Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs

The Navy’s FY2013 budget submission calls for procuring nine Arleigh Burke (DDG-51) class destroyers in FY2013-FY2017, in annual quantities of 2-1-2-2-2. The five DDG-51s scheduled for procurement in FY2013-FY2015, and one of the two scheduled for procurement in FY2016, are to be of the current Flight IIA design. The Navy wants to begin procuring a new version of the DDG-51 design, called the Flight III design, starting with the second of the two ships scheduled for procurement in FY2016. The two DDG-51s scheduled for procurement in FY2017 are also to be of the Flight III design. The Flight III design is to feature a new and more capable radar called the Air and Missile Defense Radar (AMDR). The Navy for FY2013 is requesting congressional approval to use a multiyear procurement (MYP) arrangement for the nine DDG-51s scheduled for procurement in FY2013-FY2017.

The Navy’s proposed FY2013 budget requests $3,048.6 million to complete the procurement funding for the two DDG-51s scheduled for procurement in FY2013. The Navy estimates the total procurement cost of these ships at $3,149.4 million, and the ships have received $100.7 million in prior-year advance procurement (AP) funding. The FY2013 budget also requests $466.3 million in AP funding for DDG-51s to be procured in future fiscal years. The Navy’s proposed FY2013 budget also requests $669.2 million in procurement funding to help complete procurement costs for three Zumwalt (DDG-1000) class destroyers procured in FY2007-FY2009, and $223.6 million in research and development funding for the AMDR.

Potential FY2013 issues for Congress concerning destroyer procurement include the following:

• the potential impact of a year-long continuing resolution (CR) and sequester on the DDG-51 program in FY2013; 
• whether actions should be taken to mitigate the projected shortfall in cruisers and destroyers; 
• whether to approve the Navy’s request for a DDG-51 MYP arrangement beginning in FY2013, and if so, whether it should include Flight III DDG-51s; 
• the possibility of adding a 10th ship to the proposed DDG-51 MYP arrangement; 
• whether there is an adequate analytical basis for procuring Flight III DDG-51s in lieu of the previously planned CG(X) cruiser; 
• whether the Flight III DDG-51 would have sufficient air and missile capability to adequately perform future air and missile defense missions; 
• cost, schedule, and technical risk in the Flight III DDG-51 program; 
• whether the Flight III DDG-51 design would have sufficient growth margin for a projected 35- or 40-year service life; and 
• schedule risk for recently procured Flight IIA DDG-51s.

Date of Report: March 14, 2013
Number of Pages: 64
Order Number: RL32109
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Multiyear Procurement (MYP) and Block Buy Contracting in Defense Acquisition: Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs

Moshe Schwartz
Specialist in Defense Acquisition

Multiyear procurement (MYP) and block buy contracting (BBC) are special contracting mechanisms that Congress permits the Department of Defense (DOD) to use for a limited number of defense acquisition programs. Compared to the standard or default approach of annual contracting, MYP and BBC have the potential for reducing weapon procurement costs by several percent.

Under annual contracting, DOD uses one or more contracts for each year’s worth of procurement of a given kind of item. Under MYP, DOD instead uses a single contract for two to five years’ worth of procurement of a given kind of item without having to exercise a contract option for each year after the first year. DOD needs congressional approval for each use of MYP. There is a permanent statute governing MYP contracting—10 U.S.C. 2306b. Under this statute, a program must meet several criteria to qualify for MYP.

Compared with estimated costs under annual contracting, estimated savings for programs being proposed for MYP have ranged from less than 5% to more than 15%, depending on the particulars of the program in question, with many estimates falling in the range of 5% to 10%. In practice, actual savings from using MYP rather than annual contracting can be difficult to observe or verify because of cost growth during the execution of the contract due to changes in the program independent of the use of MYP rather than annual contracting.

BBC is similar to MYP in that it permits DOD to use a single contract for more than one year’s worth of procurement of a given kind of item without having to exercise a contract option for each year after the first year. BBC is also similar to MYP in that DOD needs congressional approval for each use of BBC. BBC differs from MYP in the following ways:

• There is no permanent statute governing the use of BBC.

• There is no requirement that BBC be approved in both a DOD appropriations act and an act other than a DOD appropriations act.

