Order Code RS21059
Updated March 7, 2006
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 Navy wants to procure 7 DD(X) destroyers and 19 CG(X) cruisers. The first
two DD(X)s are to be procured in FY2007, with each ship being split-funded (i.e.,
incrementally funded) across FY2007 and FY2008. The estimated cost of each of the
first two ships is $3,291 million, for a total of $6,582 million. The two ships have
received a total of $1,010 million in FY2005 and FY2006 advance procurement funding.
The FY2007 budget requests an additional $2,568 million in procurement funding for
the two ships. The final $3,004 million in procurement funding for the two ships is to
be requested in FY2008. The Navy estimates that the next three DD(X)s will cost an
average of roughly $2.5 billion each. The total estimated procurement cost for the first
five DD(X)s has increased about 3.2% from the total shown in the FY2006 budget
submitted to Congress in early 2005. The first CG(X) is to be procured in FY2011. The
DD(X)/CG(X) program poses several issues for Congress, the most prominent perhaps
being the affordability of the DD(X)/CG(X) design. 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. 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).1 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
1 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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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).
The Navy wants to procure a total of 7 DD(X)s and 19 CG(X)s as part of a proposed
313-ship fleet.2 The first two DD(X)s are to be procured in FY2007, with each ship being
split-funded (i.e., incrementally funded) across FY2007 and FY2008. The remaining five
are to be procured at a rate of one per year in FY2009-FY2013. The first CG(X) is to be
procured in FY2011.
The estimated cost of each of the first two DD(X)s is $3,291 million, for a total of
$6,582 million. The two ships have received a total of $1,010 million in FY2005 and
FY2006 advance procurement funding. The FY2007 budget requests an additional
$2,568 million in procurement funding for the two ships. The final $3,004 million in
procurement funding for the two ships is to be requested in FY2008. The Navy estimates
that the next three DD(X)s will cost an average of roughly $2.5 billion each. Table 1
shows DD(X) and CG(X) funding through FY2011.
The Navy during the latter months of 2005 took steps to reduce the cost of the lead
DD(X) by about $266 million, and follow-on DD(X)s by about $200 million each. In
spite of these actions, the total estimated procurement cost for the first five DD(X)s
($14,200 million) has increased about 3.2% from the total shown in the FY2006 budget
submitted to Congress in early 2005 ($13,761 million). Compared to figures in the
FY2006 submission, the estimate for the first DD(X) remains unchanged, the estimate for
the second DD(X) has increased by about 7.5% (even though this ship is now to be
procured in FY2007, as opposed to FY2008 under the FY2006 budget submission), and
the estimates for the next three ships have increased by an average of about 2.8%.
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
included General Dynamics’ Bath Iron Works (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
2 For more on the proposed 313-ship fleet, see CRS Report RL32665, Navy Force Structure and
Shipbuilding Plans: Background and Issues for Congress, by Ronald O’Rourke.

