INTRODUCTION ....................................... 1 Chapter Two BACKGROUND......................................... 5 U.S. Submarine Production to Date .......................... 5 Events in the Life of a Submarine ............................ 10 Design.............................................. 10 Construction ......................................... 12 Maintenance ......................................... 13 Deactivation ......................................... 14 The Submarine Industrial Base ............................. 14 Chapter Three EFFECTS OF A PRODUCTION GAP ON SHIPYARDS.............. 21 Methodology........................................... 22 Analysis Assumptions .................................. 23 Data for Cost Estimates ................................. 23 Modeling Workforce Buildup and Postrestart Production ........ 24 An Illustrative Case: Baseline Estimates for Electric Boat .......... 25 Sizing the Residual Cadre................................ 26 Impact on Submarines Currently in Construction .............. 27 Costs of Smart Shutdown ................................ 28 v vi The U.S. Submarine Production Base Annual Cost of Maintaining Production Capabilities ............ 29 Costs and Schedule of Reconstitution....................... 30 Summary of Results Across All Cases ......................... 34 Chapter Four EFFECTS OF A PRODUCTION GAP ON NUCLEAR- COMPONENT VENDORS ................................. 43 Naval Nuclear-Propulsion Industrial Base ..................... 43 Lead Times with an Active Industrial Base ..................... 46 Shutting Down and Reconstituting the Reactor Core Vendor ....... 48 One-Year Shutdown.................................... 49 Five-year Shutdown.................................... 50 Shutting Down and Reconstituting the Rest of the Nuclear Vendor Base ............................................. 51 Risks Associated with Gaps in Nuclear Component Production...... 51 Estimation Risk ....................................... 52 Accident Risk......................................... 55 Summary and Conclusions ................................ 56 Chapter Five EFFECTS OF A PRODUCTION GAP ON NONNUCLEAR- COMPONENT VENDORS ................................. 59 Why Is This an Important Issue? ............................ 59 Scope of the Problem..................................... 60 Possible Actions to Ensure Future Product Availability ............ 62 Preserving Existing Production Lines ....................... 63 Reconstituting a Source of Supply in the Future ............... 64 Combining Shutdown, Maintenance, and Restart Costs ........... 67 Chapter Six ALTERNATIVE FLEET REPLACEMENT STRATEGIES ............. 69 Modeling Fleet Replacement ............................... 69 Defining and Screening the Alternatives....................... 75 Narrowing the Range of Production Rates Considered .......... 75 Choosing One of the Two Decommissioning Strategies .......... 78 Narrowing the Range of Fleet Sizes Considered................ 80 Checking the Feasibility of Production Gaps .................. 80 Chapter Seven COMPARING THE COST OF ALTERNATIVE STRATEGIES ......... 83 Sustaining a Fleet Size of 40 Ships at Two Produced per Year ....... 85 Differences in Discounted Costs........................... 85 Differences in Undiscounted Costs......................... 87 Identifying the Sources of the Cost Differences ................ 89 Minimum vs. Maximum Gap: the 30-Year-Life Cases ........... 91 Contents vii Minimum vs. Maximum Gap: the 35-Year-Life Cases ........... 93 30-Year Ship Life vs. 35-Year Life: the Minimum-Gap Cases ...... 95 30-Year Life vs. 35-Year Life: the Maximum-Gap Cases .......... 98 Sensitivity to Production Rate and Fleet Size ................... 99 Sustaining a Fleet Size of 40 Ships at Three Ships Produced per Year.............................................. 99 Sustaining a Fleet Size of 50 Ships at Three Ships Produced per Year.............................................. 100 Sustaining a Fleet of 30 Ships at Two Ships Produced per Year..... 101 Chapter Eight RISK ................................................. 103 Program Risk........................................... 103 Accident Risk .......................................... 107 Long-Term Risk......................................... 107 Chapter Nine CONCLUSIONS AND RECOMMENDATIONS................... 109 On the Practicality of an Extended Gap ....................... 109 On the Cost-Effectiveness of an Extended Gap .................. 110 On the Risks of an Extended Gap ............................ 110 Recommendations ...................................... 110 Appendix A. DESIGN CONSIDERATIONS ............................... 113 B. SUPPLEMENTARY BACKGROUND INFORMATION.............. 117 C. SHIPYARD EFFECTS: ADDITIONAL CASES .................... 123 D. BRITISH PRODUCTION RESTART EXPERIENCE ................ 155 E. FRENCH PRODUCTION EXPERIENCE ....................... 165 F. WORKFORCE RECONSTITUTION MODEL AND GENERIC RESULTS ............................................. 171 G. OPERATING AND SUPPORT COSTS ......................... 189 H. COMPARING COSTS: ADDITIONAL CASES.................... 193 FIGURES S.1. Total Cost to Shut Down, Maintain, and Restart a Shipyard ..... xix S.2. SSN-21 Shipyard Need Dates and Design-and- Manufacturing Spans for Selected Nuclear Components ....... xx S.3. Production Rate Influences the Fleet Size That Can Be Sustained .......................................... xxii S.4. No Matter the Scenario, Restart Cannot Be Long Delayed ....... xxiii S.5. Gapping and Restart Relations Between Minimum- and Maximum-Gap Strategies .............................. xxiv S.6. Long-Term Cost Differences Between Minimum and Maximum Gaps Are Small .............................. xxv 2.1. Nuclear Submarines Commissioned, by Class ............... 6 2.2. Submarine Fleet Composition Profile ..................... 7 2.3. Attack Submarine Fleet Composition, Past and Projected, No New Starts ....................................... 10 2.4. Typical Submarine Design and Construction Timeline ........