NAVY AIRCRAFT CARRIERS  - GAO/NSIAD-98-1 - August 1998 NAVY AIRCRAFT CARRIERS
Cost-Effectiveness of Conventionally and Nuclear-Powered Aircraft Carriers
GAO/NSIAD-98-1 -- August 1998

Navy Aircraft Carriers: Cost-Effectiveness of Conventionally and Nuclear-Powered Carriers (Chapter Report, 08/27/98, GAO/NSIAD-98-1). Pursuant to a legislative requirement, GAO: (1) compared the relative effectiveness of conventionally powered and nuclear-powered aircraft carriers in meeting national security requirements; (2) estimated the total life-cycle costs of conventionally powered and nuclear-powered carriers; and (3) identified implications of an all nuclear carrier force on overseas homeporting in Japan and overseas presence in the Pacific region. GAO noted that: (1) its analysis shows that conventional and nuclear carriers both have been effective in fulfilling U.S. forward presence, crisis response, and war-fighting requirements and share many characteristics and capabilities; (2) conventionally and nuclear-powered carriers both have the same standard air wing and train to the same mission requirements; (3) each type of carrier offers certain advantages; (4) for example, conventionally powered carriers spend less time in extended maintenance, and as a result, they can provide more forward presence coverage; (5) by the same token, nuclear carriers can store larger quantities of aviation fuel and munitions and, as a result, are less dependent upon at-sea replenishment; (6) there was little difference in the operational effectiveness of nuclear and conventional carriers in the Persian Gulf War; (7) investment, operating and support, and inactivation and disposal costs are greater for nuclear-powered carriers than conventionally powered carriers; (8) GAO's analysis, based on an analysis of historical and projected costs, shows that life-cycle costs for conventionally powered and nuclear-powered carriers (for a notional 50-year service life) are estimated at $14.1 billion and $22.2 billion (in fiscal year 1997 dollars), respectively; (9) the United States maintains a continuous presence in the Pacific region by homeporting a conventionally powered carrier in Japan; (10) if the U.S. Navy transitions to an all nuclear carrier force, it would need to homeport a nuclear-powered carrier there to maintain the current level of worldwide overseas presence with a 12-carrier force; (11) the homeporting of a nuclear-powered carrier in Japan could face several difficult challenges, and be a costly undertaking, because of the need for nuclear-capable maintenance and other support facilities, infrastructure improvements, and additional personnel; and (12) the United States would need a larger carrier force if it wanted to maintain a similar level of presence in the Pacific region with nuclear-carriers homeported in the United States. --------------------------- Indexing Terms ----------------------------- REPORTNUM: NSIAD-98-1 TITLE: Navy Aircraft Carriers: Cost-Effectiveness of Conventionally and Nuclear-Powered Carriers DATE: 08/27/98 SUBJECT: Nuclear powered ships Defense capabilities Comparative analysis Military vessels Life cycle costs Naval aircraft Cost effectiveness analysis IDENTIFIER: Navy Nuclear Propulsion Program Japan U.S.S. John F. Kennedy U.S.S. Nimitz DOD Quadrennial Defense Review DOD Bottom-Up Review Nimitz Class Aircraft Carrier U.S.S. Eisenhower ****************************************************************** ** This file contains an ASCII representation of the text of a ** ** GAO report. Delineations within the text indicating chapter ** ** titles, headings, and bullets are preserved. Major ** ** divisions and subdivisions of the text, such as Chapters, ** ** Sections, and Appendixes, are identified by double and ** ** single lines. The numbers on the right end of these lines ** ** indicate the position of each of the subsections in the ** ** document outline. These numbers do NOT correspond with the ** ** page numbers of the printed product. ** ** ** ** No attempt has been made to display graphic images, although ** ** figure captions are reproduced. 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For further details, please ** ** send an e-mail message to: ** ** ** ** [email protected]> ** ** ** ** with the message 'info' in the body. ** ****************************************************************** Cover ================================================================ COVER Report to Congressional Requesters August 1998 NAVY AIRCRAFT CARRIERS - COST-EFFECTIVENESS OF CONVENTIONALLY AND NUCLEAR-POWERED CARRIERS GAO/NSIAD-98-1 Nuclear Carrier Cost-Effectiveness (701030) Abbreviations =============================================================== ABBREV AOE - fast combat support ship CLF - Combat Logistics Force CNA - Center for Naval Analyses COH - complex overhaul CV - conventionally powered aircraft carrier CVBG - notional conventional battle group CVN - nuclear-powered aircraft carrier CVNBG - notional conventional and nuclear battle group DFM - diesel fuel marine DOD - Department of Defense DOE - Department of Energy DPIA - Docking Phased