Order Code RL32109
CRS Report for Congress
Received through the CRS Web
Navy DD(X), CG(X), and LCS Ship Acquisition
Programs: Oversight Issues and
Options for Congress
Updated July 29, 2005
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Navy DD(X), CG(X), and LCS Ship Acquisition
Programs: Oversight Issues and Options for Congress
Summary
The Navy in FY2006 and future years wants to procure three new classes of
surface combatants — a destroyer called the DD(X), a cruiser called the CG(X), and
a smaller surface combatant called the Littoral Combat Ship (LCS). Congress in
FY2005 funded the procurement of the first LCS and provided advance procurement
funding for the first DD(X), which the Navy wants to procure in FY2007.
The FY2006-FY2011 Future Years Defense Plan (FYDP) reduces planned
DD(X) procurement to one per year in FY2007-FY2011 and accelerates procurement
of the first CG(X) to FY2011. The FY2006 budget requests $716 million in advance
procurement funding for the DD(X) program — $666 million for the first DD(X),
which is planned for procurement in FY2007, and $50 million for the second DD(X),
which is planned for procurement in FY2008 — and $1,115 million for
DD(X)/CG(X) research and development. The budget requests $613.3 million for
the LCS program, including $576.5 million in research and development funding —
$240.5 million to build the second LCS, and $336.0 million in additional research
and development funding — and $36.8 million in procurement funding for LCS
mission modules.
On April 20, 2005, Department of Defense (DOD) deferred as “premature” a
Navy proposal to hold a one-time, winner-take-all competition between Northrop
Grumman’s Ship System Division (NGSS) and General Dynamics’ Bath Iron Works
(GD/BIW) for the right to build all DD(X)s. The Emergency Supplemental
Appropriations Act for 2005 (H.R. 1268/P.L. 109-13) contains a provision (Sec.
1019) that effectively prohibits such a competition.
The DD(X), CG(X), and LCS programs raise several oversight issues for
Congress. Options for Congress for the DD(X) program include approving the
program as proposed by the Navy and supplementing the industrial base, if needed,
with additional work; accelerating procurement of the lead DD(X) to FY2006 and the
second DD(X) to FY2007; deferring procurement of the lead DD(X) to FY2008;
procuring two or more DD(X)s per year; building DD(X)s at a single yard, or
building each DD(X) jointly at two yards; terminating the DD(X) program now (or
after procuring a single ship as a technology demonstrator), and supplementing the
industrial base with additional work until the start of CG(X) procurement; and
starting design work now on a smaller, less expensive alternative to the DD(X) and
procuring this new design, rather than DD(X)s or CG(X)s, starting around FY2011.
Options for Congress on the LCS program include shifting procurement funding
for LCS mission modules to the Navy’s ship-procurement account; procuring a few
LCSs and then evaluating them before deciding whether to put the LCS into
larger-scale series production; procuring LCSs at a rate of up to 10 per year;
procuring LCSs at a rate of less than 5 per year; terminating the LCS program and
instead procuring a new-design frigate; and terminating the LCS program and
investing more in other littoral-warfare improvements. This report will be updated
as events warrant.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issue for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary of FY2006 Legislative Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Short CRS Reports on These Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Organization of This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Surface Combatants in the Navy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Surface Combatant Force-Structure Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Surface Combatant Industrial Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Surface Combatant Acquisition Programs . . . . . . . . . . . . . . . . . . . . . . . . . . 10
DDG-51 Destroyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Arsenal Ship (Terminated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DD-21 Destroyer (Terminated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DD(X)/CG(X)/LCS Family of Future Surface Combatants . . . . . . . . . . . . 16
DD(X) Destroyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CG(X) Cruiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Littoral Combat Ship (LCS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DD(X)/CG(X) Oversight Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Accuracy Of Navy DD(X) Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . . 26
Program Affordability and Cost Effectiveness . . . . . . . . . . . . . . . . . . . . . . 29
Potential Program Implications for Industrial Base . . . . . . . . . . . . . . . . . . . 35
Potential Program Implications for Force Structure . . . . . . . . . . . . . . . . . . 38
Program Mission Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
DD(X) Technology Readiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
DD(X) as Bridge to CG(X) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
DD(X)/CG(X) Technologies for Other Navy Ships . . . . . . . . . . . . . . . . . . 46
LCS Oversight Issues For Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Planned Numbers Of LCSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Total Program Procurement Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Program Mission Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Program Cost Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Rapid Acquisition Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Mission Modules Funded in OPN Account . . . . . . . . . . . . . . . . . . . . . . . . . 61
Potential Program Implications For Industrial Base . . . . . . . . . . . . . . . . . . 62
Options For Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
DD(X)/CG(X) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
LCS Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
FY2006 Legislative Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
DD(X)/CG(X) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
LCS Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Prior-Year Legislative Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
DD(X)/CG(X) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

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LCS Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Appendix A. Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
List of Tables
Table 1. Funding For DD(X)/CG(X) Program, FY2002-FY2011 . . . . . . . . . . . 18
Table 2. Funding For LCS Program, FY2002-FY2009 . . . . . . . . . . . . . . . . . . . 25
Table 3. Estimated DD(X) Unit Procurement Costs . . . . . . . . . . . . . . . . . . . . . . 27
Table 4. Estimated DD(X) Unit Procurement Costs . . . . . . . . . . . . . . . . . . . . . . 30
Table 5. Follow-ship DDG-51 and DD(X) Costs . . . . . . . . . . . . . . . . . . . . . . . . 32
Table 6. Potential Future Force of Larger Surface Combatants . . . . . . . . . . . . . 39
Table 7. Coast Guard Deepwater Cutter Procurement Quantities . . . . . . . . . . . 68

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Navy DD(X), CG(X), and LCS Ship
Acquisition Programs: Oversight Issues
and Options for Congress
Introduction
Issue for Congress
The Navy in FY2006 and future years wants to procure three new classes of
surface combatants — a destroyer called the DD(X), a cruiser called the CG(X), and
a smaller surface combatant called the Littoral Combat Ship (LCS). Congress in
FY2005 funded the procurement of the first LCS and provided advance procurement
funding for the first and second DD(X)s, which the Navy wants to procure in FY2007
and FY2008, respectively.
The FY2006-FY2011 Future Years Defense Plan (FYDP) reduces planned
DD(X) procurement to one per year in FY2007-FY2011 and accelerates procurement
of the first CG(X) to FY2011. The FY2006 budget requests $716 million in advance
procurement funding for the DD(X) program — $666 million for the first DD(X) and
$50 million for the second DD(X) — and $1,115 million for DD(X)/CG(X) research
and development. The budget requests $613.3 million for the LCS program,
including $576.5 million in research and development funding — $240.5 million to
build the second LCS, and $336.0 million in additional research and development
funding — and $36.8 million in procurement funding for LCS mission modules.
The issue for Congress is whether to approve, modify, or reject the Navy’s
proposals for the DD(X), CG(X), and LCS programs. Surface combatants are a
major component of the Navy, and construction of surface combatants represents a
significant share of the Navy’s shipbuilding program. Decisions that Congress makes
on procurement of surface combatants will thus significantly affect future Navy
capabilities, Navy funding requirements, and the U.S. defense industrial base.
Summary of FY2006 Legislative Activity
DD(X) and CG(X) Programs. On April 20, 2005, Department of Defense
(DOD) issued a decision deferring as “premature” a Navy proposal to shift the
DD(X) acquisition strategy to one in which the Navy would hold a one-time, winner-
take-all competition between Northrop Grumman’s Ship System Division (NGSS)
and General Dynamics’ Bath Iron Works (GD/BIW) for the right to build all DD(X)s.
Several Members of Congress expressed opposition to this idea. The Emergency
Supplemental Appropriations Act for 2005 (H.R. 1268/P.L. 109-13 of May 11,
2005) contains a provision (Sec. 1019) that prohibits a winter-take-all competition.

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CRS-2
The provision does not prohibit the Navy from shifting to a DD(X) acquisition
strategy that somehow involves a second shipyard, even if that involvement were
limited, for example, to building only one ship in the DD(X) program.
On May 25, 2005, the Navy announced that, in light of Section 1019, it wants
to shift to a DD(X) acquisition strategy under which two DD(X)s would be procured
in FY2007, with one to be designed and built by NGSS and the other by GD/BIW.
Each ship might be split-funded (i.e., incrementally funded) in FY2007 and FY2008.
The two yards might then compete for the right to build all subsequent DD(X)s, in
which case this strategy could be viewed, at that point, as a deferred winner-take-all
approach.
The FY2006 defense authorization bill (H.R. 1815) as reported by the
House Armed Services Committee (H.Rept. 109-89 of May 20, 2005) includes a
provision (Section 123) that limits the procurement cost of the “future major surface
combatant, destroyer type,” to $1.7 billion per ship. The provision also directs the
Navy to develop an acquisition plan for a future major surface combatant, destroyer
type, that uses technologies from the DD(X) and CG(X) programs, is at least as
capable as the Navy’s current Arleigh Burke (DDG-51) class Aegis destroyer, and
would be ready for lead-ship procurement in FY2011. Since the current DD(X)
design likely could not be built for $1.7 billion, at least not without removing most
or all of the ship’s planned combat-related equipment, Section 123 would effectively
restructure the DD(X) program into an effort aimed at developing a new surface
combatant design that could meet the $1.7-billion cost limit. Such a ship would
likely be smaller than the DD(X) and be less capable in some respects than the
DD(X). With a capability at least equal to that of the DDG-51 design, however, it
would still have a substantial capability. The bill as reported recommends no
FY2006 advance procurement funding for the DD(X) program and reduces the
program’s FY2006 research and development request to $700 million. The bill
would also authorize $2.5 billion for procurement of two additional DDG-51s, to
help support the surface combatant industrial base.
The FY2006 defense authorization bill (S. 1042) as reported by the Senate
Armed Services Committee (S.Rept. 109-69 of May 17, 2005) contains a provision
(Section 121) that prohibits a winner-take-all acquisition strategy for the DD(X). The
report recommends increasing the DD(X) program’s FY2006 advance procurement
funding request by $50 million, with the additional $50 million to be used for the
second DD(X), and recommends increasing the program’s FY2006 research and
development funding request by $10 million.
The House Appropriations Committee, in its report (H.Rept. 109-119 of
June 10, 2005) on the FY2006 defense appropriations bill (H.R. 2863),
recommends deleting the $716 million FY2006 advance procurement funding request
for the DD(X) program and rescinding the program’s $304 million in FY2005
advance procurement funding, “consistent with the recommendations of the House
in H.R. 1815” (page 146). It recommends reducing DD(X) FY2006 research and
development to $670 million, and adding $50 million in FY2006 research and
development funding for the CG(X) program (page 251). The report states that the
DD(X) program “has encountered serious problems” in terms of technology
development and increasing unit procurement cost, and that “Considering the

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uncertainty in this program and the lack of authorization, the Committee believes this
program is likely to be restructured, and a new cost and acquisition strategy
developed, before proceeding to advance procurement” (page 147). The report also
states that “Given the age of the current CG–47 Ticonderoga class [Aegis cruisers]
and the potential use of CG(X) to fulfill ballistic missile defense and other missions,
the Committee believes it is imperative to accelerate” concept studies, concept
design, and other development work for the CG(X) (page 251).
LCS Program. H.R. 1815 as reported by the House Armed Services
Committee contains a provision (Section 124) that limits the procurement cost of
each LCS, including its mission modules, to $400 million. The report also
recommends increasing the research and development funding request for the LCS
program by $12 million to fund work on high-strength composite material.
The Senate Armed Services Committee, in S.Rept. 109-69 on S. 1042,
recommends increasing the LCS program’s FY2006 procurement funding request by
$8.6 million for a spare marine gas turbine engine. The report also expresses concern
for the Navy’s plan to limit competition for future Flight 1 LCSs to the two LCS
designs currently being developed, and directs the Navy to report on its acquisition
strategy for Flight 1 LCSs.
The House Appropriations Committee, in H.Rept. 109-119 on H.R. 2863,
recommends approving the LCS program’s research and development funding
request (page 251), which includes funds for building the second LCS, and adding
$440 million in the SCN account for the procurement of two additional LCSs, for a
total FY2006 procurement of three LCSs. The report states that the committee
“remains very supportive of the LCS program,” and directs the Navy to submit a
report on the development and procurement plan for LCS mission modules (page
146).
Short CRS Reports on These Programs
Two short CRS reports — CRS Report RS21059 and CRS Report RS21305 —
provide introductory overviews of the DD(X), CG(X), and LCS programs,
respectively, for readers seeking short discussions of these programs.1 This long
CRS report discusses these programs in more depth, particularly with regard to
oversight issues and options for Congress.
Organization of This Report
The next section of the report provides background information on Navy surface
combatants. The following section discusses potential oversight issues for Congress
relating to surface combatant force-structure planning, the DD(X) program, the
CG(X) program, and the LCS program. The subsequent section presents options for
Congress on the DD(X), CG(X), and LCS programs. A final section presents recent
1 CRS Report RS21059, Navy DD(X) and CG(X) Programs: Background and Issues for
Congress, by Ronald O’Rourke; and CRS Report RS21305, Navy Littoral Combat Ship
(LCS): Background and Issues for Congress, by Ronald O’Rourke.

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legislative activity on the two programs. This report will be updated as events
warrant.
Background
Surface Combatants in the Navy2
A Major Component of the Navy. Surface combatants are one of four
major types of Navy combat ships, along with aircraft carriers, submarines, and
amphibious ships.3 Historically, surface combatants have accounted for 30% to 40%
of the Navy’s battle force ships.4 At the end of FY2004, they accounted for about
35% (103 of 291 battle force ships).5
Surface combatants typically are equipped with sensors (e.g., radars and sonars)
and weapons (e.g., missiles, guns, and torpedoes) for detecting and attacking enemy
submarines, surface ships, aircraft, anti-ship cruise missiles, and land targets. Many
surface combatants also carry one or two helicopters to assist in these operations.
In descending order of size, surface combatants include battleships, cruisers,
destroyers, frigates, corvettes (also called light frigates), and patrol craft.6 The Navy
2 For additional background information on surface combatants, see U.S. Congressional
Budget Office, Transforming the Navy’s Surface Combatant Force, March 2003, pp. 4-17;
and CRS Report 94-343 F, Navy DDG-51 Destroyer Procurement Rate: Issues and Options
for Congress, by Ronald O’Rourke. (Archived, available from author at 202-707-7610.)
3 The Navy’s fleet also includes mine warfare and support ships. Aircraft carriers, though
sometimes referred to as surface combatants, are usually put into a category of their own
because their main armament — an embarked air wing consisting of dozens of high-
performance aircraft — is quite different from the typical main armament of other surface
warships and leads to fundamental differences in ship design and operation.
4 For a graph showing surface combatants as a percentage of the total number of Navy battle
force ships for the years 1948-1993, see CRS Report 94-343 F, Navy DDG-51 Destroyer
Procurement Rate: Issues and Options for Congress, by Ronald O’Rourke. (Archived,
available from author.)
5 In public policy discussions about the Navy, the commonly cited number of ships in the
Navy is the total number of battle force ships. Battle force ships are ships that can readily
deploy overseas to participate in or directly support U.S. Navy combat operations, such as
aircraft carriers, major surface combatants, submarines, amphibious ships, higher-readiness
mine warfare ships, and Navy auxiliaries that resupply Navy combat ships at sea. Ships that
do not qualify as battle force ships, such as patrol craft and military sealift ships that
transport equipment and supplies from one land mass to another, are categorized as local
defense and miscellaneous support forces. As of the end of FY2004, the Navy counted 291
battle force ships and 140 local defense and miscellaneous support forces ships.
6 Battleships, cruisers, destroyers, and frigates are referred to as major surface combatants;
patrol craft are sometimes referred to as minor surface combatants; and corvette-sized ships
can be included in either group.

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CRS-5
no longer operates battleships.7 The Navy’s surface combatant force in recent
decades has consisted largely of cruisers, destroyers, and frigates.8
Roles, Missions, and Capabilities. From World War II until the 1980s,
surface combatants were viewed largely as defensive escorts for protecting other
Navy surface ships (i.e., aircraft carriers, amphibious ships, and auxiliary ships)9 and
commercial cargo ships. During this period, the primary missions of surface
combatants were anti-air warfare (AAW) and anti-submarine warfare (ASW), and
designs for Navy surface combatant classes were determined in large part by
decisions as to whether a given class should emphasize AAW, ASW, or both.
Additional but more secondary surface combatant missions during this period
included anti-surface warfare (ASuW) and attacking coastal land targets with guns.
The largely escort-oriented role of Navy surface combatants changed in the
1980s with the advent of three major new systems — the Tomahawk cruise missile,
the vertical launch system (VLS), and the Aegis ship combat system. The Tomahawk
gave surface combatants an ability to attack enemy targets at ranges comparable to
targets that could be attacked by carrier-based aircraft. The VLS, which is a battery
of vertically oriented missile-launch tubes that is countersunk into the ship’s deck,
permitted surface combatants to carry and launch an increased number of
Tomahawks (and other missiles). The Aegis system — an integrated ship combat
system that includes the sophisticated SPY-1 multifunction phased-array radar10 —
significantly enhanced the AAW capability of surface combatants, giving them more
potential for conducting operations independent of aircraft carriers.11 In the eyes of
many observers, the Tomahawk missile and the Aegis system transformed surface
7 As part of the Reagan-era buildup toward a planned 600-ship fleet, the Navy in the 1980s
reactivated and modernized its four Iowa (BB-61) class battleships, which were originally
built during World War II and were the last battleships built by the U.S. Navy. The four
reactivated and modernized battleships, with Tomahawk cruise missiles and other new
equipment, reentered service in 1982-1988. Two of the ships were used in the 1991 Persian
Gulf war. The ships were removed from service in 1990-1992 as part of the post-Cold War
reduction in the size of the Navy.
8 In recent decades, the Navy’s cruisers have become smaller while its destroyers have
become larger, with the result that the Navy’s current cruisers and destroyers are similar in
size and (in some respects) capability. The Navy’s frigates are considerably smaller and less
capable than its cruisers and destroyers. At various times in the past, the Navy has also
operated small numbers of patrol craft.
9 The fixed-wing aircraft embarked on aircraft carriers in turn provided long-range air
protection for both the carrier and the other surface ships (i.e., surface combatants and
auxiliary ships) in the carrier battle group.
10 The Aegis system also integrates, among other things, the SPS-49 air search radar (on CG-
47 class cruisers), the Mk 99 target illumination radar, the SLQ-32 electronic warfare
system, the Standard surface-to-air missile, the Mk 41 VLS system for launching the
Standard missile and other missiles, the Phalanx close-in weapon system (CIWS), and the
ship’s tactical computers and computer displays.
11 For an introductory discussion of the Aegis system, see CRS Report 84-180 F, The Aegis
System: Its Principal Components, Its Installation on the CG-47 and DDG-51 Class Ships,
and Its Effectiveness, by Ronald O’Rourke. (Archived, available from author.)

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combatants back into significant offensive combatants for the first time since the
period before World War II.
The capabilities of Navy surface combatants are currently being enhanced by
new networking systems such as the Cooperative Engagement Capability (CEC) for
air-defense operations. Networking systems like these enable surface combatants,
other ships, and aircraft to share large amounts of targeting-quality data on a rapid
and continuous basis, permitting them to engage in what is called network-centric
warfare (NCW).12
In coming years, surface combatants are scheduled to take on a growing role as
platforms for conducting ballistic missile defense operations.13 The capabilities of
surface combatants will also be enhanced in coming years by increased application
of networking technology and by the addition of unmanned air, surface, and
underwater vehicles,14 electromagnetic rail guns, directed-energy weapons such as
lasers, and improved equipment for detecting and countering mines. Some of these
developments are to be enabled by the application to surface combatants of advanced
integrated electric drive propulsion technology.15 As these developments unfold,
surface combatants will likely continue to play a significant role in defending both
themselves and other friendly surface ships against enemy submarines, surface ships,
aircraft, and anti-ship cruise missiles.
Service Lives. For planning purposes, the Navy credits its cruisers and
destroyers with 35- or 40-year expected service lives (ESLs), its frigates with 30-year
ESLs, and its patrol craft with 20-year ESLs. In practice, however, numerous surface
combatants in recent years have been decommissioned well before the end of their
ESLs for various reasons, including decisions (like the one following the end of the
Cold War) to reduce the size of the Navy, shifts in Navy mission requirements that
made ships with certain capabilities inappropriate, and high operation and support
(O&S) costs that made ships cost-ineffective compared to other approaches for
performing their missions. The Navy currently plans to decommission more than two
dozen of its current cruisers, destroyers, and frigates over the next several years, well
before the end of their ESLs.
Current Surface Combatant Force. As of the end of FY2004, the Navy’s
surface combatant force consisted of 103 ships in four classes:
12 For more on naval NCW, see CRS Report RS20557, Navy Network-Centric Warfare
Concept: Key Programs and Issues for Congress, by Ronald O’Rourke.
13 For a discussion of the emerging role of Navy surface combatants in missile-defense
operations, see CRS Report RL31111, Missile Defense: The Current Debate, coordinated
by Steven A. Hildreth and Amy F. Woolf.
14 For more information on naval unmanned vehicles, see CRS Report RS21294, Unmanned
Vehicles for U.S. Naval Forces: Background and Issues for Congress, by Ronald O’Rourke.
15 For a discussion of electric-drive technology and its application to Navy ships, see CRS
Report RL30622, Electric-Drive Propulsion for U.S. Navy Ships: Background and Issues
for Congress, by Ronald O’Rourke.

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! 25 Ticonderoga (CG-47) class cruisers;
! 43 Arleigh Burke (DDG-51) class destroyers;
! 5 Spruance (DD-963) destroyers; and
! 30 Oliver Hazard Perry (FFG-7) class frigates.16
CG-47s, which have a full load displacement of about 9,500 tons,17 are equipped
with the Aegis system and are commonly referred to as Aegis cruisers. A total of
27 were procured between FY1978 and FY1988 and entered service between 1983
and 1994. The first five lack VLS and consequently cannot fire Tomahawks; the
final 22 are equipped with a 122-tube VLS. The Navy plans to decommission the first
five by the end of FY2006. Two of the five were decommissioned by the end of
FY2004. The Navy has planned to modernize the final 22 and keep them in service
until they are about 40 years old.
DDG-51s, which displace about 9,200 tons,18 are equipped with the Aegis
system and are sometimes referred to as Aegis destroyers. They are also equipped
with a 90- or 96-tube VLS. The first ship was procured in FY1985, and 62 have been
procured through FY2005. By the end of FY2004, 43 had entered service (the first
in 1991) and 19 were in various stages of construction. The Navy wants the three
ships procured in FY2005 to be the final ships in the program. The Navy plans to
give these ships a mid-life modernization that is intended in part to reduce their
operating and support costs.
DD-963s, which displace about 9,200 tons, are not equipped with the Aegis
system. A total of 31 were procured between FY1970 and FY1978 and entered
service between 1975 and 1983. Twenty-four were retrofitted with a 61-tube VLS
after VLS became available to the Navy in the 1980s. Twenty-six were
decommissioned by the end of FY2004. The Navy plans to decommission the
remaining five by the end of FY2006.
16 The Navy at the end of FY2004 also operated 9 Cyclone (PC-1) class patrol craft. A
total of 13 PC-1s were procured between FY1990 and FY1996 for the Navy and entered
service with the Navy between 1993 and 2000. The lead ship, PC-1, was donated to the
Philippine Navy and commissioned into service with that Navy on March 8, 2004. Four
other ships in the class — PCs -4, -8, -13, and -14 — have been loaned to the U.S. Coast
Guard. The PC-1s, which displace about 330 tons, are high-speed craft that were built to
support special operations forces. They have also been used by the Navy and Coast Guard
for port-security operations. PC-1s in service with the U.S. Navy are classified as local
defense and miscellaneous support forces and consequently are not included in the total
number of battle force ships in the Navy.
17 Full load displacement is the weight of the ship including loads such as fuels and water.
Another measure of ship size is light (i.e., empty) ship displacement, which excludes such
loads. Full load displacement is the more commonly used measure in general discussions
of Navy ships, but light displacement is generally more useful in estimating ship
construction costs.
18 This is the figure for the 29th and following ships in the class, which are referred to as the
Flight IIA ships. The first 28 ships in the class, which are referred to as the Flight I and II
ships, were built to a different design that lacked a helicopter hangar and have a full load
displacements of about 8,900 tons. Flight IIA ships have a light ship displacement of about
6,950 tons.

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CRS-8
FFG-7s, which displace about 4,000 tons, were designed as lower-cost, lower-
capability surface combatants for use in lower-threat environments. They lack both
the Aegis system and VLS. A total of 51 were procured between FY1973 and
FY1984 and entered service between 1977 and 1989. Twenty-one were
decommissioned by the end of FY2003. The Navy plans to decommission several
more over the next decade. Nine of the 30 FFG-7s in service at the end of FY2004
were operated as Naval Reserve Force (NRF) ships with crews consisting partly of
Navy reservists.
All of these ships have landing pads for operating helicopters, and all but the
first 28 DDG-51s have hangars for embarking and supporting 2 helicopters.
Surface Combatant Force-Structure Goal
310-Ship Fleet From 2001 QDR. In September 2001, as part of its final
report on the 2001 Quadrennial Defense Review (QDR), the Department of Defense
(DOD) approved a plan for maintaining a Navy of about 310 battle force ships. This
plan, which was essentially the same as the Navy force-structure plan approved in the
1997 QDR, included 116 surface combatants (108 active and 8 in the Naval Reserve
Force), all of which are cruisers, destroyers, and frigates.
In approving the 310-ship plan (and other U.S. military force-structure goals),
however, the 2001 QDR report stated that as DOD’s “transformation effort matures
— and as it produces significantly higher output of military value from each element
of the force — DOD will explore additional opportunities to restructure and
reorganize the Armed Forces.”19
In February 2003, in submitting its proposed FY2004 defense budget and
FY2004-FY2009 Future Years Defense Plan (FYDP) to Congress, DOD announced
that it had initiated studies on DOD’s undersea warfare requirements and on forcible
entry options for the U.S. military. The studies on undersea warfare could affect,
among other things, the required number of SSNs, while the studies on forcible entry
options could affect, among other things, requirements for amphibious ships and for
naval surface fire support capabilities. In launching these studies, DOD thus created
uncertainty about two of the four principal categories of ships that define the 310-
ship plan (submarines and amphibious ships), and about requirements for a certain
capability (naval surface fire support) to be performed by the Navy’s surface
combatant force.
Navy 375-Ship Proposal of 2002-2004. From about February 2002
through about February 2004, Navy officials spoke of an alternative plan for a 375-
ship Navy. The principal difference between the 310-ship plan and the 375-ship plan
was that the 375-ship plan called for a total of 160 surface combatants, including 104
cruisers, destroyers, and frigates, and 56 LCSs.
Although Navy leaders from early 2002 through early 2004 routinely referred
to the 375-ship proposal, Secretary of Defense Donald Rumsfeld, at a February 5,
19 U.S. Department of Defense, [Report on] Quadrennial Defense Review, Sept. 2001, p. 23.

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CRS-9
2003 hearing before the House Armed Services Committee, explicitly declined to
endorse it as an official DOD goal, leaving it a Navy proposal only. In April 2004,
Navy leaders began to back away from the 375-ship proposal, stating that 375 was
an approximate figure, that the ships making up the total of 375 were subject to
change, and perhaps most important, that the 375-ship figure reflected traditional
concepts for deploying Navy ships, rather than new concepts (such as the Sea Swap
concept for long deployments with crew rotation) that could significantly reduce
future requirements for Navy ships.20
2005 Navy Testimony on 260- and 325-Ship Fleets. In February 2005,
the Navy testified that the Navy in future years may require a total of 260 to 325
ships, or possibly 243 to 302 ships, depending on how much the Navy uses new
technologies and a new ship crewing and deployment method called Sea Swap. In
March 2005, the Navy provided a report to Congress showing the notional
compositions of 260- and 325-ship fleets in FY2035. The 260-ship fleet for FY2035
included 130 surface combatants — 44 Arleigh Burke (DDG-51) class Aegis
destroyers, 8 DD(X)s, 15 CG(X)s, and 63 LCSs. The 325-ship fleet for FY2035
included 174 surface combatants — 62 DDG-51s, 12 DD(X)s, 18 CG(X)s, and 82
LCSs.21
Surface Combatant Industrial Base
Construction Yards. All of the Navy’s larger surface combatants procured
since FY1985 have been built at two shipyards — GD/BIW) in Bath, ME, and
Northrop Grumman’s Ingalls shipyard (Northrop/Ingalls) in Pascagoula, MS.22 Both
yards have long histories of building surface combatants. Construction of Navy
surface combatants in recent years has accounted for virtually all of GD/BIW’s ship-
construction work and for a significant share of Ingalls’ ship-construction work.23
20 For more on Sea Swap and other new approaches for deploying Navy ships, see CRS
Report RS21338, Navy Ship Deployments: New Approaches — Background and Issues for
Congress, by Ronald O’Rourke.
21 U.S. Department of the Navy, An Interim Report to Congress on Annual Long-Range Plan
For The Construction Of Naval Vessels For FY 2006. The report was delivered to the House
and Senate Armed Services Committees on March 23, 2005. Copies of the report were
obtained by defense trade publications, and at least one of these publications posted the
report on its website. For additional discussion of Navy force-planning goals, see CRS
Report RL32665, Potential Navy Force Structure and Shipbuilding Plans: Background and
Issues for Congress, by Ronald O’Rourke.
22 The Ingalls yard, along with the Avondale shipyard near New Orleans and a third facility
at Gulfport, MS, form Northrop Grumman’s Ship Systems (NGSS) division.
23 In earlier years, some Navy surface combatants were built at other yards, such as Northrop
Grumman’s Avondale shipyard near New Orleans, LA (which built most of the Navy’s
Knox [FF-1052] class frigates between 1967 and 1974), Northrop Grumman’s Newport
News Shipbuilding of Newport News, VA (which built six nuclear-powered cruisers in the
1970s), Todd Shipyards of Seattle, WA, and San Pedro, CA (which built many of the FFG-
7s between 1977 and 1989), and Lockheed Shipbuilding of Seattle, WA (which built some
of the FF-1052s between 1968 and 1972). Additional private-sector shipyards and
(continued...)

