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[H.A.S.C. No. 106–3]



FOR FISCAL YEAR 2000—H.R. 1401






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MARCH 9, 1999



DUNCAN HUNTER, California, Chairman
FLOYD D. SPENCE, South Carolina
BOB STUMP, Arizona
JIM SAXTON, New Jersey
J.C. WATTS, Jr., Oklahoma
LINDSEY GRAHAM, South Carolina
JIM RYUN, Kansas
MARY BONO, California
JOSEPH PITTS, Pennsylvania
ROBIN HAYES, North Carolina
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JOHN M. SPRATT, Jr., South Carolina
LANE EVANS, Illinois
ADAM SMITH, Washington
JAMES H. MALONEY, Connecticut
MIKE McINTYRE, North Carolina
ROBERT BRADY, Pennsylvania

Steve Thompson, Professional Staff Member
Roger Smith, Professional Staff Member
John Sullivan, Professional Staff Member
Dionel Aviles, Professional Staff Member
Doug Necessary, Professional Staff Member

Noah Simon, Staff Assistant
Peggy Cosseboom, Staff Assistant

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    Hunter, Hon. Duncan, a Representative from California, Chairman, Military Procurement Subcommittee

    Sisisky, Hon. Norman, a Representative from Virginia, Ranking Member, Military Procurement Subcommittee


    Gerry, Mr. Dale F., Deputy Assistant Secretary of the Navy for Mine Warfare Programs (Research, Development and Acquisition)

    Hammes, Mr. Michael C. Deputy Assistant Secretary of the Navy for Ship Programs

    Huly, Brig. Gen. Jan C., Assistant Deputy Chief of Staff for Plans, Policy, and Operations, Headquarters, U.S. Marine Corps
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    Krupp, Maj. Gen. Dennis T., Director of Expeditionary Warfare Division (N85), U.S. Marine Corps

    Mullen, Rear Adm. Michael G., Director of Surface Warfare Division (N86) U.S. Navy

    O'Rourke, Mr. Ronald, Specialist in National Security, Congressional Budget Office

    St. Pe, Mr. Jerry, Chairman of the Board, American Shipbuilding Association


[The prepared statements submitted can be viewed in the hard copy.]

Gerry, Mr. Dale F.

Hammes, Mr. Michael C.

Huly, Brigadier General Jan C.

Hunter, Hon. Duncan
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Krupp, Major General Dennis T.

Mullen, Rear Admiral Michael G.

O'Rourke, Mr. Ronald

St. Pe, Mr. Jerry

[The documents submitted can be viewed in the hard copy.]

[The questions and answers are pending.]
Hunter, Hon. Duncan
Saxton, Mr.
Taylor, Mr.
Thornberry, Mr.


House of Representatives,
Committee on Armed Services,
Military Procurement Subcommittee,
Washington, DC, Tuesday, March 9, 1999.
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    The subcommittee met, pursuant to call, at 12:05 p.m., in room 2118, Rayburn House Office Building, Duncan Hunter (chairman of the subcommittee) presiding.


    Mr. HUNTER. The Subcommittee will come to order.

    This afternoon we welcome witnesses from the Department of the Navy to receive testimony on the modernization programs required by our Maritime Forces to protect them from a myriad of threats they can expect to confront in the world's littoral regions.

    Most notably, mines in the shallow water and surf zones, Anti-Ship Cruise Missiles, and torpedoes launched from diesel electric submarines.

    Since the Gulf War, both the Navy and Marine Corps have formalized their focus on littoral operations in their strategic vision documents; The Navy's Forward From the Sea; The Marine Corp's Operational Maneuver From the Sea.

    These documents outline the doctrine required to meet the security challenges that will confront U.S. Maritime Forces in the 21st Century.

    As a consequence of changing doctrine, the primary combat mission of U.S. Naval Forces in the post-Cold War Era has evolved from winning a major war at sea, to one of power projection ashore in littoral regions.
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    Therefore, both the Navy and Marine Corps must be capable of operating in these regions with little resistance on short notice and with great flexibility.

    Desert Storm highlighted deficiencies in the Sea Services' ability to successfully meet certain littoral threats. Specifically, the capability to counter relatively unsophisticated threats such as Anti-Ship Mines.

    Iraq used sea mines extensively and effectively during the Gulf War, which complicated and constrained Naval operations.

    Two of these unsophisticated mines, allegedly costing less than $1,500 apiece, achieved a mission kill against a state-of-the-art Aegis Cruiser and inflicted serious damage to a large Amphibious Helicopter Carrier.

