The Bush Administration came into office with an agenda to transform the military into a more effective and more lethal force. The Navy has numerous transformation efforts under way--some of which were begun before President Bush took office--that Navy officials hope will lead to a better fleet. Such efforts include improvements to the Navy's sensors and information networks, a new and more capable aircraft carrier, new strike and reconnaissance aircraft, and new ways for the Navy and Marine Corps to organize and fight.

Perhaps the most visible effort is the drive to transform the surface combatant force. Representing more than one-third of the fleet, that force comprises the Navy's cruisers, destroyers, and frigates. (It excludes aircraft carriers, amphibious ships, and support ships.) Over the next 10 to 15 years, the Navy plans to retire one class of destroyers, modernize its cruisers and frigates, introduce three new classes of surface combatants, and experiment with different operating concepts. If fully implemented, those plans would produce a surface combatant force of about 160 ships 25 years from now.

This Congressional Budget Office (CBO) study looks at the composition, missions, and modernization programs of the Navy's surface combatant force as well as alternatives to the Navy's current approach to the force. The study focuses on the surface combatant force for two reasons. First, that force is at the heart of the Navy's plans to increase the total size of the fleet from a little more than 300 ships to 375. Although that increase includes an additional amphibious ship and several support ships (and counts some mine-warfare ships not already counted as part of the 300-ship Navy), most of the difference is explained by expanding the surface combatant force from 115 ships today to 160 ships. The resources needed for that expansion are much larger than what the Navy now spends on surface combatants. A CBO projection of the demands on the Navy's shipbuilding budget through 2020 shows that without large budget increases, transforming the surface combatant force could crowd out funding for other ship programs. That situation could pose particular problems for the attack submarine force, which will require substantially greater funding than it now receives if the Navy wants to maintain the existing number of submarines.

Second, the new ships in the surface combatant force are the primary means by which Navy officials expect to defeat threats posed by relatively inexpensive weapon systems that potential opponents might use to inhibit the Navy's freedom of action (a strategy known as area denial). According to the 2001 Quadrennial Defense Review (QDR), defeating those threats should be a central objective of transformation.

As an alternative to the Navy's current plans, this study examines three approaches for structuring surface combatant programs that would produce a larger and more capable force in 2025 than exists today but would limit average annual spending on procurement and direct operation and support costs to roughly the amount spent last year: $6.6 billion (in 2003 dollars). Those different approaches are:

• Retaining and modernizing ships that the Navy now plans to retire and buying a new frigate to provide presence, counter area-denial threats, conduct maritime interception operations, and carry out other missions.



• Retiring more ships earlier than the Navy plans while accelerating the introduction of new classes of surface combatants--but buying them in fewer numbers.



• Buying a much smaller number of new surface combatants than the Navy proposes but operating them with multiple crews to achieve a far higher rate of peacetime availability.

Those options represent three strategies for managing the Navy's transition to a new generation of surface combatants. The first approach emphasizes the modernization of the Navy's "legacy" fleet--the surface combatants that already exist. The other two approaches emphasize the transformation to a new generation of ships. Each of the three approaches would have a very different effect on the force structure and on the capabilities it would provide to the Navy. Using several measures of capability, CBO compares the three options with one another and with the approach that the Navy is taking.

The key conclusion of that analysis is that the Navy could cap spending at today's level and still have a larger and much more capable force of surface combatants 25 years from now. However, the additional money that the Navy would spend under its plan would provide an even bigger and more effective force than any of CBO's options would.
 

The Surface Combatant Force and Its Missions

As of this writing, the Navy's force of surface combatants comprises 17 Spruance class (DD-963) general-purpose destroyers, 27 Ticonderoga class (CG-47) cruisers, 33 Oliver Hazard Perry class (FFG-7) guided-missile frigates, and 38 Arleigh Burke class (DDG-51) guided-missile destroyers (more DDG-51s are under construction). Those ships constitute the ultimate Cold War generation of surface combatants designed for open-ocean, high-intensity naval warfare against the Soviet Union.

In the past 25 years, surface combatants have seen dramatic improvements in their capabilities. Historically, surface combatants served as escorts for higher-value ships (such as aircraft carriers) or for merchant vessels, protecting them from attack by aircraft, submarines, or small surface craft. Their land-attack capability was restricted to short-range naval guns. New weapon systems--particularly the vertical launch system (VLS) for missiles and the Aegis air-defense combat system--have greatly improved the ability of surface combatants to provide air and missile defense for a naval task force. In addition, the VLS and the Tomahawk cruise missile have enabled surface combatants to attack targets far inland, well beyond the range of traditional naval guns and even naval aviation. Because of those advances, the current generation of U.S. surface combatants is among the best--if not the best--in the world today.
 

