The DDG 1000 program has from the onset faced a steep challenge framed by demanding mission requirements, stealth characteristics, and a desire to reduce manning levels by more than half that of predecessor destroyers. These requirements translated into significant technical and design challenges. Rather than introducing three or four new technologies (as is the case on previous surface combatants), DDG 1000 plans to use a revolutionary hull form and employ 11 cutting-edge technologies, including an array of weapons, highly capable sensors integrated into the sides of a deckhouse made primarily of composite material—not steel, and a power system designed for advanced propulsion as well as high-powered combat systems and ship service loads. This level of sophistication has necessitated a large software development effort—14 million to 16 million lines of code. All of this is to be accomplished while splitting construction between two shipyards. The Navy believes this approach and schedule is important to managing shipyard workloads, as starting later would have caused shipyard workload to drop too low. In a sense, then, the construction approach and schedule became an additional challenge as they became constraints on the pace of technology and design development. To meet these multiple and somewhat conflicting demands, the Navy structured its acquisition strategy to develop key systems and mature the design before starting to build the ship. While the Navy has made good decisions along the way to address risk, it is already likely, shortly before the Navy embarks on ship construction, that additional funding will be necessary or trade-offs will need to be made to develop and deliver DDG 1000 ships. Despite multiple and somewhat competing demands, the Navy conceived a thoughtful approach and achieved developmental successes on DDG 1000. Developing 10 prototypes of the ship’s critical systems helped to create confidence that a number of technologies would operate as intended, and the Navy’s plan to mature the ship’s design before starting construction aims to reduce the risk of costly design changes after steel has been cut and bulkheads built. For example, the Navy successfully demonstrated the advanced gun system through initial guided flight and testing on land. In other cases, such as for the integrated power system, tests brought to light technical problems, which the Navy was able to address by going to an alternate technology. However, notwithstanding these efforts, significant challenges remain in developing the ship’s design and a number of key components—in particular, the deckhouse, volume search radar, and the integrated power system. Moreover, the ship’s capability is contingent on an unprecedented software development effort. Recently, the Navy restructured the schedule to buy more time for development—a good decision. However, as construction of the first ship has not yet begun, the Navy may have exhausted its options for solving future problems without adding money and time. Although the initial phases of the design are complete, the shipbuilders will be pressed to complete a large amount of design work by October 2008 when lead ship construction begins. From August 2007 through May 2008, the shipbuilders finished work on 16 of the 100 design zones (individual units that make up the ship’s design) leaving 5 months to finish the final design phases in 84 zones leading up to the start of construction. While the shipbuilders believe they can finish the design by the start of ship construction, delays in the development of the ship’s key systems could impede completion of the design and eventually interfere with DDG 1000 construction. If the shipbuilders cannot finish planned design work prior to the start of lead-ship construction, the program is at greater risk for costly rework and out-of-sequence work during construction. To maintain the start of ship construction in 2008 while continuing to develop the ship’s technologies, the Navy recently realigned the program’s schedule. Rather than delivering a fully mission-capable ship, the Navy will take ownership of just the vessel and its mechanical and electrical systems—including the ship’s power system—in April 2013. At that point, the Navy plans to have completed “light-off” of the power, mechanical, and electrical systems. Light-off refers to activating and testing these systems aboard ship. The Navy deferred light-off of the combat systems—which include the radars, guns, and the missile launch systems—by over 2 years until May 2013. According to the Navy, conducting light-off in phases allows the program to test and verify the ship’s major systems, in particular the integrated power system, in isolation and creates additional time to mature the combat systems, as well as the software that supports these systems, before ship installation and shipboard testing. However, since the Navy will only test and inspect the hull prior to taking ownership of the vessel, it will not have a full understanding of how the ship operates as a complete and integrated system until after final shipboard testing of the combat systems in 2014. While the restructure maintains the construction schedule, it does delay verifying the performance of the integrated power system before