GAO-09-886R Navy’s Future Cruiser 

United States Government Accountability Office

Washington, DC 20548 

August 7, 2009 

The Honorable Edward M. Kennedy 

Chairman 

The Honorable Mel Martinez 

Ranking Member 

Subcommittee on Seapower 

Committee on Armed Services 

United States Senate 

Subject: Defense Acquisitions: Additional Analysis Needed to Capture Cost Differences 

Between Conventional and Nuclear Propulsion for Navy’s Future Cruiser

The National Defense Authorization Act for Fiscal Year 2008 requires that any budget request 

for construction of a new class of major combatant vessels will be for one with an integrated 

nuclear power system, unless the Secretary of Defense submits notification to Congress that 

it is not in the national interest to do so. The Navy’s Next Generation Cruiser—CG(X)—is 

subject to this legislation. In response to a congressional request, GAO reviewed the Navy’s 

analysis of options for CG(X), including cost estimates related to building nuclear and 

conventional cruisers. GAO examined (1) the design concepts included in the CG(X) Analysis 

of Alternatives, (2) how each ship design concept addresses threats that cause capability 

gaps for maritime air and missile defense, and (3) how the Navy’s methodology and 

assumptions affect its estimates of the relative costs for conventional and nuclear cruisers. 

To accomplish this, GAO analyzed CG(X) program documents, interviewed Navy and 

Department of Defense officials, and assessed the effect of alternative methodologies and 

assumptions on cost estimates. This letter is an unclassified summary of the classified report. 

In the CG(X) Analysis of Alternatives, the Navy identified six ship design concepts. These 

concepts include developing new designs as well as making modifications to previous hulls. 

For example, two concepts are based upon making modifications to the DDG 1000 Zumwaltclass destroyer and another concept is based upon making modifications to the DDG 51 

Arleigh Burke-class destroyer. The ship design concepts vary in both capability, including the 

sensitivity of the radar and number of missile cells, and propulsion system. The variability is 

based on whether the concept uses a previous hull or is a new design. The Navy analyzed two 

new cruiser design concepts, one with a conventional propulsion system and one with a 

nuclear propulsion system. Both included the most sensitive radar and highest number of 

missile cells of all the concepts. 

The sensitivity of the radar on each ship design drives the ability of that ship to address 

threats that cause capability gaps for joint forces. The Navy developed a minimum 

performance standard that each alternative would need to meet to address the gap. As the 

radar sensitivity level increases, the capability gaps against these threats diminish because 

the radar’s ability to meet the performance standards improves. 
The draft cost analysis—which has not yet been approved within the Navy—includes a lifecycle cost estimate and a break-even analysis. The Navy estimated the life-cycle costs for 19 

nuclear cruisers and 19 conventional cruisers using the 2007 price of crude oil. Then, in the 

break-even analysis, the Navy calculated the price of crude oil at which the cost of 19 nuclear 

cruisers equals the cost of 19 conventional cruisers. Using this analysis, the Navy determined 

that if oil prices behaved similarly to the past 35 years, the nuclear cruisers would be cheaper 

than the conventional cruisers. The Navy’s analysis does not include: (1) present value 

analysis to adequately account for the decreasing time value of money, (2) alternative 

scenarios for the future price of oil, and (3) an examination of how a less efficient 

conventional propulsion system would affect its cost estimates. By incorporating present 

value analysis, as required by Department of Defense guidance, and future oil projections 

from the Department of Energy’s Energy Information Administration, we found that the lifecycle cost of the conventional cruisers would be less than the nuclear cruisers. This 

demonstrates the sensitivity of the cost estimates to different assumptions, underscoring the 

need for more rigorous analysis before reaching conclusions about the alternatives. 

Recommendations for Executive Action

We recommend that the Secretary of Defense require that the Navy (1) before finalizing 

Phase 2 of the Maritime Air and Missile Defense of Joint Forces Analysis of Alternatives, 

include present value analysis, alternative fuel scenarios, and analysis on the effect that a less 

efficient conventional propulsion system has on the cost estimates and (2) include present 

value analysis and alternative fuel scenarios in any future analyses of the trade-off between 

conventional and nuclear propulsion. 

Agency Comments

The Department of Defense provided us with restricted comments on our report. In its 

comments, the department agreed with the recommended actions. However, it disagreed 

with several of GAO’s underlying analyses. 

– – – – – 

If you or your staff have any questions about this report, please contact me at (202) 512-4841. 

Paul L. Francis 

Managing Director 

Acquisition and Sourcing Management 

(120785 / 120851) 

 2 GAO-09-886R Navy’s Future Cruiser
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