The U.S. Navy seemed headed for the best of times before it hit the budget and sequestration squalls signaling the worst of times, or at least the most challenging of them.

After more than a decade of neglect by the Pentagon as it focused on fighting two ground wars, and then by Navy leadership who allowed major maintenance to lapse as it trained resources on supporting those conflicts, the nation's naval forces were about to get a big boost from the Pacific pivot.

To prepare for the shift, the Navy was heading for a renaissance: repairing and upgrading destroyers and other surface vessels; investing in combat systems technology improvements; and going to sea with new classes of vessels such as the Littoral Combat Ship (LCS) or the Military Sealift Command's Joint High-Speed Vessel (JHSV) to penetrate areas where bigger warships might be unable to operate.

But sequestration has put nearly all of that on hold, and in jeopardy. While the planned March 1 deployment to Singapore of LCS-1 USS Freedom is “protected,” as are some other Pacific-related operations, every other program is adrift in doubt.

Indeed, the current budget and funding mess could force the Navy to do what defense analysts say the service should have done years ago—jettison the programs it cannot afford and focus on those it can.

The financial problem for the service now is the way sequestration works, which Navy Secretary Ray Mabus calls “mindless.” It entails a mandatory cut from every program. And the effects of sequestration are exacerbated by the continuing resolution (CR), which caps program spending and expenses at the previous year's levels. Navy officials, analysts and shipbuilding executives say the CR poses the bigger threat.

“The Navy is equally—if not more—concerned about the potential impact on the Navy of an extension of the current continuing resolution,” the Congressional Research Service (CRS) affirms in a recent report.

“Navy officials state that if the current CR, which expires on March 27, is extended through the end of the fiscal year on the basis of fiscal 2012 funding levels for [the Defense Department], and if this extended CR does not include sufficient transfer authority for DOD and/or special provisions . . . for fixing execution problems in specific DOD programs,” CRS reports, “the Navy will encounter significant funding shortfalls . . . that will result in the termination of numerous planned ship- and aircraft-maintenance actions and reductions in ship steaming days and aircraft flying hours.”

The CRS says another CR budget cap could create more headaches for the Navy than for other services. “Unlike the paragraphs for other DOD procurement accounts, [which not only state] the total amount of funding for the account,” CRS notes, the language “also explicitly delineates funding for individual shipbuilding programs within the account. It also divides some of those programs further, into separate line items covering procurement funding and advance procurement funding for that program.”

All of that is of major concern for Huntington Ingalls Industries (HII), the nation's largest Navy shipbuilder.

“From the beginning of this, we've been focused on the continuing resolution,” CEO Michael Petters says. “The degree of uncertainty is as high right now as I've ever seen it.”

He notes that the company has operated under continuing resolutions in the past, but the current situation is much different.

“Typically, we've had continuing resolutions with anomalies that would allow us to go start programs on time,” he says. “This hasn't happened this time, and this continuing resolution has been exceptionally long.”

While the company's major warship programs are not in jeopardy, he says, the timing and the costs are.

“The destroyer program was a bid that we put together last summer,” he says. “The Navy would've been able to evaluate those bids and make those awards before the end of last year, but because we had a CR, they have to push that off until the end of March or April.”

The Navy, he points out, cannot do a new start under the current law. “If we get an extension to the CR, then that award gets moved all the way out, past Oct. 1, 2014.”

Destroyers are going through a resurrection of sorts with the advent of ballistic missile defense (BMD) as an emerging mission for Aegis-type ships, involving upgrades that allow ships to do both air defense and BMD.

“The Navy's priorities at the top of the list are the carriers, and then the submarines, and then destroyers and the amphibs,” Petters contends. But the amphibious vessels are at risk now, he says.

“The Navy has a great desire for amphibs,” he notes. “The Marines are looking for lift capability,” but “that seems to be where the resources start to thin.”

HII ranks first of all 2011 shipbuilding contractors, with about $7.8 billion in transactions, including aircraft carrier deals, and about $6.2 billion excluding carrier expenses, according to a recent Aviation Week analysis of contracting data aggregated by the National Institute for Computer-Assisted Reporting.

General Dynamics, which also builds destroyers, finished second in the surface-ship rankings, with about $3.3 billion in deals.

The Navy has other surface-ship investments in mind, though. It wants to build a fleet of smaller vessels meant to work the littorals and establish a small U.S. presence in ports and areas relatively ignored until now.

Smaller combat-ship and landing- vessel contracts and contract modifications tallied about $1.9 billion in 2011, ranking those costs 36th among all non-construction-related Pentagon expenses and second for Navy surface-ship programs after destroyers, which racked up about $4.8 billion for the year. This expenditure puts it ahead of the $1.6 billion in amphibious-ship transactions and the $1.5 billion spent on aircraft carrier deals.

In comparison, combat-ship-related expenses did not even crack the annual top 50 for Navy-related costs over the previous decade, and failed to rank in the top 100 between 1999 and 2009.