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CRS-10
The Navy’s smaller Cyclone (PC-1) class patrol boats were built at Bollinger
Shipyards at Lockport, LA.
LCSs, because of their smaller size and relative simplicity (i.e., the lack of a
major built-in combat system), could be built not only by a traditional builder of
larger surface combatants such as GD/BIW or Northrop/Ingalls, but also by other
private-sector shipyards that have not traditionally built larger surface combatants for
the Navy. The two industry teams now involved in the LCS program are proposing
to build the LCS at yards other than GD/BIW or Northrop/Ingalls.24
System Integrators and Supplier Firms. Lockheed Martin and Raytheon
are generally considered the two leading Navy surface ship radar makers and combat
system integrators. Boeing is another system integrator and maker of Navy surface
ship weapons and equipment. The surface combatant industrial and technological
base also includes hundreds of additional firms that supply materials and
components. The financial health of the supplier firms has been a matter of concern
in recent years, particularly since some of them are the sole sources for what they
make for Navy surface combatants.25
Surface Combatant Acquisition Programs
This section provides background on 6 Navy surface combatant acquisition
programs:
! the current DDG-51 destroyer program,
! the terminated arsenal ship program,
! the terminated DD-21 destroyer program,
! the proposed DD(X) destroyer program,
! the proposed CG(X) cruiser, and
! the proposed LCS program.
Although the arsenal ship and DD-21 programs have been terminated, they are
reviewed below because they provide context for understanding the DD(X) destroyer
and LCS programs.
23 (...continued)
government-operated naval shipyards were involved in building Navy surface combatants
in the 1960s and previous years.
24 Navy surface combatants are overhauled, repaired, and modernized at GD/BIW,
Northrop/Ingalls, other private-sector U.S. shipyards, and four government-operated naval
shipyards (NSYs) located at Portsmouth, NH, Newport News, VA, Bremerton, WA, and
Pearl Harbor, HI.
25 In addition to production facilities located at shipyards, system integrators, and supplier
firms, the surface combatant industrial base includes naval architects and engineers who
work for shipyards, systems integrators, supplier firms, and independent naval architectural
engineering firms, and research and development organizations and laboratories in the Navy
and at shipyards, system integrators, supplier firms, Federally Funded Research and
Development Centers (FFRDCs), and universities and colleges.

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CRS-11
DDG-51 Destroyer
The Arleigh Burke (DDG-51) class destroyer has been the sole class of larger
surface combatant in procurement for the Navy since FY1989. As mentioned earlier,
62 DDG-51s have been procured through FY2005, and the Navy wants the three
ships procured in FY2005 to be the final ships in the program. The final three ships
are scheduled to enter service in FY2010 and FY2011.
In the early 1990s, the Navy ended the use of competition between GD/BIW and
Northrop/Ingalls for DDG-51 construction contracts and began allocating contracts
equally between the two shipyards on a noncompetitive basis. That arrangement
remained in place until 2002, when a new agreement was reached between General
Dynamics, Northrop Grumman, and the Navy. Under this agreement, construction
of San Antonio (LPD-17) class amphibious ships was consolidated at Northrop
Grumman’s Avondale and Northrop/Ingalls shipyards (rather than being split on a
2-to-1 basis between the Northrop yards and GD/BIW, respectively) and construction
of most of the remaining DDG-51s was shifted to GD/BIW (rather than being split
on a 1-for-1 basis between GD/BIW and Northrop/Ingalls).
Arsenal Ship (Terminated)26
The Navy initiated the arsenal ship program in early 1996. The program was
aimed at developing and acquiring a class of six large surface combatants that were
each equipped with 512 VLS tubes for firing Tomahawk cruise missiles and other
land-attack weapons. The arsenal ships were to be relatively simple and (for their
size) relatively low cost ships manned by crews of not more than 50 sailors. The
stated purpose of the program was to provide U.S. regional military commanders
with substantial additional in-theater or early-arriving firepower for use in the early
phases of regional crises and conflicts.
The Navy pursued the arsenal ship program under a streamlined acquisition
strategy using what is known as Other Transaction Agreement (OTA) or Section
845/804 contracting authority. This statutory authority exempted the arsenal ship
program from many of the regulatory requirements that DOD acquisition programs
at the time were normally required to meet.27 In line with this streamlined acquisition
strategy, the Navy prior to starting the arsenal ship program did not issue a traditional
DOD document known as a Mission Need Statement (MNS) establishing a formal
DOD requirement for substantial additional in-theater or early-arriving firepower.
Also consistent with the streamlined acquisition strategy, the Navy did not conduct
a rigorous analysis — then known as a cost and operational effectiveness analysis
(COEA) and now known as an analysis of multiple concepts (AMC) or analysis of
alternatives (AOA) — demonstrating that developing and acquiring a force of 6
26 For detailed background information on the arsenal ship program, see CRS Report 97-455
F, Navy/DARPA Arsenal Ship Program: Issues and Options for Congress, by Ronald
O’Rourke. (Archived, available from author.)
27 For more on the Section 845/804 authority, see CRS Report 97-455, op. cit., pp. 34-37.

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CRS-12
arsenal ships was not simply one way, but rather the best or most promising way, of
providing this capability.
The arsenal ship program was widely understood to be a personal initiative of
Admiral Jeremy M. Boorda, who was the Chief of Naval Operations (CNO) from
April 1994 until May 1996. The arsenal ship program did not appear to be as high
a personal priority for Boorda’s successor as CNO, Admiral Jay L. Johnson, and
support for the arsenal ship program appeared to decline under Johnson’s tenure. In
April 1997, the program was incorporated into the Navy’s SC-21 family of surface
combatants for the 21st Century (see discussion below on the DD-21 program). The
Navy at about this time also deemphasized the goal of procuring six arsenal ships and
focused instead on the idea of procuring a single arsenal ship for use as a technology
test-bed. The reduction of the program from a firm six-ship effort to one involving
perhaps no more than a single ship appeared to reduce industry interest in the
program. Congress raised questions about the need for and cost-effectiveness of the
arsenal ship and substantially reduced the Navy’s FY1998 funding request for the
program. The Navy responded to this reduction by announcing in October 1997 that
it had decided to terminate the arsenal ship program for lack of sufficient funding.28
DD-21 Destroyer (Terminated)29
The Navy initiated the DD-21 program in 1994-1995.30 The DD-21 program
was aimed at developing and acquiring a next-generation destroyer called the DD-21,
meaning the destroyer for the 21st Century. The ship was also called the land attack
destroyer.31 The Navy envisaged procuring a total of 32 DD-21s; the first was to be
procured in FY2005 and enter service in 2010. The Navy hoped to procure DD-21s
at an eventual rate of three ships per year, so as to replace retiring DD-963s and FFG-
7s on a timely basis.
The DD-21 was to be the first member of the SC-21 family of surface
combatants for the 21st century. Following completion of DD-21 procurement,
perhaps around FY2015, the Navy planned to begin procuring the CG-21 — a cruiser
28 For a discussion of the termination the program, see CRS Report 97-1044 F, Navy/DARPA
Maritime Fire Support Demonstrator (Arsenal Ship) Program: Issues Arising From Its
Termination, by Ronald O’Rourke. (Archived, available from author.)
29 For more on the DD-21 program, see CRS Report RS20698, Navy Zumwalt (DD-21) Class
Destroyer Program: Background and Issues for Congress, by Ronald O’Rourke. (Archived,
available from author.)
30 The Department of Defense (DOD) Joint Requirements Oversight Council (JROC)
approved a Mission Need Statement (MNS) for the SC-21 program in Sept. 1994. DOD’s
Defense Acquisition Board (DAB) granted Milestone 0 approval for the SC-21 program in
January 1995. USD(A&T) granted Milestone I approval for the program (which permitted
the Navy to enter Phase I, the demonstration and validation phase) in Jan. 1998. The Navy
issued a Request for Proposals (RFP) for the program in Mar. 1998.
31 The DD-21 was subsequently also called the Zumwalt-class destroyer because the Navy
in July 2000 announced that the lead ship in the class would be named in honor of the late
Admiral Elmo R. Zumwalt, Jr., a surface combatant officer who was the Chief of Naval
Operations in 1970-1974.

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CRS-13
variant of the basic DD-21 design — to replace aging CG-47s. A third intended
member of the SC-21 family of ships was the arsenal ship, which, as mentioned
above, was incorporated into the SC-21 family of ships in April 1997.
As envisioned by the Navy, the DD-21 was to have been a multimission ship
with an emphasis on two mission areas — maritime dominance (which included
ASW, ASuW, and countermine warfare) and land attack. The emphasis on maritime
dominance reflected the DD-21’s role as a replacement for the FFG-7s and DD-963s,
which were designed with an emphasis on ASW. The emphasis on land attack
reflected a requirement to replace the large-caliber naval gunfire support capability
that the Navy lost in 1990-1992 when it removed its four reactivated Iowa-class
battleships form service.32
The DD-21 was to have a crew of 95 to 150 sailors, which would have been
significantly smaller than the crew of a CG-47 (about 400 persons), a DDG-51 or
DD-963 (about 350), or a FFG-7 (about 235). The goal for a significantly smaller
crew reflected a Navy emphasis on reducing ship operating and support (O&S) costs,
which are driven in large part by crew-related costs.
The DD-21 was to have featured a new wave-piercing, tumblehome hull
design33 with significantly reduced radar, infrared, and acoustic signatures; a VLS
with 64 to 256 tubes (128 may have been the final number), two copies of a new 155-
mm (i.e., 6.1-inch) gun called the Advanced Gun System (AGS), each with a
magazine containing 600 to 750 shells; sonars and other equipment for ASW and
countermine warfare; a moderately capable air-defense system (like those on FFG-7s
and DD-963s) rather than a highly capable air-defense system (like the Aegis system
on CG-47s and DDG-51s); and a hangar for a helicopter and a few unmanned air
vehicles (UAVs). In January 2000, the Navy announced that the DD-21 would be
equipped with an integrated electric-drive system.
To permit a procurement rate of three ships per year within anticipated funding
levels, the Navy wanted the DD-21 to have a unit procurement cost somewhat lower
than that of the DDG-51. Specifically, the fifth and following DD-21s were to have
a procurement cost of $750 million in FY1996 dollars — the equivalent of about
$1,057 million in FY2007 dollars. The procurement cost of the first DD-21, which
included the DD-21 program’s non-recurring detailed design and engineering costs,
was estimated at $2.03 billion in then-year dollars. The DD-21 was to have had an
O&S cost equivalent of not more than $6,000 per steaming hour in FY2001 dollars.
32 The battleships were each equipped with nine 16-inch guns. All of the Navy’s other
surface combatants are equipped with 5-inch or 3-inch guns. More generally, the DD-21’s
emphasis on land attack reflected the Navy’s post-Cold War shift in emphasis toward
operations in littoral waters that are intended to influence events ashore.
33 “Wave-piercing” means that the front end of the ship, instead of coming to a sharp tip that
is well above the water, as in a conventional hull, instead narrows to a tip that slopes down
toward the water, so that the front end of the ship looks somewhat like the blade on a
farmer’s plow that breaks through the ground as it is pushed forward. “Tumblehome” means
that the ship’s hull will have sides that slope inward from the waterline up, so as to reduce
the ship’s visibility to radar waves coming at the ship from the side.

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CRS-14
This figure, which represented a significant reduction from the O&S costs of other
Navy surface combatants, was to have been achieved in significant part by designing
the ship to be operated by crew of 95 to 150 sailors.
In July 1996, the Under Secretary of Defense for Acquisition and Technology
(USD[A&T]) approved Part 1 of the SC-21 Cost and Operational Effectiveness
Analysis (COEA), which examined surface combatant capabilities and requirements
and developed acquisition alternatives. In April 1997, the Navy completed Part 2 of
the COEA, which compared acquisition alternatives.
As with the arsenal ship program, the Navy for Phases I and II of the DD-21
program planned on using a streamlined acquisition strategy using Section 845/804
contracting authority.
Under a plan worked out by the Navy in the first half of 1998 after considerable
consultation with industry and Congress, two industry teams were competing for the
program — the “Blue” team, which included GD/BIW as the shipbuilder, Lockheed
Martin as the combat system designer and integrator, and other firms; and the
“Gold” team, which included Northrop/Ingalls as the shipbuilder, Raytheon as the
combat system designer and integrator, and other companies.
GD/BIW and Northrop/Ingalls were to build DD-21s in roughly equal numbers,
paralleling the arrangement for building DDG-51s that the Navy put into place in the
early 1990s. As a consequence, GD/BIW and Northrop/Ingalls were competing not
for the right to build the DD-21, but rather for the right to design the DD-21 and to
be the full-service contractor for the DD-21 class (i.e., the entity in charge of
planning and conducting life-cycle support for DD-21s over the many years that they
would be in service).34
Navy and DOD support for the DD-21 program appeared to decline during
2001. In the spring of that year, the Navy twice delayed its planned announcement
of the winner of the DD-21 competition.35 In June 2001, two special DOD panels
that were established by Secretary of Defense Donald Rumsfeld to review DOD
programs indicated that they did not view the DD-21 as particularly transformational.
At about the same time, Navy officials, in testifying to Congress on the proposed
FY2002 defense budget, suggested that the Navy was uncertain about the merits of
the program.36
34 Designing the DD-21 would involve hundreds of millions of dollars in design and
engineering work, while being the FSC would involve a stream of potentially many millions
of dollars of work spread out over a period of more than 40 years.
35 On Mar. 1, 2001, the Navy announced that it had delayed its planned selection of a
winning industry design for the DD-21 program by two months, to May 2001. On May 31,
2001, the Navy announced that it had again delayed selection of a winning design until
sometime after the completion of several defense studies, including the 2001 Quadrennial
Defense Review, which was submitted to Congress on Sept. 30, 2001.
36 When asked whether the Navy needed the DD-21, Navy officials on more than one
occasion answered that the Navy needed the technologies that were scheduled to be
(continued...)

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CRS-15
The Navy’s uncertainty was apparently due in part to the emerging size and cost
of the ship: Although initial reporting suggested that the DD-21 might displace about
9,000 tons, like the Navy’s current cruisers and destroyers, the reported size of the
DD-21 design grew over time to about 16,000 tons. A ship of this size, it appeared,
was needed either to accommodate two AGSs (each with a magazine containing 600
to 750 shells) along with a 128-tube VLS and a helicopter/UAV hangar, or to permit
the DD-21 hull to serve as the basis for the projected CG-21 cruiser, or both. The
projected size of the DD-21 led to concerns among observers, including Navy
officials, that the DD-21 would substantially exceed its unit procurement cost goal
and thus be difficult for the Navy to afford.37 Navy and DOD officials were also
concerned about the amount of technical risk in the DD-21 development effort,
particularly in light of the large number of new technologies that were to be
incorporated into the ship.
These developments, plus the Administration’s continued delay in announcing
a winning design after DOD submitted the 2001 Quadrennial Defense Review (QDR)
to Congress on September 30, 2001, gave rise to speculation that the Administration
was considering cancelling or restructuring the program. In late October 2001, the
House Appropriations Committee, in its markup of the FY2002 defense
appropriation bill, recommended substantially reducing the Navy’s request for
FY2002 research and development funding for the program and posed basic
questions about the DD-21’s target crew size, unit procurement cost, and whether the
DD-21 qualified as a “leap ahead” defense program. The Navy announced the next
month that it was replacing the DD-21 program with the restructured DD(X) family
of ships program (see discussion below).
36 (...continued)
incorporated into the ship, but avoided stating directly that the Navy needed the ship itself.
For a press report on this shift in Navy testimony, see Mike McCarthy, “Navy Rhetoric On
New Destroyer Subtly Shifts,” Defense Week, Aug.6, 2001, p. 6.
37 One press account, published more than a year later, stated:
In a March 10 [2003] interview with Inside the Navy, [Navy acquisition
executive John] Young recounted how, in discussions going back a year or more,
it became clear that officials were not comfortable with all of DD-21’s attributes.
Discussions were held with then-Navy Secretary Gordon England, Pentagon
acquisition czar Pete Aldridge, Young, Chief of Naval Operations Adm. Vern
Clark and Deputy Defense Secretary Paul Wolfowitz....
Before DD-21 became DD(X), the new destroyer was not truly affordable,
according to Young.
“On DD-21, people were promising to deliver a DD-21 at something around
17,000 tons for the same cost of a 9,000-ton DDG-51,” said Young. “I personally
found that hard to believe. In fact, I didn’t think it was doable....”
Christopher J. Castelli, “Young Seeks Smaller DD(X) Ship, Prompting Fire Support
Discussions,” Inside the Navy, Mar. 24, 2003.

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CRS-16
DD(X)/CG(X)/LCS Family of Future Surface Combatants
On November 1, 2001, the Navy announced that it was replacing the DD-21
program with a new DD(X) Future Surface Combatant Program aimed at developing
and acquiring a family of three new classes of surface combatants:
! a destroyer called DD(X) for the precision long-range strike and
naval gunfire mission,
! a cruiser called CG(X) for the missile and air defense mission, and
! a smaller combatant called the Littoral Combat Ship (LCS) to
counter submarines, small surface attack craft (also called “swarm
boats”) and mines in heavily contested littoral (near-shore) areas.38
The Navy stated that it planned to employ multiple competitions among industry
teams for each of the three programs. In addition, DOD announced that the DD(X)
family of ships effort would employ a relatively new acquisition strategy called
evolutionary acquisition with spiral development (EA/SD). EA/SD aims at rapidly
developing and fielding useful increments of capability and exploiting user feedback
in developing additional increments, but poses potentially important issues for
Congress regarding Congress’ ability to conduct oversight of DOD acquisition
programs.39
The DD(X), LCS, and CG(X) are each discussed in detail below.
DD(X) Destroyer
The DD(X) destroyer is effectively the successor to the DD-21 destroyer and
will resemble the DD-21 in terms of mission orientation and ship design.
Specifically, the DD(X) would:
! be a multimission destroyer with an emphasis on land-attack
operations that reflects a desire to replace the large-caliber naval
gunfire support capability that the Navy lost in 1990-1992, when it
removed its four reactivated Iowa-class battleships from service;
! have a reduced-size crew (compared to the Navy’s current surface
combatants) of 125 to 175 sailors so as to permit reduced operating
and support (O&S) costs; and
38 Somewhat confusingly, “DD(X)” has been used to refer to both the entire effort for
developing three classes of ships and (more frequently) to the destroyer program within the
overall effort.
39 For a discussion of EA/SD, see CRS Report RS21195, Evolutionary Acquisition and
Spiral Development in DOD Programs: Policy Issues for Congress, by Gary J. Pagliano and
Ronald O’Rourke.

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CRS-17
! feature a wave-piercing, tumblehome hull design with significantly
reduced signatures; a VLS; two AGSs; air-defense and ASW
systems; a hangar for a helicopter and a few unmanned air vehicles
(UAVs); and an integrated electric-drive system.
Due to continuing Navy concerns over ship affordability, the DD(X) is to be
somewhat smaller and less expensive than the DD-21. The DD(X)’s VLS would
include 80 tubes rather than the 128 tubes on the DD-21, and the DD(X) would carry
a combined total of 920 shells for its two AGSs, rather than 600 to 750 shells for
each AGS, as on the DD-21. As a result, the DD(X) is to displace 14,564 tons rather
than the DD-21’s figure of almost 16,000 tons.40 (It is possible, though, that if the
DD-21 program had been continued, the Navy eventually might have decided to
similarly reduce the size and cost of the DD-21 design.)
Although somewhat smaller than the earlier DD-21 design, the DD(X), at
14,564 tons, would be roughly 50% larger than the Navy’s current 9,500-ton cruisers
and destroyers, and larger than any Navy destroyer or cruiser since the nuclear-
powered cruiser Long Beach (CGN-9), which was procured in FY1957.
The DD(X) is to incorporate a significant number of new technologies,
including the wave-piercing, tumblehome hull design, a superstructure made partly
of large sections of composite materials rather than steel or aluminum, the integrated
electric drive propulsion system and a related ship-wide electrical distribution
system, a total-ship computing system for moving information about the ship,
automation technologies for the reduced-sized crew, a dual-band radar, a new kind
of VLS called the peripheral VLS (PVLS),41 and a new type of gun (the AGS).
The Navy originally envisaged procuring a total of 16 to 24 DD(X)s, but Navy
officials testified in February and March 2005 that they have a requirement for eight
to 12. The FY2005-FY2009 FYDP submitted to Congress in February 2004 called
for procuring the first DD(X) in FY2005, another two in FY2007, two more in
FY2008, and three more in FY2009, for a total of eight ships through FY2009. The
FY2006-FY2011 submitted to Congress in February 2005 reduces planned DD(X)
procurement to one per year for FY2007-FY2011, for a total of five ships through
FY2009.
Estimated DD(X) unit procurement costs (see Table 1) have increased
substantially since 2004:
! The Navy in 2004 estimated that the first DD(X) would cost about
$2.8 billion to procure, including about $1 billion in detailed design
40 As of Oct. 2003, the ship’s estimated full load displacement (including loaded fuels,
water, etc.) was 14,064 tons, and the ship’s estimated light (i.e., empty) displacement was
12,135 tons. (Source: Navy Office of Legislative Affairs, Oct. 3, 2003.)
41 The system is called the Peripheral VLS because the VLS tubes, instead of being installed
into the ship’s main deck in a cluster along the ship’s centerline, as with the current VLS
system, would be installed in the ship’s main deck in a line along the outer perimeter (i.e.,
periphery) of the ship.

---

CRS-18
and nonrecurring engineering costs (DD/NRE) for the class; it now
estimates the cost at $3,291 million (an increase of about 18%),
including $558 million in DD/NRE costs.
! The Navy in 2004 estimated that the second DD(X) would cost
$2,053 million to procure; it now estimates the cost at $3,061
million (an increase of about 49%), including $219 million in
DD/NRE costs.
! The Navy in 2004 estimated that subsequent DD(X)s would cost
between $1.5 billion and $1.8 billion each to procure; it now
estimates the cost at about $2.2 billion to $2.6 billion each (an
increase of roughly 45%).
Table 1. Funding For DD(X)/CG(X) Program, FY2002-FY2011
(millions of then-year dollars, rounded to nearest million)
FY02-
02
03
04
05
06
07
08
09
10
11
FY11
Research, Development, Test & Evaluation, Navy (RDTEN) account
DD(X) 505 909 1015 1164 1085
794
445
282
279
323
6801a
CG(X)
0
0
0
0
30
110
279
365
397
403
1584a
Subtotal RDTEN 505 909 1015 1164 1115
904
724
647
676
726
8385a
Shipbuilding and Conversion, Navy (SCN) account
DD(X) 1
0
0
0
220
666 2405
0
0
0
0
3291
Construction
0
0
0
22
306 2405
0
0
0
0
2733
DD/NREb
0
0
0
198
360
0
0
0
0
0
558
DD
(X) 2
0
0
0
84
50
163 2764
0
0
0
3061


Construction
0
0
0
5
40
120 2677
0
0
0
2842
DD/NREb
0
0
0
79
10
43
87
0
0
0
219
DD(X) 3
0
0
0
0
0
0
51 2492
0
0
2543
DD(X) 4
0
0
0
0
0
0
0
51 2579
0
2630
DD(X) 5
0
0
0
0
0
0
0
0
50 2186
2236
DD
(X) 6+
0
0
0
0
0
0
0
0
0
0
0
CG(X) 1
0
0
0
0
0
0
0
0
0 3210
3210
Construction
0
0
0
0
0
0
0
0
0 2710
2710
DD/NREb
0
0
0
0
0
0
0
0
0
510
510
CG
(X) 2+
0
0
0
0
0
0
0
0
0
0
0
Subtotal SCN
0
0
0
304
716 2568 2815 2543 2629 5396 16971
TOTAL
505 909 1015 1468 1831 3472 3539 3190 3305 6122 25356
Source: U.S. Navy data provided to CRS on Mar. 24, 2005.
a. Additional funding required after FY2011. Figures do not include $1,111.4 million in research and
development funding provided for the DD-21/DD(X) program in FY1995-FY2001. FY2006
Navy budget justification books reflect a different division of total RDT&E funds between
DD(X) and CG(X) for FY2007-FY2011. GAO has reported that total DD(X)/CG(X) research
and development costs are roughly $10 billion.
b. Detailed design and nonrecurring engineering costs for the class.

---

CRS-19
The Cost Analysis Improvement Group (CAIG) within the Office of the
Secretary of Defense (OSD) reportedly believes that DD(X) procurement costs may
be 20% to 33% higher than the figures above. A meeting scheduled for April 29,
2005, to grant the DD(X) approval “Milestone B” approval to proceed was
postponed, reportedly because of disagreement between the Navy and CAIG over
estimated DD(X) procurement costs.42
The Navy in 2004 proposed incrementally funding the first DD(X) through the
Navy’s research and development account rather than fully funding the ship through
the Navy’s ship-procurement account (the Shipbuilding and Conversion, Navy, or
SCN, account), where Navy combat ships traditionally have been procured.
Congress, in acting on the FY2005 budget, directed that the first DD(X) be fully
funded in the SCN account.
The DD(X) is being developed by a national industry team lead by Northrop
Grumman’s Ship Systems (NGSS) division (which includes the Northrop/Ingalls
Shipyard in Pascagoula, MS) and Raytheon Systems Company. The team also
includes GD/BIW as well as Lockheed Martin, Boeing, and several other
companies.43
Under the Navy’s current DD(X) acquisition strategy, which was approved by
the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD
AT&L) in February 2004, the first DD(X) would be built by NGSS, the second
DD(X) would be built GD/BIW, and contracts for building the first six DD(X)s
would be equally divided between NGSS and GD/BIW.44
42 Tony Capaccio, “Destroyer May Cost 33% More Than Navy Budgeted, Pentagon Says,”
Bloomberg.net, May 4, 2005; Christopher P. Cavas, “Rising Costs of DD(X) Threaten U.S.
Fleet Plans,” DefenseNews.com, May 2, 2005; Christopher J. Castelli, “Pentagon Postpones
DD(X) DAB Meeting To Resolve Cost Estimates,” Inside the Navy, May 2, 2005.
43 Following the replacement of the DD-21 program with the DD(X) program, the Blue and
Gold teams that were competing for the DD-21 program continued to compete for the right
to be the lead preliminary design agent for the DD(X) destroyer. On April 29, 2002, the
Navy announced it had selected the Gold team to be the lead preliminary design agent for
the ship. The team was awarded a $2.88 billion contract from FY2002 through FY2005 to
perform preliminary and system design work for the ship and to design, build, and test
engineering development models (EDMs — test examples) of several of its key subsystems.
On May 9, 2002, GD/BIW filed a protest of the Navy’s contract-award decision with the
General Accounting Office (GAO). On August 19, 2002, GAO announced that it had denied
the Blue team’s protest and upheld the Navy’s decision. The Gold team was subsequently
expanded into the DD(X) national team. The Navy wanted GD/BIW to be involved in the
ship-design process to ensure that both yards could compete effectively in a separate
competition for the detailed design and construction of the first DD(X) destroyer in FY2005.
44 The Navy originally anticipated holding another competition for the next phase in the
program, which includes completing the ship’s design and building the first ship. On March
3, 2004, however, the Navy stated that, to avoid delaying the program, it had decided to
award the contract for the next phase on a sole-source basis to Northrop Grumman’s Ship
Systems (NGSS) division, which includes Northrop/Ingalls. The first DD(X) would be built
by Northrop/Ingalls, while the second would be built by GD/BIW. The Navy also stated that
(continued...)

---

CRS-20
In February 2005, Navy officials announced that they would seek approval from
USD AT&L to instead hold a one-time, winner-take-all competition between NGSS
and GD/BIW to build all DD(X)s. On April 20, 2005, the USD AT&L issued a
decision memorandum stating that “at this time, I consider it premature to change the
shipbuilder portion of the acquisition strategy which I approved on February 24,
2004.” The memorandum also agreed to a Navy proposal to separate the system-
development and software-development contracts for the DD(X) from the detailed-
design effort for the DD(X). The memorandum said this change “is projected to
result in savings to the Department [of Defense], and helps to ensure that all
shipbuilder acquisition strategy options are preserved.”
Several Members of Congress expressed opposition to Navy’s proposal for a
winner-take-all competition. The Emergency Supplemental Appropriations Act for
2005 (H.R. 1268/P.L. 109-13 of May 11, 2005) contains a provision (Sec. 1019) that
prohibits such a winter-take-all competition but does not prohibit the Navy from
shifting to a DD(X) acquisition strategy that somehow involves a second shipyard,
even if that involvement were limited, for example, to building only one ship in the
DD(X) program.
On May 25, 2005, the Navy announced that, in light of Section 1019 of P.L.
109-13, it wants to shift to a DD(X) acquisition strategy under which two DD(X)s
would be procured in FY2007, with one to be designed and built by NGSS and the
other by GD/BIW. Each ship might be split-funded (i.e., incrementally funded) in
FY2007 and FY2008. The two yards might then compete for the right to build all
subsequent DD(X)s, in which case this strategy could be viewed, at that point, as a
deferred winner-take-all approach.
As part of its action on the FY2005 defense budget, Congress provided $350.5
million in advance procurement funding for the DD(X) program — $221.1 million
for the first DD(X), and $84.4 million for the second DD(X) — and directed that
procurement of DD(X)s be fully funded in the Navy’s ship-procurement account
rather than incrementally funded in the Navy’s research and development account as
the Navy had proposed for the first DD(X).
CG(X) Cruiser
The CG(X) is the Navy’s planned replacement for the CG-47s. The Navy wants
the DD(X) hull design to serve as the basis for the CG(X), and wants the CG(X) to
make maximum use of technologies already developed for the DD(X). The CG(X),
however, would likely differ from the DD(X) in at least three basic ways:
44 (...continued)
“The ship construction contracts will be allocated equally between NGSS and GD/BIW for
the first six ships... and will be Cost Plus Incentive Fee (CPIF) type contracts.... The strategy
for contracting for construction of the seventh ship and beyond will be proposed at
[Milestone B] and will include consideration of limited competition such as exercised under
the DDG-51 Program.”

