As Valentine’s Day has us all reflecting on the love in our lives, the Navy should reflect on its deep and abiding affection for the Columbia-class submarine, a new ballistic missile submarine program that is saddling taxpayers with its rather expensive tastes.

On February 7, 2024, the Congressional Research Service (CRS, the nonpartisan research arm of Congress) updated its earlier report on the Columbia-class subs, the Navy’s top priority shipbuilding program. These nuclear-armed submarines are a key feature of the Pentagon’s plans to revamp our nation’s nuclear arsenal. But as we highlighted in August 2023, the program is already facing growing costs, and some of the procurement decisions being made have important implications for the ultimate cost of the program and thus for taxpayers.

In its Fiscal Year 2024 shipbuilding plan, the Navy estimated the total procurement cost of the 12 Columbia-class submarines it plans to purchase at $100.2 billion. In June 2023, the Government Accountability Office (GAO, the nonpartisan investigative arm of Congress) projected a total procurement cost for the program of $98.7 billion, marking a rare instance of the Navy estimating higher costs for one of its programs than the GAO. In October 2023, the Congressional Budget Office (CBO, the nonpartisan budget scorekeeping arm of Congress) estimated a total procurement cost of $119 billion. Notably, these estimates don’t include military construction costs of building facilities for these vessels, nor costs for extending the life of the Trident D-5 submarine launched ballistic missiles (SLMBs). However, the updated CRS report warns that costs could surpass even CBO’s estimate.

One potential source of cost growth in the program is the Navy’s decision to use a cost-plus incentive fee (CPIF) contract to purchase the first two ships of the class. Unlike fixed-price contracts, in which the Pentagon agrees to pay a certain amount and the contractor either absorbs any extra cost or pockets any reduction in cost, CPIF contracts commit the Pentagon to paying the actual cost of the ship, plus incentive fees based on the actual cost as well as meeting technical performance objectives. This insulates the shipbuilding companies from the risk of cost growth, reducing the incentive to keep costs down. The Navy normally uses CPIF contracts for the lead ship of a class due to their higher degree of cost uncertainty, but in this case, it’s using CPIF contracts for the first two ships, needlessly increasing risk of cost growth that would be covered by the taxpayer rather than the contractor.

Given that the Pentagon views these ballistic missile submarines as essential to deterrence, cost growth in the program is unlikely to lead to any cuts to the program—however, cost growth could put pressure on other spending priorities, and on other shipbuilding programs in particular.

Another concern that we’ve raised in the past is the use of the National Sea-Based Deterrence Fund (NSBDF) for the Columbia-class subs. The fund was created in 2014 with the goals of financially insulating the rest of the Navy shipbuilding program from the costs of the new ballistic subs, and of encouraging policymakers to consider the program as a portion of the entire Pentagon budget rather than only the Navy’s budget. In other words, the NSBDF helps avoid the appearance of a sky-rocketing shipbuilding budget that might otherwise force the Navy to scale back its aggressive shipbuilding plans.

Proponents of the fund have argued the authority it grants for long lead procurement can save money, but Congress could grant that authority to the Navy without using this special fund. Moreover, whether funded through the NSBDF or the Navy’s shipbuilding budget, long lead procurement contracts can also increase costs. Long lead contracts generally include liability fees that trigger if the Pentagon or Congress decide to purchase fewer units than originally planned, which creates incentives for decision makers to stick to the original plans even if future cost concerns or strategic considerations call for purchasing fewer submarines than planned. Essentially, the financial and political beneficiaries of the Columbia-class program like using long lead procurement contracts because they reduce the flexibility of Congress and the Pentagon to adjust plans based on future conditions, thus protecting industry profits. And they like using the NSBDF because the cost of the Columbia-class program looks smaller when assessed as a portion of the entire Pentagon budget rather than the Navy’s shipbuilding budget. It also serves to protect the shipbuilding budget from the huge cost and cost-growth of the Columbia-class acquisition.

The Navy is currently planning to purchase 12 Columbia-class submarines, a number chosen to ensure that planned maintenance needs don’t interfere with the U.S. Strategic Command requirement to maintain 10 operational SSBNs at any given time. But not everyone agrees on the correct number. CBO has examined options for a force of either 8 or 10 ballistic missile submarines. In 2010 the Cato Institute recommended a fleet of 6 ballistic missile subs. Meanwhile some national security analysts are calling for more than 12 subs, arguing the growth of China’s nuclear capabilities requires more submarines to maintain deterrence.

Because of the liability clauses in long lead procurement contracts for the Columbia-class subs, these competing views over the correct number of submarines could lead to cost growth in the program if the Pentagon or Congress commit to buying more subs and then later change their minds for financial or strategic reasons.

Our view is similar to that of National Security Advisor Jake Sullivan, who argued at the Arms Control Association’s Annual Forum in June 2023 that, “the United States does not need to increase our nuclear forces to outnumber the combined total of our competitors in order to successfully deter them. We’ve been there. We’ve learned that lesson. Nor does the United States need to deploy ever-more dangerous nuclear weapons to maintain deterrence. Rather, effective deterrence means that we have a ‘better’ approach—not a ‘more’ approach.”

In the case of ballistic missile submarines, a better approach means procuring the minimum number of ships necessary to maintain deterrence, and adopting acquisition strategies that minimize cost growth so that other national security spending priorities aren’t short changed. Or as St. Valentine might have put it, the Navy should work towards a healthier relationship with the submarine of its dreams that leaves more room for the Navy’s other needs.