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Transforming the Navy's Surface Combatant Force
March 2003
Section 3 of 6



Modernizing the Surface
Combatant Force and the
Implications for the Navy's Budget

Like the rest of the military, the Navy is pursuing a variety of initiatives to transform itself into a more effective and lethal force. Those initiatives include improving sensors and information networks, developing a new and more capable aircraft carrier as well as new strike and reconnaissance aircraft, and changing the way that the Navy and Marine Corps are organized and fight. One of the Navy's highest priorities is transforming the surface combatant force. That force, which represents more than one-third of the fleet, comprises the Navy's cruisers, destroyers, and frigates. Over the next 10 to 15 years, the Navy intends to retire one class of destroyers, modernize its cruisers and frigates, introduce three new types of surface combatants (in particular, a new small warship), and experiment with different operating concepts. If those plans were fully implemented, they would result in a force of around 160 surface combatants in 25 years, compared with 115 ships today.

That transformation effort has serious budgetary implications for the Navy's shipbuilding programs. The resources needed to make those changes would be much greater than what the Navy spends on surface combatants now. The Congressional Budget Office (CBO) projects that in the absence of large increases in the Navy's shipbuilding budget through 2020, transforming the surface combatant force could crowd out funding for other ship construction programs, particularly for attack submarines.

In addition to their budgetary implications, the Navy's plans for surface combatants are important because the new ships represent the primary means by which Navy officials expect to defeat the threat of relatively inexpensive weapon systems that potential opponents might use to inhibit the Navy's freedom of action. According to the 2001 Quadrennial Defense Review (QDR), overcoming that threat should be a key objective of transformation. That objective echoes the Navy's effort in the 1980s to build new surface combatants capable of defeating large-scale attacks by antiship missiles launched from Soviet ships and aircraft.

This CBO study examines the composition, missions, and modernization programs of the Navy's surface combatant force. It also analyzes three alternative approaches to the Navy's transformation plan that highlight key issues and trade-offs associated with transformation. Those approaches were designed to improve the surface combatant force while maintaining roughly the current funding level: an average budget of $6.6 billion a year (in 2003 dollars) for both procurement and operation and support between 2003 and 2025.(1)

Transformation and What It Means for the Navy

No universal agreement exists about what military "transformation" means or why it is necessary. In the past few years, President Bush has outlined a vision of military transformation in which the number of major combat platforms is much less important than mobility, speed, and the ease of sustaining forces. In his words, the transformed military would rely "heavily on stealth, precision weaponry and information technologies."(2) The President argues that technology is changing the nature of warfare and that if the U.S. armed forces do not embrace those changes, the United States will lose its military superiority and ability to protect its interests, if not its security. Thus, he seeks dramatic improvements in military capability.(3)

The Navy has recently begun to describe what transformation might mean for its forces.(4) But critics complain that the service has been slow to recognize the importance the Bush Administration places on transformation and that its efforts to date have been disorganized and lacking a clear direction or set of priorities.(5) Other observers take a very different view, arguing that the Navy has transformed itself in terms of capabilities and the ability to perform new missions, compared with what it could do 20 years ago. They also argue that the Navy's investment in communications and sensor technology, as well as the way it has operated over the past 30 years, represents a transformation that the Army and Air Force are only now discovering and trying to achieve. The implication is that either the Navy has done a poor job of explaining how it has already transformed itself or it does not recognize itself as already being transformed.(6)

Countering Antiaccess Threats
Although echoing some of the President's themes about transformation, the 2001 Quadrennial Defense Review focused on the need to defend U.S. global interests against regional opponents in the coming decades. The military's fear is that other countries whose interests conflict with the United States' will be able to buy advanced, yet relatively inexpensive, weapons that will make U.S. military action very costly. The weapons that the Navy worries about most are mines; antiship cruise missiles; small, fast attack boats; and diesel-electric submarines (especially those with closed-cycle, air-independent propulsion systems, which can remain underwater for weeks and are extremely quiet.)

If a country had enough of those weapons, it could implement what defense analysts call an asymmetric naval antiaccess or area-denial strategy. Such a strategy would not attempt to challenge and defeat U.S. naval forces directly. Instead, it would seek to inhibit the Navy's operations by strewing coastal areas with mines, putting hundreds of antiship cruise missiles along the shore or on small, fast boats, and having several quiet diesel-electric submarines hide in noisy coastal waters. One official Navy report states: "In future crises and conflicts . . . access-denial weapons could make the projection of U.S. power so costly that the United States might be deterred from acting."(7) Or, if the nation had to act anyway, such weapons could either prevent U.S. forces from prevailing or result in a Pyrrhic victory.

The 2001 QDR was explicit in saying that naval transformation must occur to defeat area-denial threats: "Anti-ship cruise missiles, advanced diesel submarines, and advanced mines could threaten the ability of U.S. naval and amphibious forces to operate in littoral waters. New approaches for projecting power must be developed to meet these threats."(8)

Using Forward Presence for Deterrence
The 2001 QDR also stressed the importance of deterring conflict by keeping substantial, powerful U.S. forces deployed around the world. "Transforming the U.S. global military posture begins with the development of new ways to deter conflict. Deterrence in the future will continue to depend heavily upon the capability resident in forward-stationed and forward-deployed combat and expeditionary forces, including forcible entry forces, along with the rapidly employable capabilities that the U.S. military possesses throughout the globe."(9) The implication was that transformation should increase the military capabilities that the United States maintains overseas. That implication was made explicit in the subsequent Defense Planning Guidance, which directed the services to maintain forward presence in four theaters to dissuade potential adversaries from acting against the United States' interests and allies.

Transforming Technology
Another perspective on transformation is more general. It says that advances in technology--particularly communications, sensors, detection equipment, and precision weapons--provide an opportunity to create a smaller force with the same lethality and effectiveness as a much larger force.(10) In today's defense jargon, such advances allow the military to "mass effect, not forces." (For example, a stealthy bomber carrying 16 laser-guided bombs is likely to do more damage to a series of targets than 10 bombers carrying only conventional "dumb" munitions.)

Some advocates of naval transformation want to use developing technologies to better link sensors, computers, communications, and precision weapons into coherent networks so the Navy can engage enemies faster and more efficiently--thus projecting power more effectively, especially on land. Indeed, although the Navy characterizes many of its programs as being part of military "transformation," it emphasizes what it calls FORCEnet (also known as network-centric warfare) as one of the service's most important initiatives. FORCEnet is a technological effort that includes improvements in hardware and software to link all of the communication, sensor, and warfare systems of the Navy's ships so that every ship in a battle force has the same tactical data available. Thus, one ship's sensors might detect a threat, and even if that ship did not have the means to counter it, the threat could still be dealt with quickly because every other Navy ship operating in the area would know about it at the same time. If the FORCEnet effort succeeds, surface combatants, along with other Navy ships, may become more capable and effective than they are today.

Employing New Operating Concepts
Another way of thinking about naval transformation is to include different operating concepts that would allow the Navy either to provide a greater level of overseas presence or to reduce the number of platforms necessary to maintain the current level of presence. One such concept is to base more Navy ships overseas. The 2001 QDR explicitly included home-porting ships overseas as part of naval transformation.(11)

The Navy is pursuing some of those new operating concepts. It plans to base three attack submarines in Guam by early 2004. The Navy is also considering basing a cruiser/destroyer squadron there and possibly additional submarines.(12) Another option would be to use multiple, rotating crews on surface combatants to keep them deployed overseas for much longer periods than are now the case. As Chapter 2 discusses in more detail, the Navy began an experiment in the fall of 2002 that will rotate three crews from Spruance and Arleigh Burke class destroyers to one ship, with the objective of keeping the ship overseas for about 18 months, substantially increasing the time it spends on-station.

The Budgetary Implications of Transformation
The obvious question is whether the Navy's transformation efforts are expected to be accomplished under existing, smaller, or larger budgets. Some enthusiasts of transformation imply that a smaller, more effective force could also be a cheaper one.(13) Other advocates believe that transforming some parts of the Navy could free up resources to transform or enlarge other parts. Finally, some observers argue that transformation should not be achieved by reducing force structure.(14)

In the wake of the terrorist attacks of September 11, 2001, the idea of spending less money on the military has fallen out of favor. Moreover, the development of and transition to "transformational" technologies is proving expensive. Thus, although the long-term cost implications of military transformation are uncertain, a smaller defense budget may not result.(15)

The Current Surface Combatant Force

As noted above, the Navy's definition of surface combatants includes cruisers, destroyers, and frigates. (It used to include battleships, but they have been retired.) The service's proposed littoral combat ship, which would be smaller than a frigate, would also be defined as a surface combatant. That definition excludes aircraft carriers and amphibious ships as well as smaller vessels such as mine-warfare ships and patrol craft.