The Resource Implications of Modernizing the Surface Combatant Force

According to statements by Navy leaders and official briefings, the Navy proposes to introduce a new generation of surface combatants designed to confront new threats and perform new missions. With the demise of the Soviet navy, no challenges to U.S. naval supremacy remain on the open ocean. As a result, Navy leaders have refocused their attention on influencing events on land, operating in the crowded coastal regions of the world, and overcoming new antiaccess and area-denial threats to U.S. warships operating closer to shore (within the range of a potential enemy's weapons). The Navy expects the next generation of ships, designed especially for coastal areas, to reduce the risks that U.S. naval forces might face in that new operating environment and to increase the combat effectiveness of those forces.

The Navy's transition, or transformation, plan calls for the early retirement of some current-generation destroyers, the upgrading of other existing ships, and the introduction of a new family of surface combatants. Specifically, the Navy intends to retire all Spruance class destroyers and the first five Ticonderoga class cruisers by the end of 2006 and upgrade the combat and reliability systems of the remaining Ticonderogas and Oliver Hazard Perry class frigates. The Navy's main focus, however, is on buying the DD(X) future destroyer, starting in 2005; the littoral combat ship, also starting in 2005; and the CG(X) future cruiser, beginning around 2014.

The DD(X) is intended to be a multimission ship with an emphasis on land attack. It is expected to carry up to 128 VLS cells and one or two 155-millimeter (mm) advanced gun systems capable of hitting targets 100 nautical miles away. It is also designed to be highly stealthy. Exactly how many DD(X)s the Navy plans to buy is unclear, but as of this writing, 16 appears to be the number.

The littoral combat ship (LCS) is intended to be much smaller than the DD(X). The Navy wants it to be a "focused-mission" ship with a modular design, in which combat systems could be changed relatively easily depending on what mission the ship was assigned to perform. At any given time, the LCS could be configured to carry out only one of three missions: mine countermeasures, antiboat operations, or littoral antisubmarine warfare. As with the DD(X), the Navy has not stated officially how many LCSs it plans to buy, but for this analysis, CBO assumed that the service would purchase 56 of the ships, which is consistent with some statements by Navy officials and with briefings that CBO has received.

The CG(X) future cruiser would also be a multimission ship, sharing many features with the DD(X). It is supposed to emphasize air and ballistic missile defense. Although the Navy has not said how many of the new cruisers it intends to buy, presumably it would eventually want to purchase between 24 and 42 if it pursued its current Global Concept of Operations (or Global CONOPs).

Determining the Navy's Modernization Plans
Estimating the resources necessary to carry out those efforts is difficult because the Navy has not stated exactly how many surface combatants it wants or needs, nor has it laid out a long-term modernization program in any detail. Consequently, CBO developed two long-term procurement plans in an effort to gauge the level of resources that the Navy believes is necessary to modernize the surface combatant force. The first is based on a plan contained in the Report on Naval Vessel Force Structure Requirements, released in June 2000 (referred to here as the 30-Year Shipbuilding Report). That report proposed a ship construction plan to maintain a force of 116 large surface combatants, with no new small warships. Officially, it is the only long-term program for Navy ship construction on record that is available to CBO.

The second plan is based on the 2004 Future Years Defense Program, public statements by Navy officials, unofficial sources, and evidence in Navy briefings--outlined most lucidly in the Navy's new Global CONOPs briefing--from the spring and summer of 2002. That plan would upgrade 22 Ticonderoga class cruisers and 33 Oliver Hazard Perry class frigates and would begin procuring 16 DD(X)s and 56 littoral combat ships in 2005. Ten to 15 years from now, the Navy would start replacing the upgraded Ticonderogas with CG(X)s. CBO assumed that the Navy would buy 32 CG(X)s through 2025. Under that approach, the inventory of surface combatants would grow from 115 today to about 160 ships in the next 25 years--88 cruisers and destroyers capable of providing long-range air defense as well as the 16 DD(X) destroyers, and 56 littoral combat ships (see Summary Figure 1). Thus, CBO refers to that approach as the Navy's 160-ship plan. Of the two procurement plans, the Navy's 160-ship plan (based heavily on the Global CONOPs briefing) is the more consistent with current Navy thinking on the future of the surface combatant force.
 

Summary Figure 1.

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.

