A financial analysis for the acquisition of ready reserve force ships.

Abstract

The recent Defense Mobility Requirements Study determined there is an urgent need for Ready Reserve Force (RRF) ships to meet the sealift follow-on surge requirements. There are three alternatives for acquiring these ships: purchase and convert older commercial ships (inactive RRF), build militarily useful, yet commercially viable ships and lease them to the commercial shipping industry (active RRF) , or subsidize the construction of commercial ships with National Defense Features. This thesis conducted a financial analysis of these three alternatives to determine which is the most cost effective. The results of this analysis show that each alternative is a cost effective approach to acquiring ships under different values for the most critical factors: acquisition costs, lease rate and discount rate. Even so, with the current political and economic environment, and the current military 'budget crisis' the inactive RRF presents the only viable alternative for the near future.