• Programs being considered for BBC do not need to meet any legal criteria to qualify for BBC, because there is no permanent statute governing the use of BBC that establishes such criteria.

• A BBC contract can cover more than five years of planned procurements.

• Economic order quantity (EOQ) authority—the authority to bring forward selected key components of the items to be procured under the contract and purchase the components in batch form during the first year or two of the contract—does not come automatically as part of BBC authority because there is no permanent statute governing the use of BBC that includes EOQ authority as an automatic feature.

• BBC contracts are less likely to include cancellation penalties.

Potential issues for Congress concerning MYP and BBC include whether to use MYP and BBC in the future more frequently, less frequently, or about as frequently as they are currently used, and whether to create a permanent statute to govern the use of BBC, analogous to the permanent statute that governs the use of MYP.


Date of Report: March 13, 2013
Number of Pages: 23
Order Number: R41909
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Navy Aegis Ballistic Missile Defense (BMD) Program: Background and Issues for Congress

Ronald O'Rourke Specialist in Naval Affairs

The Aegis ballistic missile defense (BMD) program, which is carried out by the Missile Defense Agency (MDA) and the Navy, gives Navy Aegis cruisers and destroyers a capability for conducting BMD operations. Under MDA and Navy plans, the number of BMD-capable Navy Aegis ships is scheduled to grow from 24 at the end of FY2011 to 36 at the end of FY2018.

Under the Administration’s European Phased Adaptive Approach (EPAA) for European BMD operations, BMD-capable Aegis ships are operating in European waters to defend Europe from potential ballistic missile attacks from countries such as Iran. On October 5, 2011, the United States, Spain, and NATO jointly announced that, as part of the EPAA, four BMD-capable Aegis ships are to be forward-homeported (i.e., based) at Rota, Spain, in FY2014 and FY2015. BMDcapable Aegis ships also operate in the Western Pacific and the Persian Gulf to provide regional defense against potential ballistic missile attacks from countries such as North Korea and Iran.

The Aegis BMD program is funded mostly through MDA’s budget. The Navy’s budget provides additional funding for BMD-related efforts. MDA’s proposed FY2013 budget requests a total of $2,303.0 million in procurement and research and development funding for Aegis BMD efforts, including funding for Aegis Ashore sites that are to be part of the EPAA.

Issues for Congress for FY2013 include:

• the reduction under the proposed FY2013 budget in the ramp-up rate for numbers of BMD-capable Aegis ships over the next few years; 
• the cost effectiveness and U.S. economic impact of shifting four Aegis ships to Rota, Spain; 
• U.S. vs. European naval contributions to European BMD; 
• the lack of a target for simulating the endo-atmospheric (i.e., final) phase of flight of China’s DF-21 anti-ship ballistic missile; 
• the capability of the SM-3 Block IIB Aegis BMD interceptor; and 
• concurrency and technical risk in the Aegis BMD program.

Date of Report: March 14, 2013
Number of Pages: 95
Order Number: RL33745
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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs

The Littoral Combat Ship (LCS) is a relatively inexpensive Navy surface combatant equipped with modular “plug-and-fight” mission packages. The Navy wants to field a force of 55 LCSs. Twelve LCSs have been funded through FY2012, and the FY2013-FY2017 Future Years Defense Plan (FYDP) calls for procuring 16 more, in annual quantities of 4-4-4-2-2.

The Navy’s proposed FY2013 budget requests $1,785.0 million in procurement funding for the four LCSs requested for FY2013. The Navy’s proposed budget also requests $102.6 million in procurement funding for LCS mission modules.

There are two very different LCS designs—one developed by an industry team led by Lockheed, and another developed by an industry team that was led by General Dynamics. The Lockheed design is built at the Marinette Marine shipyard at Marinette, WI; the General Dynamics design is built at the Austal USA shipyard at Mobile, AL. LCSs 1, 3, 5, and so on are Marinette Marinebuilt ships; LCSs 2, 4, 6, and so on are Austal-built ships.

The 20 LCSs procured or scheduled for procurement in FY2010-FY2015—LCSs 5 through 24— are being acquired under a pair of 10-ship block buy contracts. Congress granted the Navy the authority for the block buy contracts in Section 150 of H.R. 3082/P.L. 111-322 of December 22, 2010, and the Navy awarded the block buy contracts to Lockheed and Austal USA on December 29, 2010. The contracts are both fixed-price incentive (FPI) block-buy contracts.

