Order Code RS21059
Updated November 28, 2005
CRS Report for Congress
Received through the CRS Web
Navy DD(X) and CG(X) Programs:
Background and Issues for Congress
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The FY2006-FY2011 Future Years Defense Plan (FYDP) reduces planned DD(X)
destroyer procurement to one per year in FY2007-FY2011 and accelerates procurement
of the first CG(X) cruiser to FY2011. The DD(X)/CG(X) program poses several issues
for Congress. For a longer discussion of the DD(X) and CG(X), see CRS Report
RL32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs: Oversight Issues
and Options for Congress, by Ronald O’Rourke.1 This report will be updated as events
warrant.
Background
The DD(X) destroyer and CG(X) cruiser are part of a proposed new family of surface
combatants that also includes the small Littoral Combat Ship (LCS).2 The DD(X) would
have a full-load displacement of about 14,564 tons, which would make it roughly 50%
larger than the Navy’s 9,500-ton Aegis 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 be a multimission ship with an emphasis on naval
surface fire support (NSFS). It would incorporate several major new technologies, and
be equipped with two 155-mm Advanced Gun Systems (AGSs) and 80 missile tubes. It
would have a crew of 125 to 175 persons, compared to more than 300 on current Navy
destroyers and cruisers. In large part due to its reduced crew size, the DD(X) is to cost
substantially less to operate and support (O&S) than the Navy’s current cruisers and
destroyers. The CG(X) would be derived from the basic DD(X) design, but would have
a more powerful radar than the DD(X), as well as additional missile tubes rather than
AGSs. The CG(X) might be larger and more expensive than the DD(X).
1 CRS Report RL32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs: Oversight
Issues and Options for Congress, by Ronald O’Rourke.
2 For more on the LCS, see CRS Report RS21305, Navy Littoral Combat Ship (LCS) Program:
Background and Issues for Congress, by Ronald O’Rourke.
Congressional Research Service ˜ The Library of Congress

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The Navy in early 2005 said it had a requirement for 8 to 12 DD(X)s and 15 to 18
CG(X)s within a planned fleet of 260 to 325 ships. A new Navy ship force structure plan
to be announced in early 2006 may alter these figures. The FY2006-FY2011 Future Years
Defense Plan (FYDP) reduced planned DD(X) procurement to one per year for FY2007-
FY2011 and accelerated procurement of the first CG(X) to FY2011. Estimated DD(X)
unit procurement costs (see Table 1) have increased substantially since 2004. The
estimate for the first DD(X) increased from about $2.8 billion to $3,291 million, or about
18%. The estimate for the second DD(X) increased from $2,053 million to $3,061
million, or about 49%. The estimates for subsequent DD(X)s increased from about $1.5
billion and $1.8 billion each to about $2.2 billion to $2.6 billion each, or roughly 45%.
Table 1 shows DD(X) and CG(X) funding through FY2011.
Table 1. DD(X)/CG(X) Funding, 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
Subotal RDTEN
505
909 1015 1164 1115
904
724
647
676
726 8385a
Shipbuilding and Conversion, Navy (SCN) account (including advance procurement)
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 RDT&E funding
provided for DD-21/DD(X) program in FY1995-FY2001. GAO has reported that total DD(X)/
CG(X) RDT&E costs are roughly $10 billion.
b. Detailed design and nonrecurring engineering costs for the class.
Until September 30, 2005, the DD(X) was being developed by a national industry
team lead by Northrop Grumman’s Ship Systems (NGSS) division (which includes the
Ingalls Shipyard in Pascagoula, MS) and Raytheon Systems Company. The team also

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included GD/BIW as well as Lockheed Martin, Boeing, and several other companies. The
Navy ended the national industry team arrangement on September 30, 2005. Since then,
the Navy has been managing the DD(X) program through a series of separate contracts
with major DD(X) contractors, including NGSS, GD/BIW, Raytheon, and BAE Systems
(the maker of the AGS).
Under the Navy’s previous DD(X) acquisition strategy of record, which was
approved in February 2004, the first DD(X) would be built by NGSS, the second would
be built GD/BIW, and contracts for building the first six DD(X)s would be equally
divided between NGSS and GD/BIW. In February 2005, Navy officials said they would
seek approval from DOD 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, DOD deferred this proposal
as premature, but agreed to a Navy proposal to separate the DD(X) system-development
and software-development contracts from the DD(X) detailed-design effort. Section 1019
of the Emergency Supplemental Appropriations Act for 2005 (H.R. 1268/P.L. 109-13 of
May 11, 2005) effectively prohibits a winner-take-all competition to build all DD(X)s.
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 “dual-lead-ship” 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 would 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 “winner-takes-all-remaining-ships” approach.
On November 23, 2005, the Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics (USD ATL) granted Milestone B approval for the
DD(X), permitting the program to enter the System Development and Demonstration
(SDD) phase. USD ATL also approved a low rate initial production quantity of 8 ships,
and separately approved a DD(X) Acquisition Program Baseline and Acquisition Strategy
Report. Press reports state that USD ATL approved the Navy’s proposed dual-lead-ship
strategy.
Issues for Congress
Accuracy Of Cost Estimates. Although the Navy has substantially increased
its estimated DD(X) procurement costs, some analysts believe these costs are still
significantly underestimated. 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 new estimates. The CAIG’s estimate for 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. The Congressional Budget Office (CBO) 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. CBO
has also questioned the accuracy of the Navy’s estimate regarding the annual O&S cost
of a DD(X) compared to a DDG-51 Aegis destroyer.
Program Affordability and Cost Effectiveness. 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)