Incremental Availability DSRA - Drydocking Selected Restricted Availability EOC - Engineered Operating Cycle FASAB - Federal Accounting Standards Advisory Board GAO - General Accounting Office IMP - Incremental Maintenance Program JFACC - joint force air component commander JP-5 - jet fuel (Navy aircraft fuel) NAVSEA - Naval Sea Systems Command nm - nautical mile NTU - New Threat Upgrade MSC - Military Sealift Command OPNAV - Office of the Chief of Naval Operations OPTEMPO - operating tempo PERA - Planning, Engraving, Repairs, and Alterations PERSTEMPO - Personnel Tempo of Operations PIA - Phased Incremental Availability QDR - Quadrennial Defense Review RCOH - Refueling Complex Overhaul SNF - spent nuclear fuel SRA - Selected Restricted Availability SLEP - Service Life Extension Program VAMOSC - Visibility and Management of Operating and Support Cost Letter =============================================================== LETTER B-259298 August 27, 1998 The Honorable Ted Stevens Chairman The Honorable Daniel K. Inouye Ranking Minority Member Subcommittee on Defense Committee on Appropriations United States Senate The Honorable C.W. Bill Young Chairman The Honorable John P. Murtha Ranking Minority Member Subcommittee on National Security Committee on Appropriations House of Representatives The aircraft carrier forms the building block of the Navy's forward deployed peacetime presence, crisis response, and war-fighting forces. The nuclear-powered carrier is the most expensive weapon system in the Nation's arsenal and represents a significant portion of the Navy's shipbuilding and conversion future years defense program. As requested, this report discusses the cost-effectiveness to the Navy of using conventionally and nuclear-powered aircraft carriers. As the Defense Department and the Navy assess design concepts for a new class of carriers, they will evaluate a number of factors, including different propulsion types. This report contains information and analysis that you may find useful in the process of allocating future defense resources. We are sending copies of this report to the Secretaries of Defense, Navy, Energy, and State and the Director, Office of Management and Budget. Copies will also be made available to others on request. Please contact me on (202) 512-3504 if you or your staff have any questions concerning this report. Major contributors to this report are listed in appendix VIII. Richard Davis Director, National Security Analysis EXECUTIVE SUMMARY ============================================================ Chapter 0 PURPOSE ---------------------------------------------------------- Chapter 0:1 The Defense Appropriations Act of 1994 Conference Report directed GAO to study the cost-effectiveness of nuclear-powered aircraft carriers. The aircraft carrier forms the building block of the Navy's forward deployed peacetime presence, crisis response, and war-fighting forces. The nuclear-powered aircraft carrier (CVN) is the most expensive weapon system in the Nation's arsenal. Pursuant to the Conference Report, GAO (1) compared the relative effectiveness of conventionally powered and nuclear-powered aircraft carriers in meeting national security requirements, (2) estimated the total life-cycle costs of conventionally powered and nuclear-powered carriers, and (3) identified implications of an all nuclear carrier force on overseas homeporting in Japan and overseas presence in the Pacific region. BACKGROUND ---------------------------------------------------------- Chapter 0:2 Navy policy, doctrine, and practice have been to operate aircraft carriers as the centerpiece of the carrier battle group. The standard carrier battle group includes the carrier and its air wing, six surface combatants, two attack submarines, and one multipurpose fast combat supply ship. As a major element of a carrier battle group, surface combatants provide the primary defensive capabilities for the group. Navy guidance states that one or more surface combatants are necessary at all times to escort and protect the aircraft carrier. Collectively, the battle group's forces provide the combatant commanders with an adequately balanced force to offensively and defensively deal with a range of threats. Throughout the 1960s and most of the 1970s, the Navy pursued a goal of creating a fleet of nuclear carrier task forces. The centerpiece of these task forces, the nuclear-powered aircraft carrier, would be escorted by nuclear-powered surface combatants and nuclear-powered submarines. In deciding to build nuclear-powered surface combatants, the Navy believed that the greatest benefit would be achieved when all the combatant ships in the task force were nuclear-powered. The Navy ceased building nuclear-powered surface combatants after 1975 because of the high cost. Recently, most of the remaining nuclear-powered surface combatants have been decommissioned early because they were not cost-effective to operate and maintain. The 1993 Bottom-Up Review prescribed a force of 12 aircraft carriers. The Quadrennial Defense Review of 1997 reaffirmed the need to retain 12 carriers. At the end