Budgetary Implications of the Navy's Plans
Both the 30-Year Shipbuilding Report plan and the Navy's 160-ship plan would require greater resources than the surface combatant force has received in recent years or expects to receive under the President's budget request for 2004. That request envisions that the Navy will spend $3.2 billion in 2004--or about 28 percent of the shipbuilding budget--to buy surface combatants. The rest of the ship construction budget would go to build aircraft carriers, submarines, amphibious ships, and support ships. In contrast, by CBO's estimate, the Navy would need to spend an average of $5.9 billion a year (in 2003 dollars) on procurement between 2003 and 2025 to implement the 160-ship plan--or more than half of the shipbuilding budget in the President's 2004 request. (The amount required to carry out the 30-Year Shipbuilding Report plan would be similar.)

At the same time, other components of the Navy will need greater resources if Navy leaders are to achieve their overall force goals. CBO estimates that to meet those goals, the budget for ship construction would have to average about $17 billion a year between 2011 and 2020--about $3 billion more than the average required for the 2003-2010 period (see Summary Table 1) and twice what the Navy spent between 1990 and 2002. (The Navy's shipbuilding budget in 2003 is about $8 billion.)

Summary Table 1 shows how deep the hole in the Navy's ship construction budget has become, and how building a larger surface combatant force would exacerbate the problem. Before 2002, the Navy's total force goal for ships was still officially about 300. That goal was set by the 1997 QDR, and the 2001 QDR referred to that fleet as being the base on which transformation would be built. Sustaining a 300-ship Navy indefinitely (that is, in steady state) would require spending about $11 billion a year on ship procurement, CBO estimates. But since 1990, the Navy has spent only about $8.5 billion per year, on average. Thus, the total shortfall in ship construction relative to the spending necessary to maintain a steady-state fleet of around 300 ships now stands at almost $39 billion. The lion's share of that shortfall involves attack submarines, of which the Navy bought seven between 1990 and 2002.

In the past year, by contrast, senior Navy admirals have argued that they need 375 ships to perform all of the missions asked of the service. By far the biggest change in force goals is the increase in the desired level of surface combatants from 116 to 160. In short, the Navy is proposing a major expansion of the surface combatant force that will require considerable resources at the same time that other ship programs will need more funding if current force levels are to be maintained.
 

Structuring the Future Surface Combatant Force at Today's Funding Level

Transforming the surface combatant force need not be as expensive a proposition as the Navy's 160-ship plan would be. CBO examined three different options to structure the force, each of which would require no more than an average of about $6.6 billion a year (in 2003 dollars) for procurement and direct operation and support costs between 2003 and 2025--about what the Navy spent in 2002. The three approaches emphasize different trade-offs between keeping the legacy generation of ships and transforming it over the next two decades. The first option would make maximum use of ships already in the fleet. The second would speed up development and acquisition of new ship classes by retiring many existing ships even faster than the Navy plans. The third would introduce a multiple-crew operating concept for the Navy's new ship classes, allowing the service to buy fewer surface combatants than envisioned in the Global CONOPs but providing more forward presence during peacetime.

Option I: Delay the Transition to Next-Generation Ships by Making the Most of the Existing Fleet
The ships that make up the legacy generation of Cold War surface combatants remain formidable fighting ships. Recognizing that fact, this approach would keep many of those surface combatants through the end of their notional service lives to ease the shortage of ships that Navy admirals have argued now exists. The Spruance class destroyers would be retained and upgraded, as would the Ticonderoga class cruisers and Oliver Hazard Perry class frigates. With respect to new ship classes, the CG(X) would be delayed for five years, and the DD(X) and littoral combat ship would be canceled. In their place, the Navy would build a next-generation frigate that was more capable than the littoral combat ship but smaller and less costly than the DD(X). That frigate would perform all three LCS missions (mine countermeasures, antiboat operations, and littoral antisubmarine warfare). In addition, it would have robust defensive capabilities to make it more survivable in the littoral environment.

Under this approach, the surface combatant force would grow substantially through 2013 compared with the force in the Navy's 160-ship plan. Indeed, between 2003 and 2012, this option would provide the largest inventory of surface combatants of any approach examined in this study. After 2013, however, as older ships began to be retired in large numbers, the force would fall well below the number of surface combatants that the Navy would have under the 160-ship plan (see Summary Figure 2). By 2025, the surface combatant force would number 130 ships under this option, with an average age of a little over 20 years--greater than under any other approach.
 

Summary Figure 2.

Inventory of Surface Combatants Under Option I, 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; FFG(X) = future guided-missile frigate; CG(X) = future guided-missile cruiser.