The LCS program has encountered controversy from time to time over the years over various program-related issues. Some observers, citing these issues, potential future Navy operations, and potential future constraints on defense spending, have proposed truncating the number of LCSs to be procured. In response to criticisms of the LCS program, the Navy over the years has acknowledged certain problems and stated that it was taking action to correct them, disputed other arguments made against the program, and maintained its support for the program and for procuring a total of 55 LCSs.

Current issues for Congress concerning the LCS program include the LCS’s prospective mission performance and cost-effectiveness, the combat survivability of the LCS, hull cracking and engine problems on LCS-1, and corrosion on LCS-2.


Date of Report: March 14, 2013
Number of Pages: 103
Order Number: RL33741
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Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs

Navy officials state that although there is much focus on the potential impacts on the military services of the sequestration of FY2013 DOD funding, the Navy is equally (if not more) concerned about the potential impact on the Navy of an extension of the current continuing resolution, or CR (H.J.Res. 117/P.L. 112-175 of September 28, 2012), through the end of the fiscal year. Shipbuilding and related programs that could experience execution problems under a year-long CR include the CVN-78 aircraft carrier program, the CVN Refueling Complex Overhaul (RCOH) program, the DDG-51 program, the DDG-1000 program, an amphibious assault ship (LHA) funded in a prior year, and the Moored Training Ship. On February 8, 2013, the Navy announced that, due to a lack of funding under the CR, it has postponed the RCOH of the aircraft carrier CVN-72. A sequester on FY2013 DOD funding could cause additional program-execution problems in Navy shipbuilding programs.

The planned size of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy’s shipbuilding plans have been matters of concern for the congressional defense committees for the past several years. In January 2013, the Navy presented to Congress a goal of achieving and maintaining a fleet of 306 ships, consisting of certain types and quantities of ships. The Navy’s proposed FY2013 budget requests funding for the procurement of 10 new battle force ships (i.e., ships that count against the 306 ship goal). The 10 ships include one Gerald R. Ford (CVN-78) class aircraft carrier, two Virginia-class attack submarines, two DDG- 51 class Aegis destroyers, four Littoral Combat Ships (LCSs), and one Joint High Speed Vessel (JHSV). These ships are funded through the Shipbuilding and Conversion, Navy (SCN) account.

The FY2013-FY2017 five-year shipbuilding plan contains a total of 41 ships—14 ships, or about 25%, less than the 55 ships in the FY2012 five-year (FY2012-FY2016) shipbuilding plan, and 16 ships, or about 28%, less than the 57 ships that were planned for FY2013-FY2017 under the FY2012 budget. Of the 16 ships no longer planned for FY2013-FY2017, 9 were eliminated from the Navy’s shipbuilding plan and 7 were deferred to years beyond FY2017. The Navy’s proposed FY2013 budget also proposes the early retirement of seven Aegis cruisers and the placement into Reduced Operating Status (ROS) of two LSD-type amphibious ships.

The Navy’s FY2013 30-year (FY2013-FY2042) shipbuilding plan, which was submitted to Congress on March 28, 2012 (more than a month after the submission of the FY2013 budget on February 13, 2012), does not include enough ships to fully support all elements of the Navy’s 306 ship goal over the long run. The Navy projects that the fleet would remain below 310 ships during most of the 30-year period, and experience shortfalls at various points in cruisers-destroyers, attack submarines, and amphibious ships.

In its July 2012 report on the cost of the FY2013 30-year shipbuilding plan, the Congressional Budget Office (CBO) estimates that the plan would cost an average of $20.0 billion per year in constant FY2012 dollars to implement, or about 19% more than the Navy estimates. CBO’s estimate is about 11% higher than the Navy’s estimate for the first 10 years of the plan, about 13% higher than the Navy’s estimate for the second 10 years of the plan, and about 33% higher than the Navy’s estimate for the final 10 years of the plan. Some of the difference between CBO’s estimate and the Navy’s estimate, particularly in the latter years of the plan, is due to a difference between CBO and the Navy in how to treat inflation in Navy shipbuilding.


Date of Report: March 12, 2013
Number of Pages: 110
Order Number: RL32665
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