The four classes of surface combatant in active service represent the ultimate development of Cold War-generation ships. Designed for combat against the Soviet Navy in the open ocean, they comprise 17 Spruance class (DD-963) general-purpose destroyers, 33 Oliver Hazard Perry class (FFG-7) guided-missile frigates, 27 Ticonderoga class (CG-47) guided-missile cruisers, and 38 Arleigh Burke class (DDG-51) guided-missile destroyers (see Figure 1).

Figure 1.
Composition of the Surface Combatant Force, 2002

(Number of ships)
Source: Congressional Budget Office based on Navy data.

Seventeen Spruance class destroyers remain from an original Cold War production run of 31 ships. Each one carries two 5-inch naval guns, a formidable open-ocean antisubmarine-warfare suite, two helicopters, short-range antiship missiles, and a short-range antimissile system (see Table 1).(16) As the first of the final Cold War generation of surface combatants, Spruance destroyers introduced many technologies and systems that have been used on subsequent combatants, including a gas-turbine propulsion system and a digital antisubmarine-warfare combat system. The Spruances were later modernized with an antiship missile capability, and 24 of them received the vertical launch system (VLS)--composed of easy-to-maintain groups of launcher "cells" inside a ship's hull--to fire Tomahawk cruise missiles at targets on land. All of the ships still in service are equipped with 61 VLS cells. The oldest Spruance in the active-duty fleet is 27, and the average age of the active ships is 22. Their notional expected service life is 35 years.

Table 1.
Characteristics of Current and Proposed Surface Combatants

Ship Class Type Displacement
Range at
20 Knots
Armament Missions

Current Ships
DD-963 Spruance General-purpose destroyer 9,300 Up to 375 6,000 Two helicopters, two 5-inch guns, eight Harpoon antiship missiles, 61 VLS cells Land attack, open-ocean antisubmarine warfare
FFG-7 Oliver Hazard Perry Guided-missile frigate 4,100 221 4,200 Two helicopters, one Mark 13 launcher and magazine with 40 self-defense missiles, one 76-mm gun, six torpedo tubes Convoy escort, maritime interception, open-ocean antisubmarine warfare
CG-47 Ticonderoga Guided-missile cruiser 9,500 Up to 410 6,000 Aegis combat system, two helicopters, two 5-inch guns, 122 VLS cellsa Long-range air and missile defense, land attack, open-ocean antisubmarine warfare
DDG-51 Arleigh Burke (Flight I/II) Guided-missile destroyer 8,400 340 4,400 Aegis combat system, one 5-inch gun, eight Harpoon antiship missiles, 90 VLS cells Long-range air and missile defense, land attack, open-ocean antisubmarine warfare
DDG-51 Arleigh Burke (Flight IIA) Guided-missile destroyer 9,200 340 4,400 Aegis combat system, two helicopters, one 5-inch gun, 96 VLS cells Long-range air and missile defense, land attack, open-ocean antisubmarine warfare
Proposed Shipsb
DD(X) General-purpose destroyer 16,000 95 to 200 N.A. Two helicopters, two 155-mm advanced gun systems, 128 VLS cells Land attack, antisubmarine warfare
Littoral Combat Ship Focused-mission combatant 3,000 N.A. N.A. One helicopter, one mission module Counterboat, countermine, littoral antisubmarine warfare
CG(X) Guided-missile cruiser 16,000 or more N.A. N.A. Next-generation air and missile defense combat system, 200 VLS cells, two helicopters, possibly other systems Long-range air and missile defense, land attack

Source: Congressional Budget Office.
Note: VLS = vertical launch system; mm = millimeter; N.A. = not available.
a. The first five ships of the class, CG-47 to CG-51, do not have VLS cells.
b. Many of the characteristics of these ships represent estimates published in media reports or CBO assumptions based on conversations with Navy officials.

The second class of the Cold War family of surface combatants was the Oliver Hazard Perry guided-missile frigate. Thirty-three of those ships remain in commission (out of 51 built for the Navy), including eight assigned to the Naval Reserve.(17) Those ships were designed to help defend sea lines of communication--essentially to serve as convoy escorts--during the Cold War. They carry 40 local air-defense and antiship cruise missiles, fired by two single, above-deck launchers; a rapid-fire cannon; two helicopters and a towed-array sonar system; and a terminal missile-defense gun--all of which provide useful combat capabilities for less stressful naval missions. The age of the oldest Perrys still in commission is 23, and the average age of the class is 19. Their notional expected service life is 35 years. As one reference work puts it, "The soundness of the design has permitted the expansion [of capabilities], and the ships have proven remarkably sturdy."(18)

Ticonderoga class cruisers use the same hull design as Spruance class destroyers, but they carry a much more formidable combat system. They are multimission ships capable of conducting antisubmarine warfare, antiship operations, land attack, and especially long-range air defense for a group of ships. They were the first U.S. surface combatant to be equipped with the Aegis combat system, which was and is the most advanced antiaircraft/ antimissile warfare system in the world. The first five Ticonderogas do not have VLS cells. Instead, they carry two above-deck twin-missile launchers fed by below-deck rotary missile magazines, which hold a total of 88 antiair and antisubmarine missiles. The remaining 22 Ticonderoga class ships, sometimes referred to as Improved Ticonderogas, have 122 VLS cells capable of firing a variety of weapons, including Tomahawk land-attack missiles. The first ship of this class was commissioned in 1983, making the oldest Ticonderoga 20 years old. The average age of the class is 14. Its notional expected service life is 35 years.

Arleigh Burke class guided-missile destroyers are the second warship designed to carry the Aegis combat system. They are the newest surface combatants in the fleet. Their hull form differs from that of the Spruances and Ticonderogas, and they have a faceted superstructure that reduces their radar cross section to one-tenth that of a Ticonderoga class cruiser. The 38 Arleigh Burkes now in commission are divided among three groups, or "flights":

  • Flight I, the earliest set, comprises 21 ships, each equipped with 90 VLS cells. Although ships of this type have a flight deck on which a helicopter can land, and most are equipped to refuel and rearm a helicopter, they have no hangar and thus would not normally be deployed with a helicopter.

  • Flight II comprises seven ships that incorporate several combat system improvements. Flights I and II are sufficiently similar that they are normally grouped together.

  • Flight IIA comprises 10 ships. They are somewhat larger than previous Arleigh Burkes to accommodate a hangar for helicopters, which would be deployed with the ships. They also have 96 VLS cells and employ more-sophisticated combat systems and radars than earlier flights do.

As of this writing, another 24 Arleigh Burkes are being built, have been authorized, or may be authorized between now and 2005, for a total planned production run of 62 ships. However, if the Navy experiences problems in developing its proposed DD(X) destroyer, it will almost certainly lengthen production of Arleigh Burkes to support the two shipyards that build surface combatants. The first Arleigh Burke was commissioned in 1991, and the average age of the class is only 5. The ships have a notional expected service life of 35 years.

Evolving Roles and Missions of Surface Combatants

In the past quarter century, surface combatants have already undergone a transformation in their capabilities. Early Cold War cruisers and destroyers generally carried mostly defensive weapons--surface-to-air missiles and antisubmarine rockets--to screen higher-value ships (such as aircraft carriers) and merchant vessels from attack. They also supported amphibious forces with naval gunfire. Today, surface combatants can and still do carry out those missions, but they have also taken on new roles and perform some of their old ones in fundamentally different ways.

Probably the three biggest improvements in the design of surface combatants in recent decades were the Aegis combat system, the vertical launch system, and long-range Tomahawk missiles. The Aegis system--which includes a powerful multifunction, phased-array (fixed-antenna) radar, fire-control directors, computers, displays, and power sources--gives a cruiser or destroyer the capability to defend an entire battle group against aircraft and missiles. The system can track hundreds of air targets up to 200 nautical miles, and because it can update the target data sent to its missiles in flight, it does not have to guide them continuously after launch. As a result, Aegis-capable ships can attack as many as 20 targets simultaneously--a vast improvement over previous antiair-warfare systems. The Aegis system is also less prone than its predecessors to jamming or to electronic countermeasures, and it is effective against sea-skimming antiship missiles. In short, the Aegis system enhances the capabilities not only of the ships that carry it but also of their entire battle group, because it provides for long-range detection, is capable of longer-range interception, and is less susceptible to saturation raids than previous combat systems.