---

CRS-21
! Compared to the DD(X), the CG(X) would be equipped with a more
powerful radar suite that could support missile-defense operations.
! Instead of the two AGSs in the DD(X) design, the CG(X) would be
equipped with additional missile-launching tubes.
! In part due to the more powerful radar system, the CG(X) might be
slightly larger and have a some somewhat higher procurement cost
than the DD(X).
A notional long-range shipbuilding plan that the Navy submitted to Congress
in May 2003 called for the first CG(X) to be procured in FY2018. The FY2006-
FY2011 FYDP accelerates the planned procurement of the in the lead CG(X) to
FY2011. A March 2005 Navy report to Congress shows a planned total of 15 to 18
CG(X)s. Funding for the CG(X) program in the FY2006-FY2011 FYDP is shown
in Table 1 above.
Littoral Combat Ship (LCS)
The Navy testified in 2003 that the LCS program was its “number one budget
priority”45 and considers the LCS a key component of efforts to transform the Navy.46
Prior to announcing the DD(X) family in November 2001, however, the Navy had
no plans to acquire a smaller combatant like the LCS and had resisted proposals for
such ships.
The LCS would be the smallest member of the DD(X) family of ships. The
primary intended missions of the LCS are countering enemy mines, submarines, and
fast attack craft in littoral (near-shore) waters. Secondary missions include
intelligence, surveillance, and reconnaissance (ISR); maritime intercept; special
operations forces (SOF) support; and logistics support for movement of personnel
and supplies. Some observers believe the LCS might also be suitable for homeland
defense operations.
The LCS would be much smaller and faster than the Navy’s current major
surface combatants. It would displace 2,500 to 3,000 tons — about the size of a
corvette (i.e., a light frigate) or Coast Guard cutter. It would have a maximum speed
of 40 to 50 knots, compared to about 30 knots for the Navy’s current surface
combatants. The LCS would have a shallower draft than the Navy’s current surface
combatants, permitting it to operate in certain coastal waters and visit certain ports
that are not accessible to the Navy’s current surface combatants.
Rather than being a multimission ship like the Navy’s current surface
combatants, the LCS would be a focused-mission ship that would be equipped to
45 Statement of Admiral Vern Clark, U.S. Navy Chief of Naval Operations, U.S. Congress,
Senate Armed Services Committee, Seapower Subcommittee, Navy and Marine Corps
Development and Procurement, Apr. 1, 2003, p. 7.
46 For more on naval transformation, see CRS Report RS20851, Naval Transformation:
Background and Issues for Congress, by Ronald O’Rourke.

---

CRS-22
perform one or two types of missions at any one time. The LCS would be capable
of having its mission orientation changed relatively quickly. Rather than having a
built-in combat system like the Navy’s current surface combatants, the LCS would
use modular “plug-and-fight” payload packages (including unmanned vehicles
[UVs]) for various missions that could be loaded on and off the ship relatively
quickly.47
The LCS would employ automation to achieve a reduced crew size of 15 to 50
“core” crew members, not including the additional crew members that would operate
the embarked mission modules.
The LCS in some ways is reminiscent of a concept for a small, fast Navy surface
combatant called the Streetfighter. The Streetfighter study effort began in 1998 and
was centered at the Naval War College. It was led by Vice Admiral Arthur
Cebrowski, who became the President of the college that year. Cebrowski in the late
1990s helped to develop and publicize the concept of network-centric warfare, and
emerged as a leading proponent of naval transformation. He retired from the Navy
in 2001. From October 2001 — a month prior the replacement of the DD-21
program with the DD(X) family of ships — through January 31, 2005, he served as
the civilian director of DOD’s Office of Force Transformation.
The Streetfighter study effort was aimed at generating new naval concepts for
fighting in heavily defended littoral waters. The Streetfighter concept for a small,
fast surface combatant, unveiled publicly in 1999, generated significant debate.
Supporters viewed it as innovative, transformational, and responsive to the Navy’s
needs for affordable, littoral-oriented forces. Critics doubted the feasibility of
combining high speed, overseas sustainability, and significant payload in a small
ship, as well as the survivability of a small ship in combat. Navy officials allowed
the Streetfighter project to proceed, but most Navy leaders at the time appeared to
politely resist the idea of a smaller combatant. Although Navy officials have
emphasized that the LCS is not the Streetfighter proposal of 1999-2001,48 the LCS
— in terms of its littoral orientation, smaller size, high speed, and planned reliance
on UVs — does appear broadly rooted in some of the thinking that came out of the
Streetfighter project.
Given the LCS’s anticipated size, cost, and baseline capabilities, Navy and
Coast Guard officials at first noted that the LCS hull design, or a derivative of it,
could be suitable for procurement by the Coast Guard as the Offshore Patrol Cutter
(i.e., the medium-endurance cutter) that forms part of the Coast Guard’s Deepwater
47 These payload packages could be boxes, canisters, or containers of some kind that could
be quickly bolted onto the deck of the LCS or stored in a garage-like space on the ship. The
equipment for performing the mission in question would be stored inside the container.
Alternatively, the payload packages could simply be pieces of equipment, such as
helicopters or unmanned vehicles, that could be directly loaded aboard ship and tied down
on the deck or stored inside a garage-like space.
48 See, for example, Randy Woods, “Mullen, Balisle Distance Littoral Combat Ship From
‘Street Fighter,’” Inside the Navy, Dec. 24, 2001.

---

CRS-23
recapitalization program.49 Subsequently, however, Navy and Coast Guard officials
deemphasized this possibility,50 and the Offshore Patrol Cutter is now to be built to
its own hull design. Navy officials have also noted that the LCS might be suitable
for export to foreign countries, many of whose navies and coast guards are built
around ships the size of the LCS.
As mentioned earlier, the Navy’s March 2005 report to Congress on potential
future Navy force levels shows, for FY2035, 63 LCSs in a 260-ship fleet and 82
LCSs in a 325-ship fleet. In the case of the 260-ship fleet, the 63-ship LCS figure
appears to be a stable total in the years leading up to FY2035, but in the case of the
325-ship fleet, the total number of LCSs continues to increase in the years leading up
to FY2035, suggesting that the total number could grow beyond 82 ships after
FY2035. In early 2005, during his final months as the Chief of Naval Operations,
Admiral Vernon Clark mentioned the possibility of building a total of 75 to 100
LCSs.51
In addition to the first LCS, which was procured in FY2005, the FY2006-
FY2011 FYDP calls for procuring the second LCS in FY2006, another two in
FY2007, three more in FY2008, and five per year in FY2009-FY2011.
On May 27, 2004, the Navy awarded contracts to teams led Lockheed Martin
and General Dynamics (GD) for final system design of two versions of the LCS, with
options for detailed design and construction of up to two LCSs each.52 Under the
Navy’s plan, the Lockheed team would build the first LCS, which was procured in
FY2005, while the GD team would build the second, which the Navy wants to
procure in FY2006. Lockheed plans to build its LCSs at Marinette Marine of
Marinette, WI, and Bollinger Shipyards of Louisiana and Texas,53 with the first built
by Marinette. GD plans to build its LCSs at Austal USA of Mobile, AL.54 These
49 For more on the Deepwater program, see CRS Report RS21019, Coast Guard Deepwater
Program: Background and Issues for Congress, by Ronald O’Rourke.
50 Malina Brown, “Navy, Coast Guard Back Away From Idea of Sharing Littoral Hull,”
Inside the Navy, Aug. 18, 2003.
51 Dave Ahearn, “CNO Clark Sees LCS Fleet Of 75-100 Ships,” Defense Today, June 3,
2005: 1-3; Scott C. Truver, “Transformation: A Bridge Too Far,” Jane’s Navy International,
March 2005: 24-26, 28-31.
52 Three industry teams competed for the LCS program. On May 27, 2004, the Navy
announced that it had awarded contracts to teams led by Lockheed Martin and General
Dynamics (GD) for final system design of the LCS, with options for detailed design and
construction of up to two LCSs each. The third competing team, led by Raytheon, was not
awarded a contract. The Lockheed team was awarded a seven-month, $46.5-million
contract, while the GD team was awarded a 16-month, $78.8-million contract.
53 Bollinger operates about 15 shipyards and ship-related facilities in Louisiana and Texas,
of which three, located in Lockport, LA, Gretna, LA, and Amelia, LA, are for building new
ships.
54 Austal USA was created in 1999 as a joint venture between Austal Limited of Henderson,
Western Australia and Bender Shipbuilding & Repair Company of Mobile, AL. The
(continued...)

---

CRS-24
yards are not among the six yards that have built the Navy’s major warships in recent
years.
The Navy wants to procure the first and second LCSs through the Navy’s
research and development account rather than the Navy’s ship-procurement account.
The Navy wants to procure LCS mission modules through the Other Procurement,
Navy (OPN) account rather than the Navy’s ship-procurement account.
Table 2 shows funding for the LCS program through FY2011. The Navy wants
LCSs to have a unit procurement cost of no more than $220 million, exclusive of
their mission modules. Figures in the table for FY2009-FY2011 (when steady-state
production of five ships per year is programmed) suggest that when the cost of
mission modules is added in, the LCS program might have an average ship
procurement cost of about $387 million, and that a program of 63 to 82 LCSs might
have a total acquisition (i.e., research and development plus procurement) cost of
about $25.3 billion to $32.7 billion.
54 (...continued)
Lockheed LCS team also includes GD/BIW as prime contractor, to provide program
management and planning, to provide technical management, and to serve as “LCS system
production lead.”

---

CRS-25
Table 2. Funding For LCS Program, FY2002-FY2009
(millions of then-year dollars; totals may not add due to rounding)
Total
03
04
05
06
07
08
09
10
11
thru
FY11
Research, Development, Test & Evaluation, Navy (RDT&EN) account
Ship 1
0
0 212.5
0
0
0
0
0
0
212.5
construction
Ship 2
0
0
0 240.5
0
0
0
0
0
240.5
construction
Procurement of
0
0
16.0
0
0
0
0
0
0
16.0
ship long-lead
items
Ships 1and 2
0
0
0
8.7
36.7
36.7
7.1
0
0
89.2
outfitting/post
delivery
LCS ship
35.3 158.3 224.2 117.3 130.8
57.7
37.1
37.9
16.4
815.0
development
LCS mission
0
0
0 209.9 131.6
65.3
57.1
80.6
34.3
578.8
package project
Subtotal
35.3 158.3 452.6 576.5 299.2
159.8
101.3
118.4
50.6 1952.0
RDT&EN
Shipbuilding and Conversion, Navy (SCN) account
Ships 3-22,
0
0
0
0 542.4
779.7 1127.2 1112.3 1110.3 4671.9
(qty)
(2)
(3)
(5)
(5)
(5)
(20)
Subtotal SCN
0
0
0
0 542.4
779.7 1127.2 1112.3 1110.3 4671.9
Other Procurement, Navy (OPN) account (for LCS mission modules)
Subtotal OPN
0
0
0
36.8 108.4
221.5
748.8
738.7
813.7 2667.9
Weapons Procurement, Navy (WPN) account
Subtotal WPN
0
0
0
0
0
0
48.3
48.4
59.3
156.0
TOTAL
35.3 158.3 452.6 613.3 950.0 1161.0 2025.6 2017.8 2033.9 9447.8
Source: Navy FY2006 budget justification books.
The conference report (H.Rept. 108-622 of July 20, 2004) on the FY2005
defense appropriations bill (H.R. 4613/P.L. 108-287 of August 5, 2004) approved the
Navy’s plan to build the first two LCSs using research and development funds rather
than shipbuilding funds, funded the first LCS’s construction cost, required the second
LCS to be built to the second LCS design now being developed, prohibited the Navy
from requesting funds in FY2006 to build a third LCS, and required all LCSs built
after the lead ships of each design to be funded in the Navy’s shipbuilding account
rather than its research and development account.

---

CRS-26
DD(X)/CG(X) Oversight Issues for Congress
The DD(X) and CG(X) programs raise several potential oversight issues for
Congress, including the following:
! the accuracy of DD(X) cost estimates;
! program affordability and cost effectiveness;
! potential program implications for the industrial base;
! potential program Implications for force structure;
! program mission requirements;
! DD(X) technology readiness;
! DD(X) as a bridge to CG(X); and
! DD(X) technologies for other Navy ships.
Each of these is discussed below.
Accuracy Of Navy DD(X) Cost Estimates
Procurement Cost Estimates. Although, as discussed in the Background
section, the Navy this year substantially increased its estimated DD(X) procurement
costs, some analysts believe the Navy is still significantly underestimating these
costs:
! The Navy has stated that a single DDG-51 procured in FY2006
would cost about $1.8 billion. If so, and if DDG-51 and DD(X)
procurement costs are roughly proportional to their light-ship
displacements,55 then a follow-on DD(X) might cost about $3.2
billion to procure.
! As mentioned earlier, the Cost Analysis Improvement Group
(CAIG) within the Office of the Secretary of Defense (OSD)
reportedly believes that DD(X) procurement costs may be 20% to
33% higher than the Navy's estimates.56 The CAIG’s estimate for
55 Light-ship displacement is the empty weight of the ship, without any fuel, other fluids, or
ammunition. The light-ship displacement of the most recent (Flight IIA) version of the
DDG-51 is 6,950 tons, while that of the DD(X) is 12,435 tons, or about 79% more.
56 Tony Capaccio, “Destroyer May Cost 33% More Than Navy Budgeted, Pentagon Says,”
Bloomberg.net, May 4, 2005; Christopher P. Cavas, “Rising Costs of DD(X) Threaten U.S.
Fleet Plans,” DefenseNews.com, May 2, 2005; Christopher J. Castelli, “Pentagon Postpones
DD(X) DAB Meeting To Resolve Cost Estimates,” Inside the Navy, May 2, 2005.

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CRS-27
the cost of the lead DD(X) might be $4.1 billion, while its estimate
for the fifth DD(X) might be $3.0 billion.57
! The Congressional Budget Office (CBO), based on DDG-51
procurement costs and other data, estimates that the lead DD(X) may
cost as much as $4.7 billion, and that the fifth DD(X) may cost $3.4
billion.58
Table 3 summarizes the above estimates of DD(X) lead ship and follow-ship
unit procurement costs.
Table 3. Estimated DD(X) Unit Procurement Costs
(billions of dollars)
If proportion-
Reported
Navy
CBO
ate to follow-
CAIG
estimate
estimate
on DDG-51
estimate
Lead DD(X)
$3.3
n/a
$4.1
$4.7
Follow-on DD(X)
$2.1
$3.2
$3.0
$3.4
Source: U.S. Navy data and July 20, 2005 CBO testimony before Projection Forces Subcommittee
of House Armed Services Committee. The figure proportionate to the DDG-51 is based on the light-
ship displacements of the DDG-51 and DD(X) and the Navy’s estimate that a single DDG-51 procured
in FY2006 would cost $1.8 billion. The CAIG figures shown are from the CBO testimony, which
CBO stated are according to an unconfirmed report about the CAIG estimates.
CBO presented its cost estimates at a July 20, 2005, hearing on the DD(X)
program before the Projection Forces Subcommittee of the House Armed Services
Committee. At this hearing, the CBO witnesses — J. Michael Gilmore and Eric Labs
— stated:
Gilmore: I can also point out that as a former member of the CAIG — I
used to work in the Office of the Secretary of Defense before I worked for the
Congressional Budget Office — I have yet to underestimate any ship or any other
major program of which I've been responsible for doing a cost estimate.
The independent cost estimators in the Cost Analysis Improvement Group
and elsewhere generally are coming in higher than the service estimate. It's not
surprisingly because they're not constrained the way the service cost estimators
are, who are all quite competent, but they also always come in lower, generally
speaking, than the ultimate costs that are realized.
57 Spoken testimony (transcript of hearing) of J. Michael Gilmore, Assistant Director for
National Security, Congressional Budget Office, at a July 20, 2005, hearing on the DD(X)
program before the Projection Forces Subcommittee of the Hose Armed Services
Committee. Gilmore said these figures are from an unconfirmed report about the CAIG
estimates.
58 Ibid.

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CRS-28
That's the history of independent cost estimating: higher than the services
but usually somewhat... lower than the ultimate costs of the system.
Labs: I was essentially going to add and make the same point.... We've
produced a number of cost estimates for individual ships and ships programs as
a whole over the last few years, and if we look at sort of how our track record has
done over the last — looking at it today, we have been low in every case if you
look at what current estimates are right now.
We have always been higher than the services when those reports were
published, but reality catches up with the services first, and then it catches up
with our estimates, and we end up being a little bit low, too.59
At this same hearing, the GAO witness testified:
The consequences of not meeting the challenges facing the DD(X) program are
significant. If the program fails to demonstrate capabilities, develop software,
or integrate subsystems as planned, these activities will be pushed into the later
stages of design and construction. In these stages, the cost of work and delays
is much higher and the schedule much less forgiving than in earlier stages.60
A February 2005 GAO report on cost growth in recent Navy shipbuilding
programs examined costs for eight recently procured Navy ships — two DDG-51s,
two LPD-17 class amphibious ships, two Nimitz-class aircraft carriers, and two
Virginia-class submarines. The group included both lead ships and follow-on ships.
The report found that the total cost for these ships had increased from initial
estimates by about 11% as of early 2005, and that costs could eventually grow
further, to about 15% to 17% above initial estimates.61 The report stated:
Navy practices for estimating costs, contracting, and budgeting for ships
have resulted in unrealistic funding of programs, increasing the likelihood of cost
growth. Despite inherent uncertainties in the ship acquisition process, the Navy
does not account for the probability of cost growth when estimating costs.
Moreover, the Navy did not conduct an independent cost estimate for carriers or
when substantial changes occurred in a ship class, which could have provided
decision makers with additional knowledge about a program’s potential costs.
In addition, contract prices were negotiated and budgets established without
sufficient design knowledge and construction knowledge. When unexpected
events did occur, the incomplete and untimely reporting on program progress
delayed the identification of problems and the Navy’s ability to correct them.62
59 Source: Transcript of hearing.
60 Government Accountability Office, Defense Acquisitions[:] Progress and Challenges
Facing the DD(X) Surface Combatant Program. (GAO-05-924T, July 19, 2005) The panel
of witnesses that included GAO had its testimony deferred from July 19 to July 20.
61 Government Accountability Office, Defense Acquisitions[:] Improved Management
Practices Could Help Minimize Cost Growth in Navy Shipbuilding Programs. (GAO-05-
183, February 2005) Tables 3 and 4 on pages 8 and 9, respectively.
62 Ibid, p. i.

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CRS-29
Operating and Support (O&S) Cost Estimate. CBO has also questioned
the accuracy of the Navy’s estimate regarding the annual operating and support
(O&S) cost of a DD(X) compared to a DDG-51. The Navy estimates that over a 35-
year life cycle, a DD(X) would cost an average of about $12 million or $13 million
less per year to operate and support than a DDG-51. CBO estimates that the
reduction in O&S costs for a DD(X) relative to a DDG-51 might range from zero to
$10 million per year.63
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! Are DD(X) lead-ship and follow-ship procurement costs likely to be
closer to the Navy estimate or the CAIG and CBO estimates? Given
the cost growth in Navy shipbuilding programs in recent years, how
much confidence should be placed in the Navy’s procurement cost
estimates?
! Is the difference in annual DD(X) and DDG-51 O&S cost likely to
be closer to the Navy’s estimate or CBO’s estimate?
Program Affordability and Cost Effectiveness
Procurement Cost and Procurement Rate. DOD’s decision to reduce
planned DD(X) procurement to one per year during the period FY2007-FY2011
appears to have been driven in large part by the increase in the Navy’s estimates for
DD(X) procurement costs. If DD(X) procurement costs turn out to be closer to the
higher CAIG or CBO estimates shown in Tables 3 above, then this could make it
difficult for the Navy to procure one DD(X) or CG(X) per year while still adequately
funding other Navy needs, including other Navy shipbuilding programs (such as
submarines), Navy aircraft and weapon procurement programs, Navy readiness
programs, and Navy personnel pay and benefits.
DOD/Navy Views On Maximum Affordable Cost. At the end of a July
19, 2005, hearing on the DD(X) program before the Projection Forces Subcommittee
of the House Armed Services Committee, DOD and Navy witnesses were asked to
provide the subcommittee with their own individual views on the procurement cost
figures at which the lead DD(X) and a follow-on DD(X) (defined as the fifth ship)
would become unaffordable. At the beginning of part two of the hearing, which was
held on July 20, the chairman of the subcommittee, Representative Roscoe Bartlett,
stated that the figures provided by the witnesses ranged from $4 billion to $4.5
billion for the lead ship and $2.5 billion to $2.9 billion for the fifth ship. As shown
in Table 4, the CAIG and CBO estimates discussed earlier are at or above these
figures.
63 Statement of J. Michael Gilmore, Assistant Director for National Security, Congressional
Budget Office, [on] The Navy’s DD(X) Destroyer Program, before the Subcommittee on
Projection Forces, Committee on Armed Services, U.S. House of Representatives, July 19,
2005, page 5. The panel of witnesses that included CBO had its testimony deferred from
July 19 to July 20.

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CRS-30
Table 4. Estimated DD(X) Unit Procurement Costs
(billions of dollars)
DOD/Navy
If pro-
witness views
portion-
Reported
Navy
CBO
on limit for
ate to
CAIG
estimate
estimate
being
follow-on
estimate
affordable
DDG-51
Lead
$3.3
$4.0-$4.5
n/a
$4.1
$4.7
DD(X)
Follow-on
$2.1
$2.5-$2.9
$3.2
$3.0
$3.4
DD(X)
Source: U.S. Navy data and transcript of July 20, 2005, hearing before Projection Forces
Subcommittee of House Armed Services Committee. See also the source note for the previous table.
Operating And Support (O&S) Cost And Affordability. The Navy
argues that the DD(X) is more affordable than it appears from looking only at
procurement costs, because the ship will have lower O&S costs than existing Navy
cruisers and destroyers. As mentioned above, the Navy estimates that over a 35-year
life cycle, a DD(X) would cost an average of about $12 million or $13 million less
per year to operate and support than a DDG-51. Over a 35-year life, this equates to
a savings of $420 million to $455 million in O&S costs relative to a DDG-51. On
this basis, the Navy argues that a force of 10 DDG-51s would have a total 35-year
O&S cost $4.5 billion less than that of force of 10 DDG-51s.
Skeptics could respond by arguing the following:
! Reducing a ship’s future O&S cost, though desirable, does not make
that ship any more affordable to procure in the budget that funds its
procurement.
! The Navy’s estimated 35-year O&S savings of $420 million to $450
million only partially offsets difference between the DD(X)’s higher
procurement cost and the procurement cost of a DDG-51 when
DDG-51s are procured at a rate of two per year.
! Executive branch guidelines set forth in Office of Management and
Budget (OMB) Circular A-9464 and standard business practice call
for future funding flows to be calculated on a present-value basis so
as to capture the investment value of money over time. When
calculated on this basis, the single-ship 35-year savings figure is
reduced by about 46%, to $226 million to $242 million, and the 10-
64 U.S. Office of Management and Budget, Circular A-94, Guidelines And Discount Rates
F o r B e n e f i t - C o s t A n a l y s i s o f F e d e r a l P r o g r a m s , a v a i l a b l e a t
[http://www.whitehouse.gov/omb/circulars/a094/a094.pdf].

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CRS-31
ship 35-year savings figure (assuming procurement of one ship per
year) is reduced by about 53%, to about $2.1 billion.65
! The above calculations accept the Navy’s estimate that a DD(X)
would, on a 35-year basis, have an annual O&S cost $12 million to
$13 million less than that of a DDG-51. As mentioned above, CBO
has also questioned the accuracy of the Navy’s estimate of relative
DD(X) and DDG-51 O&S costs, and has estimated that the
difference might range from zero to $10 million per year.
Table 5 below compares follow-ship DDG-51 and DD(X) total procurement
and life-cycle O&S costs using figures from the discussion above. The table uses
constant FY2007 dollars, which results in some adjustments to the above figures. As
can be seen in the table, on a present-value basis, the combined procurement and 35-
year life-cycle O&S cost of the follow-on DD(X) is 16% greater than that of the
DDG-51 using the Navy’s estimates, or 91% to 101% greater using CBO’s estimates.
Role of Affordability In Earlier Aegis Ship Programs. In considering
the prospective affordability of the DD(X)/CG(X) program, a comparison with the
Navy’s two previous destroyer and cruiser acquisition programs — the Aegis cruiser
and DDG-51 programs — may be of value.
Ticonderoga (CG-47) Class Aegis Cruiser Program. In the mid-1970s,
when the Navy was selecting the design for its planned Aegis cruiser, the Navy
examined three principal alternatives:
! a 17,200-ton nuclear-powered strike cruiser (CSGN);
! a 12,100-ton nuclear-powered cruiser, called CGN-42, derived from
the Navy’s Virginia (CGN-38) class nuclear-powered cruiser design;
and
! a roughly 9,000-ton ship based on the Spruance (DD-963) class
destroyer hull design.
The CSGN and CGN-42 were very capable designs. Compared to either, the
9,000-ton design was less capable because it was conventionally powered and would
have a smaller total payload. But the 9,000-ton option was substantially less
expensive to procure than the other two designs: the estimated procurement cost of
the CSGN was roughly twice that of the 9,000-ton option, while the estimated unit
procurement cost of the CGN-42 was roughly 30% to 50% greater. In large part
because of its lower unit procurement cost, the 9,000-ton design was selected.66 This
65 Source: CRS calculations using the 3.1% real discount rate set forth in Appendix C
(Revised January 2005) for discounting constant-dollar flows of 30 years or more.
66 For a discussion, see Ronald O’Rourke, “US Cruisers[:] Aegis Enters the Fleet,” Navy
International, June 1985: 338-345, particularly 341; Norman Friedman, U.S. Cruisers, An
Illustrated Design History. Annapolis, U.S. Naval Institute, 1984. pp. 419-422, 488, and
(continued...)

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CRS-32
design became the Ticonderoga (CG-47) class Aegis cruiser. The Navy was able to
afford to procure 3 of these ships per year, for a total of 27. The CG-47 design
received some criticisms, particularly in the earlier years of the program, but the ships
are considered quite capable and the program today is generally viewed as a
successful acquisition effort.
Table 5. Follow-ship DDG-51 and DD(X) Costs
(millions of constant FY2007 dollars)
Constant FY2007 dollars
Present-value calculation
35-year
35-year
Procure-
Procure-
life-cycle
Total
life-cycle
Total
ment cost
ment cost
O&S cost
O&S cost
NAVY Estimate
Follow-on DDG-51
1,393
2,115
3,508
1,393
1,133
2,526
Follow-on DD(X)
2,058
1,627
3,685
2,058
871
2,929
DD(X) less DDG
665
(488)
177
665
(262)
403
DD(X) as % DDG-51
148%
77%
105%
148%
77%
116%
CBO Estimate (with $10-million annual DD(X) O&S cost savings vs. DDG-51)
Follow-on DDG-51
1,393
1,120
2,513
1,393
600
1,993
Follow-on DD(X)
3,400
770
4,170
3,400
412
3,812
DD(X) less DDG
2,007
(350)
1,657
2,007
(188)
1,819
DD(X) as % DDG-51
244%
69%
166%
244%
69%
191%
CBO Estimate (with zero annual DD(X) O&S cost savings vs. DDG-51)
Follow-on DDG-51
1,393
1,120
2,513
1,393
600
1,993
Follow-on DD(X)
3,400
1,120
4,520
3,400
600
4,000
DD(X) less DDG
2,007
0
2,007
2,007
0
2,007
DD(X) as % DDG-51
244%
100%
180%
244%
100%
201%
Source: CRS calculations based on Navy and CBO DD(X) and DDG-51 cost data and a 3.1% real discount rate,
as specified in Appendix C to OMB Circular A-94 for discounting constant-dollar flows of 30 years or more.
DDG-51 procurement cost is an average unit cost based on a two-per-year procurement. (For a three-per-year
procurement rate, the average unit procurement cost would be $1,251 million.)
Arleigh Burke (DDG-51) Class Aegis Destroyer Program. In late 1982
and early 1983, following its experience in the selection of a design for the Aegis
cruiser, the Navy bounded the problem of what the follow-on Aegis destroyer should
look like by projecting the future size of the shipbuilding budget, applying to that
projection the surface combatant community’s historical share of shipbuilding funds
(about one-third, exclusive of funding for aircraft carriers), and then dividing the
resulting projected annual amount of surface combatant procurement funding by the
number of Aegis destroyers the Navy wanted to be able to procure each year (five).
The result was an implied unit procurement cost of $650 million in FY1983 dollars.
66 (...continued)
Norman Friedman, U.S. Destroyers, An Illustrated Design History. Annapolis, U.S. Naval
Institute, 1982. pp. 343-347, 426-427.