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procurement costs. If DD(X) procurement costs turn out to be closer to the higher CAIG
or CBO estimates, 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). The CAIG and CBO cost estimates are at
or above cost figures provided by DOD and Navy witnesses as figures that would make
the DD(X) unaffordable.
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. Skeptics could argue that 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, that the DD(X)’s lower O&S costs only partially offset its
higher procurement costs, and that the DD(X)’s life-cycle O&S cost savings, when
calculated on a present-value basis, as required by federal guidelines, are only about half
as great as the Navy states. 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. Skeptics can acknowledge these capability improvements but
question whether they are worth the ship’s cost, particularly if that cost is closer to the
CAIG or CBO estimates than to the Navy’s estimates.
Potential 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. 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 NGSS and GD/BIW — then the
DD(X) program would result in relatively low levels of surface combatant construction
work at the two yards. If DD(X) production at some point is consolidated into one yard,
the other yard could face a difficult business situation. If the other yard were GD/BIW,
which focuses on building surface combatants, theoretical scenarios 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. If the other yard were
Ingalls, the continuation of amphibious-ship construction at Ingalls could make the
scenarios of closure and liquidation or mothballing less likely, but workloads, revenues,
and employment levels could still be reduced from current levels. Another CRS report
discusses factors to consider in addressing a potential question about the merits of
maintaining two active surface combatant construction yards versus maintaining one.3
Potential Force Levels. The Navy’s early 2005 plan for a fleet of 260 to 325
ships includes a force of 67 to 92 larger surface combatants. 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, 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 to 57 to 42 ships. This raises an issue regarding the
operational implications of having substantially fewer larger surface combatants than
called for in the 260- to 325-ship plan.
3 CRS Report RL32665, Potential Navy Force Structure and Shipbuilding Plans: Background
and Issues for Congress, by Ronald O’Rourke.

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Mission Requirements. The DD(X)’s size and procurement cost appear driven
by the ship’s total collection of payload elements, which reflect a February 2004
Operational Requirements Document (ORD) for the DD(X). This ORD notwithstanding,
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 and that GAO reported in November 2004 that there is currently
no consensus between the Navy and Marine Corps regarding naval surface fire support
requirements. Skeptics might argue that the 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.
A potential question is whether some of the DD(X)’s planned capabilities are more
critical than others, and whether the size and cost of the ship might be reduced by
reducing the less-critical capabilities.
Technology Readiness. The DD(X) will incorporate several significant new
technologies. 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. 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) and other programs.
Technology Bridge to CG(X) and Other Ships. 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 and use many DD(X) technologies, and that DD(X)/CG(X) technologies will
also be used on other future ships. Skeptics could argue that DD(X)/CG(X) technologies
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.
Potential Options for Congress. Potential options for Congress, 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, amphibious ships,
transferred LCSs, Aegis ship modernizations, or Deepwater cutters;
! defer procurement of the second DD(X) to FY2008 to permit that ship to
benefit from lessons learned in building the first ship;
! 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
other work; and
! start design work now on a smaller, less expensive alternative to the
DD(X)/CG(X) design that preserves core capabilities, and procure this
new design, rather than DD(X)s or CG(X)s, starting around FY2011.

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Legislative Activity for FY2006
Emergency Supplemental for FY2005 (H.R. 1268/P.L. 109-13). Section
1019 of P.L. 109-13 effectively prohibits a winner-take-all competition to build all
DD(X)s. 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.
FY2006 Defense Authorization Bill (H.R. 1815/S. 1042). 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 Burke (DDG-51) class Aegis destroyer, and would be ready for
lead-ship procurement in FY2011. 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. S. 1042 as reported by the Senate Armed Services Committee (S.Rept. 109-69)
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.
FY2006 Defense Appropriations Bill (H.R. 2863). The House
Appropriations Committee, in its report (H.Rept. 109-119) 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 (page 146); reducing DD(X) FY2006 development to $670 million; and adding
$50 million in development funding for the CG(X) (page 251). The report states that the
DD(X) program “has encountered serious problems” in technology development and
increasing unit procurement cost, and that “Considering the 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 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”
development work for the CG(X) (page 251). The Senate Appropriations Committee,
in its report (S.Rept. 109-141 of September 29, 2005) on H.R. 2863, recommended
increasing the DD(X) program’s $716 million advance procurement funding request by
$50 million (page 124), and the program’s $1,115 million research and development
funding request by $13 million (pages 194 and 201). Of the additional $13 million, $11
million is for permanent magnet motor development work, and $2 million is for “naval
smartships that anticipate and manage.”
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