The vertical launch system also created a revolution of sorts in the combat capabilities of surface combatants, for several reasons. First, the system uses space efficiently. The five Ticonderoga class cruisers without VLS cells can carry 88 missiles apiece in their magazines for use by their two twin-missile launchers. Ticonderogas with the VLS can carry 122 missiles in their 122 cells, a nearly 40 percent improvement. Second, the system can be easily converted from an offensive system to a defensive one depending on what type of missile is loaded into the cell. Third, the VLS itself is a relatively low-maintenance weapon system that requires little training to operate. Finally, the VLS cells nestled in the center of a ship below the deck line are less susceptible to battle damage than above-deck launchers are. (Even small hits on those launchers will essentially eliminate a ship's combat effectiveness.)

The third major improvement, Tomahawk missiles, have provided surface combatants with the capability to conduct long-range strike (or land-attack) operations. In the past, a surface combatant's ability to hit targets on land was limited to the range of its guns (27 nautical miles for the 16-inch guns of Iowa class battleships and 13 nautical miles for the 5-inch guns on modern warships). The development of Tomahawk missiles and VLS cells has given surface combatants the ability to strike targets 700 miles inland--farther than the range of carrier-based aircraft (unless they are refueled in flight). The VLS/Tomahawk combination also allows ships to launch missiles quickly. A surface combatant armed only with Tomahawks could fire its entire complement within minutes if an operation demanded it. A new version of the Tomahawk missile just beginning production is expected to double the weapon's range and provide additional improvements. (Other land-attack missiles, which would be compatible with the VLS, are also being developed.)

In short, the combination of the VLS and Tomahawk has vastly improved the land-attack capabilities of surface combatants. Into the 1980s, not one of the Navy's cruisers, destroyers, or frigates could strike targets more than 13 miles inland. Today, 82 surface combatants have long-range strike capabilities.

The missions of the surface combatant force may evolve further in the future. With improvements to their radars and missiles, cruisers and destroyers may be able to provide ballistic missile defense within a theater and, possibly, play a role in national missile defense. Such changes could require the development of larger ships to accommodate more-sophisticated radars and larger, faster intercept missiles. Other types of ships, smaller than any in the current force, might also be necessary to fulfill missions that surface combatants already perform and will still be required to carry out 30 years from now.

Stated Requirements for Surface Combatants

An essential question in this analysis is, How many surface combatants does the Navy need? The service has not answered that question definitively or consistently. Furthermore, the answer depends on responses to other, related questions. What does the Navy want to do with its surface combatants? Does it need larger numbers of smaller, less-capable platforms, or should it buy fewer but more-capable platforms? Finally, will the Navy continue to operate its surface combatants as it has in the recent past--that is, by basing them in the United States and deploying them only about once every two years?

Studies by the Department of Defense and the Navy over the past 10 years have produced various estimates of the required number of surface combatants (see Figure 2). One analysis of that issue, the Surface Combatant Force Level Study, published in August 1995, stated that the Navy needed 135 to 165 surface combatants to meet wartime requirements.(19) That conclusion was based on an extensive war game in which U.S. forces fought two major theater wars (in Northeast Asia and the Persian Gulf) at the same time. The figure of 165 represents "peak demand" for surface combatants 30 to 80 days into a conflict, assuming no assistance from allies. If nations friendly to the United States are assumed to contribute 30 ships to the fight, the total wartime requirement falls to 135 surface combatants.

Figure 2.
The Number of Surface Combatants the Navy Needs, According to Various Sources

Source: Congressional Budget Office.
Note: SC-21 COEA = Surface Combatant 21 cost-effectiveness analysis; SCFLS = Surface Combatant Force Level Study; QDR = Quadrennial Defense Review.
a. Admiral Vernon Clark, Chief of Naval Operations.

Two years later, however, the 1997 QDR concluded that the Navy should operate only 116 surface combatants. The report did not provide much information about how that figure was determined, but 116 was the number of surface combatants in the fleet at the time. The subsequent QDR, in 2001, did not discuss specific requirements for forces but stated that the current force levels, set by the 1997 QDR, would be the base from which transformation would occur.

In 1999, the Navy completed the Surface Combatant Force Level Study II. It was intended to update the 1995 analysis and provide an authoritative statement of the Navy's requirements for surface combatants. That study was never released (because of the start of the 2001 QDR), but press reports indicate that it concluded that 95 surface combatants would be necessary to meet peacetime requirements in 2015, whereas 145 would be needed to fight simultaneous major theater wars in the Persian Gulf and Northeast Pacific.(20)

In June 2000, the Secretary of Defense released the Report on Naval Vessel Force Structure Requirements (also known as the 30-Year Shipbuilding Report), whose completion the Congress had mandated in the 2000 defense authorization act.(21) That report argued that naval forces were in high demand and that the 1997 QDR force was being heavily tasked. To reduce the risks posed by growing operational demands, the report advocated a 10 percent to 15 percent increase in the number of surface combatants, apparently to support a proposed increase in the number of aircraft carriers from 12 to 15.

Today, the Navy is again reevaluating its requirements for surface combatants, primarily because of the war on terrorism, pressure from the Bush Administration to transform the current fleet, and the new forward-presence posture outlined in the most recent Defense Planning Guidance. In the judgment of the Chief of Naval Operations, Admiral Vernon Clark, the Navy would need a fleet of at least 375 ships, including 30 to 60 littoral combat ships, to meet all of its requirements.(22) Under the Navy's evolving future concept of operations, the surface combatant part of that 375-ship Navy would amount to 160 ships. (For a more detailed explanation of what a 375-ship Navy might look like, see Box 1.)

Box 1.
Force Structure Under the Navy's New Operational Concept

The Navy recently began to rethink how it will use and deploy its warships. Today, the Navy's principal groups of ships are 12 aircraft carrier battle groups, 12 amphibious ready groups, and seven surface action groups (which are designated for use in the Middle East). Attack submarines deploy either with one of those groups or independently. Amphibious ready groups usually do not operate with surface combatants; thus, they generally are not capable of performing strike operations.

Under its new Global Concept of Operations (or Global CONOPs), the Navy would juggle its surface combatants to create more "strike groups." In the past, six surface combatants were notionally assigned to a carrier battle group. Actual deployments could see four to eight. The Global CONOPs would reduce that number to three. It would also assign three surface combatants to the amphibious ready groups to create 12 "expeditionary strike groups" (the first of which has already been deployed) and create two additional surface action groups. The four Trident submarines that the Navy is converting to perform conventional strike and special-operations missions would each constitute an independent strike force. Thus, the Global CONOPs would produce a total of 37 strike groups.

That operational concept would more evenly balance the Navy's strike capability across the fleet and allow the Navy to have strike presence in all four theaters called for in the Defense Planning Guidance. The new expeditionary strike groups would have the ability to perform missions that in the past could be handled only by a carrier battle group. The defensive capabilities of surface combatants would permit the groups' amphibious ships to operate in more-hostile environments, and the Tomahawk missiles on surface combatants would provide long-range strike capability. New DD(X) destroyers, with their 155-millimeter guns, would be assigned to the expeditionary strike groups, providing a shorter-range strike capability as well as fire support for the Marine Corps.

According to the Navy, implementing that concept would require 375 ships, including 160 surface combatants. The 33 surface-ship strike groups would need three cruisers or destroyers each, plus five more mostly for wartime surge, for a total of 104 cruisers and destroyers. In addition, the Navy plans to buy 56 littoral combat ships, many of which would work with the strike groups, protecting them from mines, submarines, and small boats. The rest of the Navy's fleet would comprise 12 aircraft carriers, 37 amphibious ships, 55 attack submarines, four converted Trident submarines, 14 ballistic missile submarines, and 93 logistics, countermine, and support ships.

Not all observers would agree that the Global CONOPs represents transformation. After all, the Navy has employed surface combatants with amphibious ready groups in the past, albeit not on a regular basis. However, if the Navy does reduce the number of surface combatants associated with carrier battle groups to create more strike groups, it will be organizing the fleet in a way that provides the flexibility and forward presence stressed in the 2001 Quadrennial Defense Review and the Defense Planning Guidance. Such reorganization also provides a justification for buying more ships and creating a larger force structure.