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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) effectively prohibited a winner-take-all competition to build all DD(X)s. The
provision effectively required the participation of at least one additional shipyard in the
program but does not specify the share of the program that is to go to that additional
shipyard.
Table 1. DD(X)/CG(X) Program 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)
490
895 1002 1120 1068
794
471
369
416
443 7068a
CG(X)
0
0
0
0
60
24
186
328
470
409 1477a
Subotal RDTEN
490
895 1002 1120 1128
818
657
697
886
852 8545a
Shipbuilding and Conversion, Navy (SCN) account (including advance procurement)
DD(X) 1
0
0
0
220
285 1284 1502
0
0
0 3291d
Construction
0
0
0
0
12b 1271 1502
0
0
0
2785
DD/NREc
0
0
0
220
273
13
0
0
0
0
506
DD(X) 2
0
0
0
84
421 1284 1502
0
0
0 3291d
Construction
0
0
0
0
12b 1271 1502
0
0
0
2785
DD/NREc
0
0
0
84
409
13
0
0
0
0
506
DD(X) 3
0
0
0
0
0
0
51 2556
0
0 2607d
DD(X) 4
0
0
0
0
0
0
0
51 2650
0 2701d
DD(X) 5
0
0
0
0
0
0
0
0
51 2259 231d 0
DD
(X) 6+
0
0
0
0
0
0
0
0
0
50
50
CG(X) 1
0
0
0
0
0
0
0
0
0 3235
3235
Construction
0
0
0
0
0
0
0
0
0 2701
2701
DD/NREc
0
0
0
0
0
0
0
0
0
534
534
CG
(X) 2+
0
0
0
0
0
0
0
0
0
0
0
Subtotal SCN
0
0
0
304
706 2568 3055 2607 2701 5544 17485
TOTAL
490
895 1002 1424 1834 3386 3712 3304 3587 6396 26030
Source: Navy office of Legislative Affairs, March 6, 2006.
a. Figures do not include $1,111.4 million in RDT&E funding provided for DD-21/DD(X) program in
FY1995-FY2001. Figures also do not include funding for the CG(X) radar in Navy R&D program
element (PE) 0604307N. Additional funding required after FY2011. GAO has reported that total
DD(X)/ CG(X) RDT&E costs are roughly $10 billion.
b. Funding for procurement of long lead time materials (forgings) for AGSs for each DD(X).
c. Detailed design and nonrecurring engineering costs for the class.
d. In the FY2006 budget submission, the second DD(X) was to be procured in FY2008 rather than FY2007,
and the estimated procurement costs of the first five DD(X)s were $3,291 million, $3,061 million,
$2,543 million, $2,630 million, and $2,236 million, respectively.
On May 25, 2005, the Navy announced that, in light of Section 1019, it wanted to
shift to the “dual-lead-ship” acquisition strategy now proposed in the FY2007 budget,
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. The two yards might then compete for the right

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to build all subsequent DD(X)s, in which case this strategy could be viewed as a deferred
winner-take-all approach. Section 125 of the FY2006 defense authorization act (H.R.
1815/P.L. 109-163) again prohibited the Navy from using a winner-take-all acquisition
strategy for procuring its next-generation destroyer. The provision effectively requires
the participation of at least one additional shipyard in the program but does not specify
the share of the program that is to go to that additional shipyard.
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 eight
ships (although the Navy now plans only seven), and separately approved a DD(X)
Acquisition Program Baseline and Acquisition Strategy Report.
Issues for Congress
Accuracy Of Cost Estimates. Although the Navy, between 2004 and 2005,
substantially increased its estimated DD(X) procurement costs, some analysts believe the
Navy is still significantly underestimating these costs. The Cost Analysis Improvement
Group (CAIG) within the Office of the Secretary of Defense (OSD) reportedly believed
in 2005 that DD(X) procurement costs may be 20% to 33% higher than the Navy’s
revised estimates. The CAIG’s estimate for the cost of the lead DD(X) at that time might
have been $4.1 billion, while its estimate for the fifth DD(X) might have been $3.0 billion
(as opposed to the Navy’s estimate of about $2.24 billion). The Congressional Budget
Office (CBO) estimated in 2005 that the lead DD(X) might cost as much as $4.7 billion,
and that the fifth DD(X) might cost $3.4 billion.
Program Affordability and Cost Effectiveness. 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 DD(X)s and CG(X)s in the numbers planned while still adequately
funding other Navy needs. 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) cost
effective.
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. They also argue that the DD(X) would be cost effective because
the higher procurement cost of the DD(X) compared to previous Navy surface combatants
would be more than offset by the DD(X)’s improved capabilities. 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, particularly when
calculated on a present-value basis, as required by federal guidelines, and that the ship’s
capability improvements, though substantial, may not be 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. If DD(X)/CG(X) procurement is
limited for affordability reasons 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