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CRS-33
The Secretary of the Navy (John Lehman) adjusted this figure to $700 million in
FY1983 dollars, and this became the target unit procurement cost for the follow-on
ships in the DDG-51 program.67
Remaining within that target required some design tradeoffs, but the target was
met, and the Navy in the final years of the Cold War was able to procure 5 DDG-51s
per year, as planned. When the Cold War ended and the defense budget was reduced,
the Navy was still able to procure 3 DDG-51s per year, for a total of 62 ships through
FY2005. The DDG-51 design, like the CG-47 design, has received some criticisms,
but DDG-51s, like Aegis cruisers, are considered quite capable and the program is
generally viewed as a highly successful acquisition effort.
DD(X) Program. The development of the DD(X) design appears to have
unfolded differently from that of the Aegis cruiser and DDG-51. When development
of the DD-21 (the precursor to the DD[X]) began in 1994, the initial unit
procurement cost target was $750 million in FY1996 dollars, a target cost that was
somewhat lower than the DDG-51’s unit procurement cost at the time, and which
equates to about $1,057 million in FY2007 dollars. By 2001, however, the DD-21
design had grown to between 16,000 tons and 18,000 tons, and its estimated cost had
grown considerably.
The DD-21 program was restructured in November 2001 into the current DD(X)
program, and the Navy subsequently took steps to reduce the size of the ship to about
14,000 tons. But the DD(X), going back to its DD-21 origins, in the main has grown
from a less expensive initial concept to a considerably larger and more expensive
one. The current DD(X) design is intermediate in displacement between the CSGN
and CGN-42 designs that were rejected in the late 1970s due to their estimated unit
procurement costs, and the DD(X)’s estimated unit procurement cost is now more
than twice the initial DD-21 target procurement cost of $1,057 million in FY2007
dollars. In addition, the Navy in November 2001 initiated the Littoral Combat Ship
(LCS) program. Procuring 5 LCSs per year starting in FY2009, as the Navy currently
plans, would absorb more than $1 billion per year in shipbuilding funds — an
expenditure that was not contemplated when the DD-21 program was initiated.
Cost Effectiveness. The Navy argues that the DD(X) would be cost
effective because the increased costs of the DD(X) would be more than offset by the
DD(X)’s improved capabilities. Compared to the DDG-51, these capability
improvements include, among other things:
! a 3-fold improvement in capability against anti-ship cruise missiles,
including significantly better radar performance in situations
involving near-land radar clutter;
67 See Jan Paul Hope and Vernon E. Stortz, “Warships and Cost Constraints,” Naval
Engineers Journal, March 1986: 41-52, particularly 43, and CRS Report 84-205 F, The
Navy’s Proposed Arleigh Burke (DDG-51) Class Guided Missile Destroyer Program: A
Comparison With An Equal-Cost Force of Ticonderoga (CG-47) Class Guided Missile
Cruisers, by Ronald O’Rourke. p. 30, including footnote 23. (November 21, 1984. The
report is out of print and is available directly from the author.)

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CRS-34
! a 10-fold improvement in overall battle force defense capability, in
part because of a 5-fold improvement in networking bandwidth
capacity;
! 15% more capability to defend against group attacks by enemy
surface craft (i.e., “swarm boats”);
! a 50-fold improvement (i.e., reduction) in radar cross-section, which
dramatically enhances survivability and reduces by half the total
number of missiles that need to be fired in an intercept engagement;
! a 10-fold increase in operating area against mines in shallow-water
regions;
! 3 times as much naval surface fire support capability, including an
ability to answer 90% of Marine Corps calls for fire within 5
minutes, permitting the ship to meet stated Marine Corps firepower
requirements — a capability otherwise unavailable in the surface
fleet — giving the ship a capability roughly equivalent to one-half
of an artillery battalion, and permitting a 65% reduction in Marine
Corps artillery;
! a ship design that allows underway replenishment of gun shells,
creating the equivalent of an almost-infinite ammunition magazine
and permitting nearly continuous fire support;
! about 10 times as much electrical capacity available for ship
equipment, giving the ship an ability to support future
electromagnetic rail guns and high-energy laser weapons; and
! features such as an automated fire-suppression system, peripheral
vertical launch system, and integrated fight-through-damage power
system that significantly increase ship survivability.68
Skeptics can acknowledge these capability improvements but question whether
they are worth the ship’s procurement cost or combined procurement and life-cycle
O&S cost, particularly if these costs are closer to the CAIG or CBO estimates than
to the Navy’s estimates. They could argue that if the Navy procures its minimum
planned total of 23 to 30 DD(X)s and CG(X)s (8 to 12 DD(X)s and 15 to 18
CG(X)s), each ship would effectively amortize about $330 million to $430 million
of the DD(X)/CG(X) program’s total estimated research and development cost of $10
68 Points taken from Statement of Admiral Vern Clark, U.S. Navy, Chief of Naval
Operations, Before The House Armed Services Committee Projection Forces Subcommittee,
July 19th, 2005, and Statement of The Honorable John J. Young, Jr., Assistant Secretary of
the Navy (Research, Development and Acquisition), and RADM Charles S. Hamilton, II,
Program Executive Officer For Ships, Before the Projection Forces Subcommittee of the
House Armed Services Committee on DD(X) Shipbuilding Program, July 19, 2005.

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CRS-35
billion, making each ship’s average acquisition (i.e., development plus procurement)
cost $330 million to $430 million higher than the figures shown in Table 4. If fewer
than 23 DD(X)s and CG(X)s are procured, perhaps because their procurement costs
turn out to be closer to the CAIG or CBO estimates than to the Navy’s estimates,
each ship would bear a larger portion of the $10 billion research and development
cost, increasing average ship acquisition cost by something more than $430 million.
Skeptics could also argue that DD(X) funding, if applied to other DOD programs,
might yield larger or more critical improvements in military capability.
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! At what procurement cost, or acquisition (i.e., development-plus-
procurement) cost, or combined procurement and life-cycle
operating cost would the DD(X) program become unaffordable or no
longer cost effective? In light of the discussion in the previous
section, is the cost of the DD(X) likely to be below, about equal to,
or above this cost?
! What other DOD capabilities would not be funded as a consequence
of funding the DD(X) program? If DD(X) costs turn out to be closer
to the CAIG and CBO estimates than to the Navy’s estimates, what
additional reductions in other DOD programs would be needed, and
what would be the effect of these reductions on U.S. military
capabilities?
Potential Program Implications for Industrial Base
The reduction in planned DD(X) procurement to one per year in FY2007-
FY2011 is an indication that, unless budget conditions change, DD(X)/CG(X)
procurement may never rise above one per year. Such a rate could have implications
for the surface combatant construction industrial base.
Sufficiency Of Workload For Two Yards. If DD(X)/CG(X) procurement
is limited to one ship per year and the program is divided between the two yards that
currently build the Navy’s larger surface combatants — the Ingalls shipyard of
Pascagoula, MS, which forms part of Northrop Grumman Ship Systems (NGSS), and
General Dynamics’ Bath Iron Works of Bath, ME (GD/BIW) — then the DD(X)
program would result in relatively low levels of surface combatant construction work
at the two yards.
The light-ship displacement of the DD(X) (about 12,435 tons) is about 79%
greater than that of the DDG-51 (about 6,950 tons). If shipyard construction work
for these two ship classes is roughly proportional to their light-ship displacements,
then procuring one DD(X) per year would provide an amount of shipyard work
equivalent to procuring about 1.8 DDG-51s per year. Splitting a one-per-year DD(X)
procurement rate evenly between the two yards might thus provide each yard with the
work equivalent of about 0.9 DDG-51s per year.

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CRS-36
Supporters of Ingalls and GD/BIW argued in the 1990s that a total of three
DDG-51s per year (i.e., an average of 1.5 ships per year for each yard), in
conjunction with other work being performed at the two yards (particularly Ingalls),
was the minimum rate needed to maintain the financial health of the two yards.69
Navy officials in recent years have questioned whether this figure is still valid.
Building the equivalent of about 1.8 DDG-51s per year equates to about 60% of this
rate. If the minimum rate of 3 DDG-51 equivalents per year is valid today, then a
one-per-year procurement rate for the DD(X)/CG(X) program could raise questions
about the potential future financial health of the two yards.
As a means of reducing DD(X) procurement costs, the Navy in February 2005
proposed holding a winner-take-all competition to select a single yard that would
build all DD(X)s. The Navy stated that procuring a group of 10 DD(X)s in a single
yard would cost $3 billion less, or an average of $300 million per ship less, than
dividing those 10 ships between two yards. Congress legislatively rejected the
Navy’s proposed acquisition strategy. The Navy responded in May 2005 by
proposing an alternate strategy that would assign one DD(X) to each yard and then
hold a competition for the right to build all subsequent DD(X)s — an approach that
might be thought of as a deferred winner-take-all strategy.
If this strategy were adopted, the yard that loses the competition to build the
subsequent DD(X)s could face a difficult business situation, particularly if that yard
is GD/BIW. GD/BIW is involved as a shipbuilder in no shipbuilding programs other
than the DDG-51 and DD(X).70 Consequently, if GD/BIW does not build DD(X)s
and does not receive other new ship-construction work, then GD/BIW could
experience a significant reduction in workloads, revenues, and employment levels by
the end of the decade. Theoretical scenarios for the yard under such circumstances
could include closure and liquidation of the yard, the “mothballing” of the yard or
some portion of it, or reorienting the yard into one that focuses on other kinds of
work, such as building commercial ships, overhauling and modernizing Navy or
commercial ships, or fabricating components of Navy or commercial ships that are
being built by other yards. Reorienting the yard into one that focuses on other kinds
of work, if feasible, could arguably result in workloads, revenues, and employment
levels that were significantly reduced from today’s.
If Ingalls were to lose such a competition and other work being done at Ingalls
(particularly construction of amphibious ships) does not increase, then Ingalls could
similarly experience a reduction in workloads, revenues, and employment levels.
The continuation of amphibious-ship construction at Ingalls could make the scenarios
of closure and liquidation or mothballing less likely for Ingalls than for GD/BIW, but
workloads, revenues, and employment levels could still be reduced from current
levels, and the cost of amphibious-ship construction and other work done at Ingalls
could increase due to reduced spreading of shipyard fixed overhead costs.
69 See, for example, CRS Report 94-343, Navy DDG-51 Destroyer Procurement Rate: Issues
and Options for Congress, by Ronald O’Rourke. (April 25, 1994) pp. 59-62. This report
is out of print and is available directly from the author.
70 GD/BIW is also the prime contractor for the GD version of the Littoral Combat Ship
(LCS), but the GD version is to be built by the Austal USA shipyard, of Mobile, AL.

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CRS-37
Maintaining One Yard Or Two: Factors To Consider. In light of the
Navy’s apparent interest in producing most DD(X)s in a single yard, and the
implications this might have for maintaining two active surface combatant
construction shipyards, the DD(X) program raises a potential question about the
merits of maintaining two active surface combatant construction yards vs.
maintaining one. As discussed in detail in another CRS report,71 factors to consider
in assessing this issue include the following:
! yard production capacities,
! potential future ship procurement rates for the Navy’s planned fleet
of 260 to 325 ships;
! the chance that ship procurement might need to be surged to higher
rates to respond to a change in Navy requirements;
! the feasibility of, and potential time and cost that would be required
to, reopen a closed surface combatant construction yard, create a
new surface combatant construction yard, or start building surface
combatants at an active yard that builds other kinds of ships;
! shipyard fixed overhead costs;
! costs associated with split learning curves,
! the cost of government supervision of shipyards,
! competition in ship design,
! competition in, or benchmarking of, ship construction,
! regional labor markets,
! potential work for the yards other than Navy shipbuilding,
! the geographic base of support for Navy shipbuilding, and
! the distribution of the economic benefits of Navy shipbuilding.
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! If DD(X)/CG(X) procurement does not rise above one per year, what
are the chances that the number of active surface combatant
construction yards would be reduced from two to one? Is support
71 CRS Report RL32665, Potential Navy Force Structure and Shipbuilding Plans:
Background and Issues for Congress, by Ronald O’Rourke.

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CRS-38
for the DD(X)/CG(X) program consistent with the goal of
maintaining two active surface combatant construction yards?
! What are the merits of maintaining one vs. two active surface
combatant construction yards?
! Do some parties support the DD(X)/CG(X) program in part due to
an expectation or hope that the program would result in the number
of active surface combatant construction yards being reduced from
two to one?
Potential Program Implications for Force Structure
Potential Force Levels. A continued one-per-year DD(X)/CG(X)
procurement rate could have implications for the size of the Navy’s force of larger
surface combatants. As discussed in the Background section, the Navy’s March 2005
report to Congress on future Navy force-level requirements shows the notional
compositions of 260- and 325-ship fleets in FY2035. The 260-ship fleet for FY2035
included 130 surface combatants — 44 DDG-51s, 8 DD(X)s, 15 CG(X)s, and 63
LCSs. The 325-ship fleet for FY2035 included 174 surface combatants — 62 DDG-
51s, 12 DD(X)s, 18 CG(X)s, and 82 LCSs.
Subtracting out the smaller LCSs, the March 2005 report calls for a force of 67
to 92 larger surface combatants — 67 for a 260-ship fleet and 92 for a 325-ship fleet.
Assuming a 35-year average life for larger surface combatants, maintaining a force
of 67 to 92 larger surface combatants over the long run would require a long-run (i.e.,
35-year) average procurement rate of about 1.9 to 2.6 ships per year, as opposed to
the potential DD(X)/CG(X) procurement rate of one per year.
Due to DDG-51 procurement rates in recent years, if larger surface combatants
currently in service or under construction (including FFG-7s) remain in service for
35 years, the Navy could:
! maintain a force of at least 92 larger surface combatants without
procuring any additional larger surface combatants between FY2007
and about FY2012; and
! maintain a force of at least 67 larger surface combatants without
procuring any additional larger surface combatants between FY2007
and about FY2022.
After about 2028, the number of DDG-51s in service begins to decline rapidly,
reflecting the annual rates at which they were procured (3 to 5 ships per year). As a
consequence, procuring one DD(X) or CG(X) per year for 23 or 30 years would
could eventually lead to a significant reduction in the total number of larger surface
combatants. Building the force of larger surface combatants back up to a total of 67
to 92 ships at that point could require an annual procurement rate much higher than
the steady-state procurement rate of 1.9 to 2.6 ships per year.

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CRS-39
As shown in Table 6, if DD(X)s and CG(X)s are procured at a rate of one per
year starting in FY2007, and if a total of 23 to 30 DD(X)s and CG(X)s are procured,
as called for in the Navy’s March 2005 report, then by the time that force of 23 to 30
DD(X)s and CG(X)s was fielded (2034 for 23 ships and 2041 for 30 ships), the
Navy’s force of larger surface combatants could be reduced well below 67 to 92
ships, unless DDG-51s are kept in service for 40 years rather than for their originally
planned service life of 35 years. For example, if FFG-7s and DDG-51s are kept in
service for 35 years and CG-47s are kept in service 40 years, then the total number
of larger surface combatants in 2034 and 2041, including 23 or 30 DD(X)s and
CG(X)s, respectively, would be 57 and 42 ships, respectively.
Table 6. Potential Future Force of Larger Surface Combatants
(assuming a total of 23 to 30 DD(X)s and CG(X)s
procured at one per year starting in FY2007)
Year
2034
2041
DD(X)s/CG(X)s in service
23
30
Service lives for older ships
Resulting number of larger surface combatants,
including the 23 or 30 DD(X)s/ CG(X)s above
FFG-7s
DDG-51s
CG-47s
30 years
30 years
35 years
41
30
30 years
35 years
35 years
57
42
35 years
35 years
40 years
57
42
35 years
40 years
40 years
78
58
Source: CRS calculation based on U.S. Navy data for commissioning dates of older ships. Calculation
assumes that DD(X)s enter service 5 years after the fiscal year in which they are procured.
Skeptics might question the feasibility of keeping DDG-51s (or CG-47s) in
service for 40 years, particularly in light of Navy decisions in recent years to retire
frigates, destroyers, and cruisers well short of their planned 25- to 35-year service
lives. Many of these early retirements were due to post-Cold War decisions to reduce
the size of the Navy, but concerns over the mission capabilities and cost effectiveness
of these ships were also a factor.
In a one-per-year procurement situation, if CG(X) procurement begins as
planned in FY2011 and the Navy decides to continue procuring CG(X)s in
subsequent years until the desired number of CG(X)s was reached, the Navy’s DD(X)
force, for a period of perhaps 15 to 18 years, would remain at 4 ships (the ships
procured in FY2007-FY2010), which would be one-third to one-half of the Navy’s
stated goal of 8 to 12 DD(X)s.
Alternatively, the Navy could decide, following procurement of the first CG(X)
in FY2011, to alternate procurement of DD(X)s and CG(X)s. This would permit the
number of DD(X)s to continue growing, but would delay the point at which the Navy
reached its desired number of CG(X)s. Such a delay could be viewed as inconsistent

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CRS-40
with the Navy’s apparent desire, implicit in its decision to accelerate procurement of
the first CG(X) from FY2018 to FY2011, to introduce CG(X)s into the fleet sooner
rather than later. It could also reduce learning-curve efficiencies for producing parts
of the DD(X) and CG(X) that are unique to each class of ship.
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! How likely is it that it will be feasible or cost effective to keep
DDG-51s (or CG-47s) in service for 40 years?
! What would be the operational implications if the Navy’s force of
larger surface combatants in 2034 or 2041 included 57 or 42 ships,
respectively, rather than 67 to 92 ships, as called for in the Navy’s
260- and 325-ship fleet plans?
! Following the procurement of 23 to 30 DD(X)s and CG(X)s, could
the Navy afford to begin procuring the next larger surface combatant
design at the annual rates that would be needed to increase the force
of larger surface combatants from 57 or 42 ships to 67 to 92 ships?
Would a 23- to 30-ship DD(X)/CG(X) program procured at one per
year, in other words create an unaffordable downstream requirement
for procuring larger surface combatants at a much higher annual
rates?
! What would be the operational implications, particularly for meeting
Marine Corps requirements for naval surface fire support, if the
Navy switched to CG(X) procurement in FY2011 and continued
procuring CG(X)s until a total of 15 or 18 had been procured,
leaving the Navy with a force of 4 DD(X)s, rather than 8 or 12, for
a period of 15 to 18 years?
! Conversely, what wold be the operational implications, particularly
for introducing CG(X)s into the fleet in sufficient quantities in a
timely manner, if the Navy alternated procurement of CG(X)s and
DD(X)s after FY2011?
Program Mission Requirements
DD(X) Compared To Other Destroyers and Cruisers. Although the
DD(X) is classified as a destroyer (DD) rather than a guided missile destroyer
(DDG), guided missile cruiser (CG), gun cruiser (CA), or guided missile gun cruiser
(CAG), the DD(X) design, among other things:
! is, at about 14,500 tons full load displacement, about 50% larger
than the Aegis cruiser and DDG-51 designs;
! is larger than any cruiser or destroyer that the Navy has procured
since the nuclear-powered cruiser Long Beach (CGN-9), which was
procured in FY1957;

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CRS-41
! has an area-defense anti-air warfare (AAW) capability that in some
respects is greater than that of the DDG-51;72
! has command facilities for a flag-level officer and his command staff
— a feature that previously has been installed on cruisers but not
destroyers;
! has a vertical launch system (VLS) whose weapon storage volume
and weapon weight capacity are between that of the DDG-51 and
Aegis cruiser designs;73 and
! has more gunfire capability than any cruiser the Navy has built since
World War II.
In light of these features, the DD(X) might be closer to a guided missile gun
cruiser (CAG) than a traditional destroyer (DD).
Relationship Of Capabilities To Ship Size and Cost. The DD(X)’s size
and procurement cost do not appear to have been driven by any one technology or
payload element, but rather by the ship’s total collection of payload elements. These
payload elements include, in addition to its above-mentioned AAW system, flag-
level command facilities, VLS battery, and gunfire capabilities, the following:
! sonars and other antisubmarine warfare (ASW) systems that are
roughly equivalent to that of the DDG-51;74
! a large helicopter flight deck and a hangar and maintenance facilities
for two helicopters or one helicopter and three UAVs;
72 The Navy states that radars on the DD(X) and DDG-51 are roughly equivalent in terms
of dB gain (sensitivity) and target resolution, that the firm track range of the DD(X)'s
dual-band radar — the range at which it can maintain firm tracks on targets — is 25%
greater for most target types than the firm track range of the DDG-51's SPY-1 radar, that the
DD(X)'s radar has much more capability for resisting enemy electronic countermeasures and
for detecting targets amidst littoral clutter, that the DD(X)'s AAW combat system would be
able to maintain 10 times as many tracks as the DDG-51's Aegis system, and that the two
ships can support roughly equal numbers of simultaneous AAW engagements. Given the
features of the DD(X)’s AAW system, plus its much-greater C4I/networking bandwidth,
the Navy has stated that replacing a DDG-51 with a DD(X) in a carrier strike group would
increase the strike group’s AAW capability by about 20%.
73 Although the DD(X) has 80 VLS cells, compared to 96 on the DDG-51 and 122 on the
Aegis cruiser, the DD(X)’s VLS cells are larger. The Mk 41 VLS cells on DDG-51s and
Aegis cruisers can fire a missile up to 21 inches in diameter, 21 feet in length, and about
3,000 pounds in weight. The Advanced VLS (AVLS) cells on the DD(X) can fire a missile
up to 24 inches in diameter, 22 feet in length, and about 4,000 pounds in weight.
74 The Navy states that due to differences in their sonar designs, the DD(X) would have
more littoral-water ASW capability, while the DDG-51 would have more blue-water ASW
capability.

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CRS-42
! additional berthing, equipment-stowage space, and mission-planning
space for a platoon of 20 special operations forces (SOF) personnel;
and
! facilities for embarking and operating two 11-meter boats and four
rubber raiding craft (as opposed to two 7-meter boats on the DDG-
51).
DD(X) Operational Requirements. The payload elements of the DD(X)
design reflect an Operational Requirements Document (ORD) for the DD(X) that was
approved by the Joint Staff of DOD in February 2004. Key performance parameters
included in this document include having two AGSs that can each fire 10 rounds per
minute, for a total of 20 rounds per minute.75 DOD states that
During the restructuring of the DD-21 program into the DD(X) program,
the Navy re-evaluated each DD-21 Key Performance Parameter (KPP) to
determine the potential for minimizing the size of the ship and ultimately the
cost. The Navy made many adjustments and the resulting DD(X) KPPs represent
the Navy’s minimum requirements. No other known alternative meets all of the
DD(X) KPPs and provide the sustained, precision, long-range naval surface fire
support that the United States Marine Corps requires.76
Although the DD(X) design reflects the February 2004 ORD, skeptics might
question whether the DD(X) design fully takes into account other current or planned
Navy capabilities. They could argue, for example, that since February 2004, the
Navy has increased the planned number of LCSs from an earlier range of 30 to 60 to
a new range of 63 to 82. Skeptics can argue that, notwithstanding the February 2004
DD(X) ORD, GAO reported that there is currently no consensus between the Navy
and Marine Corps regarding naval surface fire support requirements. A November
2004 Government Accountability Office (GAO) report concluded that
The Navy and Marine Corps have only recently begun the process to establish
validated NSFS requirements that address the overall capabilities needed and the
balance between different systems that will be required to provide effective,
continuous, and sustaining support fire for forces operating ashore.77
Skeptics might argue that with estimated DD(X) costs now much higher than
they were in February 2004, and the effect that increased cost appears to have had in
reducing planned DD(X) procurement, the February 2004 ORD might not reflect a
sufficiently up-to-date consideration of how increasing DD(X) capability (and
therefore cost) might reduce DD(X) numbers and therefore reduce the collective
capability of the total DD(X) force. In light of the reduction in planned DD(X)
75 Source: Statement by The Honorable Kenneth J. Krieg, Under Secretary of Defense
(Acquisition, Technology and Logistics), Before the Subcommittee on Projection Forces,
House Armed Services Committee, United States House of Representatives, July, 19, 2005,
p. 2.
76 Ibid, pp. 6-7.
77 Government Accountability Office, Information on Options for Naval Surface Fire
Support, GAO-05-39R, Nov. 2004, p. 2.

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CRS-43
procurement, skeptics could argue, certain capabilities that might have been viewed
as desirable in February 2004 might now be viewed as less desirable because of their
role in increasing DD(X) unit cost and thereby reducing planned DD(X)
procurement.
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! AGSs. Since the DD(X) is the only ship planned to carry AGSs, and
since AGSs are viewed by the Marine Corps as necessary to meet
Marine Corps requirements for naval surface fire support capability,
should the AGSs be considered the most-critical payload element on
the DD(X), and certain other payload elements, though desirable, as
possibly less critical by comparison?
! Hangar. In light of the 175 to 194 current or planned helicopter
hangar spaces on other Navy surface combatants (2 spaces on each
of 22 Aegis cruisers and the final 34 DDG-51s, and 1 space on each
of 63 to 82 LCSs), and the relatively limited number of Navy
helicopters available for filling those spaces, how critical is it for the
DD(X) to have a hangar with spaces for two helicopters? Would it
be acceptable for the DD(X) instead to have only a helicopter
landing platform and an ability to refuel and rearm helicopters, like
the first 28 DDG-51s?
! VLS tubes. In light of the 8,468 vertical launch system (VLS)
missile tubes on the Navy’s planned force of 84 VLS-equipped
Aegis ships (22 cruisers with 122 tubes each, 28 earlier DDG-51s
with 90 tubes each, and 34 later DDG-51s with 96 tubes each), the
ability of VLS tubes to store and fire either one 21-inch diameter
missile or four smaller-diameter Evolved Sea Sparrow Missiles
(ESSMs), the ability in a networked force for a ship to control a
missile fired by another ship, and the DD(X)’s key role in providing
naval gunfire support with its two AGSs, how critical is it for the
DD(X) to have 80 enlarged VLS tubes as opposed to a smaller
number, such as 64, 48, or 32?
! Command facilities. In light of the flag-level command facilities
on the 22 Aegis cruisers, as well as additional command facilities on
aircraft carriers and planned amphibious assault ships, how critical
is it for the DD(X) to have flag-level command facilities?
! SOF support facilities. In light of SOF support facilities on the
Navy’s planned force of four converted Trident submarines, or
SSGNs (66 or more SOF personnel for each ship),78 support
facilities for smaller numbers of SOF on Navy attack submarines
78 For more on the SSGN program, see CRS Report RL21007, Navy Trident Submarine
Conversion (SSGN) Program: Background and Issues for Congress, by Ronald O’Rourke.

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CRS-44
(SSNs), and the secondary SOF support role for the Navy’s planned
force of 63 to 82 LCSs, how critical is it for the DD(X) to have SOF
support facilities?
! Gun shell capacity. In light of the DD(X) design feature that allows
underway replenishment of gun shells, creating the equivalent of an
almost-infinite ammunition magazine and permitting nearly
continuous fire support, how critical is it for the DD(X) to have a
total gun shell capacity of 920 shells, as opposed to a smaller
number, such as 600?
! AAW system. In light of the Aegis area-defense AAW systems on
the Navy’s planned force of 84 Aegis ships — which, though not as
capable in some respects as the DD(X)’s AAW system in littoral
operating environments, would still be quite capable, particularly
when numbers of Aegis ships are taken into account — how critical
is it for the DD(X) to have an area-defense-capable AAW system, as
opposed to a more modest point-defense AAW system capable of
defending only the DD(X) itself (which might be closer to the more
modest AAW system that was originally envisaged for the DD-21,
the precursor to the DD(X)?
DD(X) Technology Readiness
GAO Reports and Testimony. The DD(X) will incorporate several
significant new technologies — probably more new technologies than any new class
of surface combatant that the Navy has built in decades. GAO has expressed
concerns several times in reports and testimony about whether these technologies will
be sufficiently mature in time for the lead DD(X), about the Navy’s lack of fallback
options for many of these technologies, and about the potential for problems in
technology development to add time and cost to the D(X) program, and particularly
to the effort for building the lead ship. In July 2005, GAO stated:
Demanding requirements and time frames present substantial challenges for
the DD(X) program. DD(X)’s revolutionary design and automated operations
require multiple technological advances.... At the same time, the DD(X) program
has imposed a tight schedule — one that calls for concurrent development,
design, and construction.
To reduce risk in the DD(X) program, the Navy is building 10 engineering
development models that represent the ship’s most critical subsystems and
technologies. While use of these models is a sound approach, planned testing of
the models continues through system design and, in some cases, into detailed
design and construction, creating risk. Any problems identified through testing
could require design changes and result in delays and cost increases. Past GAO
work shows that demonstrating technological maturity — that is, the technology
has been shown to perform in its intended environment — at the start of system
design and development is key to reducing risk and meeting cost, schedule, and
performance objectives. In addition, the models are not identical in design to the
subsystems that will actually be installed on the first ships and thus will require
additional work to reach the final design.

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CRS-45
The consequences of not meeting the challenges facing the DD(X) program
are significant. If the program fails to demonstrate capabilities, develop software,
or integrate subsystems as planned, these activities will be pushed into the later
stages of design and construction. In these stages, the cost of work and delays is
much higher and the schedule much less forgiving than in earlier stages. At the
same time, the Navy must compete for funding with other programs, while
supporting existing platforms and deployments, in a time when the discretionary
budget is constrained. In light of the risks framed by the DD(X)'s challenges,
decision makers should consider potential trade-offs in advance, including
accepting reduced mission performance, increased costs, delayed shipyard work,
and/or additional manning. It would be prudent to consider the palatability of
such trade-offs now before authorizing the construction of the first ship—a
commitment the Navy plans to make by the end of this fiscal year.79
Navy Position. In response, the Navy argues that development of DD(X)
technologies is proceeding well, that the new technologies will be sufficiently mature
to support the lead DD(X) as currently scheduled, and that allowing more time for
further maturing the technologies before proceeding with DD(X) procurement would
add time and cost to the DD(X) program and result in a ship whose technologies
would be less up to date at the time of ship completion.80
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! What is the risk that one or more new technologies being developed
for the DD(X) will not be sufficiently mature to support the lead
DD(X) as currently scheduled?
! If one or more of these technologies experience development
difficulties, how might this affect the schedule, cost, and capabilities
of the lead DD(X) and follow-on DD(X)s?
79 Government Accountability Office, Defense Acquisitions[:] Progress and Challenges
Facing the DD(X) Surface Combatant Program, GAO-05-924 T, July 19, 2005. (Testimony
Before the Subcommittee on Projection Forces, Committee on Armed Services, House of
Representatives. [The panel on which GAO testified had its testimony deferred to July 20,
2005.]) For earlier GAO reports on DD(X) technology maturity, see Government
Accountability Office, Progress of the DD(X) Destroyer Program, GAO-05-752R, June 14,
2005; Government Accountability Office, Defense Acquisitions[:] Assessments of Selected
Major Weapon Programs, Mar. 2005; Government Accountability Office, Defense
Acquisitions[:] Challenges Facing the DD(X) Destroyer Program, GAO-04-973, Sept.
2004; and General Accounting Office, DEFENSE ACQUISITIONS: Assessments of Major
Weapon Programs, GAO-04-248, Mar. 2004.
80 See, for example, Statement of The Honorable John J. Young, Jr., Assistant Secretary of
the Navy (Research, Development and Acquisition), and RADM Charles S. Hamilton, II,
Program Executive Officer For Ships, Before the Projection Forces Subcommittee of the
House Armed Services Committee on DD(X) Shipbuilding Program, July 19, 2005, pp. 11-
20.