The Navy's Plan for Transforming the Surface Combatant Force

The uncertainty about how many surface combatants the Navy needs reflects uncertainty about the proper size and scope of transformation from older to newer generations of ships. How quickly will anticipated antiaccess or area-denial threats evolve? Does the Navy need to transform only a few of its platforms or its entire force structure to counter those threats? More important, to what extent should the focus of transformation be on capabilities or numbers of ships?

Prominent members of the Bush Administration have stated that the emphasis in any modernization program needs to be on capabilities.(23) They appear to be saying that what is required is a set of capabilities to achieve certain tasks. If those capabilities can be provided by a smaller number of platforms, so be it. Others, including Navy officials and Members of Congress, have argued that numbers matter and that the Navy needs to buy more ships and have a larger fleet.

The Navy's plan for transforming the surface combatant force reflects that tension between capabilities and numbers. Over the next five years, the Navy intends to retire some older surface combatants before the end of their notional service life, cutting the fleet in the short term, even though stated requirements and Navy officials have called for more, not fewer, ships. After that, however, it would develop and deploy large numbers of a family of next-generation ships: the big multimission DD(X) class destroyer, a small "focused-mission" ship called the littoral combat ship (LCS), and a large multimission cruiser known as the CG(X). By 2025, the Navy's plan would result in a surface combatant force that was not only 40 percent larger than today's force but much more capable than the current Cold War generation of ships.

Retiring Spruance Class Destroyers Early
The Navy plans to retire its 17 remaining Spruance class destroyers by 2006 rather than keep them in service to the end of their notional life of 35 years. On decommissioning, those ships will average only 24 years of service. The Navy is retiring the still-capable destroyers early to save money: with a crew of 380 and the oldest technology of Cold War-generation ships, Spruances are more expensive to operate and maintain than most of the Navy's other surface combatants (see Table 2). Eliminating those ships would save an average of about $600 million per year in operating and support costs.

Table 2.
Annual Operating Costs for Present and Future Classes of Navy Ships

Ship Class Millions of 2003 Dollars

Current Operating Costs
DD-963 Spruance Destroyer 34  
FFG-7 Oliver Hazard Perry Frigate 19  
DDG-51 Arleigh Burke Destroyer 26  
CG-47 Ticonderoga Cruiser 35  
Estimated Operating Costs Based on Cost Goals
DD(X) Future Destroyer 20  
Littoral Combat Ship 14  
CG(X) Future Cruiser 27  

Source: Congressional Budget Office using data from the Navy's Visibility and Management of Operating and Support Costs (VAMOSC) database.
Note: Operating costs for ships not yet deployed represent CBO estimates based on the Navy's manning and cost thresholds for those vessels. Operating costs for the CG(X) are based on the same goals as those for the DD(X).

Some Navy officials also regard Spruance class destroyers as unreliable and more prone to unexpected breakdowns than any other surface combatant. Various engineering systems are said to be particularly unreliable. The Navy argues that retaining Spruances for their full service life would require upgrading those systems as well as some of the ships' combat systems, at a cost of $50 million to $100 million per ship. That approach would be similar to the upgrades that the Navy performed on Leahy and Belknap class cruisers in the 1980s, which it retained in the fleet until the early to mid-1990s.

Keeping Spruances running for a total of 35 years would cost an average of $45 million a year per ship for needed upgrades and operations. As a matter of relative cost, that would make keeping Spruances in service cheaper than building new destroyers, and somewhat more expensive than building the as-yet-undesigned littoral combat ship. The equivalent costs are about $60 million a year for a new Arleigh Burke class destroyer and about $30 million a year for the littoral combat ship, CBO estimates.(24)

Clearly, Spruances are much less capable than newly built guided-missile destroyers. They lack the Aegis air-defense system and carry one-third fewer VLS cells. But a better comparison of their capabilities would be with the new littoral combat ship. A modernized Spruance would have two naval guns, 61 cells for land-attack missiles, and two helicopters; as a result, its self-defense and antisubmarine-warfare capabilities could prove equal to those of the smaller LCS. However, Spruances would be larger and much less stealthy than the LCS, so the latter could prove to be more survivable against modern threats in coastal regions, although that is by no means certain.

Improving Ticonderoga Class Cruisers and Oliver Hazard Perry Class Frigates
In contrast to its plan for Spruances, the Navy wants to upgrade the combat systems, habitability, and machinery of Ticonderoga class cruisers and Oliver Hazard Perry class frigates so that those ships will be useful throughout their notional service lives or longer. The cruisers will receive especially extensive improvements that will, in some cases, change their mission.

According to the 2003 Future Years Defense Program (FYDP), the Navy was planning to upgrade all 27 Ticonderoga class cruisers. Fourteen, including the five oldest ships, would be outfitted with improved fire-control systems, radars, and self-defense systems, and their guns would be converted to the 5-inch, 62-caliber design capable of firing extended-range guided munitions. In addition, the first five ships of the class, which have above-deck launchers, would have the VLS installed (the first two would receive 64 cells, and the other three would get 128). The remaining 13 Ticonderogas would receive many of the same improvements in radars, computers, and self-protection systems, as well as better missiles and even more advanced radars in order to perform theater ballistic missile defense. In the 2004 FYDP, however, the Navy has altered its conversion plan for Ticonderogas: it proposes canceling the upgrades to the first five ships and retiring them early.(25)

The Navy argues that by updating the combat systems of Ticonderogas, it will extend their useful service life to as much as 40 years. Doing so, however, implies a substantial overlap between that cruiser conversion effort and the program to build a new cruiser, the CG(X) (discussed later). If the Navy upgraded all 27 Ticonderogas, the first one would not retire until 2023, four years after the Navy wants to commission the first CG(X). If the Navy reduced its requirement for cruisers to 22 by retiring the first five Ticonderogas early, all 22 would remain in the fleet until 2026, when the first of them would retire. For this analysis, CBO assumed that under the Navy's 160-ship plan, the upgraded Ticonderogas would serve for 35 years. (CBO's options, however, take advantage of the Navy's estimate of a 40-year service life for upgraded Ticonderogas.)

The Navy also plans to upgrade its Oliver Hazard Perry class guided-missile frigates. To maintain the operational effectiveness of those ships until the last ones retire (in 2018), the Navy wants to improve their engineering, habitability, and combat systems. According to the 2003 FYDP, the Navy plans to spend about $200 million over five years to, among many other things, replace engines, install osmosis units, upgrade the Close-In Weapons System, and incorporate the Nulka decoy system on about half of those ships. (Those last two upgrades would improve the frigate's self-defense capabilities.) The Navy plans to increase spending in later years to upgrade all of the Perrys. CBO estimates that the costs to upgrade all of the frigates would total about $360 million, or slightly more than $10 million per ship.

Developing Future Surface Combatants
Under the Navy's plans, the next generation of surface combatants would comprise three new ships: the DD(X) destroyer, the littoral combat ship, and the CG(X) cruiser. Like the Cold War generation of surface combatants, the new generation would have several different ships to fulfill different missions, but they would share as many technological and design elements as possible to reduce costs.(26) The principal difficulty in evaluating that effort is that the Navy is still unclear about what missions it wants the different ships to perform, how many of each type it needs, or even what their capabilities would be.(27)

The DD(X) Destroyer. At the direction of the Bush Administration, the Navy canceled the DD-21 Land Attack Destroyer program on November 1, 2001. In its place, the DD(X) program was established, which outlined the Navy's vision for a new generation of surface combatants, to include the DD(X) destroyer, the littoral combat ship, and eventually the CG(X) cruiser. Although the DD-21 program consisted of 32 ships, it is not yet clear how many DD(X)s would be bought. As of this writing, the Navy appears to have settled on 16--one each for the 12 planned expeditionary strike groups in the Navy's Global Concept of Operations (see Box 1) and four more for wartime surge capability.

Furthermore, how much the new destroyers might cost is uncertain. The Navy had hoped that by the fifth DD-21 in the production run, that ship would have cost less to procure than an Arleigh Burke class guided-missile destroyer, which costs about $1.2 billion per ship when buying them at a rate of two per year. But if the Navy bought only half as many DD(X)s at a rate of two per year, it would be unlikely to achieve that goal. On the basis of information from the Navy about how much it expects the first DD(X) to cost (excluding nonrecurring design elements), CBO estimates that the new destroyer would have a price tag of about $1.9 billion per ship, on average, for a 16-ship run. In contrast, the Administration estimates that the eight DD(X)s included in the 2004 FYDP would cost an average of $1.3 billion apiece. (For a detailed explanation of CBO's cost estimates for future surface combatants, see the appendix.)