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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.
Potential Implications For Force Levels. The Navy’s proposed 313-ship fleet
includes a requirement for a total of 88 cruisers and destroyers — 7 DD(X)s, 19 CG(X)s),
and 62 older Arleigh Burke (DDG-51) class Aegis destroyers. Assuming a 35-year
average life for cruisers and destroyers, maintaining a force of 88 cruisers and destroyers
over the long run would require steady-state procurement rate — that is, a long-run (35-
year) average procurement rate — of about 2.5 ships per year.
A draft Navy 30-year shipbuilding plan dated December 30, 2005 falls short of this
steady-state replacement rate over the next 30 years: The plan would procure an average
of about 1.5 DD(X)s and CG(X)s over the next 17 years, and then two DDG(X)s per year
after that. (The DDG(X), not to be confused with the DD(X), is the Navy’s notional long-
term replacement for today’s Arleigh Burke (DDG-51) class Aegis destroyers.) If the
Navy’s plan is implemented and extended to a full 35-year replacement period, the
cruiser-destroyer force will reach 88 ships in 2016, peak at 95 ships in 2021, fall below
88 ships in 2027, reach a minimum of 62 ships (about 30% below the 88-ship goal) in
FY2044-FY2046, and recover somewhat to a steady-state level of 70 ships — the steady-
state level eventually maintained by procuring 2 ships per year, and about 20% below the
88-ship goal — after 2050. If, due to affordability considerations, no more than one
DD(X) or CG(X) were procured in any given year, then a total of 17 (rather than 26)
DD(X)s and CG(X)s would be procured. The cruiser-destroyer force under this scneario
would reach 88 ships in 2016, peak at 92 ships in 2020-2021, fall below 88 ships in 2025,
reach a minimum of 54 ships (about 39% below the 88-ship goal) in FY2044-FY2046,
and recover somewhat to a steady-state level of 70 ships after 2050.
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). Skeptics might argue that
the ORD might not sufficiently account for how the DD(X)’s planned 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. As part of the effort mentioned
earlier to reduce the recurring cost of the DD(X) design by about $200 million, the Navy
decided to, among other things, reduce the AGS magazine capacity of the ship from 920
rounds to 600 rounds.
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

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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.
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 Coast Guard Deepwater
cutters;
! defer procurement of the second DD(X) to FY2008 to permit that ship to
benefit more fully 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 cruiser-destroyer that
preserves core DD(X)/CG(X) capabilities, and procure this new design,
rather than DD(X)s or CG(X)s, starting around FY2011.
Legislative Activity for FY2006
FY2006 Defense Authorization Bill (H.R. 1815/P.L. 109-163). Section 123
of the conference report (H.Rept. 109-360 of December 18, 2005) on the FY2006 defense
authorization bill (H.R. 1815/P.L. 109-163 of January 6, 2006) limits the cost of the fifth
ship in the Navy’s next-generation destroyer program to $2.3 billion, with adjustments for
inflation and other factors, with the limit to become effective with the budget that requests
full funding for the procurement of that ship. Section 125 prohibits the Navy from using
a winner-take-all acquisition strategy for procuring its next-generation destroyer. The
section defines a winner-take-all acquisition strategy as “the acquisition (including design
and construction) of such vessels through a single shipyard.” The provision effectively
requires the participation of at least one additional shipyard in the program but does not
specify the share of the program that is to go to that additional shipyard.
FY2006 Defense Appropriations Bill (H.R. 2863). The conference report
(H.Rept. 109-359 of December 18, 2006) on the FY2006 defense appropriations bill (H.R.
2863) approves the Navy’s advance procurement funding request for the DD(X) program
and increases the research and development funding request by $42.1 million. Of the
$42.1-million increase, $30.0 million is for CG(X) system concept and design, $6.6
million is for a permanent magnet motor, $2.0 million is for a floating area network, $1.5
million is for a wireless maritime inspection system, and $1.0 million each is for surface
vessel electric actuator technology development and “naval smartships that anticipate and
manage.”

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