Navy Aegis Cruiser and Destroyer
Modernization: Background and Issues for
Congress
Ronald O'Rourke
Specialist in Naval Affairs
April 29, 2009
Congressional Research Service
7-5700
www.crs.gov
RS22595
CRS Report for Congress
P
repared for Members and Committees of Congress

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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

Summary
The Navy has begun a multi-billion dollar program modernize its 84 existing Aegis cruisers and
destroyers over a period of more than 20 years. The modernizations are intended to ensure that
the ships can be operated cost-effectively throughout their entire 35-year intended service lives.
The program poses several potential oversight issues for Congress, including the issue of which
shipyards should perform the work, and how the modernization program fits into the Navy’s
larger plans for the future of its surface combatant force. This report will be updated as events
warrant.


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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 1
Aegis Cruisers and Destroyers............................................................................................... 1
Aegis Ship Industrial Base .................................................................................................... 2
Construction Shipyards ................................................................................................... 2
Overhaul and Repair Shipyards ....................................................................................... 2
Combat System Manufacturers........................................................................................ 2
Purpose of Aegis Ship Modernization Effort.......................................................................... 2
Planned Modernization Work ................................................................................................ 2
Cost ...................................................................................................................................... 3
Schedule ............................................................................................................................... 4
Shipyards Performing The Work ........................................................................................... 4
Potential Issues for Congress....................................................................................................... 4
Total Estimated Program Cost ............................................................................................... 4
Overall Vision Behind Program............................................................................................. 4
Shipyards For DDG-51 Modernizations ................................................................................ 5
Scope of DDG-51 Modernizations ........................................................................................ 5
Service Life Extension to 40 Years ........................................................................................ 5
Aegis Open Architecture ....................................................................................................... 6
Legislative Activity for FY2010 .................................................................................................. 6

Tables
Table 1. Funding for Aegis Ship Modernization........................................................................... 3

Appendixes
Appendix. Legislative Activity for FY2009 ................................................................................. 7

Contacts
Author Contact Information ........................................................................................................ 7

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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

Introduction
The Navy has begun a multi-billion dollar program modernize its 84 existing Aegis cruisers and
destroyers over a period of more than 20 years. The modernizations are intended to ensure that
the ships can be operated cost-effectively throughout their entire 35-year intended service lives.
The program poses several potential oversight issues for Congress, including the issue of which
shipyards should perform the work, and how the modernization program fits into the Navy’s
larger plans for the future of its surface combatant force.
Background
Aegis Cruisers and Destroyers
The Navy’s existing cruisers and destroyers are called Aegis ships because they are all equipped
with the Aegis combat system—an integrated combination of sensors, weapons, computers,
software, and display systems that was named for the mythological shield carried by Zeus. Aegis
cruisers and destroyers are multi-mission platforms capable of conducting missions such as air
defense (which the Navy calls anti-air warfare), ballistic missile defense (BMD), anti-submarine
warfare, anti-surface warfare, naval surface fire support for forces ashore, and Tomahawk cruise
missile strikes.
The Navy’s Aegis ships include Ticonderoga (CG-47) class cruisers and Arleigh Burke (DDG-51)
class destroyers. A total of 27 CG-47s were procured for the Navy between FY1978 and FY1988;
the ships entered service between 1983 and 1994. The first five, which were built to an earlier
technical standard, were judged by the Navy to be too expensive to modernize and were removed
from service in 2004-2005. The Navy plans to keep the remaining 22 ships in service to age 35.
A total of 62 DDG-51s were procured for the Navy between FY1985 and FY2005; the first
entered service in 1991, 52 were in service as of the end of FY2007, and the 62nd is scheduled to
enter service in 2011. The Navy until recently had planned to keep them in service to age 35, but
is now considering extending their service lives to 40 years.
Although procurement of DDG-51s ended in FY2005, the Navy now wants to restart DDG-51
procurement. Under the Navy’s plan, which appears to have been endorsed by Secretary of
Defense Robert Gates, the first DDG-51 to be procured under the restart, which would be the 63rd
DDG-51 overall, would be procured in FY2010 and would enter service in 2016 or 2017. The
resumption of DDG-51 procurement is discussed in detail in another CRS report.1
The 84 in-service Aegis ships funded in FY2005 and prior years equate to about 27% of the
Navy’s planned total force of 313 ships.2 Aegis ships are to account for the majority of the Navy’s
cruiser-destroyer force until about 2032, and the last of the 84 ships funded in FY2005 and prior
years are to remain in service into the 2040s.