Because the DD(X) destroyer would borrow much from the DD-21 program, more is known about it than about the other two ships in the new generation. Like the DD-21, the DD(X) is intended to be a multimission ship, emphasizing land attack. It would carry one or two new 155-millimeter (mm) advanced gun systems developed for the DD-21, each of which can hurl rocket-assisted precision-guided projectiles to ranges of 100 miles. It would also have a VLS battery of up to 128 cells capable of firing various land-attack and self-defense missiles, a large helicopter hangar, and a new integrated undersea-warfare suite. The DD(X) would also be able to operate boats or unmanned vehicles from a special boat ramp.

The DD(X)'s final combat capability would be determined primarily by its size. The DD-21 was supposed to be an extremely large combatant--upward of 16,000 tons--primarily because of two big advanced gun systems and large 600- to 750-round magazines and because of the need to increase its stealthiness. If the Navy decided to reduce the size of the DD(X), it would lose one of the gun systems and decrease the number of VLS cells. However, it is unclear how a smaller number of reduced-capability DD(X)s could meet the operational requirements set forth in the DD-21 program. Producing more DD(X)s would be one option, but that clearly would not be as cost-effective as the current plan.

Much like the role that the Spruance class destroyer played in the current generation of surface combatants, the DD(X) is intended to be the "pathfinder" for technologies that would be used in all subsequent ships of the next generation. Three of those technologies are especially significant.

First, the Navy wants to equip the DD(X) with an all-electric power-distribution and propulsion system instead of the gas-turbine systems on the current generation of surface combatants. That new system would allow a ship to use power far more efficiently. Gas-turbine-powered surface combatants devote most of the power they generate to propulsion, and they cannot easily redirect that power to other purposes. If the technical challenges can be overcome, an all-electric system will be able to divert power effortlessly from propulsion to weapons and back again, paving the way for the development of shipboard, electrically powered weapons, such as lasers or long-range electromagnetic guns.

Second, the DD(X) is intended to incorporate new hull forms, materials, conformal antennas (antennas embedded directly in the skin of a ship), and other design features to give the ship a very small radar cross section, as well as low magnetic, acoustic, and infrared signatures. Those "stealth" features are designed to decrease the ship's detectability and increase its survivability.

Third, the DD(X) is supposed to introduce a host of automatic advances, especially in the area of damage control. The Navy hopes that such advances will eventually allow it to operate the new destroyers with a 70 percent smaller crew than those of today's destroyers.

In addition to expressing skepticism about the Navy's ambitious cost and crewing goals for the DD(X), critics raise other questions about the program. First, it is not apparent why the DD(X) needs to be as stealthy as the Navy wants. Under the new Global Concept of Operations (or Global CONOPs), the smaller littoral combat ship would be the first to penetrate an opposing country's antiaccess network and defeat diesel submarines, mines, and swarms of small missile attack boats that would threaten successive U.S. forces. If that was true, the majority of threats facing the DD(X) would already be dealt with before it moved closer to shore, perhaps eliminating the need to greatly reduce its acoustic and magnetic signatures. Decreasing the DD(X)'s radar cross section would still seem to make sense since an enemy could engage ships close to shore with long-range antiship cruise missiles launched from far inland. But would the DD(X) need to be substantially stealthier than the Arleigh Burke destroyer, which is itself much stealthier than the Ticonderoga cruiser?

A second criticism of the DD(X) program involves its emphasis on land attack. Any surface combatant equipped with the vertical launch system is capable of land attack, and the Navy already has more VLS cells than it can afford to fill with missiles (which is one reason that it feels it can part with Spruance class destroyers). The DD(X)'s new advanced gun system would differ from current guns and have a much greater range and payload, offering the Marines better naval gunfire support. But CBO is unaware of any analysis that explains why the 63-mile extended-range guided munition--which can be fired from upgraded 5-inch, 62-caliber guns and provides five times the range of older 5-inch guns--is not sufficient for naval gunfire requirements, especially since the last large amphibious assault conducted by the United States occurred during the Korean War.

Using a stealthy ship to provide naval gunfire would not seem to make sense because, to get the most out of its range capabilities, the ship would have to operate close to shore, where it would be detectable. (Stealth is discussed in greater detail in Chapter 2.) If the threats that limited the DD(X)'s close-in operations had been eliminated, a less stealthy ship equipped with 155-mm guns, perhaps one based on a commercial design, would serve equally well. (Such a ship would essentially be a gun barge--an off-shore floating platform to provide gunfire support so that Marine Corps units would not have to carry as much artillery with them.)

The Littoral Combat Ship. As noted above, the DD-21 program was intended to consist of 32 ships, for a steady-state surface combatant force of 116 ships. In effect, the DD(X) program and the Global CONOPs modified that plan to include 16 DD(X) destroyers and 56 littoral combat ships, for a steady-state force of 160 surface combatants. Under the 2004 FYDP, the Navy plans to order the first LCS in 2005 and eight more by 2009.

The Navy has yet to answer many questions about the LCS, primarily because the ship is still in the very early stages of design and development. However, Navy officials have stated that the LCS would be much smaller and faster than the DD(X) and would be a focused-mission ship rather than a multimission or single-mission ship. In other words, the LCS would be designed modularly so that it could be reconfigured fairly quickly to perform one of three distinct missions: finding and sinking quiet diesel submarines operating in crowded, noisy, and shallow coastal waters; finding and neutralizing mines; and countering swarm attacks by small, high-speed boats armed with missiles.

Navy officials have begun to characterize the LCS as a kind of "truck" capable of carrying various cargoes. The truck--consisting of the ship's hull, propulsion plant, crew quarters, and basic defensive combat systems--would be developed and acquired separately from its three associated mission packages, or modules. The operators of the truck and the modules would train separately, probably on shore or on designated training vessels. When an LCS was slated to deploy, whichever mission package was called for would be pulled, put on the truck, and sent to sea.

Vice Admiral Phillip Balisle, head of Naval Sea Systems Command and the former head of surface warfare for the Chief of Naval Operations, used the analogy of an aircraft carrier and its air wing to describe that LCS concept, calling the carrier a "hollow" platform until the air wing comes aboard.(28) That analogy seems a bit misplaced, however. Throughout an aircraft carrier's training cycle (which lasts between 12 and 18 months prior to a six-month deployment), the air wing is assigned to the carrier and trains with it. Perhaps a better analogy, which some Navy officials have used in discussions with CBO, is the helicopter detachment routinely assigned to a surface combatant before deployment. Although a helicopter detachment trains with the surface combatant to which it has been assigned, it is more flexible in that it can be assigned to a different ship at the last minute, if necessary. The detachment can even be transferred to another ship during deployment if a mission requires it. Neither of those options is possible with a carrier air wing.

Even that analogy, however, does not quite capture what Navy planners are suggesting for the littoral combat ship. Traditionally, the captain of a surface combatant "fights" the ship, employing all of the weapons and systems at hand. The commander of a helicopter detachment is just another department head on a surface combatant, answering to the ship's captain. But who would "fight" the LCS--the truck driver or the mission-module commander? Which of them would be ultimately responsible for the safety of the ship? The mission commander could be expected to take the lead because only he or she would have the expertise to "fight" the ship. But how that would work in actual combat situations is not clear--especially if the truck driver remained responsible for the safety of the ship and its crew.

Another key unknown about the LCS is its ultimate size and configuration. Reports suggest that the Navy is exploring designs that range in size from as little as 300 tons of displacement to as much as 5,000 tons. (By comparison, an Oliver Hazard Perry frigate displaces about 4,000 tons.) Most reports suggest a ship the size of a large corvette, on the order of 3,000 tons. That size ship provides a good balance between payload and endurance. It can deploy reliably overseas while having enough room for acceptable crew facilities, and it is the smallest ship deemed capable of supporting a single medium-sized helicopter. Should the LCS be required to embark (that is, carry, operate, and sustain) a medium-sized helicopter, it would need a displacement of at least 4,000 tons. Smaller vessels can carry helicopters, but the Navy's Helicopter Master Plan calls for only two types of helicopters in the fleet--both variations of the large, multimission SH-60 Blackhawk. Introducing an entirely new class of smaller helicopters to support the littoral combat ship would entail considerable costs for training and operation and support.(29) (For more information about the role of helicopters in helping surface combatants counter area-denial threats, see Box 2.)