producing and installing it on the ship. Tests of a complete integrated power system with the control system will not occur until 2011—nearly 3 years later than planned. To meet the shipyard’s schedule, the Navy will buy a power system intended for the third ship and use it in land-based tests. As a result, the integrated power system will not be demonstrated until a year after the power systems have been produced and installed on the two lead ships—an approach that increases exposure to cost and schedule risk in production. Finalizing deckhouse manufacturing and assembly processes are essential to constructing and delivering the deckhouse as planned. Changes to the manufacturing processes for deckhouse production are ongoing. The shipbuilder is validating process changes through production and inspection of a series of test units, culminating with a large-scale prototype manufactured to the same thickness and other specifications of the deckhouse. Final validation of the manufacturing processes for deckhouse construction will not occur until after construction, inspection, and shock testing of the large-scale prototype. However, test and inspection activities are not scheduled for completion until after the deckhouse production readiness review in September 2008. Problems discovered during testing and inspection may require additional changes to manufacturing methods. Moreover, facility and machinery upgrades necessary to construct and assemble the deckhouse are not all scheduled to be complete until March 2010—over a year after the start of construction of the first deckhouse. While the shipbuilder expects to complete efforts to meet the construction schedule, if difficulties occur, the deckhouses may not be delivered to the shipyards on time, disrupting the construction sequence of the ships. Further, the volume search radar (one of two radars in the dual band radar system) will not be installed during deckhouse construction as initially planned. Instead, installation will occur at the shipyard when the first ship is already afloat, a more costly approach. The change was partly due to delays in developing the volume search radar. Land-based demonstrations of the volume search radar prototype originally planned to be done before starting ship construction will not be completed until 2009—almost 2 years later. Development difficulties center on the radar’s radome and transmit- receive units. The contractor has been unable to successfully manufacture the radome (a composite shield of exceptional size and complexity), and the transmit-receive units (the radar’s individual radiating elements) have experienced failures operating at the voltage needed to meet range requirements. While the Navy believes that the voltage problem has been resolved, upcoming land-based tests will be conducted at a lower voltage—and without the radome. The Navy will not demonstrate a fully capable radar at its required power output until after testing of the first production unit sometime before combat systems light-off in 2013. Crucial to realizing DDG 1000’s required manning reductions is the ability to achieve a high degree of computer automation. If the ship’s software does not work as intended, crew size would need to be increased to make up for any lack of automation. Given the risks associated with the ship’s software system, referred to as the total ship computing environment, the Navy initially planned to develop and demonstrate all software functionality (phased over six releases and one spiral) over 1 year before ship light-off. As a result of changes in the software development schedule, the Navy eliminated this margin. Until recently, the Navy was able to keep pace with its development schedule, successfully completing the first three software releases. However, the Navy is now entering the complex phases of software development when ship functionality is introduced. The Navy certified release 4 without the release meeting about half of the software system requirements, mainly because of issues coding the ship’s command and control component—the heart of the ship’s decision-making suite. Problems discovered in this release, coupled with the deferred work, may signify larger software issues that could disrupt the development of releases 5 and 6 and prevent the timely delivery of software to meet the ship’s schedule. Costs of the DDG 1000 ships are likely to exceed current budgets. If costs grow during lead ship construction due to technology, design, and construction risks, as experience shows is likely, remaining funds may not be sufficient to buy key components and pay for other work not yet under contract. Despite a significant investment in the lead ships, the remaining budget is likely insufficient to pay for all the effort necessary to make the ships operational. The Navy estimates a total shipbuilding budget of $6.3 billion for the lead ships. Of this amount, the Navy has approximately $363 million remaining in unobligated funds to cover its outstanding costs and to manage any cost growth for the two lead ships, but known obligations for the lead ships, assuming no cost growth during construction, range from $349 million to $852 million (see table 1). The main discrepancy is the current estimated cost of the combat systems.