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CRS-46
DD(X) as Bridge to CG(X)
The Navy argues that the DD(X) will act as a bridge to the CG(X) because the
CG(X) will be based on the DD(X) hull design (perhaps slightly enlarged) and use
many of the same basic technologies as the DD(X). The Navy states that
The DD(X) hull and propulsion plant will be spiraled into the CG(X) platform
with about 80% design overlap, representing a tremendous cost avoidance in the
CG(X) program. Without DD(X), CG(X) will be behind schedule and therefore
unavailable to counter critical threats and will also require up to four billion
dollars (representing a net additional billion dollars of taxpayer money) for
non-recurring engineering costs.81
Skeptics could argue that DD(X) technologies planned for use in the CG(X)
could be developed without building any DD(X)s, or by building a single DD(X) as
an integrated technology demonstrator.
DD(X)/CG(X) Technologies for Other Navy Ships
The Navy argues that several DD(X)/CG(X) technologies are to be incorporated
into other planned Navy ships:
A significant portion of the DD(X) R&D funding is procuring systems for use on
multiple platforms. About 25% of DD(X) R&D investment is common and
directly applicable to [the aircraft carrier] CVN-21and [the amphibious assault
ship] LHA(R). With the exception of nuclear propulsion technology, little
research and development funding for aircraft carriers has been funded since the
inception of the NIMITZ-class carrier almost forty years ago. Consequently,
DD(X) is the principal technology driver for CVN-21’s radars, computing
environment, deckhouse construction and other command and control systems.
Without DD(X), CVN-21 will likely be delayed by one year and R&D costs
alone will grow by $1.3 billion, not including the cost of the schedule delay.82
Skeptics could argue that DD(X)/CG(X) technologies planned for use in other
Navy ships could be developed without building any DD(X)s or CG(X)s, or by
building a single DD(X) or single CG(X), or one ship of each kind, as integrated
technology demonstrators.
LCS Oversight Issues For Congress
The LCS program raises several potential oversight issues for Congress,
including the following:
! planned numbers of LCSs;
81 Statement of Admiral Vern Clark, U.S. Navy, Chief of Naval Operations, Before The
House Armed Services Committee Projection Forces Subcommittee, July 19th, 2005, p. 11.
82 Statement of Admiral Vern Clark, U.S. Navy, Chief of Naval Operations, Before The
House Armed Services Committee Projection Forces Subcommittee, July 19th, 2005, p. 11.

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CRS-47
! total program procurement cost;
! program mission requirements;
! program cost effectiveness;
! rapid acquisition strategy;
! LCS mission modules funded in the Other Procurement, Navy
(OPN) account; and
! potential program implications for the industrial base.
Each of these is discussed below.
Planned Numbers Of LCSs
As discussed in the Background section, the planned number of LCSs has
increased from an earlier range of 30 to 60 to the currently planned range of 63 to 82.
In his final months in office as Chief of Naval Operations, Admiral Vernon Clark
mentioned the possibility of building 75 to 100 LCSs. The reasons for this increase
in planned LCS numbers is not clear, but Navy and DOD officials during this time
have mentioned the potential suitability of the LCS for performing homeland defense
operations, a mission that was not emphasized at the outset of the LCS program.
Potential oversight questions for Congress include the following:
! What is the analytical basis for the Navy’s planned number of LCSs,
and why has this figure grown substantially since the inception of
the program? What role, if any, have homeland defense operations
played in this increase?
! Does the Navy intend to formally increase the planned number of
LCSs from the current range of 63 to 82 ships to the range of 75 to
100 ships mentioned by Admiral Clark?
! Has the Navy increased the planned number of LCSs in part because
this is the least expensive way for the Navy to maintain a 260- to
325-ship fleet within projected Navy funding levels while
accommodating growing Navy costs in areas, such as personnel-
related expenditures?
Total Program Procurement Cost
Navy officials acknowledge that the total number of LCSs, the cost of individual
LCS mission modules, and the ratio of mission modules to LCSs, is not yet clear, and
that the potential total procurement cost of the LCS program, including mission
modules, is therefore unknown. Supporters could argue that total program cost will

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CRS-48
become clearer as the Navy works through the details of the program. Skeptics could
argue that a major acquisition program like the LCS program should not be initiated
until its potential total costs are better understood.
Program Mission Requirements
Primary Missions. The LCS program is based on a Navy requirement for
additional capability for countering enemy submarines, surface attack craft and mines
in heavily contested littoral areas.83 Has the Navy accurately projected this
requirement?
83 Mission requirements for the LCS program are technically covered (i.e., “grandfathered”)
by the MNS that was issued for the old SC-21 (i.e., DD-21) program. The analysis behind
the SC-21 MNS, however, did not focus on potential littoral anti-access challenges in littoral
waters. The Navy’s requirement for additional capability for countering enemy submarines,
surface attack craft, and mines in littoral waters instead reflects an analysis aimed at
identifying gaps or weaknesses in Navy capabilities that the Navy performed initially in
February 2001, which did focus on potential littoral anti-access challenges in littoral waters.
The Navy refined this analysis further in 2001 and 2002 and then issued mission
requirements for the LCS in a Preliminary Design Interim Requirements Document. (U.S.
Department of the Navy, Littoral Combat Ship Flight 0 Preliminary Design Interim
Requirements Document [PD-IRD], Feb. 10, 2003.) The document states:
The primary threat to sea based U.S. joint forces will be from mines, aircraft,
ships, boats, submarines, and coastal defense units armed with Anti-Ship Cruise
Missiles (ASCM), and submarine-launched torpedoes. Mines present the most
challenging threat because they can be deployed from ships and aircraft, both
military and civilian, and can also be deployed from submarines. Significant
threats will also come from air and ship launched torpedoes; fighter-launched
Tactical Air-to-Surface Missiles; other ordnance carried by sea and land-based
aircraft (fixed- and rotary-wing); chemical, biological and nuclear weapons, and
in the future, directed energy weapons. While operating in the littoral regions,
additional threats from coastal defense sites (artillery, missile, multiple rocket
launchers, and possibly torpedoes) small boats and Tactical Ballistic Missiles
may be encountered. A third tier threat will include preemptive attacks or covert
action from special operations forces, combat divers, and terrorists. The
weapons threats may be supported by C3 [command, control, and
communications], electronic attack, and electronic support [i.e., electronic
eavesdropping] systems.
Further details on existing, projected, and technologically feasible threats
are contained in the Classified “Major Surface Ship Threat Assessment”, ONI-
TA-018-01, January 2001....
The LCS will deliver focused mission capabilities to enable joint and
friendly forces to operate effectively in the littoral. These focused mission
capabilities are an enhanced mine warfare capability, a better shallow-water
ASW capability, and an effective counter to small craft. There are other
capabilities inherent in the LCS that support other missions such as Maritime
Interdiction Operations (MIO) and Intelligence, Surveillance, and
Reconnaissance (ISR).

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CRS-49
Those who support the notion that the Navy has accurately projected this
requirement could argue the following:
! The Navy experienced difficulties countering mines in a 1984
mining incident in the Red Sea, in the 1987-1988 Navy operation to
escort reflagged Kuwaiti tankers and other U.S.-flag commercial
ships in the Persian Gulf, in the 1991 Persian Gulf War, and (to a
smaller degree) in the recent Iraq war. Navy ships were damaged by
mines in the 1987-1988 and 1991 operations.
! The Navy has also been challenged by surface attack craft while
operating in littoral waters, such as during the 1987-1988 escort
operation.
! While the Navy does not appear to have been significantly
challenged by enemy submarines in littoral waters in recent military
operations, proliferation of modern non-nuclear-powered submarines
to potential adversaries has been a concern among Navy officials and
other observers for several years.
! In light of the many firms globally that are marketing non-nuclear-
powered submarines, surface attack craft, and mines to foreign
buyers, and the interest that numerous countries, including potential
foreign adversaries, have shown in either buying such systems from
foreign suppliers or building them indigenously, it is reasonable to
expect that the Navy in the future will need additional capability for
countering such systems.
Those who question the notion that the Navy needs to acquire additional
capability for countering mines and surface attack craft in littoral waters could argue
the following:
! recent major U.S. military combat operations — in Kosovo in 1999,
in Afghanistan in 2001-2002, and in Iraq in early 2003 — suggest
that the Navy faces no immediate crisis in littoral-warfare
capabilities; and
! potential U.S. adversaries do not appear to be acquiring submarines,
surface attack craft, and mines at the rate that some observers have
expected, and may attempt to circumvent the Navy’s littoral-warfare
plans by focusing on acquiring different kinds of littoral-defense
systems, such as autonomous underwater vehicles (AUVs).84
84 A May 2003 report on DOD programs for countering enemy anti-access and area-denial
forces written by the Center for Strategic and Budgetary Assessments (CSBA) — a non-
governmental study group generally supportive of defense transformation — argued this
point at length, stating:
Although none of these three threats [diesel subs lurking close to shore,
mines, and swarming boats] are new, naval and civilian leaders have concluded
(continued...)

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CRS-50
84 (...continued)
that their previous efforts to deal with them have been ineffective....
All of these judgments and conclusions are also open to debate. Indeed, the
Navy may be preparing to fight the last maritime AD [area-denial] network, and
with the wrong tools. As [naval analyst and author] Norman Friedman has noted
after a careful review of global naval arms transfers and purchases, coherent
maritime AD networks comprised of submarines, mines, and boats — and even
ASCMs [anti-ship cruise missiles] — are not materializing. This suggests one
of three things: potential adversaries have decided not to develop maritime AD
networks; they are attracted to the maritime AD capabilities that currently
occupy US naval planners, but have elected not to pursue them in the near term
for other political or military reasons; or they are pursuing new capabilities to
outflank DON transformation plans.
This last circumstance would seem not only plausible, but highly probable. For
any adversary contemplating a long-term competition with the US battle fleet,
building a maritime AD network that US naval expeditionary forces are being
specifically designed to defeat would not appear to be an attractive
transformation path. From an adversary’s perspective, crewed submarine
operations are an extremely expensive pathway, and the prospect of taking on the
US attack submarine fleet is not an attractive one. The United States is expending
an enormous amount of resources and effort, however belatedly, to sweep
stationary mines and to effect rapid but relatively narrow penetrations of static
minefields. For an adversary to embark now on a major procurement program to
buy these types of weapons would appear to be huge gamble. And except for
surprise attacks, no serious naval opponent is going to emphasize swarming boats
(except perhaps in special cases like the Persian Gulf, where sea room for US
naval forces is limited). As was conclusively demonstrated at the Battle of
Bubiyan Channel, a naval engagement during the first [i.e., 1991] Gulf War, fast
attack craft attacking a prepared naval force that enjoys air superiority is not a
survivable tactic.
An alternative approach might be to pursue new underwater attack systems
combining the technology of torpedoes, mobile mines, and new autonomous
underwater vehicles (AUVs). Pursuing new types of stealthy uncrewed attack
submarines, or long-range autonomous torpedoes, or mobile mines that
constantly shift their position or patrol an engagement area would appear to be
a far more attractive competitive strategy for maritime AD, in that it would side-
step most, if not all, of US counter-AD plans. Moreover, such a strategy would
allow attacks beyond the littoral dead zone to threaten the very viability of the
[U.S.] sea base. AUV technology available today could easily allow an adversary
to conduct wake-homing attacks on surface vessels at ranges out to 250 miles.
In the future, even longer-range attacks will be possible, perhaps extending to
ocean basin ranges. In addition, unlike in the past when the military sector
dominated the development of underwater systems, today’s revolution in
remotely operated underwater vehicles and AUVs is being driven by the
commercial and scientific communities. Since most of the research and
development (R&D) for long-range AUVs is being borne by them, the costs for
weaponizing AUVs are likely to be reasonable, meaning that AUV-based
weapons might be built in numbers, and quickly, opening the possibility of
springing either an operational or tactical surprise. Moreover, once built,
(continued...)

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CRS-51
Potential questions for Congress regarding the mission requirements for the LCS
include the following:
! The Navy has been aware of challenges posed by enemy mines,
surface attack craft, and submarines in littoral waters since its
operations in the Persian Gulf in 1987-1988 and 1991, if not before.
Why did the Navy not begin to identify these challenges as a source
of significant new mission requirements until 2001? Is the Navy
exaggerating the threat posed by these area-denial systems to help
justify the start of the LCS program?
! Does OSD agree with the Navy’s view on the scale and composition
of current and projected threats to Navy ships operating in littoral
waters?
! What is the latest evidence on whether potential foreign adversaries
are developing improved littoral-defense systems based on
submarines, surface attack craft, and mines?
! To what degree might potential U.S. adversaries attempt to
circumvent current Navy plans for improving its littoral-warfare
capabilities by acquiring different kinds of littoral-defense systems,
such as AUVs?
Homeland Security Mission. As mentioned in the Background section,
some observers believe the LCS might also be suitable for homeland defense
operations. Making this an additional mission for the LCS could lead to an increase
in the total planned LCS procurement quantity. The Coast Guard, however, could
also conduct such operations, and is currently procuring new cutters and aircraft
under its Deepwater acquisition program to improve its ability to conduct these and
other operations in the future.85
Supporters of adding homeland defense as a mission for the LCS could argue
that many of the features that make the LCS suitable for Navy operations in littoral
waters overseas could make it suitable for homeland defense operations in littoral
waters close to the United States. Skeptics could argue that the Coast Guard’s new
Deepwater cutters and aircraft may be more cost effective than the LCS for
84 (...continued)
weaponized AUVs would require little infrastructure overhead, and they could
operate largely autonomously after the start of a war.
(Andrew Krepinevich, Barry Watts, and Robert Work, Meeting the Anti-Access and Area-
Denial Challenge, Center for Strategic and Budgetary Assessments, 2003, pp. 57-58.
Emphasis as in the original. The excerpted passage is from the chapter of the report
focusing on Navy programs, which was written by Robert Work, CSBA’s naval issues
analyst.)
85 For more on the Deepwater program, see CRS Report RS21019, Coast Guard Deepwater
Program: Background and Issues for Congress, by Ronald O’Rourke.

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CRS-52
conducting these operations, and that a more rigorous examination of potential Navy
and Coast Guard methods for performing such operations should be conducted before
adding homeland defense as a mission for the LCS and possibly increasing the size
and cost of the LCS program.
Program Cost Effectiveness
In contrast to the DD(X), which reflects the outcome of a formal analysis
intended to identify the best or most promising way to perform certain surface
combatant missions (the SC-21 Cost and Operational Effectiveness Analysis [COEA]
of 1995-1997), the Navy prior to announcing the start of the LCS program in
November 2001 did not conduct a formal analysis — which now might be called an
analysis of multiple concepts (AMC) — to demonstrate that a ship like the LCS
would be more cost-effective than potential alternative approaches for performing the
LCS’s stated missions. Potential alternative approaches for performing the LCS’s
stated missions include (1) manned aircraft, (2) submarines equipped with UVs, (3)
a larger (perhaps frigate-sized) surface combatant equipped with UVs and operating
further offshore, (4) a non-combat littoral support craft (LSC) equipped with UVs,
or (5) some combination.
An AMC is often performed before a service starts a major acquisition program.
The absence of an AMC raises a question regarding the analytical basis for the
Navy’s assertion that the LCS is the most cost-effective approach for performing the
LCS’s stated missions, particularly given the Navy’s pre-November 2001 resistance
to the idea of a smaller combatant. As a result, the issue of whether a ship like the
LCS represents the best or most promising approach has become a subject of some
debate.
Arguments Supporting LCS as Best Approach. Supporters of the LCS
could argue that the LCS program represents the best possible approach for
performing the LCS’s stated missions because the LCS program:
! builds on about four years of analytical work on small, fast surface
combatants done in 1998-2001 at the Naval War College under the
Streetfighter project, which showed several potential operational
advantages of using a smaller ship like the LCS for performing
littoral-warfare missions;
! would respond to the Navy’s need for forces that can operate in
littoral waters (including shallow-draft waters inaccessible to larger
Navy surface ships) to counter enemy submarines, surface attack
craft, and mines;
! has been shown in computer simulations and wargames to
substantially improve Navy littoral warfare capabilities;
! would be a key Navy program for achieving and exploiting the
concept of network-centric warfare, which is a key component of
naval transformation;

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CRS-53
! would take full advantage of unmanned vehicles, which are another
key component of naval transformation;
! would exploit the new concept of modular payload packages to
achieve significant mission flexibility and an improved ability to
accept upgrades and new missions over its life-cycle;
! would be more numerous and mobile in littoral waters than larger
and slower surface ships, and would thus be more effective in terms
of making it difficult for the enemy to plan and react to U.S.
operations in littoral waters;
! would achieve survivability through speed, stealth, battlespace
awareness, self-defense weapons, and support from other Navy
platforms;
! would avoid the need to put at risk larger and more expensive
surface ships, with their larger crews, to conduct operations in
potentially dangerous littoral waters; and
! would respond to the Navy’s need for more affordable ships.
Supporters of the LCS program can also argue that the Navy in the past has built
prototype ships without having first done an AMC, and that the Navy is now
conducting an AMC for the LCS program.
Arguments Questioning LCS as Best Approach. Skeptics of the LCS
program could argue that while many of the above arguments may be true, they do
not demonstrate that the LCS is the best or most promising approach for performing
the LCS’s stated missions, and that the Navy is proposing the LCS program on the
basis of “analysis by assertion.” More specifically, skeptics could argue the
following:
! Although it might be argued that the LCS is covered under the SC-
21 COEA, the SC-21 COEA did not examine options for acquiring
a small combatant like the LCS and thus cannot in substance provide
a formal analytical basis for arguing that the LCS is the best or most
promising approach.
! In testimony to the House Armed Services Committee in April 2003,
the Navy acknowledged that, on the question of what would be the
best approach to perform the LCS’s stated missions, “The more
rigorous analysis occurred after the decision to move to LCS.”86
86 Spoken testimony of Vice Admiral John Nathman, Deputy Chief of Naval Operations
(Warfare Requirements and Programs), at an April 3, 2003 hearing on Navy programs
before the Projection Forces subcommittee of the House Armed Services Committee. At
this hearing, the chairman of the subcommittee, Representative Roscoe Bartlett, asked the
(continued...)

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CRS-54
! The four years of analysis done by the Navy prior to announcing the
LCS program revolved to a large degree around the Streetfighter
concept, which differs in certain respects from the LCS concept.87
More important, the analysis focused primarily on what a
Streetfighter might look like and what kind of warfighting
contribution it could make as part of a larger Navy force, rather than
on the more basic question of whether a smaller surface ship
represented a better approach than other alternatives for performing
the missions in question.
! Although Navy computer simulations and wargames may show that
a ship like the LCS would increase the Navy’s warfighting
effectiveness in the littoral environment, the Navy has not shown
that this increase is greater than the increase that might be achieved
by investing a similar amount of funding in other approaches for
performing littoral warfare missions. The Navy identified a need for
additional littoral warfighting capability and leaped to the conclusion
that the LCS would be the best way to provide it, without thoroughly
examining potential alternative approaches. Helicopters, frigates,
and submarines have performed littoral warfare missions for years,
and the Navy has not shown through rigorous analysis why these
platforms — or unmanned vehicles deployed from manned aircraft,
submarines, or larger surface ships operating further from shore —
would be inferior to the LCS for performing them.
! The survivability of the LCS in dangerous littoral waters is open to
question. Speed, stealth, and battlespace awareness may not be
sufficient to avoid being targeted and attacked by modern sensors
and weapons, particularly in waters close to an enemy’s shore, and
the LCS’s modest self-defense weapons may not be adequate to
counter incoming missiles and torpedoes. Larger ships are generally
more capable than smaller ships of withstanding a hit from a weapon
of a given size without sinking. The cruise missiles, mines, and boat
bomb that in recent years have significantly damaged some of the
Navy’s current surface combatants and amphibious ships, but not
86 (...continued)
Navy witnesses about the Navy’s analytical basis for the LCS program. The witnesses
defended the analytical basis of the LCS program but acknowledged that “The more
rigorous analysis occurred after the decision to move to LCS.” See U.S. Congress, House
Committee on Armed Services, Subcommittee on Projection Forces, Hearing on National
Defense Authorization Act for Fiscal Year 2004 — H.R. 1588, and Oversight of Previously
Authorized Programs. 108th Cong., 1st sess., Mar. 27, and Apr. 3, 2003, (Washington: GPO,
2003), p. 126. For an article discussing the exchange, see Jason Ma, “Admiral: Most LCS
Requirement Analysis Done After Decision To Build,” Inside the Navy, Apr. 14, 2003.
87 The Streetfighter, for example, was often described as a ship of several hundred (i.e., less
than a thousand) tons displacement, while the LCS is usually described as a larger ship
displacing 1,500 to 3,000 tons.

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CRS-55
sunk them, would have a higher likelihood of sinking a smaller ship
like the LCS. It is not clear that it would be necessary or preferable
to send a small and potentially vulnerable manned ship into heavily
defended littoral waters to deploy UVs when UVs could also be
launched from aircraft or from larger ships operating further
offshore.
! The cost-effectiveness of the LCS as a focused-mission ship
employing modular mission payload packages (rather than a ship
with a built-in multimission combat system) is open to question.
LCS mission modules would not be changed in open waters; they
would be changed in a friendly port. If the friendly port is near the
LCSs’ operating area, then are LCSs needed in that area? If the
friendly port is not near the operating area, will the LCSs be able to
change mission modules in a timely manner? Where and how will
mission modules that are not loaded on the LCSs be stored in the
theater of operation? How many LCSs, and how many LCS mission
modules, will need to be procured and deployed into a theater to
ensure that an adequate number of LCSs equipped with the right
mission modules will be on station in the operating area when they
are needed?
! While it may be acceptable to build one, two, or a few ships as
prototypes without first having analytically validated the cost-
effectiveness of the effort, it is quite another thing to propose a 30-
to 60-ship procurement program with a potential total acquisition
cost of billions of dollars without first examining through rigorous
analysis whether this would represent the most cost-effective way
to spend such a sum.
! Although the Navy since November 2001 has conducted analyses of
the missions to be performed by the LCS, the results of these
analyses are of questionable credibility because they were performed
well after the fact, in the knowledge that the Navy had already
announced that the LCS is the preferred approach for performing
these missions. Analyses like these should be performed before the
selection of a preferred concept, to help officials identify that
concept, not after it has been selected, to provide officials with an
after-the-fact justification for their selection.
Potential Oversight Questions. Potential oversight questions for Congress
include the following:
! Why did the Navy, prior to announcing the start of the LCS program
in November 2001, not perform an analysis of multiple concepts
(AMC) showing through a formal, rigorous analysis that a ship like
the LCS was not just one way, but the best or most promising way,
to perform the LCS’s stated littoral warfare missions? If the analysis
that the Navy conducted prior to its November 2001 announcement,
including its Streetfighter analysis from 1998-2001, was sufficient

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CRS-56
to serve as an AMC justifying the Navy’s decision to initiate the
LCS program, why did the Navy not collect this analysis, reformat
it, and present it as an AMC? Given differences between the
original Streetfighter concept and the LCS as currently proposed
(and statements from Navy officials that the LCS is not the
Streetfighter), how applicable is the Streetfighter analysis to the
question of whether a ship like the LCS represents the best or most
promising way to perform the LCS’s stated missions?
! Why did the Navy apparently wait until months after announcing the
start of the LCS program to begin doing an AMC for the LCS
program? Given the Navy’s commitment to the LCS program, can
an AMC at this point be done in an unbiased manner?
! If the LCS program is granted approval to proceed as the Navy has
proposed, would this set a precedent for other major DOD
acquisition programs to be initiated without first conducting an
AMC showing that the proposed acquisition solution is the best or
most promising approach? If so, what might be the potential
advantages and disadvantages for DOD acquisition of such a
precedent?88 What might be the potential implications for Congress’
ability to conduct effective oversight of future DOD acquisition
programs?
! What are the relative operational advantages and disadvantages of
performing the LCS’s stated littoral warfare missions using (1) a
ship like the LCS, (2) a somewhat larger, frigate-sized ship, (3)
submarines, (4) manned helicopters and fixed wing aircraft, and (5)
88 At a May 13, 2003, professional conference, Vice Admiral Albert Konetzni, the deputy
commander and chief of staff for the Atlantic Fleet, expressed misgivings regarding a
number of DOD acquisition programs that he believes were initiated without sufficient prior
analysis. An article reporting on Konetzni’s remarks stated:
“I feel very strongly that we have lost our bearings when it comes to
transformation because most of the talk is not backed up by solid intellectual
analysis,” states the admiral’s prepared speech for event....
Unfortunately, service officials in recent times “have largely abandoned
operations analysis,” Konetzni said. “Without looking clearly at the mission and
rigorously analyzing the potential of new tactics and technologies to improve
warfighting, we just get PowerPoint solutions,” he said, adding, “I just can’t take
seeing another slide with red, yellow, and green blocks for effectiveness with
nothing mathematical behind them.”
A better path would be one in which proposals for innovation are studied
analytically and developed with a “complete plan” — including concept of
operations, training and maintenance — “before we throw these things on our
ships,” he said.
(Keith J. Costa, “Konetzni: Transformation In Need of ‘Solid Intellectual
Analysis,’” Inside the Pentagon, May 22, 2003.)

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CRS-57
unmanned vehicles deployed from manned aircraft, submarines, and
ships larger than the LCS operating further from shore? How do
these options compare in areas such as payload capacity, ability to
deploy payload systems into littoral waters in a timely fashion,
ability to maintain on-station for extended periods of time,
vulnerability and survivability, and potential acquisition and life-
cycle operation and support costs?
Rapid Acquisition Strategy
Compared to previous Navy combat ship acquisition programs, which typically
have required 12 or more years to move from program inception to the
commissioning of the first ship in the class,89 the Navy is proposing to have the first
LCS enter service in early 2007, or less than six years after the announcement of the
program in November 2001.
Navy officials say that the LCS program’s rapid acquisition strategy is consistent
with DOD acquisition reform, a chief goal of which is to significantly reduce
acquisition “cycle time” — the time needed to move a program from initial
conception to first deployment of usable hardware. They also argue that the LCS is
urgently needed to meet an urgent Navy need for improved littoral-warfare
capabilities.
Skeptics, while acknowledging that the LCS program’s rapid acquisition
strategy is consistent with DOD acquisition reform, could question whether such a
strategy is needed to meet an urgent Navy operational need. They could argue the
following:
! Recent major U.S. military combat operations — in Kosovo in 1999,
in Afghanistan in 2001-2002, and in Iraq in early 2003 — suggest
that the Navy faces no immediate crisis in littoral-warfare
capabilities.
! If improved enemy littoral anti-access/area-denial capabilities do
emerge, they are likely to do so gradually, over a period of many
years, as potential adversaries incrementally acquire and learn to use
such capabilities, permitting time for a less-hurried start to LCS
procurement; and
! The Navy’s argument about having an urgent operational need for
LCSs is undercut by its own 2003 procurement profile for the LCS
program, which would procure a total of 56 ships over a relatively
89 The Virginia (SSN-774) class submarine program, for example, was announced in early
1991, and the first ship in the class is scheduled to enter service in 2004. The DDG-51
program was begun in the late 1970s and the first ship in the class entered service in 1991.
The DD-21 program is the de facto successor to the DD-21 program, which began in 1994-
1995, and the first DD(X) is scheduled to enter service in 2011.