Box 2.
The Role of Helicopters in Countering Area-Denial Threats

Helicopters are the essential weapon system on a surface combatant for defeating the threats posed by small, quiet submarines; swarms of small boats; and mines. Unmanned aircraft may perform those missions in the future, but in the next 15 to 20 years--perhaps longer--they are unlikely to replace the vital capability provided by helicopters. Most of the Navy's current surface combatants are capable of embarking a medium-sized helicopter (the H-60 series by Sikorsky). Only the Flight I/II Arleigh Burke destroyers cannot accommodate a permanent helicopter detachment, although they could support one for a few days at a time.

Helicopters use a variety of sensors, including dipping sonar, to detect a submarine. That information is transmitted to the surface combatant for processing. If a target is identified and needs to be engaged, the job can be done either by the helicopter (using antisubmarine torpedoes) or by the surface combatant (using torpedoes or antisubmarine rockets). Even if the helicopter cannot get a precise enough fix on a submarine to target it with a weapon, the helicopter's presence may force the sub to become still and quiet, thereby thwarting its mission. Or the submarine may try to run, in which case the superior dash speed of the helicopter will allow it to keep after the submarine, forcing the sub to run down its batteries. Particularly in shallow water, a helicopter can fight submarines more effectively and with less risk than a surface combatant with its own sonar systems can do by itself.

Helicopters are also effective in countering swarms of small boats by virtue of their speed and armament. As a general rule of thumb, something trying to intercept a small, fast boat needs to be about 50 percent faster than its target. Thus, destroying a boat traveling at 80 knots requires the interceptor to have a speed of at least 120 knots. Only a helicopter, which can travel in excess of 120 knots, provides enough speed to ensure a tactical advantage. Furthermore, helicopters can destroy those targets with their substantial payloads of missiles (such as the Hellfire) and heavy-caliber machine guns. For example, in the Battle of Bubiyan Channel during the Gulf War, two groups of allied helicopters annihilated two convoys of Iraqi fast-attack craft without any loss to themselves or allied shipping.1

Helicopters are arguably less essential for mine clearing, the only one of the three missions discussed here for which unmanned underwater and surface vehicles can also be used effectively. However, it will take years for the Navy to finish developing and acquiring such remote mine-hunting systems.

1.  Robert Gardiner and Norman Friedman, Navies in the Nuclear Age: Warships Since 1945 (Annapolis, Md.: Naval Institute Press, 1995), pp. 105-107.

Yet another uncertainty surrounding the littoral combat ship is how it would be used. The Global CONOPs suggests that the LCS would be employed in forward-deployed squadrons. However, the size of those squadrons and whether they would be single mission (all carrying the same type of mission module) or multimission (having a mix of mission modules) are unknown. Also unclear is how the LCS would be supported logistically. Some Navy officials have suggested that littoral combat ships could be refueled by the cruisers and destroyer with which they would be operating. But what about food, munitions, and spare parts? Would the squadrons require mother ships? (The Navy does not appear to think so if the ships are in the 3,000-ton range.) If so, how would the mother ships be protected? Under any circumstances, the large numbers of LCSs that the Navy envisions buying would require the service to expand its supporting combat logistics force (for more details, see Box 3).

Box 3.
Providing Logistics Support to a Navy That Has Littoral Combat Ships

Expanding the size of the Navy's fighting force to include littoral combat ships would probably require increasing the number of combat logistics ships (oilers, ammunition ships, and multiple-product vessels) needed to keep that fleet resupplied. The size of that increase, however, would depend heavily on whether those additional logistics ships were operated by the active-duty Navy or the Military Sealift Command and on their capability. (For example, ships that carry three products can do the same supply job as a larger number of dual-product ships, but they are more expensive.)

Today's combat logistics force is composed of 34 ships: 13 oilers, seven ammunition ships, six combat stores ships, and eight triple-product replenishment ships that operate with aircraft carriers. The Navy estimates that a 375-ship fleet would need 42 combat logistics ships, although it says that number is still being studied.

That estimate is consistent with recent experience. In 1995, the Navy had 372 battle force ships, including 41 combat logistics ships, or 11 percent of the fleet. Current numbers are almost the same. If today's fleet was scaled up to 375, the number of combat logistics ships would be about 42--the same as the Navy's estimate.

If, by contrast, the requirement for combat logistics ships was based on the size of the surface combatant force rather than the size of the entire fleet, a larger number of resupply vessels would be necessary. A recent historical average suggests that the Navy needs one logistics ship for every 3.2 surface combatants. Thus, a surface combatant force of 160 ships would require 50 replenishment ships. That measure is misleading, however, because the combat logistics force is responsible for keeping the entire fleet resupplied at sea, not just the surface combatant force.

In this analysis of the Navy's plans for surface combatants and alternative approaches to those plans, the Congressional Budget Office included the costs of additional combat logistics ships in its estimates where appropriate.

Of the many uncertainties surrounding the LCS, the biggest question is whether the tactical concept of operations for that ship makes sense. The Navy describes the LCS as the "transformational" leg of the DD(X) program because it is designed to provide "assured access" in the face of future naval antiaccess networks. The theory is that the smaller, speedier, and more stealthy LCS would enter an enemy's littoral waters and eliminate mine, submarine, and boat threats, allowing larger and less stealthy ships to move closer to shore at acceptable levels of risk. Yet if an enemy had over-the-horizon targeting capability and antiship cruise missiles effective enough to compel larger combatants to remain far out at sea, could it not engage smaller ships closer to its own shore and overwhelm their small loads of short-range self-defense missiles and guns?

Conversely, if the larger combatants had to move closer to shore to provide longer-range air and missile defense for the LCSs, why could they not perform the antisubmarine warfare, antiboat, and countermine missions themselves? Indeed, the three missions now assigned to the LCS appear heavily dependent on helicopters (and, in the future, unmanned systems); it is not clear why larger combatants could not use those systems to similar effect.

Finally, there is the question of what the LCS will cost. The Navy has provided some information to CBO about the possible price tag of the LCS and its mission modules. But it has not specified whether it plans to buy one mission module of each type for every LCS it buys or a total of 56 mission modules (one for each ship), divided equally among the three missions. CBO estimates the average cost of the LCS, with 1.25 mission modules per ship, at about $350 million apiece (see the appendix for more details). In comparison, the Navy estimates that the first nine ships would cost an average of $200 million and that the mission sets assigned to each ship would cost about $180 million.

The CG(X) Cruiser. In the Navy's plans, the third ship of the DD(X) program will be a large multimission surface combatant, which is expected (although not yet certain) to use the same hull, propulsion plant, and basic combat systems as the DD(X). The key difference is that the CG(X) cruiser would be designed to provide long-range fleet air defense, long-range defense against overland cruise missiles, and theater ballistic missile defense. The CG(X) might be equipped with an upgraded Aegis combat system, but more likely it would introduce an entirely new, advanced-generation combat system, including new radars and more-advanced missiles. Because of its mission, the CG(X) would probably trade the DD(X)'s advanced gun systems for additional VLS cells. CBO assumes that the minimum VLS load for the CG(X) would be 200 cells.

In light of the Navy's plans to modernize Ticonderoga class cruisers, the need to begin building the CG(X) is not pressing. Currently, the Navy thinks it may order the first CG(X) in 2014, with that ship entering the fleet in 2019 or 2020. Such a timetable would cause a large overlap between the first CG(X) and the retirement of the modernized Ticonderogas, which would have an expected service life of 40 years. In fact, the first of the 22 VLS-equipped Improved Ticonderogas, the Bunker Hill, would not retire until 2026, and the last, the Port Royal, would remain in service until 2034. According to press reports, the CG(X) warships "will first complement and eventually replace the 27 Ticonderoga-class Aegis cruisers" [emphasis added], suggesting that the CG(X) production run might be greater than 27 ships.(30)

A larger production run for the new cruiser would be consistent with the Global CONOPs. That operating plan calls for 24 ships--a single cruiser to be assigned to each of 12 carrier strike groups and 12 expeditionary strike groups. However, it also calls for nine surface action groups to provide theater ballistic missile defense, with two dedicated antiballistic-missile shooters and a single antiair "shotgun" for protection. That goal suggests that the Navy would need another 18 CG(X)s, for a total production run of 42. In this analysis, CBO assumed that the additional cruisers would be used to replace the early-flight Arleigh Burke destroyers on a one-for-one basis. (The first of those ships is scheduled to retire in 2026, if it serves its full 35-year expected service life. If midlife upgrades extend that service life to 40 years, the first destroyer will not retire until 2031.) The average price for the CG(X) would be $2.2 billion, CBO estimates (see the appendix for details).

