REDUCING THE DEFICIT: SPENDING AND REVENUE OPTIONS
Congressional Budget Office - March 1997


DEF-07 REDUCE PROCUREMENT OF DDG-51 DESTROYERS


Annual Savings							Five-Year
Savings from			(Millions of dollars)		Cumulative
the 1997 Plan		1998	1999	2000	2001	2002	Total

Budget Authority	551	660	777	879	1,149	4,016

Outlays			27	127	274	431	585	1,444

NOTE: Savings relative to the Administration's 1998 plan appear in Appendix A.

The DDG-51 destroyers of the Arleigh Burke class would be used in a war to protect aircraft carrier battle groups and to attack land- and sea-based targets. The ships incorporate the Aegis combat system for air defense and the Tomahawk missile fired from the Vertical Launching System for land attack. Compared with previous classes of destroyers, the DDG-51s incorporate other improvements in speed, weapons, and armor. The Navy states that the DDG-51s also will be more difficult for enemy forces to detect because of design features that reduce their radar, sonar, and infrared signatures.

The Administration's 1997 plan would have bought 14 more DDG-51s from 1998 through 2002--two per year in 1998 and three per year from 1999 to 2002. In the 1997 defense authorization act, the Congress provided multiyear contract authority for three ships per year from 1998 through 2001, thereby adding a ship in 1998. The Administration's 1998 plan adds a ship in 1998 in response to Congressional action, but reduces the number of ships purchased in 2002 from three to one.

In contrast, this option would buy only 10 DDG-51s from 1998 through 2002 at a rate of two a year. Compared with the Administration's 1997 plan as modified by the Congress, this option would buy five fewer ships during the 1998-2002 period and could save about $551 million in budget authority in 1998 and $4 billion over five years. (Savings in outlays would be $27 million in 1998 and $1.4 billion over five years.) Of the $4 billion in budget authority savings associated with this option, about $3 billion results from building five fewer ships and $1 billion from consolidating construction at one shipyard. Compared with the Administration's 1998 plan, which calls for building two fewer ships through 2002, this option would save $2.1 billion in budget authority and $1.4 billion in outlays. The smaller fleet of DDG-51s in the next decade would also result in savings in operating and support costs that are not included in this option.

Reducing the number of DDG-51s purchased each year could have some disadvantages. Buying fewer DDG-51s might reduce the capabilities of the fleet by providing fewer ships that can perform multiple missions (such as strike and antiair, antisurface, and antisubmarine warfare). With the Navy's post-Cold War policy of deploying its ships more flexibly, which could require that surface combatants sometimes be deployed without an aircraft carrier, such capabilities might be more important.

Moreover, proponents of the Administration's plan might contend that the advanced capabilities of the DDG-51s will continue to be needed in the post-Cold War world. The sophisticated combat systems that the DDG-51 incorporates include the Aegis system, which is designed to stop attacks by large numbers of enemy aircraft and their antiship missiles attempting to saturate the air defenses of the aircraft carrier battle group. The hostile air threat to the U.S. Navy has declined with the breakup of the Soviet Union, and the smaller air forces of regional powers that the United States is most likely to fight are less capable of launching saturation attacks. Combat against regional powers, however, is likely to bring ships into littoral areas where they have less time to react to threats and thus might benefit from the quicker reaction of the Aegis system. Nevertheless, some analysts believe that the DDG-51, which was designed during the Cold War, is not optimally designed to fight in coastal areas and is too expensive to purchase in large numbers if the Navy's budget declines.

Only two shipyards currently build surface combatants, and reducing procurement to two vessels a year might sustain only one producer. The Congress would have to weigh carefully the possible effects of reducing the country's naval shipbuilding capabilities and the ability to reconstitute them if a change in threat required a buildup of forces. If reduced purchases caused one shipyard to close, the remaining shipyard might be able to charge higher prices that might offset some or all of the savings from lower production.

The Navy might be able to minimize such growth in unit costs. Even if only one shipyard remained, the government--a single buyer that has many alternative uses for its limited procurement budget--might be able to exert pressure on that yard to restrain costs. Indeed, one approach the Navy could take would be to let the two shipyards bid competitively for a single contract covering all ships purchased during the 1998-2001 period. In the longer term, closing a shipyard might reduce the Navy's costs by eliminating excess naval shipbuilding capacity.

Reducing the number of DDG-51s, as proposed in this option, need not limit the Navy's ability to counter regional threats. For example, the combination and automation of sensor inputs and weapons in non-Aegis ships may allow them to react faster to the shorter-range threats in regional conflicts. Advances in com-munications may allow a ship with the Aegis system to control the weapons of all other ships in a group, shortening the reaction time of the entire group. In addition, according to a press report, the Navy already has a shortage of Tomahawk missiles to be carried on existing ships, including the DDG- 51, that have the Vertical Launching System.

Considering the reduced threat, the Navy may already have enough sophisticated Aegis ships. With the 75 Aegis ships that would eventually be available under this option (27 CG-47 Ticonderoga class cruisers, 38 DDG-51s funded through 1997, and 10 future DDG-51s), two could be assigned as escorts to each of the 12 aircraft carrier battle groups, leaving 51 available for independent operations. In addition, the Navy would need fewer Aegis ships to escort carrier battle groups if the number of carriers was reduced (see DEF-06) or if lower threat levels warranted assigning only one Aegis ship per battle group. Because of the reduced threat, the Navy is already lowering the number of surface combatants assigned to escort and protect the aircraft carrier.

In the longer term, procuring fewer DDG-51s would exacerbate the Navy's difficulty in maintaining its force goal of 346 ships. In recent years, requirements for overseas presence have prompted the Navy to increase the goal from about 330 ships to 346. Yet the Administration's 1997 plan produces an average of about five ships per year during the 1997-2001 period. Assuming that the average life expectancy of a ship is 35 years, continuing that rate of procurement would stabilize the size of the fleet at less than 200 ships. Producing fewer DDG-51s per year would reduce the fleet even further unless the funds were used to procure a greater number of less expensive ships. With lower threat levels in the post-Cold War era, however, a smaller fleet of highly capable ships might be adequate. Most navies, especially those of potential adversaries, have smaller and less sophisticated ships than the DDG-51.