1 CRS Report RL32109, Navy DDG-1000 and DDG-51 Destroyer Programs: Background, Oversight Issues, and
Options for Congress, by Ronald O'Rourke.
2 For more on the Navy’s planned 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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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

Aegis Ship Industrial Base
Construction Shipyards
The builders of the Navy’s Aegis ships are General Dynamics’ Bath Iron Works (GD/BIW) of
Bath, ME, and the Ingalls shipyard of Pascagoula, MS, that forms part of Northrop Grumman
Shipbuilding (NGSB). Of the 84 in-service Aegis ships funded in FY2005 and prior years,
GD/BIW built 41 (7 cruisers and 34 destroyers), and Ingalls built 43 (15 cruisers and 28
destroyers). Building surface combatants is GD/BIW’s primary business. Ingalls builds both
surface combatants and large-deck amphibious assault ships.
Overhaul and Repair Shipyards
Several U.S. shipyards maintain and repair Aegis ships, with much of the work done under multi-
ship/multi-option (MSMO) contracts. Under a MSMO contract, a shipyard is responsible for
conducting depot-level maintenance work on several ships in a class.
Combat System Manufacturers
The primary contractor for the Aegis system is Lockheed Martin’s Maritime Systems & Sensors
division of Moorestown, NJ. Lockheed and the firms that previously owned the Moorestown
facility have been the primary Aegis contractor since the 1970s. Other makers of Navy surface
ship combat systems include Raytheon, the maker of, among other things, the combat system for
the Navy’s new DDG-1000 class destroyers, and General Dynamics, the maker of the combat
system for the General Dynamics version of the Littoral Combat Ship (LCS).3 Although
Lockheed is the primary contractor for the Aegis system, Raytheon has a share of the system.
Purpose of Aegis Ship Modernization Effort
A primary objective of the Aegis ship modernization effort is to improve the ships’ combat
capabilities so that the ships will remain mission-effective to the end of their intended service
lives. A second major objective is to make the ships less expensive to operate, maintain, and
modernize over the remainder of their lives. The modernization itself is not intended to extend the
ships’ expected lives from 35 years to some higher figure, such as 40 years. Additional
maintenance work would be needed to extend the ships’ lives to 40 years or some other higher
figure.
Planned Modernization Work
The Navy’s Aegis ship modernization plan includes modernization of the ships’ basic hull,
mechanical, and electrical (HM&E) equipment, and modernization of their combat systems. In
both areas, the Navy plans to install new systems or components that are more capable than the

3 For more on the DDG-1000 and LCS programs program, see CRS Report RL32109, Navy DDG-1000 and DDG-51
Destroyer Programs: Background, Oversight Issues, and Options for Congress, by Ronald O'Rourke, and CRS Report
RL33741, Navy Littoral Combat Ship (LCS) Program: Background, Oversight Issues, and Options for Congress, by
Ronald O'Rourke.
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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

ones they are to replace. Some of the planned changes are intended to permit the ships to be
operated with a smaller crew, thereby reducing their annual operation and support (O&S) costs.
Planned changes to the ships’ combat systems are intended to, among other things, begin shifting
their Aegis computers and software to a more open architecture (OA), meaning, in general terms,
an arrangement that uses non-proprietary computers and software. The Navy believes that
moving Aegis to an OA design will permit the Aegis system to be updated over the remainder of
the ships’ lives more easily and less expensively, using contributions from a variety of firms.
In August 2008, it was reported that the Navy has decided to expand the scope of the DDG-51
modernization program to include the installation of a BMD capability, so that all DDG-51s
would eventually be BMD-capable, and that the Navy has not committed to similarly expanding
the scope of the CG-47 modernization program due to financial constraints.4 Equipping all DDG-
51s with a BMD capability would significantly expand the previous program of record for sea-
based BMD platforms, which called for a total of 18 Aegis ships (3 CG-47s and 15 DDG-51s) to
be BMD-capable.5
Cost
The Navy estimated in 2007 that modernizing the first 8 CG-47s would cost an average of about
$221 million per ship. Table 1 shows annual funding for the Aegis ship modernization program
for FY2005-FY2009, as planned under the FY2009 budget.
Table 1. Funding for Aegis Ship Modernization
(as shown in FY2009 budget; figures in millions of then-year dollars; totals may not add due to rounding)