Budgetary Implications of the Navy's Plan

Analyzing the resources necessary to implement the Navy's plan for modernizing its surface combatant force is particularly difficult because the Navy has not specified exactly how many surface combatants it wants or needs, nor has it laid out its long-term modernization program in any detail. The 2004 FYDP provides details only through 2009. As a consequence, CBO developed two long-term procurement plans, based on official information, to determine the level of funding that the Navy thinks it needs to modernize the surface combatant force. Comparing those plans with past and projected funding levels suggests that the Navy could face trade-offs among different parts of its fleet in coming years.

Determining the Navy's Procurement Plans for Surface Combatants Through 2025
CBO's first procurement plan was based on information contained in the June 2000 Report on Naval Vessel Force Structure Requirements (referred to here as the 30-Year Shipbuilding Report), which is the Navy's program of record to the Congress for long-term ship procurement. That report proposed a long-term procurement profile aimed at maintaining a steady-state force of 116 surface combatants, consisting of 27 Ticonderoga class cruisers, 57 Arleigh Burke class guided-missile destroyers, and 32 DD-21 land-attack destroyers. At the end of their service life, the 27 upgraded Ticonderogas would presumably be replaced by 27 CG-21 future cruisers, although that is not certain.

CBO's second shipbuilding plan--which more closely reflects current Navy thinking--is drawn from public statements by Navy officials, the 2004 FYDP, unofficial sources, and the new Global Concept of Operations. CBO assumed that to achieve the force structure goals implied by the Global CONOPs, the Navy would modernize its 22 Improved (VLS-capable) Ticonderoga cruisers and would buy 16 DD(X) destroyers, 32 CG(X) cruisers (with an eventual goal of 42), and 56 littoral combat ships.(31) The Navy would also modernize its frigates and purchase 62 Arleigh Burke destroyers as specified in the 2004 FYDP.(32) Under that approach (referred to here as the Navy's 160-ship plan), the inventory of surface combatants would grow over the next 25 years until it reached a steady-state level of 160 ships (see Figure 3).

Figure 3.
Inventory of Surface Combatants Under CBO's Estimate of the Navy's 160-Ship Plan, 2001-2025

Source: Congressional Budget Office.
Note: DD-963 = Spruance class general-purpose destroyer; FFG-7 = Oliver Hazard Perry class guided-missile frigate; CG-47 = Ticonderoga class guided-missile cruiser; DDG-51 = Arleigh Burke class guided-missile destroyer; DD(X) = future general-purpose destroyer; LCS = littoral combat ship; CG(X) = future guided-missile cruiser.

The Navy's 160-ship plan defines the upper limit of the service's goals for surface combatants, and it conforms most closely to Navy briefings about the Global CONOPs. That concept of operations calls for 88 Aegis ships, 16 DD(X) destroyers, and 56 littoral combat ships. The briefings do not provide a date when such a force would exist, only its general outlines. To derive a procurement plan for surface combatants, CBO used the information in the 30-Year Shipbuilding Report and updated it for recent developments--particularly the intention to buy 16 DD(X)s instead of 32 DD-21s, as well as 56 littoral combat ships. (That procurement plan is shown in Figure 4.) CBO then calculated the cost of the two shipbuilding plans using its cost estimates for the various types of surface combatants. (For more details of those estimates, see the appendix.)

Figure 4.
Annual Purchases of Surface Combatants Under CBO's Estimate of the Navy's 160-Ship Plan

Source: Congressional Budget Office.
Note: DDG-51 = Arleigh Burke class guided-missile destroyer; DD(X) = future general-purpose destroyer; LCS = littoral combat ship; CG(X) = future guided-missile cruiser.

The Resource Implications of the Navy's Modernization Program for Surface Combatants
Although the surface combatant force is one of the healthiest parts of the Navy in terms of its share of procurement dollars and its average age, the Navy's 160-ship plan would require greater funding for that force than it has received in recent years. Between 1990 and 2002, the surface combatant force received an average of $3.6 billion a year (in 2003 dollars) for ship construction, or 42 percent of the Navy's total shipbuilding budget. With that money, the Navy built an average of 3.5 surface combatants a year. That production level is a little more than the 3.4 ships per year required to maintain a force of 116 surface combatants in steady state. (In 2003, the Navy is building only two surface combatants, spending about $2.7 billion.) By contrast, sustaining a 160-ship force in steady state would require substantial increases in construction and funding--to 4.7 ships and about $5.2 billion per year.

Thus, the current level of funding for surface combatants cannot continue much longer if the Navy wishes to achieve its new, higher force goals. CBO estimates that the Navy's 160-ship plan would entail spending an average of about $5 billion annually on surface combatants between 2003 and 2010, for a construction rate of 4.0 ships a year--more than the amount necessary to sustain a force of 116 ships but still less than the amount needed to achieve the 160-ship force goals by 2025. Consequently, after 2010, the surface combatant force would have to consume a far larger share of the Navy's shipbuilding budget. The Navy's 160-ship plan would spend an average of $6.2 billion a year between 2011 and 2020 on surface combatants--or about three-quarters of today's shipbuilding budget. Without a significant rise in the Navy's construction funding, that level of spending would require trade-offs with other shipbuilding programs.

The numbers for surface combatants portray only part of the overall budgetary challenge that the Navy is facing. Other elements of the Navy will also need greater resources if the service is to achieve a total force goal of 375 ships. Although most of the planned increase in the fleet involves surface combatants, reaching a 375-ship Navy would require maintaining at least the current force levels for other types of ships. Between 2011 and 2020, the average ship construction budget needed to build all of the aircraft carriers, submarines, surface combatants, amphibious ships, and support ships now planned would be almost $17 billion a year, CBO estimates (see Table 3). That level is roughly double the Navy's average construction spending of $8.5 billion a year over the 1990-2002 period. (The 2003 shipbuilding budget is only slightly more than $8 billion.)(33)

Table 3.
Average Annual Construction Spending and Procurement for Navy Ships, by Category, 1990-2020

Category Force Goal
of ships)
(Based on 1997
and 2001 QDR
force goals)a
Cumulative Surplus
or Shortfall (-)
Relative to Steady-
State Requirements,
Projected Annual

2003-2010 2011-2020

Construction Spending (Billions of 2003 dollars)
Surface Combatants 116   3.6   3.4c   2.0c   5.1   6.2  
Attack Submarinesd 58   1.3   3.9   -34.1   4.2   6.3  
Ballistic Missile Submarinese 14   0.3   0.8   -7.1   0.6   0.4  
Aircraft Carrierse 12   1.4   1.4   -0.5   2.0   2.1  
Amphibious Ships 36   0.9   1.1   -1.8   0.6   0.9  
Other 70   0.9   0.7   2.9   1.0f   1.0f  
  Total 306   8.5   11.3   -38.7   13.5   16.9  
Procurement Quantity
Surface Combatants 116   3.5   3.4c   1.8c   4.0   6.2  
Attack Submarinesd 58   0.6   1.8   -15.4   1.8   2.9  
Ballistic Missile Submarines 14   0.2   0.3   -2.3   0   0.1  
Aircraft Carriers 12   0.2   0.2   -1.1   0.1   0.2  
Amphibious Ships 36   0.8   0.9   -0.7   1.1   0.4  
Other 70   2.2   2.1   1.7   2.3f   3.4f  
  Total 306   7.5   8.7   -16.0   9.2   12.7  

Source: Congressional Budget Office.
Note: QDR = Quadrennial Defense Review.
a. The steady state represents the annual spending and purchases required to maintain the fleet at the level of the force goals, which are very close to current levels. To determine steady-state purchases, CBO divided the Navy's inventory of ships by the service life of each type of ship. Those annual purchases were then multiplied by CBO's estimate of the unit (per-item) cost for each type of ship.
b. CBO projection based on the Navy's proposed 375-ship fleet, including 160 surface combatants.
c. If the requirement for surface combatants was 160 (reflecting the Navy's 160-ship plan including about 60 littoral combat ships), the steady-state budget would be $5.2 billion a year and the cumulative 1990-2002 shortfall would be $19 billion. Likewise, the steady-state procurement rate would be 4.7 ships per year, and the cumulative shortfall would be a deficit of 15 ships.
d. These numbers represent a slight change from the force goals in the 1997 and 2001 QDRs. They assume 54 attack submarines and four Trident submarines converted to a guided-missile configuration, whereas the 1997 QDR called for 50 attack submarines, and the 2001 QDR seemed to affirm a force goal of 55 attack submarines.
e. Includes funding for refueling overhauls.
f. Includes Maritime Prepositioning Force Future ships.