Option II: Accelerate the Transition to Next-Generation Ships by Retiring Much of the Existing Fleet Early
In this option, the Navy would more aggressively pursue the new capabilities and ships promised by next-generation technology. To free up the funds for that effort, it would dramatically cut the surface combatant force in the short term. Essentially, this option would fit the Navy's 160-ship plan within the constraints of an average budget of $6.6 billion a year for procurement and operation and support. It would upgrade the combat and reliability systems of 13 of the current 27 Ticonderoga class cruisers; of the other 14, the first five would be retired by 2006 and the rest by 2014, well before the end of their notional 35-year service life. This approach would follow the Navy's plan to retire all Spruances by 2006. In addition, it would retire all Perry class frigates by 2010. It would buy 12 DD(X)s, accelerate the procurement of the CG(X) to 2012, and purchase only 30 littoral combat ships, starting in 2005.

Overall, this approach would give up many older ships in the short run to have more next-generation ships in the long run. The force would immediately and sharply decline, falling to 85 ships by 2010--by far the smallest force of all the approaches that CBO examined (see Summary Figure 3). By 2025, however, the purchase of new ships, especially the littoral combat ship, would bring the force up to 123 surface combatants. This option would produce a younger force than CBO's other two options would: the age of surface combatants would average a little over 18 years in 2025.
 

Summary Figure 3.

Inventory of Surface Combatants Under Option II, 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.

Option III: Buy Fewer Next-Generation Ships by Assigning Multiple Crews to New Ship Classes
Under this approach, the Navy would transform the surface combatant force through a different operating concept--using three crews to operate two ships. By doing so, the Navy could provide the same forward presence as under its 160-ship plan but with a smaller fleet and for much less money. However, although multiple-crewed ships can provide about twice the peacetime presence of single-crewed ships, they offer no extra benefit during war. (Wartime capability would be based on the number of hulls in the surface combatant force.) This option would restrict the new crewing concept to future ship classes, on the theory that it would be easier to design new ships to accommodate multiple crews than to modify existing ones.

With respect to ship programs, this approach would follow the Navy's plan in retiring Spruances early and upgrading Ticonderoga cruisers and Perry frigates. It would also buy the same types of next-generation surface combatants as Option II but fewer of them: eight DD(X)s and 28 littoral combat ships. The CG(X) would be delayed until 2018, and only 15 would be purchased. Because those new classes of ships would use multiple crews and spend more time at sea, they would cost more to operate than single-crewed ships would. CBO included those higher costs in its analysis.

Under this option, the surface combatant force would rise to 124 ships by 2025, but the multiple-crewing concept would make that force equivalent to 165 single-crewed ships in peacetime (see Summary Figure 4). That force would be the second oldest examined here, with an average age of about 20 years in 2025.
 

Summary Figure 4.

Inventory of Surface Combatants Under Option III, 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.

Measures of Capability Under the Various Approaches

To evaluate the different options in this study and compare them with the plan in the 30-Year Shipbuilding Report and the Navy's 160-ship plan, CBO used various measures of peacetime and wartime capability for the surface combatant force. The principal measures were the total number of surface combatants, the total number of VLS cells that those ships carry, the number of ships capable of long-range fleet air defense, the number of helicopter hangars on surface combatants, the number of penetrating littoral antisubmarine warfare suites, the number of guns capable of firing extended-range guided munitions and the number of 155-mm advanced gun systems (to provide long-range fire support to the Marine Corps), the number of next-generation ships, the total crew size of the surface combatant force, and its average age.

Because the Navy's principal peacetime mission is maintaining a combat-credible forward presence, capabilities on-station (in a ship's theater of operations) are a better measure of how well the surface combatant force performs than fleet totals are. Conversely, in wartime, the critical measure is how much actual firepower can be brought to bear in a given period of time. Thus, CBO calculated the "surge" capacity of each force structure 14 days and 36 days after the beginning of a wartime mobilization. (Chapter 3 provides a detailed assessment of how the different force structures compare using CBO's measures.)⁽¹⁾

Of the approaches analyzed in this report, the Navy's 160-ship plan would provide the most capable and balanced force of surface combatants--but at a cost that could prove prohibitive. However, all of the alternatives that CBO examined, even those with constrained budgets, would produce a fleet of surface combatants that was much more effective than today's force (see Summary Table 2).

Although Option I's force would be the oldest, it would also be the largest and most capable in 2010, according to the majority of measures that CBO used. By 2025, however, it would still be the oldest fleet and would no longer be as capable as the Navy's planned 160-ship force. Option II's strong suit would be its number of next-generation ships, which is a wartime measure. Conversely, Option III would be the best among CBO's options with respect to peacetime presence. The force of the 30-Year Shipbuilding Report would have the most VLS cells and 155-mm guns by 2025 because it would purchase more DD(X)s--in the absence of a littoral combat ship--than would any other approach.