Navy DDG-1000 (DD(X)) and CG(X) Programs: Background and Issues for Congress

Navy DDG-1000 (DD(X)) and CG(X) Programs: Background and Issues for Congress

Order Code RS21059
Updated August 18, 2006
CRS Report for Congress
Received through the CRS Web
Navy DDG-1000 (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’s proposed FY2007 budget requests $2,568 million in partial
procurement funding for the first two DDG-1000 destroyers. The Senate-reported
version of the FY2007 defense appropriations bill (H.R. 5631) recommends approving
this request, but the House-reported version recommends using this funding to instead
fully fund one DDG-1000. For a longer discussion of the DDG-1000 and CG(X), see
CRS Report RL32109, Navy DDG-1000 (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 DDG-1000 (formerly 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 DDG-1000 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 DDG-1000 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 about 142, compared
to more than 300 on current Navy destroyers and cruisers. In large part due to its reduced
crew size, the DDG-1000 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
DDG-1000 design, but would have a more powerful radar than the DDG-1000, and might
be larger and more expensive than the DDG-1000.
1 For more on the LCS program, 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

CRS-2
The Navy wants to procure a total of 7 DDG-1000s and 19 CG(X)s as part of a
proposed 313-ship fleet.2 Under the Navy’s proposed plan, the first two DDG-1000s 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, and the first CG(X) is to be procured in FY2011.
The estimated cost of each of the first two DDG-1000s 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 DDG-1000s will cost an average of roughly $2.5 billion each. Table
1 shows DDG-1000 and CG(X) funding through FY2011.
Since September 30, 2005, the Navy has managed the DDG-1000 program through
a series of separate contracts with major DDG-1000 contractors, including Northrop
Grumman’s Ship Systems (NGSS) division (which includes the Ingalls Shipyard in
Pascagoula, MS), General Dynamics’ Bath Iron Works (GD/BIW) of Bath, ME,
Raytheon, and BAE Systems (the maker of the AGS).
Under an earlier DDG-1000 acquisition strategy that was approved in February 2004,
the first DDG-1000 would be built by NGSS, the second would be built GD/BIW, and
contracts for building the first six DDG-1000s 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 DDG-1000s. On April 20, 2005, DOD deferred this proposal as premature, but
agreed to a Navy proposal to separate the DDG-1000 system-development and software-
development contracts from the DDG-1000 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 DDG-1000s. The
provision effectively required the participation of at least one additional shipyard in the
program but did not specify the share of the program that is to go to that additional
shipyard.
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 DDG-1000s would be procured in FY2007, with one to be designed and
built by NGSS and the other by GD/BIW. The Navy is currently reviewing its acquisition
strategy for the third and subsequent DDG-1000s. 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.
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.

CRS-3
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
DDG-1000, 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 DDG-1000
Acquisition Program Baseline and Acquisition Strategy Report.
Table 1. DDG-1000/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
DDG-1000
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)
DDG-1000 1
0
0
0
220
285 1284 1502
0
0
0
3291
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
DDG-1000 2
0
0
0
84
421 1284 1502
0
0
0
3291
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
DDG-1000 3
0
0
0
0
0
0
51 2556
0
0
2607
DDG-1000 4
0
0
0
0
0
0
0
51 2650
0
2701
DDG-1000 5
0
0
0
0
0
0
0
0
51 2259
2310
DDG-1000 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)/DDG-1000
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 DDG-1000/ CG(X) RDT&E costs are roughly $10 billion.
b. Funding for procurement of long lead time materials (forgings) for AGSs for each DDG-1000.
c. Detailed design and nonrecurring engineering costs for the class.
Issues for Congress
Accuracy Of Cost Estimates. Some analysts believe the Navy is significantly
underestimating DDG-1000 procurement costs. The Congressional Budget Office (CBO)
estimated in 2005 that the lead DDG-1000 might cost as much as $4.7 billion, and that
the fifth DDG-1000 might cost $3.4 billion. The Cost Analysis Improvement Group
(CAIG) within the Office of the Secretary of Defense (OSD) reportedly believed in 2005

CRS-4
that DDG-1000 procurement costs may be 20% to 33% higher than the Navy’s revised
estimates. The Navy states that it is confident about its DDG-1000 cost estimates.
Program Affordability and Cost Effectiveness. If DDG-1000 procurement
costs turn out to be closer to the higher CAIG or CBO estimates, this could make it
difficult for the Navy to procure DDG-1000s 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 in 2005 as figures that would
make the DDG-1000 cost effective. The Navy argues that the ship is more affordable than
it appears from looking only at procurement costs, because it will have lower O&S costs
than existing Navy cruisers and destroyers. They also argue that the DDG-1000 would
be cost effective because the higher procurement cost of the DDG-1000 compared to
previous Navy surface combatants would be more than offset by the DDG-1000’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 DDG-1000’s lower O&S costs only partially offset its
higher procurement costs, particularly when calculated on a present-value basis, 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.
Potential Implications For Force Levels. The Navy’s proposed 313-ship fleet
includes a requirement for a total of 88 cruisers and destroyers — 7 DDG-1000s, 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.
The Navy’s 30-year shipbuilding plan falls short of this steady-state replacement
rate: It would procure an average of about 1.5 DDG-1000s 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 DDG-1000, 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 2044-2046, and recover somewhat after 2050 to a level
of 70 ships — the steady-state level eventually maintained by procuring 2 ships per year,
and about 20% below the 88-ship goal. If, due to affordability considerations, no more
than one DDG-1000 or CG(X) were procured in any given year, then a total of 17 (rather
than 26) DDG-1000s and CG(X)s would be procured. The cruiser-destroyer force under
this scenario 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 2044-
2046, and recover well after 2050 to a steady-state level of 70 ships.
Mission Requirements. The DDG-1000’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 DDG-1000. Skeptics might argue
that the ORD might not sufficiently account for how the DDG-1000’s planned capability
(and therefore cost) might reduce DDG-1000 numbers and therefore reduce the collective
capability of the total DDG-1000 force. A potential question is whether some of the
DDG-1000’s planned capabilities are more critical than others, and whether the size and