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CRS-58
long 15-year period, with the final ships in the program not delivered
until about 2021.
Some observers believe that the LCS program’s rapid acquisition strategy is
motivated primarily not by concerns for the Navy’s near-term littoral warfare
capabilities, but rather by one or more of the following four factors, all of which are
essentially political in nature rather than operational:
! A belief that LCS production must start before there is a change
in administration. Some observers believe the Navy adopted a
rapid acquisition strategy for the LCS program due to a belief that,
to maximize the LCS program’s chances of survival, the Navy must
start building the first LCS before there is a change in
administration. The DD-21 program, these observers believe, was
vulnerable to termination because it was initiated during the Clinton
administration but was still years away from production when the
Clinton administration was succeeded by the Bush administration.
This, they believe, made it easier for the Bush administration to view
the DD-21 program as a Clinton administration initiative in which
the Bush administration had no stake, and easier for the Bush
administration to consider terminating because defense firms at that
point had not become dependent on the construction of DD-21s as
a significant source of revenue. Navy officials, these observers
believe, have “learned the lesson” of the DD-21 program and have
concluded that starting to build the first LCS before there is a change
in administration is important, if not critical, to the LCS program’s
chances of survival.
! A belief that funding to begin LCS production must be secured
before there was a change in the Chief of Naval Operations.
Other observers (including some in the group above) believe the
Navy adopted a rapid acquisition strategy for the LCS program due
to a belief that, to maximize the LCS program’s chances of survival,
the Navy must secure funding for building the first LCS before there
was a change in the Chief of Naval Operations (CNO). Admiral
Vernon Clark became the CNO in July 2000 and it was originally
expected that Clark, like most CNOs in recent years, would serve a
four-year term in office, meaning that he would remain CNO
through the end of June 2004. At that point, the House and Senate
Armed Services Committees would likely have reported their
versions of the FY2005 defense authorization bill, and the House
and Senate Appropriations may have reported their versions of the
FY2005 defense appropriation bill. Admiral Clark, a surface warfare
officer by training, is perhaps the leading proponent of the LCS
program. Some observers might have believed Clark’s successor
might not be as strong a supporter of the LCS. LCS supporters,
these observers believe, may have “learned the lesson” of the arsenal
ship program and concluded that securing funding to build the first

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CRS-59
LCS before there is a change in CNO is important, if not critical, to
the LCS program’s chances of survival.90
! A belief that LCS procurement must not be scheduled to start
after the start of DD(X) procurement. Other observers (including
some of those in the groups above) believe that Navy officials who
support the LCS adopted a rapid acquisition strategy for the LCS
program due to a belief that, to maximize the LCS program’s
chances of survival, LCS procurement must not start after DD(X)
procurement. In the eyes of these observers, since the LCS and
DD(X) programs may compete for a limited amount of surface
combatant procurement funding, starting DD(X) procurement before
LCS procurement would create an opportunity — a window of time
following the start of DD(X) procurement but prior to the start of
LCS procurement — for DD(X) supporters to advocate terminating
the LCS program so as to better ensure that there will be sufficient
surface combatant procurement funds in the future to continue the
DD(X) program. Navy officials, these observers believe, understand
this potential dynamic and adopted a rapid acquisition strategy for
the LCS program so that the LCS procurement start date could match
the then-planned DD(X) procurement start date of FY2005, thereby
depriving DD(X) supporters of such an opportunity.
! A desire to limit congressional review of the program prior to
seeking congressional approval for starting procurement. A
fourth group of observers (including some in the above three groups)
believe that Navy officials adopted a rapid acquisition strategy for
the LCS program in part to limit the amount of time available to
Congress to assess the merits of the LCS program and thereby
effectively rush Congress into approving the start of LCS
procurement before Congress fully understands the details of the
program.
With regard to the possibility of rushing Congress into a quick decision on LCS
procurement, it can be noted that announcing the LCS program in November 2001
and subsequently proposing to start procurement in FY2005 resulted in a situation of
Congress having only three annual budget-review seasons to learn about the new LCS
program, assess its merits against other competing DOD priorities, and make a
decision on whether to approve the start of procurement. These three annual budget-
review seasons would occur in 2002, 2003, and 2004, when Congress would review
the Navy’s proposed FY2003, FY2004, and FY2005 budgets, respectively.
Congress’ opportunity to conduct a thorough review of the LCS program in the first
two of these three years, moreover, may have been hampered:
90 On Oct. 21, 2003, DOD announced that Admiral Clark’s term in office would be extended
by two years, through the end of June 2006. The Senate in July 2004 confirmed Clark for
an additional two years ending July 2006. In late Jan. 2005, however, it was reported that
Clark would step down as CNO in July 2005. Clark left office on July 22, 2005.

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! 2002 budget-review season (for FY2003 budget). The Navy’s
original FY2003 budget request, submitted to Congress in February
2002, contained no apparent funding for development of the LC91S.
In addition, the Navy in early 2002 had not yet announced that it
intended to employ a rapid acquisition strategy for the LCS program.
As a result, in the early months of 2002, there may have been little
reason within Congress to view the LCS program as a significant
FY2003 budget-review issue. In the middle of 2002, the Navy
submitted an amended request asking for $33 million in FY2003
development funding for the LCS program. Navy officials explained
that they did not decide until the middle of 2002 that they wanted to
pursue a rapid acquisition strategy for the LCS program, and
consequently did not realize until then that there was a need to
request $33 million in FY2003 funding for the program. By the
middle of 2002, however, the House and Senate Armed Services
committees had already held their spring FY2003 budget-review
hearings and marked up their respective versions of the FY2003
defense authorization bill. These two committees thus did not have
an opportunity to use the spring 2002 budget-review season to
review in detail the Navy’s accelerated acquisition plan for the LCS
program or the supporting request for $33 million in funding.
! 2003 budget-review season (for FY2004 budget). To support a
more informed review of the LCS program during the spring 2003
budget-review season, the conferees on the FY2003 defense
authorization bill included a provision (Section 218) requiring the
Navy to submit a detailed report on several aspects of the LCS
program, including its acquisition strategy. In response to this
legislation, the Navy in February 2003 submitted a report of eight
pages in length, including a title page and a first page devoted mostly
to a restatement of Section 218’s requirement for the report. The
House and Senate Armed Services committees, in their reports on
the FY2004 defense authorization bill, have expressed
dissatisfaction with the thoroughness of the report as a response to
the requirements of Section 218. (For details, see the "Legislative
Activity" section of this report.) It is thus not clear whether the
defense authorization committees were able to conduct their spring
2003 budget-review hearings on the FY2004 budget with as much
information about the LCS program as they might have preferred.
Potential oversight questions for Congress concerning the LCS program’s rapid
acquisition strategy include the following:
! Is the Navy pursuing a rapid acquisition strategy for the LCS
program to meet an urgent operational requirement for improved
91 The conference report (H.Rept. 107-772) on the FY2003 defense authorization bill (H.R.
4546) states: “The budget request for FY2003 included no funding for research and
development for a littoral combat ship (LCS),” p. 562.

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CRS-61
littoral warfare capabilities, or for essentially political purposes that
are aimed at maximizing the LCS program’s chances of survival?
What would be the operational risk of deferring the start of LCS
procurement by one or two years, so as to provide additional time for
learning about and assessing the merits of the program?
! Is the Navy employing a rapid acquisition strategy for the LCS
program in part in an attempt to rush Congress into a quick decision
on LCS procurement before Congress fully understands the details
of the program? If so, and if DOD later concludes that this strategy
worked for the LCS program, would this encourage DOD to use a
similar approach for securing congressional approval on other
defense acquisition programs in the future? If so, what might be the
potential consequences for future congressional oversight of
proposed DOD acquisition programs?
Mission Modules Funded in OPN Account
As mentioned in the Background section, the Navy plans to procure LCS
mission modules through the Other Procurement, Navy (OPN) appropriation account
rather than the Navy’s ship-procurement account. The OPN account, as its name
suggests, is a large, “grab-bag” appropriation account for procuring a wide variety of
items, many of them miscellaneous in nature.
Supporters of the Navy’s plan can argue that it is consistent with the traditional
practice of procuring ship weapons (e.g., missiles and gun shells) through the
Weapon Procurement, Navy (WPN) appropriation account or the Procurement of
Ammunition, Navy and Marine Corps (PANMC) appropriation account rather than
the ship-procurement account. LCS mission modules, they could argue, are the
payload of the LCS, just as missiles and gun shells are the payload of other types of
surface combatants, and should therefore be funded outside the ship-procurement
account.
Those skeptical of the Navy’s plan to fund LCS mission modules through the
OPN account could argue that the LCS mission modules are not comparable to
missiles and gun shells. Missiles and gun shells, they could argue, are expendable
items that are procured for use by various classes of ships while the LCS mission
modules will incorporate sensors as well as weapons, are not intended to be
expendable in the way that missiles and gun shells are, and are to be used largely, if
not exclusively, by LCSs, making them intrinsic to the LCS program. In light of this,
they could argue, it would be more consistent to fund LCS mission modules in the
ship-procurement account rather than the OPN account.
Potential oversight questions for Congress include the following:
! Are LCS mission modules analogous to missiles and gun shells that
are procured through the WPN and PANMC appropriation accounts?
! Does the Navy’s plan to fund the LCS mission modules through this
account effectively obscure a significant portion of the total LCS

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CRS-62
program acquisition cost by placing them in a part of the Navy’s
budget where they might be less visible to Congress? If so, was this
the Navy’s intention?
! Does funding a significant portion of the LCS program’s total
procurement cost through the OPN account give the LCS program
an unfair advantage in the competition for limited ship-procurement
funding by making the LCS program, as it appears in the ship-
procurement account, look less expensive? If so, was this the
Navy’s intention?
Potential Program Implications For Industrial Base
As mentioned in the Background section, current plans call for LCSs to be built
in shipyards other than GD/BIW and Northrop/Ingalls. Supporters of this plan could
argue that this will help constrain LCS construction costs because the yards in
question are smaller facilities than GD/BIW and Northrop/Ingalls that, unlike
GD/BIW and Northrop/Ingalls, do not include equipment for installing, integrating,
and testing complex surface combatant combat systems like the Aegis system. As
a result, supporters could argue, the fixed overhead costs of these yards are lower
than those of GD/BIW and Northrop/Ingalls, and these lower costs can be passed on
to the Navy. In this way, supporters could argue, building LCSs in a yard or yards
other than GD/BIW and Northrop/Ingalls could reduce LCS procurement costs by
breaking the “lock” that large, higher-cost yards like GD/BIW and Northrop/Ingalls
have maintained on major Navy shipbuilding programs. They could also argue that
building LCSs at yards other than those that have traditionally built major Navy ships
could broaden the geographic base of support for Navy shipbuilding programs.
Skeptics of the idea of building LCSs in yards other than GD/BIW and
Northrop/Ingalls could argue that GD/BIW and Northrop/Ingalls have considerable
unused building capacity, and that building LCSs at GD/BIW or Northrop/Ingalls
could reduce the cost of other Navy shipbuilding programs being performed at these
yards (including potentially the DD(X) program) by spreading GD/BIW’s or
Northrop/Ingalls’ fixed overhead costs over a larger amount of shipbuilding work.
In this sense, skeptics could argue, the savings associated with building LCSs at a
smaller yard with lower fixed overhead costs will be offset by the higher costs
associated with reduced spreading of fixed costs at GD/BIW or Northrop/Ingalls.
They could argue, in light of the effect on spreading of shipyard fixed costs, that
building LCSs at a smaller yard might even be intended by OSD or the Navy to
improve the apparent affordability of the LCS relative to other Navy shipbuilding
programs while perhaps not significantly reducing overall Navy shipbuilding costs.
Skeptics could also argue that the six large shipyards that have built all the Navy’s
major ships in recent years92 currently have much more capacity than the Navy now
needs, and that building some or all LCSs in a smaller shipyard would exacerbate this
92 These 6 yards are GD/BIW; GD/Electric Boat of Groton, CT, and Quonset Point, RI;
GD/National Steel and Shipbuilding Company (NASSCO) of San Diego, CA;
Northrop/Ingalls, Northrop/Avondale of New Orleans, LA; and Northrop/Newport News
(NGNN) of Newport News, VA.

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CRS-63
excess-capacity situation by effectively creating a seventh yard with a strong
dependence on Navy shipbuilding contracts.
Potential oversight questions for Congress include the following:
! What are the potential implications for the combined cost of all
Navy shipbuilding programs if LCSs are built in yards other than
GD/BIW or Northrop/Ingalls?
! What effect would building LCSs in yards other than the six yards
that have built the Navy’s major ships in recent years have on the
balance between Navy shipbuilding capacity and prospective Navy
programs for using that capacity? Would it in effect create
additional yards with a strong dependence on Navy shipbuilding
contracts?
! Does OSD or the Navy support building LCSs in yards other than the
six major Navy shipbuilders supported in part as a strategy for
improving the apparent affordability of the LCS relative to other
Navy shipbuilding programs while perhaps not significantly reducing
overall Navy shipbuilding costs?
! Does OSD or the Navy support building LCSs at yards other than the
six major Navy shipbuilders supported in part as a strategy for
pressuring GD or Northrop to reduce production capacity at their six
yards so as to bring capacity more into alignment with prospective
levels of Navy shipbuilding work?
Options For Congress
This section presents potential options for Congress for DD(X) and CG(X)
programs, and for the LCS program.
DD(X)/CG(X) Program
Potential options for Congress on the DD(X) and CG(X) programs, some of
which can be combined, include the following:
! approve the DD(X) program as proposed by the Navy and
supplement the industrial base, if needed, with additional DDG-51s,
additional amphibious ships, transferred LCSs, modernizations of
existing Aegis ships, or Coast Guard Deepwater cutters;
! accelerate procurement of the lead DD(X) to FY2006 and the second
DD(X) to FY2007 to better support the industrial base;
! defer procurement of the lead DD(X) to FY2008 to provide more
time for maturation of key technologies;

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CRS-64
! procure two or more DD(X)s per year to reduce DD(X) unit
procurement costs and better support the industrial base;
! build DD(X)s at a single yard, or build each DD(X) jointly at two
yards;
! terminate the DD(X) program now, or after procuring one or two
ships as technology demonstrators, and supplement the industrial
base with additional DDG-51s, additional amphibious ships,
transferred LCSs, modernizations of existing Aegis ships, or
Deepwater cutters until the start of CG(X) procurement; and
! start design work now on a new-design ship that is smaller and less
expensive than the DD(X), and procure this new design, rather than
DD(X)s or CG(X)s, starting around FY2011.
The following paragraphs contain additional notes on some of these options.
Options for a Smaller, Less Expensive, New-Design Ship.
Roughly 9,500-Ton Surface Combatant (SC(X)). One option for a
smaller, less expensive, new-design ship would be a new-technology surface
combatant about equal in size to the Navy’s current 9,500-ton cruisers and destroyers.
Such a ship, which might be called the SC(X) (meaning surface combatant, in
development) could:
! be intended as a replacement for either the CG(X) program or both
the DD(X) and CG(X) programs;
! incorporate many of the same technologies now being developed for
the DD(X) and CG(X), including, for example, radar technologies,
the AGS, integrated electric-drive propulsion, and technologies
permitting a reduced-sized crew;
! cost substantially less to procure than a DD(X) or CG(X), and
perhaps about as much to procure as a DDG-51 destroyer;
! be similar to the DD(X) and CG(X) in terms of using a reduced-size
crew to achieve annual operation and support costs that are
considerably less than those of the current DDG-51 design;
! carry a payload — a combination of sensors, weapon launchers,
weapons, and aircraft — that is smaller than that of the DD(X) or
CG(X), but comparable to that of current DDG-51s or Aegis
cruisers.
A land-attack oriented version of the SC(X) might be able to carry one AGS, as
opposed to the two on the DD(X). An air- and missile-defense version of the SC(X)
would have fewer missile tubes than CG(X), but still a fairly substantial number.

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CRS-65
Roughly 6,000-Ton Frigate (FFG(X)). A second option for a smaller, less
expensive, new-design ship would be a frigate intended as a replacement for both the
DD(X)/CG(X) effort and the LCS program. The option for a new-design frigate was
outlined in a March 2003 CBO report on surface combatants.93 CBO estimated that
such a ship, which it called the FFG(X), might displace about 6,000 tons. CBO
estimated that a 6,000-ton FFG(X) might have a unit procurement cost of about $700
million.
A 6,000-ton FFG(X) might be too small to be equipped with the AGS, in which
case it could not provide the additional naval gunfire capability that would be
provided by the DD(X). A 6,000-ton FFG(X) might, however, be capable of
performing the non-gunfire missions that would be performed by both the DD(X) and
the LCS. A 6,000-ton FFG(X) would could be viewed as a replacement in the surface
combatant force structure for the Navy’s FFG-7s and DD-963s. Since a 6,000-ton
FFG(X) would be roughly midway in size between the 4,000-ton FFG-7 design and
the 9,000-ton DD-963 design, it might be suitable for carrying more modern versions
of the mission equipment currently carried by the FFG-7s and DD-963s.
Low-Cost Gunfire Support Ship. A third option for a smaller, less
expensive, new-design ship would be a low-cost gunfire support ship — a relatively
simple ship equipped with one or two AGSs and only such other equipment that is
needed for basic ship operation. Other than the AGSs and perhaps some advanced
technologies for reducing crew size and thus total life-cycle cost, such a ship could
use existing rather than advanced technologies so as to minimize development time,
development cost, and technical risk. Some of these ships might be forward-
stationed at sites such as Guam or Diego Garcia, so as to be available for rapid
crewing and movement to potential contingencies in the Western Pacific or Indian
Ocean/Persian Gulf regions. The goal would be to procure specialized AGS-armed
ships as a niche capability for the Navy, and then forward-station some of that
capability so as to maximize the odds of being able to bring a desired number of
AGSs to an overseas theater of operation in a timely manner on those occasions when
it is needed.
Options for Supplemental Work for the Industrial Base.
Additional DDG-51s. Additional DDG-51s that would be procured under this
option could be modified to include new technologies permitting crew size to be
reduced by about 100 sailors, bringing the ship’s crew size closer to the intended
crew size of the DD(X) and thereby capturing much of the savings in annual
operation and support costs that were to be generated by the DD(X)’s reduced crew
size.94
93 U.S. Congressional Budget Office, Transforming the Navy’s Surface Combatant Force,
Mar. 2003, pp. 27-28, 63.
94 GD/BIW, the lead designer of the DDG-51, has proposed modifying the DDG-51 design
to permit such a reduction in crew size. GD/BIW made this proposal not to support the
option described here, but rather to provide the Navy with an option for how to build the
remaining DDG-51s in the Navy’s ship-procurement plan, and how to modify DDG-51s
(continued...)

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CRS-66
Opponents of procuring additional DDG-51s this option could argue that the
Navy does not have an urgent operational need for any DDG-51s beyond those
already planned for procurement, and that funding should not be spent to procure
expensive Navy ships solely for the purpose of bolstering the industrial base.
Supporters could argue that uncertainty over the planned size and composition of the
Navy implies that the Navy might indeed have an operational need for additional
DDG-51s; and that the Navy in any event would make good use of any additional
DDG-51s that are procured. They might also argue that the Navy originally planned
on procuring a total of about 57 DDG-51s, and that bolstering the defense industrial
base consequently was an important reason, if not the primary reason, for procuring
most of the DDG-51s procured in FY2004 and FY2005.
Additional Amphibious Ships. Procuring additional LHD or LHA(R)
amphibious ships might occur as part of a plan for implementing the new sea basing
concept for conducting expeditionary operations ashore. Procuring these ships during
the FY2006-FY2011 period might in some cases be facilitated by using incremental
funding or advance appropriations.
Transferred LCSs. This option would transfer production or some or all
LCSs to GD/BIW, Northrop/Ingalls, or both. This would likely increase the
construction cost of LCSs due to the higher overhead costs of GD/BIW and
Northrop/Ingalls compared to the smaller yards where LCSs are currently scheduled
to be built, but it could also reduce the cost of other ships being built at GD/BIW and
Northrop/Ingalls (e.g., DD(X)s, amphibious ships, and Deepwater cutters) by
spreading overhead costs at these yards over a larger volume of work.
Modernizations Of Existing Aegis Ships. This option could involve
assigning most or all of the Navy’s planned work to modernize existing Aegis
cruisers and destroyers to GD/BIW, Northrop/Ingalls, or both. It could also involve
expanding the scope of the work to be done under these modernization programs.
Additional Coast Guard Deepwater Cutters. This option would involve
accelerating procurement of new cutters to be procured under the Coast Guard
Deepwater acquisition program.95 It could also involve expanding the total number
of cutters to be procured under the program.
The Coast Guard Deepwater program is a 25-year program for replacing and
modernizing the Coast Guard’s aging fleet of deepwater-capable cutters, patrol boats,
and aircraft. The program currently envisages procuring, among other things,
! 8 new National Security Cutters (NSCs): 421 feet long with 3,900
ton displacement (fully loaded) (i.e., ships roughly analogous to the
Coast Guard’s current high-endurance cutters); and
94 (...continued)
already in service. A DDG-51 modified along the lines proposed by GD/BIW, however,
could be procured in larger numbers to support the option described here.
95 For more on the Deepwater program, see CRS Report RS21019, Coast Guard Deepwater
Program: Background and Issues for Congress, by Ronald O’Rourke.

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CRS-67
! 25 new Offshore Patrol Cutters: 341-feet long with 2,900 ton
displacement (fully loaded) (i.e., ships roughly analogous to today’s
medium-endurance cutters).
Some supporters of the Deepwater program are interested in the idea of
compressing the Deepwater acquisition period from 20 or 25 years to as few as 10 or
15 years. This idea, which would accelerate into earlier years the procurement of
cutters (and aircraft) now planned for later years, would increase the annual funding
requirements of the Deepwater program in the nearer term but reduce its total cost by
permitting the acquisition of new cutters (and aircraft) at more efficient annual rates.
Supporters of the Deepwater program may also be interested in expanding the
number of cutters to be procured under the program. They could argue that the
current planned procurement totals are insufficient to meet the Coast Guard’s post-
9/11 mission requirements. A September 2003 report on the Deepwater program by
the RAND Corporation states:
The Coast Guard’s ambitious effort to replace and modernize many of its ships
and air vehicles — conceived and put in motion before the September 11, 2001
terrorist attacks and officially known as the Integrated Deepwater System
program — will not provide the USCG [U.S. Coast Guard] with adequate assets
and capabilities to fulfill traditional and emerging mission demands. To satisfy
these demands, the USCG will need the capabilities of twice the number of
cutters and 50 percent more air vehicles than it has been planning to acquire over
the next two decades. It cannot gain these capabilities merely by buying the
assets in the current program over 10 or 15 years instead of over 20. Rather, it
can only gain these capabilities by acquiring significantly more cutters,
unmanned air vehicles and helicopters than are in the current acquisition
program, or by mixing into the program other platforms and technologies that
provide the same or additional capabilities.96
Table 7 compares quantities of NSCs and OPCs to be procured under the Coast
Guard’s current Deepwater plan with RAND’s estimate (based in part on work done
by the Center for Naval Analyses, or CNA) of the number of NSCs and OPCs that
would need to be procured to fully meet traditional and emerging Coast Guard
mission demands:
96 John Birkler, et al., The U.S. Coast Guard’s Deepwater Force Modernization Plan: Can
It Be Accelerated? Will It Meet Changing Security Needs?, RAND, National Security
Research Division, MR-3128.0-USCG, Sept. 2003.

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CRS-68
Table 7. Coast Guard Deepwater Cutter Procurement Quantities
RAND Estimate
CNA Estimate
Total
Type
Deepwater

for Traditional
for Emerging
plan
(RAND + CNA)
Missionsa
Missionsb
NSC
8
35
9
44
OPC
25
36
10
46
Source: The U.S. Coast Guard’s Deepwater Force Modernization Plan: Can It Be Accelerated? Will
It Meet Changing Security Needs? ,op cit, Table 3-2.
a. RAND estimate of numbers needed to fully meet traditional mission demands.
b. CNA estimate of additional numbers needed to fully meet emerging mission demands.
The 90 NSCs and OPCs shown in the final column of Table 4 have a combined
light-ship displacement equal to that of 20.7 DD(X)s.97 Similarly, about four NSCs
or about five OPCs would have a light-ship displacement comparable to that of one
DD(X). Procuring four or five NSCs and OPCs per year might thus generate about
as much shipyard construction work as procuring one DD(X) per year, and procuring
eight to 10 NSCs and OPCs per year might generate about as much shipyard
construction work as procuring two DD(X)s per year. Building NSCs and OPC,
however, would likely require a somewhat different mix of shipyard construction
skills than building DD(X)s.
Northrop Grumman’s Ship Systems (NGSS) division, which includes
Northrop/Ingalls, is the co-leader, along with Lockheed Martin, of the team selected
by the Coast Guard as the prime contractor for the Deepwater program. Accelerating
and expanding procurement of Deepwater cutters could thus provide significant
amounts of additional shipbuilding work to Northrop/Ingalls. If the total number of
cutters to be procured is expanded beyond the currently planned figure, it might also
be possible to award some cutter construction contracts to GD/BIW, if the various
parties now involved in the Deepwater program could agree to the idea.
The Coast Guard is part of the new Department of Homeland Security (DHS).
Coast Guard programs are therefore funded primarily through the DHS budget rather
than the DOD budget. Accelerating and expanding the cutter portion of the
Deepwater program as a means of compensating for a reduced DD(X) procurement
rate or the termination of the DD(X) program could therefore require close
coordination between DHS and DOD, and between the various congressional
committees that oversee the Coast Guard and Navy budgets.
97 The NSCs have a light-ship displacement of 3,290 tons; the OPCs have a light-ship
displacement of 2,350 tons. Forty-four NSCs and 46 OPCs would thus have a combined
light-ship displacement of 251,000 tons, which is equivalent to the light-ship displacement
of 20.7 DD(X)s.

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CRS-69
LCS Program
Potential options for Congress on the LCS program, some of which can be
combined, include the following:
! shift procurement funding for LCS mission modules from the Other
Procurement, Navy (OPN) account to the Navy’s ship-procurement
account (the Shipbuilding and Conversion, Navy [SCN] account) to
provide more visibility to LCS mission module procurement costs
and to the combined procurement cost of LCSs and LCS mission
modules;
! procure a few LCSs and then evaluate them in exercises before
deciding whether to put the LCS into larger-scale series production;
! procure LCSs at a rate of up to 10 per year to get LCSs into the fleet
sooner and achieve better production economies of scale;
! procure LCSs at a rate of less than 5 per year so as to reduce annual
LCS funding requirements;
! terminate the LCS program (and also the DD(X) program) and
instead procure a new-design frigate as a common replacement; and
! terminate the LCS program and invest more in other littoral-warfare
improvements.
The following paragraphs contain additional notes on some of these options.
Procure a Few and Then Evaluate. Under this option, a few LCSs would
be procured and evaluated in tests and exercises while judgment is reserved on the
question of whether to approve the LCS program as a series-production effort that
could lead to the procurement of 63 to 82 ships. This option was proposed in a May
2003 CSBA report on anti-access/area-denial challenges and a February 2004 CSBA
report on the LCS program. The February 2004 report states:
Despite its promise, the LCS represents the first small US battle force capable
combatant to be designed and built by the Navy and the US shipbuilding industry
in over 60 years. Moreover, the LCS battle network system will introduce an
entirely new concept of battle modularity that has no US or foreign naval
precedent. There are therefore a number of unresolved issues about this ship and
its associated organizational and support structure. Many of these issues appear
to be irreducible through paper analysis. Therefore, a second proposition is that
the LCS program must undergo thorough operational experimentation in
addition to any continued analytical study.
Current Navy LCS production plans appear to be overly ambitious. Accordingly,
the Navy should consider a modification to its current plans to allow more
thorough testing of the ship as a battle network component system.

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CRS-70
— Given the many degrees of design freedom in meeting the Flight 0 LCS
requirements (six initial designs and three remaining designs, including a steel
semi-planing monohull, a trimaran, and a surface effects ship), the Navy would
be advised to build at least two different operational prototypes. However,
choosing two different prototypes will not completely resolve many of the
operational issues. It seems clear that only by testing squadron prototypes will
the Navy be able to fully resolve some of the outstanding issues surrounding the
LCS and its support structure.
— The currently approved shipbuilding profile for the LCS could be modified
to build two operational squadrons and to reduce the risk associated with the
current, significantly compressed, LCS program. Assuming the Navy
down-selects to two different designs, it should award one competitor a Research
and Development (R&D) contract for a ship in FY05 and a follow-on version in
FY06 paid for by ship construction money. Similarly, it should then award a
second competitor a R&D ship contract in FY06 and a follow-on version in
FY07. In this way, the Navy could have two different two-ship squadrons by
FY08, which would seem to be the minimum size needed to conduct comparative
squadron operational tests. The Navy could also opt for slightly larger squadrons
by dividing the planned ships in FY08 and FY09 among the builders. Once the
squadrons were organized, however, the Navy should then delay the final
production decision for at least one year to conduct meaningful operational
testing.
A counter argument is made by those who believe the fleet is too small for its
current global commitments, particularly those associated with the global war on
terror. They argue that the LCS is needed now, in numbers. However, the Chief
of Naval Operations undercut this position when he recently elected to retire
some older ships early, and to accept a smaller fleet in the near term in order to
free up the resources required to build up the fleet over the long term. Moreover,
current strategic circumstances indicate the Navy appears to have some time
before having to confront a serious naval competitor in the littorals. As a result,
delaying the final LCS production run for a short period while squadron
prototypes are tested would appear to appreciably lower the program’s
developmental risk without appreciably raising the fleet’s overall operational
risk.98
Procure New-Design Frigate (FFG(X)) Instead. This is the same frigate
discussed earlier as a new-design alternative to the DD(X) and CG(X).
Invest in Other Littoral-Warfare Programs. Other littoral-warfare
programs in which additional funds could be invested as an alternative to the LCS
include the following:
! littoral-oriented aircraft, such as certain kinds of helicopters;
98 Robert O. Work, Naval Transformation and the Littoral Combat Ship, Center for Strategic
and Budgetary Assessments, 2004, p. vi., emphasis as in the original. The May 2003 CSBA
report on anti-access/area-denial challenges is: Andrew Krepinevich, Barry Watts, and
Robert Work, Meeting the Anti-Access and Area-Denial Challenge, Center for Strategic and
Budgetary Assessments, 2003.

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CRS-71
! littoral-oriented sensors and weapons for airplanes, helicopters, and
submarines;
! a non-combat littoral support craft (LSC) for deploying helicopters
and unmanned vehicles into littoral waters; and
! unmanned vehicles that can be launched from aircraft, submarines,
or other larger surface ships (either existing types or LSCs) operating
further from shore than would the LCS.
The idea of a non-combat littoral support craft (LSC) is presented as an option
in the May 2003 CSBA report, which states:
Helicopters and unmanned surface and air systems, employed by large
multi-mission combatants or sea base support ships operating within the
protected confines of the sea base, and augmented by submarines and unmanned
underwater vehicles, would appear to be a viable, lower risk option than those
outlined in DON plans. Such an option might forego a littoral combat ship, and
instead pursue a vessel along the lines of the littoral support craft (LSC) studied
by the Office of Naval Research since 1997, or HSVs [high-speed vessels] like
the HSV-X1, a high-speed wave-piercing catamaran leased by the Navy in 2001.
Like the LCS, the LSC and HSV are both designed to operate at high speeds, but
they both trade stealth for larger deck areas and more storage volume. Both
would be able to employ helicopter detachments and unmanned vehicle
detachments, or both, in a maritime AD [area-denial] environment — and in
larger numbers than could be carried by an LCS. These detachments would
operate from roll-on, roll-off container vans. In lower threat environments, or
once maritime AD threats had been rolled back, they could then perform
important logistics functions in support of the sea base, serving as high speed
ship-to-shore delivery craft....99
A decision to purse this option could reflect a view that one or more of these
alternative approaches represent a better or more promising approach than the LCS
for performing littoral-warfare missions.
FY2006 Legislative Activity
DD(X)/CG(X) Program
H.R 1815/S. 1042 (FY2006 Defense Authorization Bill). The FY2006
defense authorization bill (H.R. 1815) as reported by the House Armed Services
Committee (H.Rept. 109-89) includes a provision (Section 123) that limits the
procurement cost of the “future major surface combatant, destroyer type,” to $1.7
billion per ship. The provision also directs the Navy to develop an acquisition plan
for a future major surface combatant, destroyer type, that uses technologies from the
DD(X) and CG(X) programs, is at least as capable as the Navy’s current Arleigh
99 Meeting the Anti-Access and Area-Denial Challenge, op. cit., p. 59, emphasis as in the
original.