of fiscal year 1997, the Navy's force consisted of four conventionally powered carriers and eight nuclear-powered carriers. One of the conventionally powered carriers is homeported in Yokosuka, Japan, and another is in operational reserve status. The Navy is building two nuclear-powered Nimitz-class carriers, the Harry S. Truman (CVN-75) and the Ronald Reagan (CVN-76), which are scheduled to be delivered in fiscal years 1998 and 2003, respectively. In fiscal year 2001, the Navy will begin to build the last Nimitz-design carrier, CVN-77. These nuclear-powered carriers will replace three of the four conventionally powered carriers now in the force. The U.S.S. Nimitz (CVN-68) begins a 3-year refueling complex overhaul in fiscal year 1998 at an estimated cost of $2.1 billion (then-year dollars), followed by the U.S.S. Eisenhower (CVN-69) in fiscal year 2001 at an estimated cost of $2.3 billion (then-year dollars). Table 1 shows the changes in the Navy's carrier force through fiscal year 2018 based on planned service lives. Table 1 Navy's Carrier Force Structure Plan (end of fiscal year) 1996 1998 2003 2008 2013 2018 -------------------------------- ------ ------ ------ ------ ------ ------ CV-Active Conus 2 1 0 0 0 0 CV-Japan 1 1 1 0 0 0 CV-Reserve training 1 1 1 1 1 0 ================================================================================ Total conventional 4 3 2 1 1 0 ================================================================================ Total nuclear 8 9 10 11 10 10 Planned carrier CVX class 0 0 0 0 1 2 ================================================================================ Total 12 12 12 12 12 12 -------------------------------------------------------------------------------- Key: CV=conventionally powered carriers. The Navy is assessing design concepts for a new class of aircraft carriers, designated the CVX. As a part of this assessment, the Navy will study a number of factors, including various types of propulsion. The formal design process for CVX began in 1996. The project received $45.7 million in fiscal year 1998 and $190.2 million is being requested for fiscal year 1999. One of the principal objectives of the CVX project is to reduce life-cycle costs by 20 percent. The Navy wants to begin building the first CVX-78 class carrier in fiscal year 2006 and commission it in 2013. Not withstanding the decision on the propulsion type for the CVX, a majority of the Navy's carriers will be nuclear-powered for at least the next 30 years (see fig. 1). GAO studied the cost-effectiveness of nuclear-powered aircraft carriers, including analyses of total life-cycle costs and the implications of an all nuclear-powered fleet on overseas homeporting. After consulting with the Joint Staff, Office of the Secretary of Defense, and Navy officials, GAO identified three principal measures of effectiveness to evaluate the relative effectiveness of conventionally and nuclear-powered carriers in meeting national security requirements and objectives: (1) overseas presence, (2) crisis response, and (3) war-fighting. GAO examined the major assumptions and requirements used in developing overseas presence, crisis response, and war-fighting plans and evaluated the recent operational experience of the conventionally and nuclear-powered carrier force. GAO also evaluated several characteristics and capabilities of large, modern conventionally and nuclear-powered carriers. Relying principally on Navy data, GAO examined the historical and projected costs to acquire, operate, support, inactivate, and dispose of conventionally and nuclear-powered carriers such as those now in the force. Unless otherwise noted, GAO used the Kitty Hawk/John F. Kennedy-class and the Nimitz-class aircraft carriers in its conventionally and nuclear-powered carrier cost-effectiveness analysis. RESULTS IN BRIEF ---------------------------------------------------------- Chapter 0:3 GAO's analysis shows that conventional and nuclear carriers both have been effective in fulfilling U.S. forward presence, crisis response, and war-fighting requirements and share many characteristics and capabilities. Conventionally and nuclear-powered carriers both have the same standard air wing and train to the same mission requirements. Each type of carrier offers certain advantages. For example, conventionally powered carriers spend less time in extended maintenance, and as a result, they can provide more forward presence coverage. By the same token, nuclear carriers can store larger quantities of aviation fuel and munitions and, as a result, are less dependent upon at-sea replenishment. There was little difference in the operational effectiveness of nuclear and conventional carriers in the Persian Gulf War. Investment, operating and support, and inactivation and disposal costs are greater for nuclear-powered carriers than conventionally powered carriers. GAO's analysis, based on an analysis of historical and projected costs, shows that life-cycle costs for conventionally powered and nuclear-powered carriers (for a notional 50-year service life) are estimated at $14.1 billion and $22.2 billion (in