ABSTRACTSpeed‐power margins are applied during the preparation of powering performance estimates for new U.S. Navy ship designs. This paper describes a study which was carried out in support of the U.S. Navy's Energy Conservation Program. The primary purpose of the study was to estimate, for new naval ships, the savings in ship fuel consumption and ship acquisition costs which might be achieved by the use of design power margin values which are smaller than those in the current NAVSEA margin policy. A second, related purpose was to determine the risks, in terms of reduced probabilities of achieving design speed, which would be associated with the use of reduced power margin values. The results of the study indicate that reductions in fuel consumption and acquisition cost can be achieved if a projected new naval ship is redesigned with a smaller value of power margin. However, the results are shown to be dependent upon ship size constraints and on the type of propulsion system. The results of the study also indicate that, for a projected new naval ship, the use of a reduced design power margin value will be accompanied by a substantial decrease in the probability of achieving the design speed.