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CRS-72
Burke (DDG-51) class Aegis destroyer, and would be ready for lead-ship
procurement in FY2011. Since the current DD(X) design likely could not be built for
$1.7 billion, at least not without removing most or all of the ship’s planned combat-
related equipment, Section 123 would effectively restructure the DD(X) program into
an effort aimed at developing a new surface combatant design that could meet the
$1.7-billion cost limit. Such a ship would likely be smaller than the DD(X) and be
less capable in some respects than the DD(X). With a capability at least equal to that
of the DDG-51 design, however, it would still have a substantial capability. The bill
as reported recommends no FY2006 advance procurement funding for the DD(X)
program and reduces the program’s FY2006 research and development request to
$700 million. The bill would also authorize $2.5 billion for procurement of two
additional DDG-51s, to help support the surface combatant industrial base.
Section 123 states:
SEC. 123. FUTURE MAJOR SURFACE COMBATANT, DESTROYER TYPE.
(a) Limitation of Costs- Except as provided in subsection (b), the total amount
obligated or expended for procurement of each ship for the future major surface
combatant, destroyer type, may not exceed $1,700,000,000 (such amount being
the estimated total procurement end cost of that ship in the fiscal year 2006
budget).
(b) Adjustment of Limitation Amount- The Secretary of the Navy may adjust the
amount set forth in subsection (a) for the ship type referred to in that subsection
by the following:
(1) The amounts of increases or decreases in costs attributable to economic
inflation after September 30, 2005.
(2) The amounts of increases or decreases in costs attributable to
compliance with changes in Federal, State, or local laws enacted after September
30, 2005.
(c) Written Notice of Change in Amount- The Secretary of the Navy shall
annually submit to Congress, at the same time as the budget is submitted under
section 1105(a) of title 31, United States Code, written notice of any change in
the amount set forth in subsection (a) during the preceding fiscal year that the
Secretary has determined to be associated with a cost referred to in subsection
(b).
(d) Authorization of Appropriations- Of the amount provided in section 201(2)
for Research and Development, Navy, for fiscal year 2006, $700,000,000 is
available for technology development and demonstration for the ship referred to
in subsection (a).
(e) Acquisition Plan- In developing the acquisition plan for the future major
surface combatant, destroyer type, the Secretary shall ensure that the resulting
acquisition program —
(1) uses technologies from the DD(X) and CG(X) programs, as well as any
other technology the Secretary considers appropriate;
(2) has an overall capability not less than that of the Flight IIA version of
the Arleigh Burke (DDG-51) class destroyer; and

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(3) would be ready for lead-ship procurement not later than fiscal year
2011.
H.Rept. 109-89 states:
The committee is deeply concerned with the skyrocketing costs of weapon
systems that cannot be explained by inflation or by reduced economies of scale.
In many instances, these increases result from the addition of costly, and often
unneeded, requirements to the Department’s most expensive platforms. To affect
the changes proposed in this bill, both the Department and Congress must accept
that current DOD acquisition culture and processes are no longer affordable....
The committee is particularly concerned by the Navy’s rising shipbuilding
costs and by recent statements from the Navy’s officials that they are uncertain
about what to do about the problem. With an annual shipbuilding budget of
approximately $10.0 billion, the committee is concerned with the amount of
capability and military presence that can be maintained with new weapons
systems. For example, the proposed Future Major Surface Combatant (DD(X)),
has price estimates of over $3.0 billion per ship. The committee is also
concerned with the effect the Navy’s procurement strategy will have on the
shipbuilding industrial base. These rising costs threaten to undermine the Navy’s
shipbuilding program, putting future naval capabilities in jeopardy.
This year, the committee asks the fundamental question of how the Navy’s
appetite for “mega-ships” will affect the industrial base and sustain production
rates necessary to deploy an operational fleet of sufficient size to meet global
commitments. The committee believes that early designs for many platforms
successfully addressed the missions of the global war on terrorism by being light,
agile and cost-effective. However, the committee notes with dismay that costly
features redundantly supported by other platforms and systems are now
contributing to spiraling program costs. (Pages 11-12)
The FY2006 defense authorization bill (S. 1042) as reported by the Senate
Armed Services Committee (S.Rept. 109-69 of May 17, 2005) contains a provision
(Section 121) that prohibits a winner-take-all acquisition strategy for the DD(X). The
report recommends increasing the DD(X) program’s FY2006 advance procurement
funding request by $50 million, with the additional $50 million to be used for the
second DD(X), and recommends increasing the program’s FY2006 research and
development funding request by $10 million.
H.R. 2863 (FY2006 Defense Appropriations Bill). The House
Appropriations Committee, in its report (H.Rept. 109-119 of June 10, 2005) on
H.R. 2863, recommends deleting the $716 million FY2006 advance procurement
funding request for the DD(X) program and rescinding the program’s $304 million
in FY2005 advance procurement funding, “consistent with the recommendations of
the House in H.R. 1815” (page 146); reducing DD(X) FY2006 research and
development to $670 million; and adding $50 million in FY2006 research and
development funding for the CG(X) program (page 251). The report states:
The DD(X) program has encountered serious problems over the past year, on two
separate fronts:

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Outyear funding and acquisition strategy.—When internal budget decisions
in late 2004 reduced the planned buy of this ship class to one per year, unit costs
rose significantly, causing the Navy to propose an early downselect and “winner
take all” competition. This change to the program of record was denied by the
Congress. With such low quantities, ships included in the current FYDP would
cost approximately $2.75 billion each. This is double the cost of DDG–51
destroyers procured in fiscal year 2005.
Technological difficulties.—The development program has run into
difficulties over the past year. The integrated power system, the volume search
radar, the peripheral vertical launch system, and the integrated deckhouse have
all experienced problems. Although not unusual for a program of this size and
complexity, these difficulties highlight the fact that much development work
remains to be done. In addition, several changes have added weight to the ship
design, which raises technical risk and reduces flexibility for potential changes
in the future.
Considering the uncertainty in this program and the lack of authorization,
the Committee believes the program is likely to be restructured, and a new cost
and acquisition strategy developed, before proceeding to advance procurement.
(Pages 146-147; italics as in the original)
The report also states:
The Committee recommends $670,000,000 for further development of the
next generation DD(X) destroyer. As discussed under ‘‘Shipbuilding and
conversion, Navy’’, this program has experienced numerous difficulties over the
past year, and the total requirement for these vessels is still uncertain. Despite
these issues, however, the Committee believes there is value in keeping the
DD(X) development effort moving forward. In addition, many of these
technologies are expected to have utility for the next generation CG(X) cruiser,
currently funded for lead ship procurement in fiscal year 2011 and discussed
further below. Considered together, the bill includes $750,000,000 for
development of the DD(X) and CG(X).
CG(X)
The Committee recommendation accelerates concept design, concept
studies, and other development work for the CG(X) next generation cruiser.
Given the age of the current CG–47 Ticonderoga class and the potential use of
CG(X) to fulfill ballistic missile defense and other missions, the Committee
believes it is imperative to accelerate this work. The Committee bill raises this
funding from $30,000,000 to $80,000,000. (Page 251)
H.R. 1268/P.L. 109-13 (FY2005 Emergency Supplemental). The
conference report (H.Rept. 109-72) on the Emergency Supplemental Appropriations
Act for 2005 (H.R. 1268/P.L. 109-13) contains a provision (Sec. 1019) that states:
PROHIBITION ON COMPETITION OF THE NEXT GENERATION
DESTROYER (DD(X))
SEC. 1019. (a) No funds appropriated or otherwise made available by this Act,
or by prior Acts, may be obligated or expended to prepare for, conduct, or

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implement a strategy for the acquisition of the next generation destroyer (DD(X))
program through a winner-take-all strategy.
(b) WINNER-TAKE-ALL STRATEGY DEFINED- In this section, the term
`winner-take-all strategy’, with respect to the acquisition of destroyers under the
next generation destroyer program, means the acquisition (including design and
construction) of such destroyers through a single shipyard.
This provision would effectively prohibit the Navy from using a winner-take-all
competition for the right to build all DD(X)s. The provision does not, however,
appear to require DOD to maintain the current acquisition strategy of dividing the
first six DD(X)s evenly between two yards. As a consequence, the provision does not
appear to prohibit DOD from shifting from the current DD(X) acquisition strategy
to a different acquisition strategy, so long as the new strategy somehow involves a
second shipyard in the design and construction of DD(X)s. Under this provision,
DOD might, for example, be able to shift to an acquisition strategy under which one
yard builds all but one DD(X)s while the other yard builds a single DD(X).
The Senate report on the bill (S.Rept. 109-52) contains also states:
DD(X) Integrated Power System. — Land-based testing of the Integrated Power
System for DD(X), the next-generation Navy destroyer, is scheduled for this
summer. During this testing, the Navy plans to use a fall back motor option
instead of the Permanent Magnet Motor [PMM] being developed as part of the
DD(X) program. The Committee is aware the PMM is significantly lighter and
smaller than the fall back option and is much more efficient than any other motor
option. The Committee, therefore, directs the Navy to continue PMM
development efforts and evaluate conducting land-based testing of the PMM
prior to Production Readiness Review [PRR]. (Page 25; italics and bracketed
material as in the original)
H.Con.Res. 95. The conference report (H.Rept. 109-62) contains a provision
(Section 507) stating:
SEC. 507. SENSE OF THE SENATE REGARDING THE ACQUISITION OF
THE NEXT GENERATION DESTROYER (DDX).
(a) SENSE OF THE SENATE- It is the sense of the Senate that —
(1) it is ill-advised for the Department of Defense to pursue a winner-take-all
strategy for the acquisition of destroyers under the next generation destroyer
(DDX) program; and
(2) the amounts identified in this resolution assume that the Department of
Defense will not acquire any destroyer under the next generation destroyer
program through a winner-take-all strategy.
(b) WINNER-TAKE-ALL STRATEGY DEFINED- In this section, the term
`winner-take-all strategy’, with respect to the acquisition of destroyers under the
next generation destroyer program, means the acquisition (including design and
construction) of such destroyers through a single shipyard.

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This provision was added to the Senate version of the bill (S.Con.Res 18) on
March 17, 2005, an amendment (S.Amdt 182) that became Section 510 of the Senate
version of the bill.
LCS Program
H.R. 1815/S. 1042 (FY2006 Defense Authorization Bill). H.R. 1815 as
reported by the House Armed Services Committee (H.Rept. 109-89) contains a
provision (Section 124) that limits the procurement cost of each LCS, including its
mission modules, to $400 million. The report also recommends increasing the
research and development funding request for the LCS program by $12 million to
fund work on high-strength composite material. (Page 165)
In its report (S.Rept. 109-69) on S. 1042, the Senate Armed Services
Committee stated:
The budget request included $36.8 million in Other Procurement, Navy
(OPN), for mission modules for the littoral combat ship (LCS). These mission
modules will enable the LCS to operate in the littorals by providing capability in
the mine warfare, small boat neutralization, and anti-submarine warfare missions.
The budget request did not include funding for a spare engine for the first ship
of the class, which will use the MT30 marine gas turbine engine. If there were
a main engine casualty after delivery of the ship, much valuable time would be
lost in the testing and validation of its concept of operations without a spare
engine. The committee recommends an increase of $8.6 million in OPN for a
spare MT30 marine gas turbine engine for the LCS. (Pages 72-73)
S.Rept. 109-69 also stated:
The Navy recently completed construction of the experimental littoral
[support] craft [or LSC-X, also known as the X-craft] and has been authorized
to procure one flight 0 littoral combat ship (LCS). Funding for the second flight
0 vessel from the second contractor team is included in the fiscal year 2006
budget request. These ships were intended to provide experience upon which the
Navy would base decisions on how to proceed with acquisition of flight 1 LCS
vessels, now scheduled to begin in fiscal year 2008.
The original plan put forth by the Navy implied that the contracts for flight
1 vessels would be awarded competitively. The Navy now appears to be
changing the acquisition approach to narrowing the selection of flight 1 proposals
to a selection from between the two successful bidders for the flight 0 program.
The committee understands that this could be the most convenient approach from
an administrative standpoint, but is concerned that this would discourage other
potential contractor teams from continuing work to mature concepts and
technologies for potential implementation on later LCS vessels.
Therefore, the committee directs the Navy to report to the congressional
defense committees at the same time as the submission of the fiscal year 2007
budget on its acquisition strategy for the flight 1 portion of the LCS program.
That report should provide details on the testing and experimentation that the
Navy intends to conduct prior to awarding the flight 1 contracts; the acquisition
strategy for acquiring flight 1 vessels, including any reasons for having changed

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that strategy if it has changed; and the Navy’s plans for transitioning technologies
from other Navy research and development activities, with particular emphasis
on technologies being developed in the DD(X) program that may be appropriate
for applying to the LCS program. (Page 110)
FY2006 Defense Appropriations Bill (H.R. 2863). The House
Appropriations Committee, in its report (H.Rept. 109-119 of June 10, 2005),
recommends approving the program’s research and development funding request
(page 251), which includes funds for building the second LCS, and adding $440
million in the SCN account for the procurement of two additional LCSs, for a total
FY2006 procurement of three LCSs (page 146). The report states:
The Committee remains very supportive of the LCS program, and believes that
further procurement in fiscal year 2006 is prudent and reasonable given the status
of the program at this point in time. The Committee directs that, prior to
obligation of SCN funds for the third and fourth ‘‘flight zero’’ LCS ships, the
Navy certify in writing to the congressional defense committees that the ship
designs from each prime contractor are sufficiently stable to allow further
construction. The Committee also believes that, while the LCS ship itself is of
stable and mature design, the mission modules essential to LCS warfighting
capabilities are less mature. A number of these technologies have not been
demonstrated in an operational environment, and cost estimates for the mission
modules appear immature as well. To address this issue, the Committee directs
the Navy to submit, not later than February 1, 2006, a report on the development
and procurement plan for LCS mission modules, including a description of the
development status of each subsystem. The report shall include a schedule
showing how production of those modules align with planned LCS ship delivery
schedules and an allocation scheme showing how modules would be allocated
among LCS-class ships. (Page 146; see also page 251)
Prior-Year Legislative Activity
DD(X)/CG(X) Program
FY2005.
Authorization. The House Armed Services Committee, in its report
(H.Rept. 108-491) on the FY2005 defense authorization bill (H.R. 4200),
recommended disapproval of the $221.1 million in the DD(X) program’s FY2005
funding request for beginning detailed design, non-recurring engineering work, and
construction of the lead DD(X). The committee recommended deferring the
initiation of construction of the lead DD(X) to FY2006. The report stated:
The committee has strongly supported the DD(X) program since its
inception....
In its report, ‘’Defense Acquisitions — Assessments of Major Weapons
Programs,’‘ dated March 2004, the General Accounting Office (GAO) assessed
the DD(X) as entering system development with none of its 12 critical
technologies fully mature (and thereby subject to a higher risk of completing
development at the planned cost and schedule). The program manager is pursuing

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risk mitigation by constructing and testing engineering development models for
the critical technologies; however, the acquisition strategy calls for engineering
development model construction and testing to be done concurrently with system
design. The decision to reduce the weight of the ship prompted redesign of the
advanced gun system and hull form engineering development models. Because
of schedule slippage, only two engineering development models (the hull form
and the integrated power system) would be mature by the award of the lead ship
construction contract, currently planned for September 2005. Current testing
schedules call for the integrated power system, dual band radar suite, total ship
computing environment, and peripheral vertical launching system to continue
development beyond the lead ship production decision. In the GAO’s view,
should any of these innovative technologies encounter challenges that cannot be
accommodated within the current design margins, redesign of other technologies
and of the integrated ship system may be needed. Redesign would likely result
in additional costs and schedule delays and affect the planned installation
schedule. In addition, because the DD(X) acquisition strategy focuses on
developing and maturing technologies that could be leveraged across multiple
ship classes, delay in the maturation of critical technologies would increase the
risk for other development programs.
The committee notes that the engineering development models of the
integrated power system and the advanced gun system are scheduled to complete
land-based testing by the end of fiscal year 2005 and the multi-function radar will
have completed two-thirds of its land-based and at-sea testing by that date. The
committee believes that it would be prudent to delay the award of the contract for
construction of the first ship of the class from fiscal year 2005 to fiscal year 2006
in order to accommodate any results from the testing of these critical systems in
the design of the ship prior to beginning construction. The committee
recommends that the DD(X) program be restructured to reduce concurrency and
develop technology “off-ramps” for technologies that do not mature.
Accordingly, the committee recommends a decrease of $221.1 million in
PE 64300N and deferring the initiation of construction of the lead ship from
fiscal year 2005 to fiscal year 2006. (Pages 174-175).
The committee recommended a $10-million increase in funding for developing
the DD(X)’s AGS (page 166) and a $2-million increase for developing and
demonstrating improvements in manufacturing methods and process technology for
high power switches and conversion equipment to be used in the DD(X) program
(page 191).
The report also stated:
The committee has observed the increasing use of funds designated for
research and development (R&D) purposes to acquire operational platforms. The
fiscal 2005 budget proposal would take the practice to unprecedented levels, with
three DD(X) and two LCS ships, three E — 2C aircraft, and eleven VH-XX
helicopters proposed for acquisition with R&D funds.
The use of R&D funds for prototypes and truly developmental items is both
proper and prudent. This practice also makes sense when, following the
completion of testing, a test asset still has useful capability to bring to the
operational fleet. However, it is difficult to believe that nearly half of the VH-XX
fleet, for example, qualifies as prototypes or dedicated test assets. The fact that

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the platforms may occasionally be used for some testing purposes does not, in the
committee’s view, qualify them as research craft. Indeed, the committee would
be surprised were the department actually proposing to regularly carry the
President on prototype aircraft.
While the committee recognizes the increased flexibility of R&D funds in
acquiring platforms, there is concern that placing acquisition programs in the
R&D budget, particularly at their early, least stable stage, threatens other
programs, particularly in science and technology. The R&D budget is a very
small pool from which to fund acquisitions of large items like ships, and as
procurements are must-pay bills, typical procurement cost-growth would put the
rest of the R&D budget at risk.
The committee’s action with regard to particular programs funded in R&D
should therefore be seen not only as a reflection of the merits of those items, but
also as an expression of concern over the rapidly expanding portion of the R&D
budget being used for purposes other than R&D. (Pages 248-249)
The Senate Armed Services Committee, in its report (S.Rept. 108-260) on the
FY2005 defense authorization bill (S. 2400), approved the start of construction of the
lead DD(X) in FY2005 and increased the program’s FY2005 funding request by
$99.4 million to begin design work on the second DD(X) (page 173). The committee
included a provision in the bill (Section 211) authorizing the use of FY2005 funds
for the second DD(X) and stating that $99.4 million shall be available in FY2005 for
the detail design of the second DD(X). In discussing Section 211, the committee’s
report stated:
The Committee on Armed Services of the Senate, in its report (S.Rept. 108-
46) to accompany the National Defense Authorization Act for Fiscal Year 2004,
directed the Secretary of the Navy to provide a report on the viability of the
surface combatant industrial base, with specific focus on the transition from the
DDG — 51 Arleigh Burke-class destroyers to the DD(X). This report was
delivered to the congressional defense committees in March 2004. The report
included a workload analysis that showed that if the DD(X) schedule slips, the
shipyard that is scheduled to build the follow ship, the second destroyer of the
DD(X)-class, could experience significant workload issues which, depending on
the length of the schedule slip, could affect the financial viability of the this
shipyard. This is exacerbated by the fact that this shipyard’s workload and
resultant viability is solely dependent on the design and construction of surface
combatants.
The committee remains concerned about the viability of the competitive
industrial base for the design and construction of surface combatants for the
Navy. According to the Future Years Defense Program (FYDP), there will be no
surface combatants in the budget request for fiscal year 2006. The budget
request for fiscal year 2005 includes $3.5 billion for the construction of the last
three DDG — 51 Arleigh Burke-class destroyers, bringing the inventory to 62 of
these multi-mission ships. The next class of destroyers will use the DD(X)
design. The first of these ships is being funded with incremental RDTE,N
funding starting with $221.1 million of construction money in fiscal year 2005.
If the current schedule is maintained, the contract for the second ship of the
DD(X)-class will not be awarded for about eighteen months, and is expected in
fiscal year 2007 using Shipbuilding and Conversion, Navy (SCN), funding. This

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gap could jeopardize the design and production capability of the shipyard
scheduled for the second ship.
The Navy had originally planned to compete the construction phase of the
first DD(X), but recently made a decision to award that contract on a sole-source
basis to the shipyard with lead design responsibility. The committee expects the
Navy to take all actions necessary to ensure the viability of the second shipyard
in order to maintain a healthy and competitive industrial base for surface
combatants. The committee believes that the Navy is responsible for ensuring
that both shipyards share equitably in the DD(X) design effort from this point
forward to facilitate a smooth transition from design to fabrication to
construction of DD(X).
The committee believes that if the flexibility provided by using RDTE,N
funds for the lead ship at the lead shipyard is justified, that same flexibility is
necessary for the follow ship at the second shipyard as well.
The budget request included $1.4 billion in PE 64300N for DD(X) total
ship engineering. The committee recommends an increase of $99.4 million in PE
64300N to accelerate design efforts at the follow shipyard for the second
DD(X)-class destroyer, for the purpose of sustaining a competitive industrial
base for surface combatant ships. (Pages 130-131)
The conference report (H.Rept. 108-767) on H.R. 4200 (P.L. 108-375) states:
The conferees have strongly supported both the DD(X) program and the
Navy’s acquisition strategy, which uses the construction and test of engineering
development models (EDMs) to mitigate technical risk.
The conferees are aware of the assessment by the Government
Accountability Office (GAO) of the maturity of 12 technologies critical to
DD(X), as the program entered the system development and demonstration
(SDD) phase, and the GAO’s further assessment that DD(X) technology maturity
and design stability will not be demonstrated before the Milestone B decision
scheduled for March 2005. Many of the tests to demonstrate technical maturity
will occur around the time of the critical design review (CDR) late in fiscal year
2005. Program officials acknowledge the risks associated with the advanced
technologies, but the conferees believe that taking such risks is warranted to
ensure that the DD(X) technologies are not obsolete, and that the Navy has taken
adequate steps to mitigate the risks before ship construction begins. These steps
include the identification of fall back options if new technologies are not
available.
In particular, the conferees note the concerns expressed in the House report
(H.Rept. 108-491) regarding the schedule for land-based testing of the integrated
power system and advanced gun system EDMs. These two system EDMs are not
scheduled to complete land-based testing until late in fiscal year 2005, coincident
with the DD(X) CDR.
The conferees agree that the integrated power system and advanced gun
system are key elements which drive much of the DD(X) design, and that
land-based testing of these systems should be essentially complete prior to the
DD(X) CDR. The conferees direct the Secretary of the Navy, in coordination
with the Under Secretary of Defense for Acquisition, Technology and Logistics,

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to report to the congressional defense committees following completion of the
DD(X) CDR. That report should include the results of the CDR and an
assessment of the readiness of the program to proceed beyond the SDD phase of
the program.
The conferees share the concerns raised in the Senate Report (S.Rept. 108-
260) regarding maintaining the viability of a competitive industrial base for the
design and construction of Navy surface combatants. As noted in that report, the
Navy had originally planned to compete the construction phase of the DD(X), but
made a decision to award that contract on a sole-source basis to the shipyard with
lead design responsibility. The conferees expect the Navy to take all actions
necessary to ensure the viability of the second shipyard in order to maintain a
healthy and competitive industrial base for surface combatants. (Pages 590-591)
Appropriation. The House Appropriations Committee, in its report
(H.Rept. 108-284) on the FY2005 defense appropriations bill (H.R. 4613),
recommended deferring the initiation of construction of the lead DD(X) from
FY2005 to a future year and reducing the program’s FY2005 funding request by a net
$248.8-million. The report stated:
The Committee believes the DD(X) development schedule does not provide
sufficient time for the proper maturation and testing of transformational
technologies prior to initiating construction of the first ship, presenting a
potential ‘’rush to failure.’‘ According to the Navy’s schedule, detailed design
drawings necessary for the construction of the ship will not be completed prior
to the award of this initial construction contract. It is the Committee’s view that
it is not prudent to proceed with the construction of a ship without first
completing detailed design drawings and concluding basic testing of the
technologies that will be integrated into the ship. According to the General
Accounting Office, none of the twelve critical technologies for DD(X) will reach
maturity prior to entering product development. Further, based on the Navy’s
schedule, land based testing of two critical technologies will not be complete
prior to the conclusion of the Critical Design Review (CDR).
Accordingly, the Committee recommends eliminating the $221,000,000
requested for the first increment for construction of the first DD(X) ship. This
recommendation is based on the Committee’s judgment that the highly
concurrent, extremely aggressive DD(X) development program does not support
a fully informed acquisition decision in fiscal year 2005, making a request for
construction funding premature. The Committee believes that additional time for
development prior to the construction contract award will provide time for the
program to stabilize and for the maturation and testing of critical technologies.
The Committee also recommends a reduction of $43,800,000 from the
$191,400,000 requested for Critical Design Review (CDR), scheduled for the last
quarter of fiscal year 2005. This recommendation reflects the Committee’s
conclusion that the CDR schedule must slip in order to complete land-based
testing of critical components of the leading technologies prior to completion of
CDR. The Committee directs the Navy to extend the time frame for the CDR to
ensure that land-based testing has been completed on all twelve DD(X) critical
technologies prior to the completion of CDR.
Finally, the Committee recommends an increase of $13,000,000 only for the
completion of the DD(X) alternative engine construction and its delivery to the

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Navy for testing, an increase of $1,000,000 for Floating Area Networks, and an
increase of $2,000,000 for smart ships that anticipate and manage. (Pages 287-
288. See also page 278.)
The report also stated:
The Committee recommends an increase of $125,000,000 to initiate
advance procurement of materiel necessary for the construction of an additional
DDG — 51 Guided Missile Destroyer in the 2006 or 2007 budget.
This recommendation is based on the Committee’s view that the additional
system development and testing required for the DD(X), the next generation
destroyer, will lead to a delay in the Initial Operating Capability of the DD(X).
With this delay, the Committee believes operational requirements of the Navy
necessitate the construction of at least one more DDG — 51.
The Committee expects the Navy to fully fund the construction of this DDG —
51 in a future budget request. (Pages 164-165)
The Senate Appropriations Committee, in its report (S.Rept. 108-284) on the
FY2005 defense appropriations bill (S. 2559), supported the program’s research and
development funding request but stated that it believes that construction of the lead
ship should be funded in the Navy’s shipbuilding account. The committee approved
the total amount requested for the program, but transferred the $221 million intended
for initiating lead ship detailed design and construction to the Navy’s shipbuilding
account. The committee also recommended an additional $99.4 million in the
shipbuilding account as advance procurement funding for the second DD(X), which
the report stated is to be built at a second-source shipyard. The report stated:
The Committee recommends supporting the President’s budget request for
the DD(X) Destroyer program but holds that construction of the ship should be
funded within the shipbuilding and conversion account in a manner consistent
with prior shipbuilding programs. The Committee is encouraged by the Navy’s
willingness to propose nontraditional means of overcoming the enormous
financial burden that ship cost overruns and prior year bills place upon the
shipbuilding budget, but finds that such costs would not be eliminated but rather
obscured by funding ship construction in the research and development account.
Therefore, the Committee recommends transferring $221,116,000 of research and
development funding to the Shipbuilding and Conversion, Navy account and
directs the Navy to fund future ship construction programs within the
shipbuilding and conversion account. In addition, the Committee recommends
providing $99,400,000 in advance procurement funding for the second DD(X)
ship to be constructed at a second source shipyard. (Page 83. See also page
157.)
The conference report (H.Rept. 108-622) on H.R. 4613 (P.L. 108-287)
provides $350.5 million in advance procurement (AP) funding in the SCN account
for the DD(X) program — $221.1 million for the lead DD(X) (transferred from the
Navy’s research and development account), and $84.4 million for the second DD(X).
The designation of this funding as AP funding implies that the nominal year of
procurement for both ships is not FY2005, but rather a future fiscal year. The report
stated:

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The conferees agree to provide a total of $305,516,000 for advance
procurement for the DD(X) class of ships instead of $320,516,000 as proposed
by the Senate and no appropriation as proposed by the House. The conferees
direct the Navy to include future funding requests for the DD(X) in the
Shipbuilding and Conversion, Navy appropriation.
Within the funds provided, $221,116,000 is only for design and advance
procurement requirements associated with the first ship of the DD(X) class and
$84,400,000 is only for design and advance procurement requirements associated
with construction of the second ship at an alternative second source shipyard.
The conferees direct that no funds shall be available for the procurement of long
lead time material for items that are dependent upon delivery of a DD(X) key
technology unless that technology has undergone testing, thereby reducing risk
to overall program costs.
The conferees direct that full funding of the remaining financial
requirement for these ships, not including traditional advance procurement
requirements, shall be included in a future budget request. (Page 188; see also
pages 185 and 187.)
The conference report also provides $1,176.5 million in research and
development funding for the DD(X) program. After accounting for the $221.1
million transferred to the SCN account, this equates to a $34-million reduction from
the request. The report stated:
The conferees agree to provide $1,176,469,000 for the DD(X) program
instead of $1,182,785,000 as proposed by the House and $1,210,469,000 as
proposed by the Senate.
The conferees agree that prior to the completion of the Critical Design
Review (CDR), the Navy should complete land-based testing of the Advanced
Gun System (AGS) and the Integrated Power System (IPS). The conferees
believe it is not advisable to complete CDR prior to ensuring that at least two of
the 12 key technologies have completed testing due to historical trends of ship
cost growth based on re-design to accommodate changes in technological
requirements.
The conferees direct the Navy to submit a report to the congressional
defense committees that addresses the Navy’s plan to transition DD(X) key
technologies through development, testing, acquisition, and installation. This
report should also address “back up” technologies that could be inserted into the
DD(X) program should the maturity of the planned technology not materialize
within a timeline necessary to meet the stated DD(X) schedule. (Page 310; see
also pages 278 and 300)
FY2004.
Authorization. The House Armed Services Committee, in its report
(H.Rept. 108-106) on the FY2004 defense authorization bill (H.R. 1588),
recommended increasing the Administration’s request for development funding for
the DD(X) program by $4 million, to $1,042 million (pages 160, 175, and 182). The
committee noted that the Navy is currently reviewing the ship’s operational
requirements and key performance parameters, which will affect the design and size