    These weapons continue to be a threat from relatively low tech military forces throughout the world, and especially in the Arabian Gulf Region.

    The mismatch between resources and requirements for mine warfare has been particularly evident over the last decade. The Service has spent less than 1/2 of one percent of its total budget on this critical area.

    The Secretary of Defense has indicated, on three separate occasions from November 1997 to January 1999, in correspondence to the Navy, his great concern about the lack of resources being applied to mine warfare.
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    Stating, and I quote from his April 1998 letter, ''I remain concerned about the lack of commitment of necessary resources to bring about the desired transformation of mine warfare within the shortest possible time. Over the past several years, we have spent a great deal of our resources on RDT&E Programs, none of which have resulted in any transition to production. We cannot continue in this manner in the future.''

    He went on to state that funds for Naval Mine Warfare Programs were to be fenced from further funding reductions, until a current, dedicated capability for the fleet becomes an organic capability in the fleet.

    In January 1999, the Secretary of Defense noted that the Navy had still failed to fully-fund this effort. So, he directed that an additional $315 million be added to the Navy's budget to fully-fund its Organic Mine Warfare Initiatives.

    Just as mines present a relatively simple, inexpensive, and easily deployed threat against U.S. Naval Forces in the littoral, the spread of other threats, such as the sale of sophisticated Anti-Ship Cruise Missiles, ASCMs, and Diesel Submarines by Russia and other countries, could greatly complicate the ability to employ Navy and Marine Corps forces in potential trouble spots.

    ASCMs have widely proliferated throughout the world. Many small and relatively unsophisticated militaries have the capability to employ them against U.S. Naval Forces.

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    One has only to look to the Arabian Gulf, as examples of this threat, where there are both ship and shore launch versions of the Chinese Silk Worm Missile used by Iran to protect its Gulf Coast line and air-launched French Exosit Missiles in the Iraqi inventory.

    Most can still recall the severe damage inflicted on the USS Stark in 1987 from an Exosit Missile fired by an Iraqi Mirage F–1 Attack Jet.

    In order to meet these ASCM threats, the Navy has invested considerable resources principally because of the danger ASCMs pose to aircraft carriers.

    While Aegis Cruisers and destroyers are extremely capable against ASCMs, there is always the possibility of missiles alluding Aegis ships requiring other combatants, such as amphibious ships, to defend themselves.

    To address this requirement, the Navy is investing in the Ship Self-Defense System for amphibious ships and aircraft carriers. As a result, the new LPD–17 San Antonio Class Amphibious Assault Ship will be constructed with this system on board.

    Torpedoes launched from Diesel Electric Submarines also present a particularly challenging threat for Naval Forces operating in littoral areas.

    Although the threat is not as widespread as ASCMs, submarine technology has widely spread into potential trouble spots in the world. For example, the North Korean Diesel Submarine Force could complicate U.S. Navy operations around the Korean Peninsula, just as Iran's Advanced Russian Kilo Class Submarines have the potential to threaten operations in the Arabian Gulf and North Arabian Sea.
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    Although the Navy has both towed and expendable countermeasures that ships can employ to confuse torpedoes, there is no similar system to a self-defense missile that would destroy a torpedo in the water.

    The Navy is developing upgrades for its Towed Decoy Systems to improve their capability against evolving torpedo threats.

    Additionally, the Navy is also procuring the Launched Expendable Acoustic Device, a ship launched acoustic decoy intended to confuse a torpedo as it homes on the launching ship.

    However, the Navy has no systems that are intended to detect, track, and destroy a torpedo in a manner similar to that of Self-Defense Missile Systems.

    Today, we will hear about the Navy and Marine Corps progress to meet these littoral warfare threats from our first panel.

    We would like to welcome at this time Mr. Dale Gerry, Deputy Assistant Secretary of the Navy for Mine Warfare Programs. Secretary Gerry, thank you for being with us today. Major General Dennis T. Krupp, Director for Expeditionary Warfare, Office of the Chief of Naval Operations. I thank you General.

    Rear Admiral Michael G. Mullen, Director of Surface Warfare, Office of the Chief of Naval Operations. Thank you, Admiral, for being with us.
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    Major General Select Jan C. Huly, Assistant Deputy Chief of Staff for Plans, Policy, and Operations, Headquarters, Marine Corps. Thank you, General, for being with us.

    Our second panel is going to focus on shipbuilding requirements needed to carry out both the Navy's ''Forward From the Sea'' and the Marine Corps ''Operational Maneuver From the Sea'' doctrine.