fiscal year 1997 dollars), respectively. The United States maintains a continuous presence in the Pacific region by homeporting a conventionally powered carrier in Japan. If the U.S. Navy transitions to an all nuclear carrier force, it would need to homeport a nuclear-powered carrier there to maintain the current level of worldwide overseas presence with a 12-carrier force. The homeporting of a nuclear-powered carrier in Japan could face several difficult challenges, and be a costly undertaking, because of the need for nuclear-capable maintenance and other support facilities, infrastructure improvements, and additional personnel. The United States would need a larger carrier force if it wanted to maintain a similar level of presence in the Pacific region with nuclear-carriers homeported in the United States. GAO'S ANALYSIS ---------------------------------------------------------- Chapter 0:4 OPERATIONAL EFFECTIVENESS OF CONVENTIONALLY POWERED AND NUCLEAR-POWERED CARRIERS -------------------------------------------------------- Chapter 0:4.1 To evaluate the relative effectiveness of conventionally and nuclear-powered aircraft carriers in meeting national security requirements and objectives, GAO identified three principal measures of effectiveness: (1) overseas presence, (2) crisis response, and (3) war-fighting. Using the Navy's Force Presence Model and data, GAO's analysis shows that, on a relative basis, a force of 12 conventional carriers, when compared to a force of 12 nuclear carriers, can provide a greater level of overseas presence in the European Command, the Central Command, and the Western Pacific\1 or that a force of 11 conventionally powered carriers can provide an equivalent level of forward presence as a force of 12 nuclear-powered carriers. Because a conventionally powered carrier's maintenance requirements are not as stringent and complex as those of a nuclear-powered aircraft carrier, the conventionally powered carrier spends a smaller proportion of its time in maintenance than does the nuclear aircraft carrier and, thus, is more available for deployment and other fleet operations. Unified Commanders consider the quality of presence of the two types of carriers to be the same. Navy carriers have been tasked to respond to various crises across the full range of military operations, from humanitarian assistance to major theater wars. Nuclear-powered carriers are known for their abilities to sustain long duration high-speed transits. Although both types of carriers can transit to crisis areas at the same top speed, the conventional carriers take somewhat longer to cover long distances than nuclear carriers due to their need to refuel. For example, GAO's analysis of Navy data indicates that in an 18-day voyage from the U.S. West Coast to the Persian Gulf, a distance of about 12,000 nautical miles, steaming at a sustained speed of 28 knots, a conventional carrier would arrive about 6 hours later than a nuclear carrier. On a shorter voyage from the U.S. East Coast to the eastern Mediterranean Sea, a distance of about 4,800 nautical miles, a conventional carrier would arrive about 2 hours later than a nuclear carrier. Neither of these two examples include the time delay caused by refueling the other ships in the battle group, which would have the same refueling requirements, regardless of the carrier's propulsion. Conventionally powered carriers can be available sooner for large scale crises because it is easier to accelerate or compress their maintenance. Carrier maintenance periods can be shortened by varying degrees, depending on the stage of the maintenance being performed.\2 The degree a depot maintenance period can be shortened--or surged--depends on when the decision is made to deploy the carrier. For both types of carriers, the decision must be made early if the period is to be substantially shortened. Due to the complexity of its maintenance, a nuclear carrier's maintenance period cannot be surged to the same degree as that of a conventional carrier. In addition, the crews for both carrier types train to the same standards, except for the power-plant crew, and spend comparable time in predeployment training. GAO found little difference in the operational effectiveness of nuclear and conventional carriers in the Persian Gulf War. Although the Navy had opportunities to place more nuclear carriers in the combat zone, it followed previously planned deployment schedules. As a result, five of the six carriers that participated in the air campaign were conventionally powered. GAO found that the Navy operated and supported all six carriers and their battle groups in essentially the same manner during the conflict. Each battle group was assigned its own dedicated support ships, which enabled frequent replenishment of fuel and ordnance. Conventional carriers replenished aviation fuel about every 2.7 to 3.1 days and the nuclear carrier every 3.3 days--after only a fraction of their fuel and supplies were exhausted. The distance to targets and the number and mix of aircraft aboard each carrier, rather than propulsion type, determined the number