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of the ship, and asked to be kept informed of the review and its impact on the ship’s
capabilities and design (page 175).
In its report (S.Rept. 108-46) on the FY2004 defense authorization bill (S.
1050), the Senate Armed Services Committee recommended approving the
Administration’s request for $1,038 million in development funding for the DD(X)
destroyer (page 165). The committee stated that it was aware of the debate within
DOD and the Navy over the ship’s size, and that key performance parameters for the
ship are under review. The committee noted its support for the Marine Corps’
requirements for naval surface fire support, and directed the Navy to ensure that these
requirements are taken into account in reviewing operational requirements for the
DD(X) (page 241). The committee stated that it believed that demands for surface
combatants are expanding beyond the 116-ship surface combatant force called for in
the 2001 Quadrennial Defense Review (QDR). The committee stated that it
remained concerned about the surface combatant industrial base, particularly during
the transition from DDG-51 procurement to DD(X) procurement in FY2006-FY2008,
and directed the Navy to submit an updated report on the surface combatant industrial
base by March 1, 2004 (page 126).
Appropriation. The House Appropriations Committee, in its report (H.Rept
108-187) on the FY2004 defense appropriations bill (H.R. 2658), stated:
The Committee is highly supportive of the Navy’s concept of DD(X), but
is concerned by the lack of a final decision on such elemental things as design
requirements, including weight, size, and armament. In addition, the Navy’s
stated mission for DD(X) continues to evolve, making it difficult for the
Committee to match the appropriation request to tasks the Navy desires to
accomplish in fiscal year 2004. Although funds requested will be used to initiate
Phase IV of DD(X), the Committee is not convinced the Navy has a clear
acquisition strategy for this next phase.
The Committee is also concerned that the Navy and the Office of the
Secretary of Defense (OSD) appear to have “withheld” a significant level of
funds previously appropriated for DD(X). While the Committee recognizes a
Navy and OSD tradition of not releasing all funds appropriated for programs for
management flexibility and the application of certain financial adjustments, the
percentage withheld from the DD(X) program appears greater than that applied
to other programs.
The Committee recommends a reduction of $100,000,000 for DD(X)
design. The Committee’s recommendation is based on the lack of a definitive
requirement, lack of a final decision on design, low execution of previously
appropriated funds, and a lack of an acquisition strategy for Phase IV of DD(X).
The Committee recommends an increase of $20,000,000 for DD(X) which
is only for developing an alternative engine as the prime power source. The
Committee’s intent is that the Navy pursue a risk mitigation strategy for the
engine which could deliver overall program cost savings in a potential
competitive scenario. (Page 255)
In its report (S.Rept. 108-87) on the FY2004 defense appropriation bill (S.
1382), the Senate Appropriations Committee commented on the Navy’s proposal to

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fund the first DD(X) and the first LCS in the Navy’s research and development
account rather than in the Navy’s ship-procurement account:
The Committee is aware that the Department of the Navy plans to fund the
purchase of ships in fiscal year 2005 within the Research and Development,
Navy account. These ships — the first in their class — the DD(X) next-
generation destroyer and the Littoral Combat Ship [LCS] are currently planned
to be procured with research and development dollars with the second ship in
each class to be procured with Shipbuilding and Conversion, Navy [SCN] funds
in fiscal year 2006.
The Committee understands that there are seeming advantages to this
approach — reducing prior year shipbuilding costs and providing these programs
with the additional flexibility that is inherent in research and development
funding. The Committee is concerned, however, that the Department will not
reap the benefits it seeks. Central to the argument that supports building the first
ship in a class with research and development funding is the necessity to learn
lessons from the research, development and testing being done. If the Navy plans,
as it currently does, to fund the second ship in each of these classes in fiscal year
2006 in SCN before actual construction even begins on the research and
development-funded ships, the distinction between funding in research and
development and SCN only becomes one of full-funding.
Therefore, the Committee directs that if these ships — the DD(X) and LCS
— are funded in research and development, all research and development
acquisition rules will apply, including technology readiness reviews, milestone
decisions, and test and evaluation before these ships may enter Shipbuilding and
Conversion, Navy for procurement.
If the Navy chooses not to follow the acquisition policies required of
research and development programs before they enter procurement, funding for
these first ships in their class shall be requested in Shipbuilding and Conversion,
Navy, as has been the tradition. (Pages 154-155)
The conference report (H.Rept. 108-283) on the FY2004 defense
appropriations bill (H.R. 2658/P.L. 108-87) stated:
The conferees agree with the Senate concerning the Navy’s plans to fund
the purchase of ships — DD(X) and LCS — in fiscal year 2005 within the
Research, Development, Test and Evaluation (RDT&E) appropriation. The
conferees believe that the use of research and development funding to procure
first ships of a class is not in keeping with budgetary guidelines regarding full-
funding. The conferees agree that should the fiscal year 2005 request include
these ships — DD(X) and LCS — within RDT&E, all research and development
acquisition rules shall apply, including technology readiness reviews, milestone
decisions, and test and evaluation before these ships may transition to
procurement. (Page 292)
FY2003.
Authorization. Section 1025 of the conference report (H.Rept. 107-772) on
the FY2003 defense authorization bill (P.L. 107-314/H.R. 4546) requires DOD to
submit a report to Congress by March 31, 2003 on

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the effect of the contract award announced on April 29, 2002, for the lead design
agent for the DD(X) ship program on the industrial base for ship combat system
development, including the industrial base for each of the following: ship
systems integration, radar, electronic warfare, and launch systems.... The report
shall include the following: (1) The Secretary’s assessment of the effect of the
contract award referred to in that subsection on ship combat system development
and on the associated industrial base. (2) A description of any actions that the
Secretary proposes to ensure future competition in the ship combat system
development and industrial base.
LCS Program
FY2005.
Authorization. The House Armed Services Committee, in its report
(H.Rept. 108-491) on the FY2005 defense authorization bill (H.R. 4200),
recommended disapproval of the $107.7 million requested for FY2005 to begin
building the lead LCS. The committee recommended that construction of the lead
ship be delayed until FY2006. The committee recommended approval of the
remainder of the program’s FY2005 funding request. The report stated:
Prior to announcing the LCS program, the Navy did not conduct a formal
analysis of alternatives to demonstrate that a ship like the LCS would be more
cost-effective for performing the stated missions than potential alternative
approaches. In the statement of managers accompanying the conference report
on H.R. 4546 (H.Rept. 107-772), the conferees raised a number of issues with
respect to the development of LCS. The Secretary of the Navy’s report on those
issues was a brief, summary document that provided little detail with regard to
the analysis performed by the Navy in developing the requirement and the
concept for LCS. The Navy’s March 2004 report on LCS requirements, concepts
of operations, acquisition strategy, and systems that would be replaced by LCS
was also a relatively brief summary document that provided little new
information about the LCS program. Congress has directed the General
Accounting Office to report by March 1, 2005, on the LCS program’s analytical
justification, concept of operations, technical maturity, and potential costs.
The committee continues to have concerns about the lack of a rigorous
analysis of alternative concepts for performance of the LCS mission, the
justification for the force structure sought by the Navy, and whether the
program’s acquisition strategy is necessary to meet an urgent operational need.
In view of continued unfunded requirements for mission module development
and experimentation and what the committee believes is the need for more
thorough evaluation program, the committee is concerned about the Navy’s
ability to resolve these issues before committing to the design for the LCS and
beginning construction of the first ship. Finally, the committee is concerned
about whether the program schedule provides sufficient time and capabilities for
experimentation and evaluation of the operational concepts for LCS before
committing to major serial production of the ship.
Consequently, the committee recommends $244.4 million in PE 63581N for
the LCS, a decrease of $107.7 million for LCS construction. The committee also
recommends that the construction of the first Flight 0 LCS be delayed until fiscal
year 2006. (Page 184-185)

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The Senate Armed Services Committee, in its report (S.Rept. 108-260) on the
FY2005 defense authorization bill (S. 2400), recommended approval of the
program’s funding request for FY2005 (page 170) but otherwise did not discuss the
program.
The conference report (H.Rept. 108-767) on H.R. 4200 (P.L. 108-375) stated:
The conferees note the concerns expressed in the House report
accompanying H.R. 4200 (H.Rept. 108-491) regarding whether the LCS program
schedule provides sufficient time and opportunities for experimentation and
evaluation of the operational concepts for LCS in Flight Zero before committing
to major serial production of the ship with Flight One. The program plan
provided with the fiscal year 2005 budget request had construction starting on
Flight One ships before delivery and evaluation of Flight Zero ships. This
concurrency could require expensive retrofit to Flight One ships after lessons
have been learned from operating Flight Zero ships.
The conferees are concerned with a potential industrial impact induced by
making fiscal year 2006 a gap year in LCS production, which could lead to
increased ship costs or technology insertion challenges. However, the conferees
agree with the rationale of section 8092 of the Department of Defense
Appropriations Act for Fiscal Year 2005 (section A of Public Law 108 — 287),
which directs that no funds be obligated for construction of a third vessel in the
fiscal year 2006 budget request. The conferees expect that the Navy will include
a plan that reduces the risk of concurrency in the LCS justification submitted as
part of the fiscal year 2006 budget request. (Page 540)
Appropriation. The House Appropriations Committee, in its report
(H.Rept. 108-553) on the FY2005 defense appropriations bill (H.R. 4613),
recommended a net $57-million increase in funding for the LCS program, consisting
of a $107-million increase to fully fund the lead LCS in FY2005 at a total cost of
$214 million, and a $50-million decrease for Phase I pre-design/concept studies for
a subsequent improved version of the LCS design. The committee stated that it
views the lead LCS as a prototype and that design and construction of the next
version of the LCS should not proceed until the prototype is completed and tested.
The report stated:
The Committee remains impressed with the Navy’s initiative in pursuing
the LCS program, which promises to address significant operational gaps in Navy
capability while presaging new ways of developing and fielding technology to
the Fleet. The Committee has agreed to the Navy’s request to fund construction
of LCS in the research, development, test and evaluation appropriation,
recognizing the Navy’s desire to more readily accommodate potential changes
to the program. The Committee approves this request because it views the Flight
0 ship as a prototype of a completely new class of ship. Once the Navy has
completed and tested the prototype, it should proceed with the preliminary design
and construction of the first Flight 1 ship.
The Committee recommendation includes increasing the budget request for
the construction of the first Flight 0 LCS by $107,000,000, fully funding this
construction effort at $214,000,000. The fiscal year 2005 request included only
$107,000,000 for the first increment of the LCS construction. Budget
documentation indicates the Navy plans to request an additional $107,000,000

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for the second and final increment for the first ship in fiscal year 2006. The
Committee strongly opposes incremental funding of ship construction and
therefore has provided a total of $214,000,000 in 2005 for construction of the
first LCS, fully funding the construction requirement in one year.
The Committee recommendation reduces the LCS request by $50,000,000
for Phase I pre-design/concept studies for the development of a request for
proposal for the preliminary design of the Flight 1 ship. This recommendation is
based on the Committee’s judgment that the preliminary design of the first Flight
1 ship should commence after test and evaluation of the Flight 0 prototype to
avoid potential costly re-design efforts. (Page 288-289. See also page 274.)
The Senate Appropriations Committee, in its report (S.Rept. 108-284) on the
FY2005 defense appropriations bill (S. 2559), recommended approval of the FY2005
funding request for the program. The committee stated that it views the lead LCSs
as prototypes and directed the Navy to include no funding in its FY2006 budget
request for construction of a second ship of either prototype design. The report
stated:
The Committee supports the budget request for the Littoral Combat Ship
[LCS] and consents to the Navy’s request to fund construction of the first
prototype ship for each of two ship designs in the Research and Development,
Navy account. Approval for funding LCS in the research and development
account is strictly based on the acknowledgment of the prototypical nature and
high level of technical risk inherent in this program. The Committee finds LCS
to be unique and unlike any other shipbuilding program the Navy has previously
pursued; and therefore, grants the Navy’s request for the increased flexibility that
funding within the research and development account affords. However, the
Committee directs that all follow-on ships beyond one prototype for each LCS
ship design be fully funded in the Shipbuilding and Conversion, Navy account.
The Committee also believes that substantial testing of the LCS and the
associated mission modules is required to evaluate each ship design and validate
operational requirements. Therefore, the Committee directs that no funds shall
be obligated to prepare a fiscal year 2006 budget request for construction of the
second ship of either prototype design. This directive is intended to provide for
a ‘’gap’‘ year between the construction of the first prototype ship and second
ship of each design, thereby ensuring that design problems discovered during the
construction of each ship design are identified and fixed before construction of
the follow-on ships. In addition, the consent to build the LCS prototype ships
with research and development funding should in no way be interpreted as
approval for other ship construction programs to be funded within the Research
and Development, Navy account.
The Committee is also concerned that the development of various LCS
mission modules, which will be procured independently from the vessel, will
obscure the actual cost of the weapon system. Therefore, the Committee directs
the Navy to identify LCS mission module funding separately within the Research
and Development, Navy and Other Procurement, Navy accounts. (Page 156-157)
The report also stated:
A central feature of the LCS design is modular Mission Packages. The
planned Mission Packages may consist of a combination of modules, manned and

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unmanned off-board vehicles, deployable sensors, and other support equipment.
The Navy plans to begin funding Mission Modules, which will be procured
independently from Seaframe development, in the fiscal year 2006 budget
request under the “Other Procurement, Navy” account. The Committee feels
strongly about creating an appropriate level of visibility to ensure an accurate
accounting of total program costs. The Committee, therefore, directs the Navy
to establish a “LCS Mission Packages” line within the account and to request all
items (modules, vehicles, sensors, etc.) related to the development of LCS
Mission Packages in this line as part of the fiscal year 2006 budget request.
(Page 93.)
The conference report (H.Rept. 108-622) on H.R. 4613 (P.L. 108-287)
includes a provision (Section 8092) that provides $214.7 million in the Navy’s
research and development account for construction of the lead LCS. The provision
also states:
None of the funds provided in this Act may be obligated to prepare a fiscal year
2006 budget request for a third vessel under the Littoral Combat Ship program
in fiscal year 2006: Provided, That funds for the second vessel shall be for a
second source supplier: Provided further, That all subsequent ships shall be
purchased with “Shipbuilding and Conversion, Navy” funds beginning in fiscal
year 2007.
The conference report stated:
The conferees agree to provide $457,089,000 for the Littoral Combat Ship
(LCS) program instead of $409,089,000 as proposed by the House and
$352,089,000 as requested and proposed by the Senate.
The conferees agree with the Senate that all follow-on ships, beyond one
of each prototype design, should be fully funded in the Shipbuilding and
Conversion, Navy appropriation. The conferees also agree that substantial
testing of the LCS and associated mission modules is required to evaluate each
ship design and validate operational requirements. Therefore, the conferees
direct that no funds shall be obligated to prepare a fiscal year 2006 budget
request for construction of a third vessel, as reflected in the conference
agreement including Section 8092 as originally proposed by the Senate. This
directive is intended to provide for a “gap” year between construction of the
prototype ships and the follow-on construction of a second ship of each design,
thereby ensuring that design problems discovered during the prototype phase of
each ship design are identified and corrected before construction of follow-on
ships. The conferees also agree with the Senate that beginning in the fiscal year
2006 budget request, the Navy should identify LCS mission module funding
separately within the Research, Development, Test and Evaluation, Navy and
Other Procurement, Navy appropriations. (Pages 310-311)
FY2004.
Authorization. The House and Senate Armed Services Committees, in
their reports (H.Rept. 108-106 and S.Rept. 108-46, respectively) on the FY2004
defense authorization bill (H.R. 1588/S.1050), recommended increasing the FY2004
funding request for the LCS program by $35 million to fund additional development

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of LCS mission modules (pages 158 and 183-184 in the House report, and page 162
in the Senate report).
The House report noted that the Navy did not perform an analysis of
alternatives prior to announcing the LCS program. The report noted the various
issues about the program that were raised in the conference report on the FY2003
defense authorization bill (see above), and stated that the February 2003 Navy report
submitted in response to Section 218 of the FY2003 defense authorization bill
was a brief, summary document that provided little detail with regard to the
analysis performed by the Navy in developing the requirement and the concept
for the LCS. The committee expects that the Secretary of the Navy will address
more completely the issues raised in the [conference report] prior to proceeding
to an Acquisition Program Initiation decision in mid-fiscal year 2004. (Page 183)
The committee noted concerns about the Navy’s strategy for developing LCS
mission modules that were expressed in the FY2003 conference report and stated that
it was recommending a $35-million increase to reduce development risk in this area.
(Pages 183-184)
The Senate report stated:
The committee is concerned that the analysis underpinning the LCS
requirement is not sufficient. Section 218 of the National Defense Authorization
Act for Fiscal Year 2003 (Public Law 107-314) required the Secretary of the
Navy to submit a report on LCS which addressed in detail the analytical process
to examine alternatives, and establish relative priorities to meet valid
requirements. The committee believes that the report, which was delivered
pursuant to last year’s requirement, did not provide the necessary analysis.
The Navy believes that this ship would offer a way to achieve a fleet size
of 375 ships, a number that the Chief of Naval Operations has said is required to
support the Sea Power 21 vision. The committee is concerned that the larger
surface combatant force [included in the 375-ship plan] will decline to a number
even below that which is projected in the near term as a result of the acquisition
of LCS. While the cost of the LCS seaframe has been estimated, and is included
in the preliminary design interim requirements document, there is no firm
estimate of what LCS will cost with its focused mission modules. Overall Navy
affordability constraints may well lead to a fleet with the number of Navy ships
close to the number now in commission, only of lesser capability.
The committee directs the Comptroller General to submit a report to the
committee by March 1, 2005, that (1) details the Navy’s progress in further
defining the concept of operations for the LCS; (2) assesses the analytical basis
for the establishment of LCS requirements; (3) assesses the technical maturity of
the focused mission modules for flight zero ships, and, to the extent possible, for
flight one ships; and, (4) estimates the recurring LCS weapons system cost, to
include seaframe and focused mission modules, at a production rate similar to
that in the Navy plan.
The committee believes that the Navy will have to conduct significant
experimentation to determine the utility of the LCS concept. The focused
mission modules are required to enable that experimentation, yet the Navy failed

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to fully fund focused mission modules in the budget request. The committee
believes that before committing to production of more than a few ships, the Navy
should have determined, through analysis and experimentation, that this ship will
deliver the Navy’s expected capabilities. To accelerate this process, the
committee recommends an increase of $35.0 million ... for LCS modules. (Pages
179-180)
Appropriation. The House Appropriations Committee, in its report
(H.Rept. 108-187) on the FY2004 defense appropriation bill (H.R. 2658),
recommended reducing funding for the ship portion of the LCS program by $15
million and increasing funding for the development of LCS mission modules by $25
million. The report states:
The Committee is very supportive of the Navy’s concept of the LCS. It is an
innovative approach to meeting the threats and through the use of “mission
modules” will be able to quickly transform to meet emerging threats. Future
enhancements include the use of unmanned aerial vehicles and unmanned
undersea vehicles. The spiral development approach will provide sufficient
flexibility to implement the LCS in “flights”, providing increasing levels of
warfighting capability.
The Committee is concerned, however, with the lack of final requirements
documentation and a spiral development plan for LCS. It is clear that the initial
system will not provide all of the warfighting capabilities promised with LCS,
but there is no definition of the requirement and no “roadmap” of how the Navy
will achieve the system required. It is also of concern that LCS capabilities will
overlap those of existing systems operating in the littoral battlespace, an issue
that the Navy has not fully addressed.
The Committee requests the Navy submit by March 1, 2004, a final requirements
document and a spiral development plan for advancing the LCS through its
development and acquisition. Additionally, the Navy should continue to refine
its concept of operations in the littoral battlespace to ensure no duplication of
effort.
The Committee recommends an increase of $25,000,000 for LCS only to
accelerate mission module development and the integration of these modules into
LCS Flight 0. These funds may not be obligated or expended until the submission
of the March 1, 2004 report previously requested.
The Committee recommends a reduction of $15,000,000 for the LCS. The
Committee’s recommendation is based on the lack of a final design or
development plan for LCS. (Pages 254-255)
The Senate Appropriations Committee, in its report (S.Rept. 108-87) on the
FY2004 defense appropriation bill (S. 1382), recommended approving the
Administration’s funding request for research and development work on the LCS
program, but recommended increasing the portion of this funding that is to be used
for developing LCS mission modules. The report states:
The Committee is supportive of the Navy’s Littoral Combat Ship [LCS]
program, but is concerned that the Navy has underestimated the technological
challenges the development of this ship may face. While considerable effort has

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been made and careful thought has been taken regarding plans for the sea frame,
the Committee remains unconvinced that similar efforts have been taken
regarding the ship’s mission modules. Unfortunately, of the $158,071,000 the
Department of Navy requested for LCS research and development, the
Department only requested $41,000,000 for sea frame-related mission module
activities. The Committee, therefore, has earmarked $76,000,000 of the request
for LCS and directs the Navy to establish a fully-funded mission module research
and development program for the Flight 0 LCS that extends beyond the
patchworked mine warfare plan. (Page 156)
As noted in the section on legislative action concerning the DD(X), the
committee also commented on the Navy’s proposal to fund the first DD(X) and the
first LCS in the Navy’s research and development account rather than in the Navy’s
ship-procurement account. This report language appears in the section on legislative
activity concerning the DD(X).
The conference report (H.Rept. 108-283) on the FY2004 defense
appropriations bill (H.R. 2658/P.L. 108-87) stated:
The conferees have included $168,071,000 for continued research and
development of the Littoral Combat Ship (LCS), the amount recommended by
the House and $10,000,000 above the amount recommended by the Senate.
The conferees agree with the House language regarding the need to refine
the Navy’s concept of operations in the littoral battlespace to ensure that there
is no duplication of effort between LCS and other platforms. To this end, the
conferees direct the Navy to provide a report to the House and Senate
Committees on Appropriations, no later than March 1, 2004 that details the
missions LCS will conduct in the littoral battle space, which platforms and
systems currently conduct these missions, and what changes, if any, will be made
to future years’ budgets to eliminate any duplication of effort.
In addition, in order to maintain focus on the LCS’ mission module
development and integration, the conferees agree that $51,000,000 of the funds
provided for LCS is available only for these efforts. (Pages 291-292)
(In response to this language, the Navy submitted a report on March 3, 2004.)
As noted in the section on legislative action concerning the DD(X), the
conference report also commented on the Navy’s proposal to fund the first DD(X)
and the first LCS in the Navy’s research and development account rather than in the
Navy’s ship-procurement account. This report language appears in the section on
legislative activity concerning the DD(X).
FY2003.
Authorization. Section 218 of the conference report (H.Rept. 107-772) on
the FY2003 defense authorization bill (H.R. 4546/P.L. 107-314) authorized $4
million for requirements development for the LCS, and stated that the Navy may not
obligate any funds for the construction of an LCS until the Navy submitted a detailed
report on the LCS program’s acquisition strategy that “address[es] the plan and
schedule for fulfilling the requirements of Department of Defense Instruction 5000-

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series for a major defense acquisition Milestone A decision for initiation of concept
and technology development for” the LCS. The LCS acquisition strategy must also
include a “robust” concept and technology demonstration phase. The conferees
stated:
An LCS program may be necessary to provide capabilities to carry out the
National Military Strategy. However, neither the Office of the Secretary of
Defense, the Joint Chiefs of Staff, nor the Navy has provided any indication that
they have completed sufficient work on any number of prerequisites that the
Department of Defense (DOD) is required to meet before concluding that new
development is required to provide the capabilities inherent in an LCS. These
include requirements in title 10, United States Code, and internal DOD
directives, such as DOD 5000.2-R Mandatory Procedures for Major Defense
Acquisition Programs and Chairman, Joint Chiefs of Staff (CJCS) Instruction
3170.01B.
The LCS has not been vetted through the Joint Requirements Oversight
Council (JROC) process, particularly regarding possible alternatives and the
relative priority to meet valid requirements. This should be completed prior to
initiation of any program which is intended to support joint combat operations.
The conferees believe that the Navy needs to assess the adequacy of
existing and planned platforms to test the littoral combat ship concept and how
these platforms will be used in the development, test, and evaluation of the LCS
and its mission modules. The conferees strongly believe that the Navy must
capitalize on ongoing and planned experiments, demonstrations, and evaluations
of existing, prototype, and experimental hull forms and platforms to better inform
the Navy’s decisions on the LCS. Some of these have been completed, but others
are planned and await modification or construction of the hull form and platform
demonstrators.
The conferees are also concerned that the Navy’s strategy for the LCS does
not clearly identify the plan and funding for development and evaluation of the
mission modules upon which the operational capability of the LCS will depend.
The conferees believe that the strategy for LCS development must provide for the
identification, transition, and integration of the component technologies and
subsystems to be included in the several mission modules and for the evaluation
of each mission module as a system before its deployment on the LCS.
The conferees expect the JROC and the Navy to specifically deal with a
number of concerns in fulfilling the requirements in the LCS provision. These
include:
(1) Assessing the extent to which unmanned systems could be capable of
completing the missions instead of a manned LCS vessel. Briefings on the LCS
indicate that an LCS would be used for operations determined to be “too risky”
for larger surface combatants. This raises questions about the level of risk the
Navy has determined to be acceptable for an LCS that is unacceptable for larger
surface combatants.
(2) Identifying the threat or threats that have negated the Navy’s previous
investments in multi-mission ships and made the missions of anti-submarine
warfare, anti-surface warfare, and antimine warfare “too risky” for these ships.
The Navy has invested heavily in providing combatants of all types and

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displacements with onboard and offboard sensors, weapons, and information
connectivity. This investment was directed to ensure that multimission ships
could operate at any time and in any place.
(3) Determining the level of support from other combatants and auxiliaries that
LCS vessels will require, and whether this will lead to altered planning
assumptions for sizing the force. An open question regarding a “focused mission”
vessel such as an LCS is whether the vessel will be able to operate with impunity
in the presence of threats outside its focused mission warfare area. If not, the
Navy may have to adjust operating and support concepts in more significant ways
than merely adding LCS vessels to the current battle group.
(4) Identifying the appropriate level of helicopter support in the baseline LCS
vessel. The naval helicopter has been a proven key capability for combatant
surface ships when conducting the three primary warfare areas stated for LCS.
Navy briefings indicate that the LCS will require a helicopter capability to carry
out its missions and will operate forward of the battle group. Nevertheless, the
Navy appears to have forgotten the lessons learned from the first flight of Arleigh
Burke-class destroyers and has not included a naval helicopter hangar as a key
requirement for the LCS.
(5) Assessing the implications of using and supporting nonmarinized systems as
component capabilities on LCS vessels. For example, the Navy has indicated the
desire for using OH-58D helicopters on LCS. Although these Army helicopters
have flown from Navy ships for short periods, they have limited capabilities for
LCS mission areas. Naval helicopters, however, have the durability and system
integration required to provide joint and battle group synergism for LCS
missions.
(6) Identifying whether there are changes in tactics and procedures which the
Navy could apply to current platforms and concepts of operations that would
accomplish the envisioned LCS missions without putting additional pressure on
an already underfunded ship acquisition plan.
(7) Assessing the assignment of LCS-unique missions to the U.S. Coast Guard,
close allies, or coalition partners. If we are to continue assuming joint and
coalition warfare, perhaps the U.S. Navy could count on the Coast Guard or
smaller navies of allies to contribute more effectively by performing ‘’small
ship’‘ mission[s]. (Pages 562-564)
(In response to this section, the Navy submitted a report on February 10, 2003.)

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CRS-95
Appendix A. Acronyms
AAW
Anti-air warfare
AGS
Advanced Gun System
AMC
Analysis of multiple concepts
AOA
Analysis of alternatives
ASuW
Anti-surface warfare
ASW
Antisubmarine warfare
AUV
Autonomous underwater vehicle
BIW
Bath Iron Works shipyard of Bath, ME
CBO
Congressional Budget Office
COEA
Cost and operational effectiveness analysis
CSBA
Center for Strategic and Budgetary Assessments
DOD
Department of Defense
DON
Department of the Navy
EA/SD
Evolutionary acquisition with spiral development
EDM
Engineering development model
FYDP
Future Years Defense Plan
GD
General Dynamics Corporation
ISR
Intelligence, surveillance, and reconnaissance
LCS
Littoral Combat Ship
LSC
Littoral support craft
LSC-X
Littoral support craft — experimental
MIW
Mine warfare
O&S
Operating and support
OPN
Other Procurement, Navy appropriation account
OSD
Office of the Secretary of Defense
PANMC
Procurement of Ammunition, Navy and Marine Corps
appropriation account
R&D
Research and development

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CRS-96
SCN
Shipbuilding and Conversion, Navy appropriation account — the
Navy’s ship-procurement account
SOF
Special operations forces
UAV
Unmanned Air Vehicle
UV
Unmanned Vehicle
VLS
Vertical launch system
WPN
Weapons Procurement, Navy appropriation account

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