    During the Full Committee, and I am going to talk about them a little bit here before we get into our first panel in terms of statements.

    During the Full Committee's February 24th hearing on the fiscal year 2000 defense budget request, the Chief of Naval Operations, Admiral J. Johnson, stated that his number one long-term concern is building enough ships and enough aircraft to recapitalize a force.

    He went on to add, ''We need a minimum of 305 ships fully manned, adequately trained, and properly equipped.'' I accept Admiral Johnson's remarks as the Navy's public commitment to this fleet size as being minimum necessary to support both peacetime forward presence and war fighting requirements.

    Even though this fleet size has been reduced from the 346 ship requirement that was established by the Bottom Up Review only six years ago, the Navy's Shipbuilding Program over the past several years has been insufficient to support this smaller number.

    Everybody is familiar with the five to six ships year production rate. With an average ship service life of 30 to 35 years, it is only going to be a matter of time before we get down to a 200 ship Navy. We are building to a 200 ship Navy today.
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    I credit the Administration for funding increases in the President's budget for fiscal year 2000 that began to recapitalize shipbuilding programs. However, not until fiscal year 2005 does the budget provide for building nine ships per year.

    It is going to be done, presumably, by another President, another Secretary of Defense who is appointed by another President, who has yet to be named, over which this President has absolutely no legal constraints or authority.

    Nonetheless, the President's blueprint has been laid out before Congress and before the American people as a commitment to substantially increase the ship build rate. There are currently only six major ship yards engaged in new construction of ships for the U.S. Navy.

    It has become increasingly difficult to support these facilities with the low military shipbuilding rates for the past several years.

    There have been recent merger and acquisition proposals to reduce excess capacity and consolidate this industrial base. Additionally, many of the construction ship yards have begun competing for Navy maintenance work that was previously performed in Government-owned and private sector maintenance yards.

    As the shipbuilding industrial base continues to so-call right size, concentration of market power could raise issues regarding competition in the shipbuilding market.

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    I look forward to a frank and open discussion of the adequacy of the Navy's shipbuilding plan and the state of the U.S. shipbuilding industry.

    Our shipbuilding panel today will be comprised of Navy, industry, and Congressional Research Service witnesses. I am pleased to welcome Mr. Michael Hammes, Deputy Assistant Secretary of the Navy for Ship Programs.

    Mr. Jerry St. Pe, Chairman of the Board, American Shipbuilding Association and, of course, our good friend, Mr. Ronald O'Rourke, our National Defense Specialist, Congressional Research Service.

    Before we begin with the first panel, I want to call on my good friend from Virginia, the Ranking Democrat on the Subcommittee, Mr. Sisisky, for any remarks that he would like to make.


    [The prepared statement of Mr. Hunter can be found in the Appendix.]


    Mr. SISISKY. Thank you, Mr. Chairman.

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    Before we begin, I want to join you in welcoming our distinguished witnesses and thank them for agreeing to serve on our two panels this afternoon.

    I will not comment on the littoral panel because you certainly have covered that area well. I also want to commend you for identifying ship recapitalization for the Navy as an issue worthy of separate consideration by the Subcommittee during our hearing process this year.

    Mr. Chairman, for years now, I have been concerned about the chronic mismatch between the size of the Navy that will result from planned ship procurements and the size of the Navy called for in our national strategy.

    As you well-know, I have been outspoken in sounding the alarm. Today, I am told that future years' defense plan before us would redress this chronic mismatch that I, along with others, have been heard.

    So, why am I still concerned? The future years' defense plan before us today is characterized as sufficient to maintain the Navy Fleet at about 300 ships; enough for the current strategy.

    The problem is that this apparent equilibrium is a short-term peculiarity and very perishable. It occurs simply because we have young ships in the fleet today and plan to buy inexpensive ships in the future years' defense plan.

    The real challenge in maintaining the right size and right kind of fleet for the Navy will occur in the 2010 and beyond time frame. Moreover, because it mask the problem, this budget may actually make the situation worse.
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    Mr. Chairman, you do not have to take my word as a cause to remain concerned. You will find on close reading of Mr. Ron O'Rourke's authoritative statement that he is clearly and convincingly the definitive expert on the subject of Navy ship recapitalization.

    I thank you and look forward to today's testimony.

    Mr. HUNTER. I thank the gentleman from Virginia, who really is an expert in this area, and has focused this Subcommittee very strongly on the crisis that attends these times.

    We are going to have to conclude today's hearing by 3:00 p.m. Therefore, I want to ask the witnesses to keep their remarks brief.