of air sorties flown. The average number of sorties flown were nearly identical for both types of carriers when based on the number of aircraft assigned to the respective carriers. In comparing their characteristics and capabilities, GAO found that the two types of carriers are similar in many respects. For example, both carriers follow the same operational guidance; have the same standard airwing; and, can surge to conduct additional air operations, if necessary. The most noticeable differences are the nuclear carrier's ability to steam almost indefinitely without needing to replenish its propulsion fuel and its larger aircraft fuel and ordnance storage capacity, thereby further reducing dependence on logistics support ships. The larger storage capacity is primarily due to design decisions that have little to do with propulsion type.\3 Nuclear carriers still need periodic resupply of aviation fuel, ordnance, and other supplies, and as such, remain dependent on logistics support ships to sustain extended operations at sea. Logistics support ships are an integral part of carrier battle groups and accompany the groups during peacetime deployments, in crisis response, and during wartime. Nuclear carriers also can accelerate faster than conventional carriers, enabling them to respond faster if conditions affecting the recovery of landing aircraft suddenly change, but the Navy could not provide any examples where an aircraft was lost because a conventionally powered carrier could not accelerate in sufficient time. -------------------- \1 An all conventionally powered carrier force and an all nuclear-powered carrier force were used to illustrate the relative ability of the two carrier types to fulfill peacetime overseas deployment requirements. This analysis assumes that a carrier is permanently forward deployed in Japan. \2 An employment cycle typically includes three maintenance periods, three predeployment training periods, and three deployments. For the conventionally powered carrier, two of the maintenance periods last 3 months and the other maintenance period lasts 12 months, and for the nuclear-powered carrier, the first two periods last 6 months and the final period lasts 10-1/2 months. \3 Analyses by the Naval Sea Systems Command and the Center for Naval Analyses show that a Nimitz-class nuclear design with a conventional propulsion system could provide equivalent aviation ordnance and fuel capacities while retaining the same range and speed characteristics of the current Kennedy-class conventional carrier. LIFE-CYCLE COSTS FOR NUCLEAR-POWERED CARRIERS ARE HIGHER THAN CONVENTIONALLY POWERED CARRIERS -------------------------------------------------------- Chapter 0:4.2 Nuclear-powered carriers cost more than conventionally powered carriers to acquire, operate and support, and inactivate. GAO estimates that over a 50-year life, the costs of a nuclear-powered carrier is about $8.1 billion, or about 58 percent, more than a conventionally powered carrier (see table 2). Historically, the acquisition cost for a nuclear-powered carrier has been about double that of a conventionally powered carrier. Midlife modernization\4 for nuclear-powered carriers is estimated to be almost three times as expensive as a conventionally powered carrier--about $2.4 billion versus $866 million (in fiscal year 1997 dollars).\5 Table 2 Life-Cycle Costs for a Conventionally Powered Carrier and a Nuclear-Powered Carrier (based on a 50-year service life) (Fiscal year 1997 dollars in billions) Conventionally powered Nuclear- Cost category carrier powered carrier ------------------------------------- -------------- --------------- Investment cost\a $2.916 $6.441 Ship acquisition cost 2.050 4.059 Midlife modernization cost 0.866 2.382 Operating and support cost 11.125 14.882 Direct operating and support cost 10.436 11.677 Indirect operating and support cost 0.688 3.205 Inactivation/disposal cost 0.053 0.899 Inactivation/disposal cost 0.053 0.887 Spent nuclear fuel storage cost n/a 0.013 ====================================================================== Total life-cycle cost $14.094 $22.222 ---------------------------------------------------------------------- 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: GAO's analysis. GAO estimates that nuclear-powered carriers have cost about 34 percent more than conventionally powered carriers to operate and support because personnel and maintenance costs are higher and nuclear-powered carriers require unique support organizations and activities. Personnel costs for nuclear carriers are greater because more personnel are required for a nuclear-powered carrier, nuclear-qualified personnel receive greater total compensation, and they are required to complete additional training. For example, a nuclear-powered carrier needs about 130 more personnel in its engineering and reactor departments than are needed in the conventionally powered carrier's engineering department. Also, each year, nuclear-qualified officers receive up to $12,000 and nuclear qualified enlisted personnel receive about $1,800 more than personnel do in nonnuclear