The analysis also highlights the reason for the rise of combat-ship expenditures: the growing importance of the LCS program. Indeed, Navy officials say the immediate LCS fleet plans are among the few protected against most budgetary or sequestration impacts. The LCS-1 USS Freedom, for example, deployed March 1, as scheduled, the same week the Navy acknowledged it had picked up options on four more LCS vessels totaling some $1.4 billion.

The Navy has plans for a 55-vessel LCS fleet that will anchor the surface-ship force. Sized between a corvette and a frigate, the ship has the perfect footprint, service officials say, for the type of coastal missions the Navy will have to perform in the Pacific and other global spots—countermine operations, antisubmarine warfare, counter-piracy and similar assignments.

The leading contractors for combat-ship expenses are the two LCS primes: Lockheed Martin, with $906.3 million in 2011 transactions for the Freedom-class version; and Austal USA, which builds the LCS-2 Independence-class version, with $845.8 million.

The LCS work catapults Lockheed Martin and Austal—relative newcomers to the Navy shipbuilding fraternity—into the third and fourth spots, respectively, among surface-fleet primes for 2011, the analysis shows. Austal also builds the JHSVs.

While most of the focus about the Pacific pivot has been on the reestablishment and sustainment of destroyers and other vessels of the Navy's blue-water fleet, the service also is seeking to anchor its forward presence with the development of sea sprinters—such as the JHSV—that can race from point to point, carrying people and supplies.

The way Navy brass see it, ships like JHSV and LCS will allow the U.S. to expand and solidify its footprint without investing and risking too much national collateral. The Navy wants to work the two ships in tandem, leveraging their various strengths.

The JHSV, for example, is not built to be a combat ship, and the vessel's concept of operations calls for it to rely on other ships for protection. “We will marry up with other ships,” says Capt. Douglas Casavant, master of JHSV-1 USNS Spearhead, which is a Military Sealift Command Vessel. “That will primarily be LCS,” he adds. “They will plow the road that we will follow carrying the gear.”

And it's easy to see why Navy officials and the rest of the military, particularly special operations forces, are starting to feel the love for the JHSV, a floating warehouse that can transit relatively short distances with loads ranging from tanks and helicopters to containerized cargo, along with the personnel needed to support the associated operations.

“What we have here,” Casavant says, in showcasing the internal warehousing space during a tour of the USNS Spearhead, “is 20,000 sq. ft. of flexibility.”

With 896 tie-downs to anchor cargo and containers, a 600-ton lift capability and comfortable seating for 312 passengers, the Spearhead can carry a lot of assets.

There may be times, he says, when deployed forces need a quick extraction. “When those folks leave their areas, they're usually in a hurry. We're made to sprint. This is the size of a football field going about 50 mph.”

The ship, he says, can reach top speed–above 40 kt. in a tad more than 1.15 min. It can land most Navy helicopters, and there are plans to test its ability to handle a hovering V-22 Osprey tiltrotor.

With its stern ramp, shallow draft and unique bridge-wing maneuvering console, the Spearhead can operate in areas many vessels cannot. “A lot of ideas that may have sounded crazy in the past are now possible,” he says.

In some ways, the new small-ship concepts are turning traditional Navy thinking and strategy on its head. For example, the maxim used to be that the best way to hunt a submarine was with another submarine. But the automatic radar periscope detection and discrimination upgrade to the multimode radar on the Sikorsky MH-60R helicopter aboard the LCS has turned the Romeo and vessel into a lethal submarine-killing duo.

But the Navy's biggest problem now may not be finding the best way to employ or deploy LCS or JHSV vessels, but how to properly maintain current ships to ensure they meet mission needs.

Recent Navy reports spotlight the results of years of mangled maintenance, even in the prized Aegis-equipped destroyer and cruiser fleets. This year, the service embarked on a more rigorous inspection program.

To keep pace with the inspection schedule, says Rear Adm. Robert Wray, president of the Board of Inspection and Survey (Insurv), the service may have to rely more on uniformed inspectors than civilian technicians to scrutinize ships, as well as systems, equipment and components onboard (see interview with Wray on page DT23).

“Insurv is subject to budget restrictions just like the rest of the Navy,” Wray comments. “An inspection aboard a DDG [destroyer] might require 29 officers and maybe 70 technicians. Now, we'll have 29 officers and perhaps 50 technicians.”

Leveraging some of the expertise in the ranks, Wray says, the Insurv inspections should take no more time than when the full complement of civilian technician inspectors are available. “We're still going to be able see [problems],” he affirms. “The risk in my view is minimal.”

As the teams perform a greater number of inspections, Insurv inspectors will develop an in-depth database of trends, problems and other issues that will not only help guide those who are doing the inspections, but those aboard who are getting the ships ready for scrutiny.

Over time, Wray says, the inspections will improve. “We will get better readiness data.” The information will help the fleet prepare for budgets, maintenance and operations.

Given the current financial uncertainty, the Navy will need all the help it can get.

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