A Trade-Off Between Surface Combatants and Attack Submarines?
What Table 3 shows is that unless the Navy is able to devote significantly more money to ship construction, its leaders will have to decide whether to pursue transformation objectives in the surface combatant force or maintain the attack submarine force near current levels. Over the past 13 years, the Navy has been dramatically underfunding its attack submarine programs relative to the amount needed to maintain that force at the level of 58 subs.(34) The cumulative shortfall over that period in both funding and construction relative to steady-state requirements is about $34 billion and 15 submarines, respectively. Because the Navy did not buy many attack submarines during the 1990s, it must begin to purchase them soon or accept that the force level will decline substantially.(35)

In comparison, the surface combatant force is far healthier, at least with respect to past requirements. Based on the force goal of 116 surface combatants--the requirement that the Navy has operated under for the past six years and that is still official--spending for surface combatants between 1990 and 2002 showed a cumulative surplus of $2 billion and about two ships relative to steady-state needs. Based on the greatly expanded force requirements called for in the Navy's 160-ship plan, however, funding and construction over the 1990-2002 period fell short by $19 billion and 15 ships.

Other major components of the Navy are being funded at levels closer to their steady-state requirements. Support ships have actually received a surplus of funding over the past 13 years and will make only modest demands on the Navy's budget relative to what they have been getting. Aircraft carriers and amphibious ships have been underfunded but not dramatically so. Although ballistic missile submarines experienced a large cumulative shortfall between 1990 and 2002, it reflects the relatively young age of those subs (13 years, on average) and their long service life (42 to 44 years). The Navy need not order another ballistic missile submarine until at least 2020.

1.  This analysis treats average spending for research and development as a constant between 2003 and 2025, although CBO's cost estimates for the first DD(X) destroyer and the first littoral combat ship do include the research and development money being spent to build those ships (see the appendix for more details).
2.  Address by George W. Bush given at the U.S. Naval Academy, May 25, 2001. See also "Remarks by the President to the Troops and Personnel" (speech given at the Norfolk Naval Air Station, February 13, 2001); and "U.S. President George W. Bush Addresses the Corps of Cadets" (speech given at the Citadel, December 11, 2001).
3.  Ibid.
4.  See Department of the Navy, Naval Transformation Roadmap: Power and Access . . . From the Sea (2002).
5.  See Gopal Ratnam, "Critics Question Depth of Navy's Sea Power Vision," Defense News (June 24, 2002), p. 12; see also Ronald O'Rourke, "Transformation and the Navy's Tough Choices Ahead: What Are the Options for Policy Makers?" Naval War College Review (Winter 2001).
6.  See Norman Friedman, "Are We Already Transformed?" Proceedings, U.S. Naval Institute (January 2002), pp. 34-36; and Colonel Robert O. Work, USMC (ret), The Challenge of Maritime Transformation: Is Bigger Better? (Washington, D.C.: Center for Strategic and Budgetary Assessments, 2002).
7.  Department of the Navy, Vision . . . Presence . . . Power (1999), p. 3.
8.  Department of Defense, Quadrennial Defense Review Report (September 30, 2001), p. 31. Other analysts voice the same viewpoint. See, for example, many of the publications issued by the Center for Strategic and Budgetary Assessments in Washington, D.C.
9.  Department of Defense, Quadrennial Defense Review Report, p. 25.
10.  Many Navy officials share that view of transformation. See also Friedman, "Are We Already Transformed?"
11.  Department of Defense, Quadrennial Defense Review Report, p. 27. See also O'Rourke, "Transformation and the Navy's Tough Choices Ahead," pp. 103-104.
12.  Statement of Rear Admiral Miles B. Wachendorf, U.S. Navy, Director, Strategy and Policy Division, before the Subcommittee on Seapower of the Senate Armed Services Committee, March 19, 2002.
13.  See, for example, the discussion in O'Rourke, "Transformation and the Navy's Tough Choices Ahead," p. 98.
14.  For an overview of those schools of thought, see O'Rourke, "Transformation and the Navy's Tough Choices Ahead." See also James R. Blaker, Understanding the Revolution in Military Affairs: A Guide to America's 21st Century Defense, Defense Working Paper No. 3 (Washington, D.C.: Progressive Policy Institute, January 1997).
15.  See Congressional Budget Office, The Long-Term Implications of Current Defense Plans (January 2003), and Budgeting for Defense: Maintaining Today's Forces (September 2000).
16.  Most of the information in this and the subsequent paragraphs of this section was taken from Norman Polmar, The Naval Institute Guide to the Ships and Aircraft of the U.S. Fleet (Annapolis, Md.: Naval Institute Press, 2001).
17.  Additional ships were built for foreign navies.
18.  A.D. Baker III, The Naval Institute Guide to Combat Fleets of the World, 2002-2003: Their Ships, Aircraft, and Systems (Annapolis, Md.: Naval Institute Press, 2000), p. 965.
19.  Office of the Chief of Naval Operations, Director, Surface Warfare, Surface Combatant Force Level Study: Requirements for Joint Warfare (August 1995).
20.  See Robert Holzer, "Requirements Rise May Force Larger U.S. Warship Fleet," Defense News (May 24, 1999), p. 1; and Roman Schweizer, "New Surface Ship Force Level Study Evaluates Future Capabilities, Needs," Inside the Navy (May 10, 1999), p. 1.
21.  Secretary of Defense William Cohen, Report on Naval Vessel Force Structure Requirements (June 26, 2000).
22.  See Dale Eisman, "Navy Leader Makes Case for New Ships Designed to Speed Quietly to Hot Spots," Virginian-Pilot (May 2, 2002); Kerry Gildea, "Clark Estimates Future Naval Fleet at 375 Ships," Defense Daily (February 19, 2002), p. 9; and Andrew Koch, "USN Pushes Littoral Combat Ship," Jane's Defence Weekly (January 23, 2002).
23.  For example, see Ron Laurenzo, "Wolfowitz: U.S. Must Focus on Capabilities," Defense Week (February 25, 2002).
24.  Those cost estimates do not include the normal midlife upgrades to combat and engineering systems that would be necessary to employ ships for their full service life--35 years for destroyers and (CBO assumed) 25 years for littoral combat ships.
25.  David Brown, "Five Ticos in the Trash?" Navy Times (July 8, 2002), p. 14.
26.  In the Navy's current generation of surface warships, Spruance class destroyers and Ticonderoga class cruisers share the same hull, and the cruisers and Arleigh Burke class destroyers share the same propulsion system and have similar combat systems.
27.  For a thorough summary of the program, see Ronald O'Rourke, Navy DD(X) Future Surface Combatant Program: Background and Issues for Congress, CRS Report for Congress (Congressional Research Service, May 10, 2002).
28.  Vice Admiral Phillip M. Balisle, "Transforming the 21st Century Surface Navy," Armed Forces Journal International (September 2002).
29.  Press reports suggest that the Navy wants the LCS to embark a smaller helicopter but at least support an SH-60-sized aircraft. See Nick Jonson, "Navy Issues Request for Proposals for Littoral Combat Ship Model," Aerospace Daily (August 16, 2002), p. 1. In addition, Northrop Grumman Ship Systems unveiled a design for the LCS that would allow it to support a medium-sized helicopter for a few days but not embark one for an entire deployment. See Nick Jonson, "Northrop Grumman Outlines Details of Littoral Combat Ship Proposal," Defense Daily (February 11, 2003).
30.  Scott C. Truver, "U.S. Ship Debate: The Big Question," Jane's Defence Weekly (April 24, 2002), p. 25.
31.  If the Navy decided to replace the Arleigh Burke destroyer with the CG(X) (which would make far more sense than designing a new ship at that point), the CG(X) production line would need to be extended through at least 2028. CBO assumed that the Navy would continue to buy the CG(X) and thus would purchase a total of 32 between 2014 and 2025.
32.  Essentially, CBO assumed that the DD(X) would be built on the current schedule, with the lead ship purchased in 2005.
33.  That funding level does not include tactical aircraft, which will also place substantial demands on Navy resources over the next 15 years.
34.  The 1997 Quadrennial Defense Review set the force goal for attack submarines at 50. That goal was raised to 55 several years later. The current force level is 54, and the Bush Administration is converting four ballistic missile submarines to a guided-missile configuration, which will allow them to perform conventional missions. Thus, for the purposes of this analysis, CBO assumed a force goal of 58 attack submarines.
35.  See Congressional Budget Office, Increasing the Mission Capability of the Attack Submarine Force (March 2002).

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