jobs. Nuclear-powered carriers are also more costly to maintain because the scope of work is larger and considerably more labor hours are required. Because of the complex procedures required to maintain nuclear power plants, shipyard workers must be specifically trained to maintain nuclear carriers. Additionally, the materials used in nuclear carriers must meet exacting standards and the shipyards must have the facilities needed for the specialized work. Also, these projects cost more because of the unique industrial base, specialized nuclear suppliers, and the Naval Nuclear Propulsion Program's exacting and stringent environmental, health, and safety standards. Shipbuilders must follow šnon-deviationē plans (i.e., no deviation from the approved plans without government approval). An unavoidably high cost overhead structure (engineering, quality assurance, and production control) and costly production work are required in the naval nuclear propulsion industry. Based on the Navy's maintenance plans, GAO estimates that over a 50-year life, nearly 40 percent more labor hours are needed to maintain a nuclear-powered carrier than are required to maintain a conventionally powered carrier. The Navy estimates that it will cost between $819 million and $955 million to inactivate and dispose of the first Nimitz-class nuclear-powered carrier. This is almost 20 times more costly than the $52.6 million that is estimated it will cost to inactivate and dispose of a conventionally powered carrier. Most of the costs can be attributed to removing contaminated nuclear equipment and material, including the highly radioactive spent fuel. -------------------- \4 The midlife modernization represents the service life extension program for conventional carriers and the nuclear refueling complex overhaul for nuclear carriers. Both investments accomplish the common objectives of extending the operating life of the ship. \5 The initial nuclear fuel load and its installation are included in the acquisition cost category. The midlife modernization cost category includes removal of the initial fuel load. It also includes the cost of the replacement fuel load and its installation. IMPLICATIONS OF AN ALL NUCLEAR CARRIER FORCE ON HOMEPORTING A CARRIER IN JAPAN AND OVERSEAS PRESENCE IN THE PACIFIC REGION -------------------------------------------------------- Chapter 0:4.3 Homeporting Navy ships overseas enables the United States to maintain a high level of presence with fewer ships because the need for a rotation base to keep forces deployed is smaller. A conventionally powered carrier has been permanently forward deployed in Japan since 1973. Japan currently pays a substantial share of the costs for the permanently forward deployed carrier, including all yen-based labor, berthing and maintenance facilities improvements, and other support costs such as housing. The last two conventionally powered carriers, including the carrier now homeported in Japan, will reach the end of their service lives in the 2008 to 2018 period. The Navy will have to decide if it wishes to change how it maintains forward presence in the Pacific region. That is, the Navy will have to decide whether to continue the current approach to presence in the region and design and acquire a conventionally powered replacement carrier to homeport in Japan. Alternately, if the Navy wished to provide the same level of presence in the region with nuclear-powered carriers, it would need to (1) establish a nuclear-capable maintenance facility and related infrastructure in Japan to accommodate the nuclear-powered carrier to be homeported there or (2) expand the force to include the additional nuclear-powered carriers that would be necessary, but with ships deployed from the United States. While it would be several years before the carrier force would undergo a complete transition to nuclear propulsion, it would also take several years to implement any of the strategies that will allow the United States to maintain a long-term continuous naval carrier presence in the Pacific region. CONCLUSIONS ---------------------------------------------------------- Chapter 0:5 The Navy is assessing design concepts for a new class of aircraft carriers. As part of this assessment, it will evaluate a number of factors, including different propulsion types. GAO's analysis of measures of effectiveness (forward presence, crisis response, and war-fighting) shows that conventionally and nuclear-powered carriers both have effectively met the Nation's national security requirements. The analysis also shows that conventionally powered carriers have lower total life-cycle costs. This report also discusses the implications of a changing carrier force structure on providing overseas presence for the Pacific region. AGENCY COMMENTS ---------------------------------------------------------- Chapter 0:6 The Departments of Defense (DOD), Energy, and State provided comments on a draft of this report. DOD's comments (see app. VII) and GAO's detailed evaluation are included in the report where appropriate. Overall, DOD partially concurred with the report. Specifically, DOD