CRS-5
cost of the ship might be reduced by reducing the less-critical capabilities. As part of a
late-2005/early-2006 effort to reduce the recurring cost of the DDG-1000 design by about
$214 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 DDG-1000 will incorporate several significant new
technologies. GAO has expressed concerns about whether these technologies will be
sufficiently mature in time for the lead DDG-1000, 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 DDG-1000 program. The Navy
argues that development of DDG-1000 technologies is proceeding well, that the new
technologies will be sufficiently mature to support the two lead DDG-1000s, and that
allowing more time for further maturing the technologies before proceeding with DDG-
1000 procurement would add time and cost to the DDG-1000 and other programs.
Potential Implications for Industrial Base. If DDG-1000/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 shipyard of Pascagoula, MS, which forms part of NGSS and GD/BIW — then the
DDG-1000 program would result in relatively low levels of surface combatant
construction work at the two yards. If DDG-1000 production at some point is
consolidated into one yard, the other yard could face a difficult business situation.
Options for Congress
Potential options for Congress include the following:
! approve the program as proposed by the Navy;
! use a block-buy contract for DDG-1000s procured during the five-year
period FY2007-FY2011;
! defer procurement of the second DDG-1000 to FY2008;
! as an annual affordability measure, limit DDG-1000/CG(X) procurement
to a combined total of no more than one ship per year;
! as total-program affordability measure, limit DDG-1000/CG(X)
procurement to a combined total of 9 or 11 ships — one for each of 9
planned expeditionary strike groups (ESGs), or one for each of 11
planned carrier strike groups (CSGs);
! procure no more than one or two DDG-1000s for use as technology
demonstrators for future, less-expensive surface combatants, and
supplement the industrial base with other work; and
! start design work now on a lower-cost naval gunfire support ship and/or
a lower-cost cruiser-destroyer, and start procuring these ships, rather than
additional DDG-1000s or CG(X)s, when these new designs are ready for
procurement.
Legislative Activity for FY2007
FY2007 Defense Authorization Bill (H.R. 5122/S. 2766). The House Armed
Services Committee, in its report (H.Rept. 109-452 of May 5, 2006) on H.R. 5122,

CRS-6
recommended full procurement funding for the first DDG-1000 and design funding for
the second. The committee stated:
The committee does not believe the DD(X) is affordable.... Because of its
expense, the committee does not believe that DD(X) will be procured in sufficient
numbers to meet the operational need.... The committee supports the construction of
up to two DD(X)s to demonstrate technologies that could be incorporated into future,
more affordable, major surface combatants. (Pages 69-70)
The Senate Armed Services Committee, in its report (S.Rept. 109-254 of May 9,
2006) on S. 2766, recommended approving the Navy’s FY2007 funding request for the
first two ships. The committee stated:
The committee agrees with the Navy’s determination that competition is an underlying
benefit of dual sourcing, and that it is critical to meeting the fifth ship cost limitation
established for the next generation destroyer program. The committee is equally
concerned with the risk that the dual lead ship strategy adds to the program.... The
committee urges the [Defense Acquisition Board] to carefully weigh affordability and
risk mitigation considerations in arriving at a decision to approve award of the lead
ship contracts. The committee directs the Secretary of the Navy to submit a report to
the congressional defense committees, 30 days prior to lead ship contract(s) award,
on the Navy’s competition strategy for DD(X) follow ship procurement. (Page 68)
FY2007 Defense Appropriations Bill (H.R. 5631). The House
Appropriations Committee, in its report (H.Rept. 109-504 of June 16, 2006) on H.R.
5631, recommends approving the Navy’s request for FY2007 DDG-1000 procurement
funding to fully fund the procurement of one DDG-1000 rather than partially fund the
procurement of the first two DDG-1000s. The committee’s report stated that
The use of incremental funding mortgages the future of the procurement budget of the
Defense Department in a manner that is not acceptable to the Committee. In addition,
the precedent of incremental funding for these programs could be applied to a variety
of other procurements, leading to a loss of budget transparency and reducing the
ability to perform oversight. Therefore, the recommendations in this bill include full
funding for one DD(X) destroyer.... (Page 4)
The report also states:
The budget requested $2,568,111,000 to incrementally fund 2 [DD(X)
destroyers], with the balance of funding to be provided in fiscal year 2008. The
Committee cannot support such a far-reaching policy change which has implications
beyond the Navy’s shipbuilding program. Further, the Navy’s proposal requires
special legislative authority to be executed, and this authority is not included in the
House-passed National Defense Authorization Act, 2007 (H.R. 5122). (Page 139)
Senate. The Senate Appropriations Committee, in its report (S.Rept. 109-292 of
July 25, 2006) on H.R. 5631, recommends approving the Navy’s request for FY2007
procurement funding for the first two DDG-1000s and “reminds the Navy that this is a
unique acquisition strategy and should not be used as a precedent for incrementally
funding any future DDG-1000 or any other shipbuilding program.” (Page 115) The
report recommends increasing the Navy’s request for FY2007 DDG-1000 research and
development funding by a net $1 million (pages 179 and 186).
crsphpgw