FY05 FY06 FY07 FY08 FY09
Aegis cruisers
RDT&EN 0
13.6
7.7
4.7
4.8
OPN
0
124.5 231.2 216.0 232.4
WPN 0
5.3
18.4
23.4
45.2
OMN
0 41.2 86.7 101.4 111.4
Cruiser
subtotal
0
184.6 344.0 345.5 393.8
Aegis destroyers


SCN 49.8
49.3
0
0
0
OPN 0
3.0
32.0
52.7
165.5
OMN 0
10.0
3.9
20.9
39.9
Destroyer
subtotal
49.8 62.3 35.9 73.6 205.4
TOTAL
49.8 246.9 379.9 419.1 599.2
Source: Navy data provided to CRS on May 20, 2008.

4 Otto Kreisher, “BMD Boost,” Seapower, August 2008: 12-14.
5 For more on sea-based BMD programs, see CRS Report RL33745, Sea-Based Ballistic Missile Defense - Background
and Issues for Congress, by Ronald O'Rourke.
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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

Notes: RDT&EN is the Research, Development, Test and Evaluation, Navy appropriation account; SCN is the
Shipbuilding and Conversion, Navy account; OPN is the Other Procurement, Navy account; WPN is the
Weapon Procurement, Navy account, and OMN is the Operation and Maintenance, Navy account. RDT&EN
funds are for the ship program only, and do not include funds for Aegis Weapon System development.
Schedule
Under the Navy’s plan, the oldest cruisers and destroyers would be modernized first, followed by
progressively younger ships. The Navy wants to divide the modernization work for each ship into
two shipyard periods—one for HM&E work, the other for combat system work. The first cruiser
HM&E upgrade began in FY2006. Two fully modernized cruisers per year are to be delivered in
FY2009 and FY2010, and three per year are to be delivered starting in FY2011. The Navy wants
each destroyer to receive its combat system modernization two years after its HM&E
modernization. The Navy wants to begin the first two destroyer HM&E modernizations in
FY2010 and its first two destroyer combat system modernizations (on the same two ships) in
FY2012. The Navy reportedly wants to increase the rate to three ships per year in FY2013-
FY2015, and to nine ships per year starting in FY2016.6
Shipyards Performing The Work
The Navy plans to use competitively awarded MSMO contracts for executing the Aegis
modernizations. Under the Navy’s plan, all U.S. shipyards would be eligible to compete for the
contracts. Navy policy calls for modernizations lasting longer than six months to be competed on
a coast-wide basis, meaning that competitions would be open to all yards located along the same
coast where the Aegis ships in question are homeported.
Potential Issues for Congress
Total Estimated Program Cost
One potential oversight issue for Congress concerns the total estimated cost of the Aegis ship
modernization program: What is the Navy’s total estimated cost, and how was this figure affected
by the Navy’s reported decision in 2008 to expand the scope of the DDG-51 modernization
program to include the installation of a BMD capability?
Overall Vision Behind Program7
Some industry sources have questioned the Navy’s logic behind the Aegis ship modernization
program, arguing that the Navy lacks a sufficiently thought-through overall vision—a desired
end-point—for the surface combatant force, and that in the absence of such a vision, the Navy is
planning to spend money on Aegis ship modernizations in a scattershot manner, without knowing
whether this will lead to the best-possible future surface fleet for the Navy. These sources argue

