Report to Congress on U.S. Navy Destroyer Programs

March 3, 2022 5:57 AM

The following is the March 2, 2022, Congressional Research Service report, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress.

From the report

The Navy began procuring Arleigh Burke (DDG-51) class destroyers, also known as Aegis destroyers, in FY1985, and a total of 87 have been procured through FY2021, including two in FY2021. From FY1989 through FY2005, DDG-51s were procured in annual quantities of two to five ships per year. Since FY2010, they have been procured in annual quantities of one to three ships per year.

DDG-51s are being procured in FY2018-FY2022 under a multiyear procurement (MYP) contract that Congress approved as part of its action on the Navy’s FY2018 budget. DDG-51s procured in FY2017 and subsequent years are being built to a design called the Flight III design, which incorporates a new and more capable radar called the SPY-6 radar.

The Navy’s proposed FY2022 budget requests the procurement of one DDG-51 in FY2022, rather than the two DDG-51s that are called for in FY2022 under the FY2018-FY2022 DDG-51 MYP contract, and that were projected for FY2022 under the Navy’s FY2021 budget submission. A key issue for Congress for the DDG-51 program in FY2022 is whether to fund the procurement of one DDG-51, two DDG-51s, or some other number of DDG-51s (such as zero or three).

When procured at a rate of two per year, DDG-51s cost roughly $2.0 billion each. Due to the reduced production economies of scale that would occur at a production rate of one ship per year, the one DDG-51 requested for procurement in FY2022 has an estimated cost of $2,401.7 million (i.e., about $2.4 billion). Under the Navy’s proposed FY2022 budget, the one requested DDG-51 would receive $384.9 million in prior-year Economic Order Quantity (EOQ) funding—a type of advance procurement (AP) funding that occurs under an MYP contract. Taking this prior-year EOQ funding into account, the Navy’s proposed FY2022 budget requests the remaining $2,016.8 million (i.e., about $2.0 billion) needed to complete the ship’s estimated procurement cost of $2,401.7 million. The Navy’s proposed FY2022 budget also requests $45.8 million in cost-to-complete funding to pay for cost growth on DDG-51s procured in prior years, bringing the total amount of procurement funding requested for the DDG-51 program to $2,062.5 million (i.e., about $2.1 billion)

Procuring one DDG-51 rather than two DDG-51s in FY2022 would prevent the Navy from fulfilling its obligations in the final year of the FY2018-FY2022 DDG-51 MYP contract. Navy officials state that as a result, the Navy would need to pay a $33 million penalty to the DDG-51 shipbuilders (unless the Navy and the shipbuilders were to reach an agreement to amend the terms of the MYP contract).

Navy officials have stated that requesting procurement of one DDG-51 rather than two DDG-51s was an affordability measure—a means of helping the Navy remain within its budget topline while meeting funding needs for other Navy programs. Procuring a second DDG-51 in FY2022 is the number one item on the Navy’s FY2022 Unfunded Priorities List (UPL)—the service’s list of programs it would prefer to be funded in FY2022, if additional funding were to become available.

The UPL states that procuring two DDG-51s rather than one DDG-51 in FY2022 would require an additional $1,659.2 million (i.e., about $1.7 billion) in shipbuilding funding. That figure is not the cost of the second DDG-51—the second DDG-51’s procurement cost would be roughly $2.0 billion. Adding the second DDG-51, however, would reduce the estimated procurement cost of the first DDG-51 due to the resulting increased production economies of scale. The figure of $1,659.2 million is thus the net increase in shipbuilding funding that would be needed to procure two DDG-51s rather than one DDG-51 in FY2022.

Download the document here.

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