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Navy $40 Billion Savings Effort Linked to Force Structure Assessment

The Honorable Thomas Modly, acting Secretary of the Navy, talks with Capt. John J. Cummings, USS Gerald R. Ford'(CVN 78) commanding officer, in the ship’s pilot house. US Navy photo.

WASHINGTON, D.C. – The Navy’s effort to squeeze $40 billion in savings from its budget is linked to the size and shape of the future force, Secretary of the Navy Thomas Modly said Friday.

The Navy is working with several competing priorities, Modly said while appearing with the other service secretaries at an event hosted by the Center for Strategic and International Studies. The Navy has a mandate to grow the fleet while digging out of a readiness hole at a time Pentagon anticipates flat budgets for the next several years.

“What I told the department is we need to look at ourselves to see where we can find savings, different than the way we traditionally do things before we can ask for anything more,” Modly said.

The Navy’s Stem to Stern review’s $40 billion target sounds high, even unachievable, Modly said. However, when looked at on an annual basis, he’s aiming for finding about $8 billion in savings per year out of the annual budget of roughly $200 billion he expects the service will work with for the next five years.

“It’s actually a staggeringly low number relative to our top line,” Modly said. “Our topline is over $200 billion a year. If we can free up five to six percent of that, we can start moving down the path to building a 355-plus Navy.”

Modly did not provide specific areas he expects or hopes to find savings to reinvest in shipbuilding, but he hinted at shifts in the workforce as one likely target. A much-anticipated Force Structure Assessment, due for imminent release, will include some changes to the way the Navy has traditionally considered manning, Modly said.

For example, the average per-hull operating cost in the fleet today is about $2 billion, which is twice the per-hull cost of operating the fleet in the 1980s, Modly said.

“We have to reverse that trend,” Modly said. “We have to be more distributed.”

The cost of retaining crew members and providing services for the crew member families is part of why per-ship operating expenses are increasing.

“The cost of caring for families is increasing,” Modly said. “It’s hard to buck that trend. It is what it is.”

One solution is reducing the number of people on ships. The challenge is increasing lethality while reducing the number of people required to run a ship, Modly said. The result can be more lightly-manned ships, but with more highly trained crews.

“We have to do a lot of soul searching,” Modly said.