Navy takes lifecycle view of energy costs in acquisitions

Monday - 10/17/2011, 5:45am EDT

Jared Serbu, DoD reporter, Federal News Radio

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The Navy says that for the first time, it's starting to think about the way the ships, planes and other systems it buys will use energy over their entire lifecycles. But the service is not necessarily doing this to become more green, but rather to keep its future energy costs from spiraling out of control.

The new acquisition approaches are part of a broader effort across the Navy and across the Defense Department to reduce the department's reliance on fossil fuels. The Navy has dedicated $900 million in funding this year to new tactical and shore-based energy initiatives, including considerable efforts to find drop-in replacementsfor it most commonly-used fossil fuels.

But funding alternative fuels isn't enough, said Jim Thomsen, the Navy's principal deputy assistant secretary for acquisition.

"Biofuels, drop-in fuels, hybrid-electric drive, all this stuff is tremendous," he said at the annual Navy Energy Forum Friday in Washington. "But at the end of the day, we have to go buy things. The question for us is how we go buy things differently and build it back into the culture."

First, Thomsen said, the Navy has to come up with a way of accounting for the cost of fuel over the lifecycle of the systems it buys — something it doesn't have right now. The department has told four of its major systems commands to come up with a way of calculating the fully burdened cost of energy for new systems in a way that's repeatable across the acquisition process. The commands are expected to provide the department with answers by the end of October.

Once those methods are in place, energy efficiency will be one of the major criteria the Department of the Navy will use when it's deciding among vendors in a competition for a new system, Thomsen said.

"We're going to make energy performance an evaluation factor in our source selections," he said. "That will be really the default position for major programs and weapons and platforms that are going through evaluation. Notice I didn't say subfactor. We'll have some off-ramps so that we're not putting people in a straightjacket, but this will be our default position."

And energy won't just be a consideration for systems fresh from the assembly line. When program managers go to Navy acquisition leaders for approval on modernization and sustainment programs for things the Navy already owns and operates, they'll have to bring along plans for continual energy performance improvements, Thomsen said.

Thinking about energy use on the front-end of acquisition programs is a relatively new idea for the Navy, said Jo Decker, assistant deputy chief of naval operations for fleet readiness and logistics.

"Things really are different this time," she said. "For many years, major acquisition decisions were based on up-front costs with little regard for long-term ownership costs. And that the way we're structured doesn't help. We're separated out along the lines of who manages what money in the Department of the Navy and even in the Department of Defense, based on the appropriations process. In recent years, we're tried to get smarter. We're more cognizant of how acquisition decisions impact our long-term lifecycle costs."

Fuel bills increasing

Decker said a failure to factor-in energy use during past acquisitions is now catching up with the Navy. Since it is operating a mature fleet without many new ships coming online, the Navy is stuck with ships and planes that were built in acquisition cultures that didn't pay a lot of attention to energy costs.

"We find ourselves, almost every year, having to get lots of contingency operations money to help us meet our fuel bills. That's largely how we've survived over the past few years," she said.

The Navy's woes don't spring entirely from the fact that crude oil has gotten more expensive: Cost drivers for operating the Navy and Marine Corps' ships, planes and helicopters are up across the board. Manpower and maintenance costs have risen significantly, but fuel bills have risen even faster. In the case of the Navy's fixed-wing aircraft, energy costs shot up at 13 times the rate of inflation between 2001 and 2009.

Without a change, things will only get worse, Decker said. Unless the Navy changes the way it thinks about energy, buying jet fuel and diesel will begin to crowd out warfighting capability and force structure.

That's partially due to the fact that the next generation of ships and planes will be even more hungry for energy than the current fleet. The Navy estimates its future aviation platforms will need 30 percent more energy than the current inventory. And its ships and submarines will need 40 percent more than today's.