6 Otto Kreisher, “BMD Boost,” Seapower, August 2008: 12-14.
7 This issue, and most of the subsequent potential issues for Congress, are based in part on CRS interviews conducted
in January 2007 with several major defense firms that have an interest in the Aegis ship modernization program.
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Navy Aegis Cruiser and Destroyer Modernization: Background and Issues for Congress

that, before spending money on Aegis ship modernizations, the Navy should develop a more fully
considered overall vision for the future of the surface fleet that looks at the surface force and the
Navy as a whole as parts of a larger network of defense capabilities involving other U.S. military
forces. One potential alternative to the Navy’s plan would be to forego some or all of the Aegis
ship modernizations, accelerate the planned procurement of new cruisers and destroyers, and
replace the unmodernized Aegis ships with the accelerated replacement ships.8
Shipyards For DDG-51 Modernizations
Some industry sources propose allocating all the DDG-51 modernizations to GD/BIW and
NGSB, with each firm receiving one-half of the ships. These sources argue that this would reduce
the cost of the DDG-51 modernizations by permitting the two firms to achieve sustained learning-
curve benefits in the program, and also support the shipbuilding industrial base by providing
additional work to the two yards that have built all Navy cruisers and destroyers procured in
recent years. Competitive pressure on GD/BIW and NGSB, these industry sources argue, can be
maintained by using Profit Related to Offer (PRO) bidding, under which the two yards would bid
prices for performing the modernizations allocated to them, with the lower bid winning a higher
profit margin.
Scope of DDG-51 Modernizations
Some industry sources have suggested expanding the scope of the DDG-51 modernizations in
various ways to further increase the ships’ capabilities or further reduce their crew sizes and
operating costs. One proposal would add some electric-drive propulsion equipment to the ships’
existing mechanical-drive propulsion systems to more fully interconnect the mechanical-drive
components, which could reduce the ships’ fuel use and create other operational advantages.9
Service Life Extension to 40 Years
Another potential option for the Aegis ship modernization program would be to expand its scope
to include work that would be needed to extend the service lives of the Aegis ships from 35 years
to a higher number, such as 40 years. Extending the Aegis ships’ service lives to 40 years could
permit the Navy to maintain higher numbers of cruisers and destroyers in future years. The
Navy’s report on its FY2009 30-year shipbuilding plan, submitted to Congress in early February
2008, incorporates a new assumption that the service lives of all 62 Aegis destroyers will be
extended from 35 years to 40 years.10 Subsequent to the submission of this report, however, a

8 The Navy plans to replace the 22 CG-47s with 19 CG(X) cruisers to be procured between FY2011 and FY2023, and
the 62 DDG-51s with a comparable number of DDG(X) destroyers, the first of which would be procured in FY2023.
The DDG(X) is not to be confused with DD(X), the prior name of the DDG-1000 destroyer (which is not intended as a
replacement for either the CG-47s or the DDG-51s). For more on the CG(X) program, see CRS Report RL34179, Navy
CG(X) Cruiser Program: Background, Oversight Issues, and Options for Congress, by Ronald O'Rourke.
9 For more on this proposal, see CRS Report RL33360, Navy Ship Propulsion Technologies: Options for Reducing Oil
Use - Background for Congress, by Ronald O'Rourke.
10 U.S Navy, Report to Congress on Annual Long-Range Plan for Construction of Naval Vessels for FY 2009, p. 9.
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Navy official was quoted as stating that the Navy had not yet officially approved the idea of
extending the service lives of those ships.11
Aegis Open Architecture
Some observers have expressed concerns about the Navy’s plan for moving to an open
architecture (OA) on the Aegis system, arguing that it will not shift the Aegis ships to a truly open
architecture, or do so quickly enough.12 For firms that make Navy surface ship combat systems,
or parts of them, the issue of how to implement open architecture on Aegis ships and other Navy
surface ships has potentially very large business implications. Potential candidates for the basis of
an eventual common open-architecture combat system for Navy surface ships include (but are not
necessarily limited to) a modularized version of Lockheed’s Aegis system, Raytheon’s Total Ship
Computing Environment Infrastructure, or TSCEI (the core of the combat system being
developed for the DDG-1000 destroyers), and the Core Mission System developed by General
Dynamics and Northrop for the General Dynamics version of the LCS. The Senate Armed
Services Committee’s report on the FY2008 defense authorization bill directed the Navy to report
to Congress quarterly on the Navy’s plan and progress in implementing OA.13 The Navy
submitted the first such report in February 2008; subsequent reports have followed a three-month
intervals.
On September 22, 2008, Raytheon filed a protest with the Government Accountability Office
(GAO) for lack of competition in the Navy’s plan to award a sole-source contract to Lockheed for
modernizing the Aegis combat systems on the fleet’s cruisers and destroyers.14 On December 22,
2008, GAO denied Raytheon’s protest.15
Legislative Activity for FY2010
The Navy’s proposed FY2010 budget is expected to be submitted to Congress in early- to mid-
May.

