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COST AND VALUE IN AIR AND MISSILE DEFENSE INTERCEPTS

Photo: U.S. Navy

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Commentary by Wes Rumbaugh

Published February 13, 2024

Remote Visualization



With numerous missile defense engagements in the Red Sea, a common framing for
news reporting has been the relative cost of the interceptor and the missile or
drone it intercepts. These data points are frequently used to illustrate the gap
between the two costs, which can lead to the impression that defenses are too
expensive to sustain. Multiple media outlets have, for instance, highlighted the
U.S. Navy’s use of a $2 million Standard Missile-2 to intercept $2,000 Houthi
drones. It makes for a good headline, but the simplistic comparison can be
misleading. While analysis of these adverse cost exchange ratios is a tempting
and sometimes useful framework, it obscures both the complexity of air and
missile defense engagements and the complicated value of air and missile
defense.

THE INSUFFICIENCY OF THE COST EXCHANGE RATIO

The “cost exchange ratio” framework is attractive because it is rooted in some
truth: air and missile defense interceptors are relatively expensive. Budget
documents for FY2024 suggest that U.S. defensive missiles are, overall, roughly
twice as expensive as offensive missiles (see table below), when averaging
all-up-round unit costs. Highly capable U.S. offensive missiles are also likely
more expensive than less sophisticated missiles provided to the Houthis by Iran,
though there is some evidence of underestimating the cost of these systems.

Image


This asymmetry is mostly due to the significant technical demands of air and
missile defense interceptors. While offensive missiles have gotten more precise,
their requirements for precision targeting and maneuvering capability still pale
in comparison to defensive interceptors. To successfully intercept an attacking
missile, air and missile defense interceptors must possess exceptional speed,
range, and sophisticated guidance. This is what makes missile defense “the
ultimate precision guidance challenge.”

Despite these technical challenges, a careful look suggests that the U.S. Navy
has had some success in reducing interceptor costs over time, when considering
inflation and different missile variants. These trends are visible for the
average unit cost of Standard Missile-6 (SM-6), Standard Missile-2 (SM-2), and
Evolved Sea Sparrow Missiles (ESSM) in inflation-adjusted dollars (see graph
below). These figures show that interceptor costs often fall over time, while
cost jumps are associated with the introduction of new, more capable variants.
The 2024 spike in SM-6 unit costs stemmed from procuring the new Block IB
variant, which features a new second stage rocket motor to extend the
interceptors’ range. But between 2018 and 2023, when the U.S. Navy was
purchasing a mix of Block I and IA SM-6 missiles, the unit cost declined every
year on an inflation-adjusted basis, a trend also evident in the unit costs of
the ESSM Block II missile.

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OPERATIONAL COMPLEXITIES AFFECT INTERCEPT DECISIONS

Two other aspects of the usual cost exchange ratio comparison should also be
considered. In the first instance, the difficult decisions made by air and
missile defense operators cannot be captured by a simple accounting exercise of
comparing the cost of the weapons being fired. Air and missile defense
engagement decisions are far more complex than choosing an interceptor that is
of similar cost to the attacking missile. All else being equal, operators on the
ship are likely to choose the cheapest possible option to successfully engage a
threat. But the complexity of air and missile defense can often render cheaper
interceptor options ineffective or create unnecessary operational risk to U.S.
assets.

To defend shipping in the Red Sea, U.S. naval assets must defend larger areas,
rather than a specific point target. This requires interceptors with longer
ranges to increase the area of protection of any individual ship. Shorter-range
interceptors are cheaper, but also can only provide defenses to a smaller area
around the ship. These cheaper interceptors are useful for defending the ship
itself from attacks but cannot provide the area-wide coverage to also defend
shipping vessels.

The constraints of ship-based air defense also introduce unique challenges that
may require the use of a more expensive interceptor. Ships deploy with the
missiles they were loaded at port. These loadouts are overwhelmingly tailored to
defeat the most stressing threats. The need to intercept more capable threats
like anti-ship cruise missiles or ballistic missiles (both of which have been
fired by the Houthis) means more expensive interceptors must be part of the
deployed inventory. But if a less expensive munition, like a drone, is the only
threat, this could lead to the use of a more expensive interceptor for a less
capable threat. No loadout is perfect, but a ship commander must defend the ship
and its crew. The alternative mistake, having too few expensive interceptors for
a more challenging threat, could invite catastrophe. Commanders likely err
toward greater capability relative to expected missions in selecting defensive
interceptor loadouts, increasing the cost of interceptors on board.

INTERCEPTOR COST VERSUS VALUE OF DEFENDED ASSETS

A second problem with typical media reporting is that it does not consider the
value of the defended assets, and thus the relationship between cost and the
value of the assets defended. In the case of engagements with Houthi missiles,
U.S. interceptors have been protecting commercial ships in the Red Sea that
accounted for about 10 percent of global seaborne trade in 2023. While global
shipping costs have risen in response to Houthi missile attacks, those costs
would likely be higher if they were consistently hitting commercial vessels.

In addition to defending commercial shipping, air and missile defenses protect
the value of the U.S. ships deployed to the region. The recent air defense
engagement by the USS Gravely (DDG 107) illustrates the potential risk of
overemphasizing the relative cost of interceptors. In that engagement, the
Gravely used its Phalanx Close-In Weapon System (CIWS) to engage an incoming
anti-ship cruise missile. The 20-millimeter (mm) rounds fired by the CIWS were
likely cheaper than the anti-ship cruise missile they engaged. The cost of using
these cheaper interceptors, however, was operational risk, allowing the missile
within a mile of the roughly $2 billion ship and all of the sailors on it before
it was shot down.

To be sure, the entire value of air and missile defense can be hard to quantify.
A decision not to defend international shipping from Houthi attacks could call
into question the U.S. desire or capability to defend freedom of navigation more
broadly. The utility of air and missile defense, however, is clearly profound in
today’s threat environment. In the words of deputy assistant secretary of
defense for space and missile defense, John D. Hill, “Integrated air and missile
defense is why Ukraine remains sovereign.” It is difficult to place a direct
dollar value on international freedom of navigation or Ukraine’s sovereignty,
but protecting these intangible assets remains a worthy goal of U.S. national
security policy.

TOWARD BETTER VALUATION

The impulse toward efficiency and cost consciousness in defense spending is
important in spending taxpayer money effectively. However, the goal of the
Department of Defense is not to have the most favorable accounting balance, but
to provide a military capable of supporting U.S. national security priorities.
Over the long term, the United States cannot afford to play catch against every
Houthi missile attack in the Red Sea. Air defenses buy time to find another
means to end the Houthi threat to shipping lanes. In this light, the important
issue is not whether a single interceptor costs more than the missile it
defeated, but rather whether those interceptors successfully allowed the United
States to pursue its goals in the region effectively. If so, the employment of
air defense interceptors in the Red Sea represents funds well spent.

Wes Rumbaugh is a fellow with the Missile Defense Project at the Center for
Strategic and International Studies in Washington, D.C.

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Commentary is produced by the Center for Strategic and International Studies
(CSIS), a private, tax-exempt institution focusing on international public
policy issues. Its research is nonpartisan and nonproprietary. CSIS does not
take specific policy positions. Accordingly, all views, positions, and
conclusions expressed in this publication should be understood to be solely
those of the author(s).

© 2024 by the Center for Strategic and International Studies. All rights
reserved.

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Missile Defense Defense Strategy and Capabilities Defense and Security and
Defense Budget and Acquisition
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WES RUMBAUGH

Fellow, Missile Defense Project


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