• Sycamore Institute AU

Sinking the Navy’s Sunk Cost Fallacy

By: Benjamin Brodt


On July 12th, 2020, the USS Bonhomme Richard caught fire while docked in San Diego harbor. The fire raged for nearly a week as first responders were ineffective in putting out the fire and mid to senior level officials failed to act. After the flames were extinguished, the ship was already too badly damaged and had to be scrapped. The Bonhomme Richard was originally commissioned in 1998 at a building cost of $750 million (1.2 billion today) as well as yearly maintenance of $270 million. At the end of the day, the US Navy spent around $6.7 billion on the Bonhomme Richard just for it to burn down at port. The Navy’s recent investigation into the mismanagement of the catastrophe revealed a plethora of issues. The two largest problems identified were that systems were not working properly and that necessary training was not being done. These problems are simply side effects of the larger problems the Navy is currently dealing with. This fire was a major disaster for the USN, but luckily the US is in a state of peace at the moment. If the Navy should be called upon, however, these structural issues will quickly come to light under fire and will cause the US to lose the war at sea.

In order to receive funds from Congress and continue operations the Navy must submit a budget request every year along with long term goals for their force posture. Since 2016, the Navy’s goal has been achieving a larger fleet of ships: 355 to be specific. The USN created this number in an effort to keep pace with the People’s Liberation Army Navy, the Chinese Navy. Unlike the USN, however, the PLAN is focusing on capabilities and costs, crafting its Navy to meet the nation’s needs. The USN, on the other hand, is simply attempting to produce as many ships as the PLAN has, almost regardless of their effectiveness. The Department of the Navy’s arbitrary push for a 355 ship fleet has led to the continued building and maintenance of ships which have already proven to be seriously flawed. This crusade is causing wasted budgets, poor ship designs, and most importantly- a US Navy which is utterly unprepared for any future conflicts.

The problem does not begin with the USN’s 355 ship fleet. It began during the 1990’s when the Navy had time, money, and political willingness to experiment with ship designs. It lost sight of what ships needed to do, and instead began creating ships which could excel in one very specific aspect but failed in all others. Each ship became dependent on a fleet of others to support it logistically and for security. This approach culminated in the Littoral Combat Ship in 2004. The goal of the LCS was to be a small, fast assault vehicle designed for operations close to shore. Many of the ships’ problems stem from its engine, a frankenstein design which severely increased prices because of the USN’s insistence that the ship travel at least 40 knots. Upon commissioning, their captains almost immediately realized that there is absolutely no reason for a 500 foot long, autonomous ship to travel 40 knots. Rear Admiral Perez has said that the LCS is unsuitable for anything other than patrol operations against small insurgent craft armed with no anti-ship missiles. In addition, Captain Coleman (former commander of the USS Independence LCS) said that the LCS was “especially vulnerable to tactical aircraft armed with standoff anti-ship missiles.” For a ship designed for anti-access operations against a near peer adversary, the LCS seems to really not do its job. Despite these warnings, Navy officials continued ahead with the program, ultimately creating a LCS fleet of 23 (35 total being built).

The LCS is just one example of the Navy creating uni-functional ships which are woefully unable to achieve their ultimate stated goal without the assistance of an armada of other ships. Because of the interdependence of the current fleet, the cost of operating one ship has risen dramatically in recent years, and it is only continuing to rise. The Congressional Budget Office estimates that the annual operating cost of the US Navy will increase from $74 billion to $113 billion in thirty years. This is due to both an increase in ships (some of which have already been shown to be obsolete) and the costs of maintenance and support. As the costs of operating rise, so too does the cost of readiness rise.

With a penny pinching congress, and a shrinking defense budget, commanders will be pressured to reduce the operating cost of the fleet. As most of this cost is fixed, the easiest thing to cut will be large, expensive training. The unfortunate downside to lowering operational costs is that readiness also slips. Commanders will practice less because of both top-down pressure and the increasing risk that comes with increasing the cost of ships. Commanders will be much more willing to accept necessary risks with a $500 billion dollar, tried and true destroyer than a fast and untested LCS worth twice that much.

Readiness issues are not the only negative consequence of the USN’s increasingly expensive ships. It also makes these ships very valuable to both the US and its adversaries. If the US’ adversaries were able to sink or severely damage one US ship, it could easily take an entire CSG out of the fight for the foreseeable future (depending on which ship is struck). This has led the US’ adversaries to create new tactics, weapons, and capabilities which could sink a US ship relatively easily. The Pacific is now the testing ground for these brand new, near-peer warfighting concepts and technologies. In recent years, the US has witnessed China’s ability to coordinate electronic warfare with hypersonic missiles, rendering enemy ships unable to maneuver or defend themselves (not that having electronics online would matter much to a 100 ton floating rock being targeted by hypersonic missiles). Artificial intelligence combined with cheap, mass-produced drones have created independently operating swarms which are able to break through the most sophisticated missile defense capabilities onboard US ships. Even insurgents can slip under the US’ high-tech defenses, as evidenced by the USS Cole attack.

The US needs to recognize the vulnerability of its fleet to emerging adversarial threats and either develop ships which can effectively counter these capabilities, or spend less on ships. Instead of creating more expensive new ship designs which do not work for their intended purpose, drain the defense budget, and discourage training and operational use, the US instead needs to focus on the battle tested designs and focus on countering the most relevant threats. It needs to create many more fast, cheap ships, ideally autonomous and unmanned, which can operate independently from the larger fleet and defend itself. Unless the USN stops pouring money into sunk costs, the US will lose the next major naval engagement decisively.