concurred there is a life-cycle cost premium associated with nuclear power. However, DOD believed GAO's estimate of that premium was overstated by several billion dollars because of what DOD believed are analytic inconsistencies in GAO's analysis. DOD also believed the draft report did not adequately address operational effectiveness features provided by nuclear power. DOD did not agree with GAO's approach of making cost-per-ton comparisons between the two types of carriers currently in the force, believing the conventionally powered carriers reflect 40-year old technologies. DOD believed a more appropriate cost comparison would include pricing conventionally and nuclear-powered platforms of equivalent capabilities. According to DOD, any analysis of platform effectiveness should include mission, threat, and capabilities desired over the life of the ship. Further, it stated the draft report did not adequately address future requirements but relied on historical data and did not account for platform characteristics unrelated to propulsion type. That is, many of the differences may be explained by platform size, age, and onboard systems than by the type of propulsion. Congress asked GAO to examine the cost-effectiveness of conventionally and nuclear-powered aircraft carrier propulsion. Such an analysis seeks to find the least costly alternative for achieving a given requirement. In this context, GAO used as the requirement DOD's national military strategy, which is intended to respond to threats against U.S. interests. That strategy encompasses overseas peacetime presence, crises response, and war-fighting capabilities. GAO used those objectives as the baseline of its analysis and selected several measures to compare the effectiveness of conventionally and nuclear-powered carriers. Those measures were discussed with numerous DOD, Joint Staff, and Navy officials at the outset. Those measures reflect the relative capabilities of each propulsion type, including the nuclear-powered carrier's greater aviation fuel and munitions capacity and unlimited range. Notwithstanding the enhanced capabilities of nuclear propulsion, GAO found that both types of carriers share many of the same characteristics and capabilities, that they are employed interchangeably, and that each carrier type possesses certain advantages. GAO also found that both types of carriers have demonstrated that each can meet the requirements of the national military strategy. GAO's analysis shows that conventionally powered carriers can meet that strategy at a significantly lower life-cycle cost. The primary reason that GAO's analysis shows a higher premium for life-cycle costs of a nuclear-powered carrier is because different methodologies were used. The GAO methodology compared the investment, operating and support, and inactivation/disposal costs of operational carriers. This approach allowed GAO to use historical costs to the extent possible. GAO also used a cost-per-ton approach to develop its acquisition cost estimate. This approach is an accepted method for estimating procurement costs and has been used by the Navy. The GAO methodology showed that the life-cycle cost premium associated with nuclear propulsion was about $8 billion per carrier over a 50-year life versus about $4 billion using the Navy's approach. GAO's and the Navy's estimated life-cycle costs for a nuclear-powered carrier were very similar even though different methodologies were used. However, the life-cycle cost of a conventionally powered carrier using the two methodologies varies significantly--$14 billion versus $19 billion. Several factors account for the variance. For example, a different universe of ships was used to determine the estimated cost for a Service Life Extension Program. In estimating procurement costs, the Navy used actual labor hours for the U.S.S. John F. Kennedy (CV-67), adjusted to reflect current labor, overhead, and material rates for a nuclear shipbuilding facility, Newport News Shipbuilding. Operating and support costs varied, in part, because DOD used fully burdened fuel delivery costs and a different methodology for estimating personnel costs. GAO believes its methodology of reviewing a historical perspective covering a wide range of peacetime presence, crises response, and war-fighting scenarios that both types of carriers faced during the past 20 years is sound. A full discussion of GAO's methodology can be found in appendix I. GAO continues to believe that this assessment will be helpful to the Navy as it assesses design concepts for a new class of aircraft carriers. The Energy Department concurred with DOD's comments addressing estimates of costs associated with nuclear reactor plant support activities and storage of naval spent fuel. These comments and GAO's evaluation of them are discussed in appendix VII. The State Department noted that the entry of nuclear-powered vessels into Japanese ports remains sensitive in Japan and there would have to be careful consultations with the government of Japan should the U.S. government wish to homeport a nuclear-powered carrier in Japan.