11 Zachary M. Peterson, “Destroyer Extension Part of 313-Ship Plan,” NavyTimes.com, February 11, 2008.
12 See, for example, Dan Taylor, “Roughead: Navy Could Be Implementing Open Architecture Faster,” Inside the
Navy, September 29, 2008. See also Dan Taylor, “Report: All Cruisers, Destroyers To Have Open Architecture by
2025,” Inside the Navy, September 8, 2005; and Geoff Fein, “Navy OA Report To Congress Shows Service Making
Gains Across The Enterprise,” Defense Daily, September 5, 2008.
13 S.Rept. 110-77 of June 5, 2007 on S. 1547, pp. 272-273.
14 August Cole, “Raytheon Files Protest On Aegis Work,” Wall Street Journal, September 24, 2008: B3; Geoff Fein,
“As A Measure if Last Resort, Raytheon Files Protest Over Lack of Aegis Competition,” Defense Daily, September 25,
2008: 2-3; Rebekah Gordon, “Raytheon Protests Sole-Source Award For Aegis Modernization,” Inside the Navy,
September 29, 2008.
15 Zachary M. Peterson, with additional reporting by Rebekah Gordon, “GAO Denies Raytheon Protest of Aegis
Contract Awards to Lockheed,” DefenseAlert—Daily News (InsideDefense.com), December 24,, 2008; Bettina H.
Chavanne, “Raytheon Loses Protest Bid On Aegis Modernization Contract,” Aerospace Daily & Defense Report,
January 6, 2009: 6; Geoff Fein, “Navy’s Decision To Sole-Source Aegis Work Was ‘Unobjectionable,’ GAO Says,”
Defense Daily, January 12, 2009: 6.
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Appendix. Legislative Activity for FY2009
FY2009 Defense Authorization Bill (H.R. 5658/S. 3001)
The Senate Armed Services Committee discussed the Aegis destroyer modernization program on
pages 79-80 of its report (S. Rept., 110-335 of May 12, 2008) on S. 3001. The committee stated
that it views the Navy’s plan to extend DDG-51 service life to 40 years as “very high risk,”
questioned whether the Navy has fully evaluated the option of performing the DDG-51
modernizations in the yards where the ships were built, and directed the Navy to submit a report
on this option and on the Navy’s plan to perform the work through MSMO contracts. The report
discussed the Navy’s plan to move toward an Aegis open architecture on pages 121-123. The
committee expressed concern regarding the Navy’s rate of progress in achieving this goal, and
directed that no more than 50% of FY2009 funding authorized for certain Navy research and
development work on surface ship combat systems may be obligated “until 30 days after
submission by the Secretary of the Navy of a detailed program plan for implementing OA for the
Aegis combat system. The program plan shall be included in subsequent quarterly reports to the
congressional defense committees on Naval Open Architecture, and shall include methodology
and scheduling for incrementally opening the Aegis combat system.”
FY2009 Defense Appropriations Act (H.R. 2638/P.L. 110-329)
The FY2009 defense appropriations bill became Division C of H.R. 2638/P.L. 110-329 of
September 30, 2008, a consolidated appropriations act. The bill approves the Navy’s OPN
funding request for Aegis destroyer modernization, reduces the Navy’s OPN funding request for
Aegis cruiser modernization by $66.7 million, and reduces the Navy’s WPN funding request for
Aegis cruiser modernization by $15.1 million.

Author Contact Information

Ronald O'Rourke

Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610




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