Comparison of the DDG-51 and DD(X) Destroyers
Procurement Cost for the Lead Ship of the Class
(Billions of 2007 dollars)
Navy’s estimate 2.6————–3.3
CBO’s estimate 2.6—————4.7
Displacement (Thousands of long tons)
Light load 6.6——————-12.1
Full load 8.3———————14.3
Procurement Cost per Thousand Long Tons for the
Lead Ship of the Class (Millions of 2007 dollars)
Navy’s estimate 385————–275
CBO’s estimate 385————–385
a
Annual Operating Costs per Ship (Millions of 2007 dollars) 34 22 to 32
Life-Cycle Costs per Ship (Billions of 2007 dollars)b
Using the Navy’s estimate for DD(X) procurement 2.1 2.7 to 2.9
Using CBO’s estimate for DD(X) procurement 2.1 3.8 to 4.0
Source: Congressional Budget Office.
a. This number is the same as CBO’s estimate for the DDG-51 because it is based on a direct analogy to
that ship.
b. Life-cycle costs are shown on a discounted (net-present-value) basis.
that envisioned a fleet of 260 to 325 ships, including eight to 12 DD(X)s. The
program of record submitted with the President’s 2006 budget included 10
DD(X)s, pending the Navy’s determination of the composition of its future fleet.
According to that program, the lead ship of the DD(X) class would be procured in
2007.
Comparing Construction Costs
for the DDG-51 and DD(X)
Comparing the cost of the lead ship of the DDG-51 Arleigh Burke class with the
cost of the lead DD(X) depends critically on the inflator used to convert 1985 dollars
to 2007 dollars. According to information in Department of Defense (DoD)
cost reports, the lead ship of the DDG-51 class, begun in 1985, cost approximately
$1.2 billion to build. Using DoD’s inflator for overall military procurement
to convert that amount to 2007 dollars results in a cost of $2.0 billion to
construct the first DDG-51. However, the Assistant Secretary of the Navy for
Research, Development, and Acquisition, John Young, has stated that if the first
DDG-51 were bought now, it would cost $2.4 billion (20 percent more than
DoD’s overall procurement inflator would indicate).2
According to analysis of the inflationary component of past cost increases in
shipbuilding programs that was conducted by the Navy and shared with CBO,
DoD’s overall procurement inflator underestimates the inflation that has actually
occurred in the naval shipbuilding industry. On the basis of that analysis, the
Navy provided CBO with a composite inflator that reflects the growth in labor
and material costs that the naval shipbuilding industry has experienced in the past
and expects to experience through 2011. Using that inflator, CBO calculates that
the lead DDG-51 cost almost $2.6 billion in 2007 dollars (see Table 1).
According to the latest information available to CBO, the Navy estimates that the
lead ship of the DD(X) program would cost $3.3 billion. (Information provided
by the Navy suggests that the service’s estimate of that cost grew by about 25 percent
between the President’s 2004 and 2006 budgets.) Using the Navy’s current
estimate for the lead ship and historical relationships about how the cost per ship
declines as more are built, CBO estimates that the DD(X) would cost an average
of $2.4 billion apiece for a 10-ship program.
However, recent press reports indicate that the Cost Analysis Improvement Group
(CAIG) in the Office of the Secretary of Defense believes that procurement costs
for the DD(X) program may be 33 percent higher than the Navy estimates.3 If
those reports are accurate, the first DD(X) could cost a total of $4.4 billion,
implying an average cost of $3.2 billion for a 10-ship program. (As shown in
Table 2, the Navy’s cost goals and estimates for the DD(X) program and its predecessor,
the DD-21, have increased several times since 1996.)
CBO employed a top-level approach to bound the potential cost of the lead
DD(X). (Our experience indicates that such an approach can provide a good
indication of a program’s possible costs.) CBO calculated a metric of cost per
long tons, measured in terms of a ship’s light-load displacement (when carrying
no fuel, crew, cargo, or water), based on the lead DDG-51. That first DDG-51
weighed 6,624 long tons and cost a total of $2.6 billion in 2007 dollars, or $385
million per thousand tons. The Navy now expects the DD(X) to have a light-load
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