The following is the Congressional Research Service report of November 17, 2021, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress.
From the report
The Navy began procuring Arleigh Burke-class destroyers (DDG-51), also known as Aegis destroyers, during fiscal year 1985, and a total of 87 were purchased during fiscal year 2021, including two in fiscal year 2021. From fiscal year 1989 to fiscal year 2005, DDG-51s were purchased in annual quantities of two to five vessels per year. Since fiscal year 2010, they have been purchased in annual quantities from one to three vessels per year.
The DDG-51s are purchased in FY 2018-FY 2022 under a Multi-Year Supply Contract (MYP) that Congress approved as part of its action on the FY 2018 budget of Marine. The DDG-51s purchased in FY 2017 and beyond are built using a design called the Flight III design, which incorporates a new, higher performance radar called the SPY-6 radar.
The Navy’s proposed budget for FY2022 calls for the purchase of one DDG-51 in FY2022, rather than the two DDG-51s that are requested for FY2022 under the MYP contract DDG-51 for Exercise 2018-Exercise 2022, and which were scheduled for Exercise 2022 as part of Navy Exercise 2021. budget presentation. A key question for Congress for the DDG-51 program in FY2022 is whether to fund the purchase of one DDG-51, two DDG-51s, or some other number of DDGs. -51 (like zero or three).
When purchased two per year, DDG-51s cost around $ 2.0 billion each. Due to the reduced production economies of scale that would occur at a production rate of one ship per year, the DDG-51 requested for purchase in fiscal year 2022 has an estimated cost of 2,401.7 million dollars (i.e. approximately $ 2.4 billion). As part of the Navy’s proposed budget for fiscal year 2022, the requested DDG-51 would receive $ 384.9 million in previous year’s Economic Order Quantity (EOQ) funding, a type of funding from Advance Procurement (AP) that occurs under a MYP contract. Taking into account this EOQ funding from the previous year, the Navy’s proposed budget for fiscal year 2022 requests the remaining $ 2,016.8 million (i.e. approximately $ 2.0 billion). needed to supplement the estimated supply cost of the vessel of $ 2,401.7 million. The Navy’s proposed budget for fiscal year 2022 also requests $ 45.8 million in total cost funding to cover the cost growth of DDG-51s purchased in previous years, bringing the total amount of funds to ‘supply requested for the DDG-51 program at $ 2,062.5 million (i.e. approximately $ 2.1 billion)
Purchasing one DDG-51 rather than two DDG-51s in FY2022 would prevent the Navy from meeting its obligations in the final year of the MYP FY2018-FY2022 DDG-51 contract. Navy officials say that as a result, the Navy should pay a fine of $ 33 million to DDG-51 shipbuilders (unless the Navy and shipbuilders reach an agreement to change the terms of the MYP contract ).
Navy officials said requesting the purchase of one DDG-51 rather than two DDG-51s was an affordability measure – a way to help the Navy stay on budget while meeting funding needs other Navy programs. The purchase of a second DDG-51 in FY2022 is the number one item on the Navy’s Unfunded Priority List (UPL) for FY2022 – the list of service programs that it would prefer to be funded in fiscal year 2022, should additional funding become available.
The UPL says that the purchase of two DDG-51s instead of one DDG-51 in fiscal year 2022 would require additional funding of $ 1,659.2 million (i.e. approximately $ 1 , $ 7 billion) in funding for shipbuilding. This figure is not the cost of the second DDG-51 – the cost of supplying the second DDG-51 would be around $ 2.0 billion. The addition of the second DDG-51, however, would reduce the estimated supply cost of the first DDG-51 due to the increased production economies of scale that would result. The figure of $ 1,659.2 million therefore corresponds to the net increase in shipbuilding funding that would be required to purchase two DDG-51s rather than one DDG-51 in fiscal year 2022.
Download the report here.