    If there are no objections, the prepared statements of everybody, along with any accompanying materials you might attach to them will be included into the record.

    Mr. Gerry, the floor is yours, followed by Rear Admiral Mullen, then General Krupp, and General Select Huly.

    The floor is yours.

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    Secretary GERRY. Thank you, Chairman Hunter, Mr. Sisisky, and distinguished members of the Procurement Subcommittee.

    I am pleased to have this opportunity to appear before you today to discuss Ship Self-Defense Programs for countering underwater threats to our Naval Forces. I will address programs that provide a defense against sea mines and torpedoes.

    Our ability to counter these threats enables U.S. Naval Forces to influence events ashore through sustained maritime dominance. I would first like to address our programs to counter the sea mine threat.

    Today, our mine countermeasures capability is provided by a superb mix of dedicated forces that consist of mine countermeasures ships, Airborne Mine Countermeasures Helicopters, a mine warfare command ship, and Navy Special Operations Forces.

    The Navy is committed to maintaining the readiness of these forces. It continues to pursue initiatives for improving current systems, as well as developing systems where we have capability shortfalls.

    Since Desert Storm, the Navy has made a significant investment resulting in improvements to our mine countermeasures capability. Twenty of our 26 mine countermeasures ships and the USS Inchon, the command and support ship, have been delivered to the Fleet since then.

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    We have also improved the Navy's overall ability to respond to the sea mine threat by permanently forward deploying two MC–1 class ships to the Arabian Gulf, and home forwarding another two ships in Japan.

    We have also addressed shortfalls in both the very shallow water region and the surf zone by first establishing a Very Shallow Water mine countermeasures attachment that provides a rapidly deployable force to accomplish missions in 40- to 10-feet water depth.

    Second, developing systems to clear mines and obstacles in the 10- to 0-feet water depth. Additionally, we are implementing an Organic Mine Warfare Vision that will mainstream mine countermeasures systems into Battle Groups and Amphibious Ready Groups (ARGs).

    They will be integrated, both physically and doctrinally, into all Navy Joint Task forces, eliminating the exclusive reliance on dedicated mine countermeasure forces.

    This organic capability will provide the Battle Groups the ability to respond to the sea mine threat with sensors and weapons embedded in our deployed forces.

    It will be a systems of systems approach that will include seven signature programs that will be in our air, surface, and sub-surface components. This air capability, currently in the MH–53E Helicopter, will transition to the CH–60S Sierra, consistent with the Navy's strategy to reduce type, model, and series aircraft.

    This helicopter will be deployed in our Battle Groups and Amphibious Ready Groups. It will be equipped with five systems to detect and destroy moored and bottom mines in both shallow and deeper water.
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    Additionally, both the surface force and the submarine force will be provided systems to accomplish mine war field reconnaissance. I believe you can see from my remarks today that the Navy is moving forward smartly in the commitment to provide a defense against a sea mine threat.

    We are maintaining the readiness of the dedicated force and have initiated the programs to provide an organic capability to the Fleet by 2005. I can guarantee you that these efforts are also being closely watched by the Secretary of Defense.

    Just this past January, Secretary Cohen provided guidance to the Navy to:

    (1) fence the Mine Warfare Funding Program until the organic vision has been achieved;

    (2) ensure that the readiness of the existing dedicated force is not jeopardized to pay for the organic capability; and

    (3) continue to match resources to requirements.

    I would now like to address ship self-defense against the torpedo threat. Today, surface ship torpedo defense is provided by a variety of systems because there is no one universal solution to the threat.

    The most widely used method of torpedo defense makes use of decoys to confuse an incoming homing torpedo and evasive maneuvers by the ship under attack. Virtually any ship in the Navy's inventory today has the capability to tow our basic decoy system, the NIXIE.
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    Beyond this basic tow decoy, we have developed a Launch Decoy System that will deliver to the Fleet later this year. We have an enhanced self-propelled version of this system in early development.

    These more advanced decoys will be used in conjunction with torpedo detection systems that alert ship operators to all incoming torpedo threat. The Navy also has an effort underway to create a hard kill torpedo countermeasure that will physically destroy an incoming torpedo.

    We are also continuing a broad-based research and development effort in torpedo defense to cover other shortfall areas. This year, the Congress provided an additional $5 million for surface-ship computer defense efforts that we will be using:

    (1) to development enhancements to the NIXIE System to make it more effective in the littoral environment;

    (2) to evaluate and make recommendations for torpedo defense for our large deck ships; and

    (3) to conduct a demonstration of the mobile decoy I mentioned earlier.

    In summary, Mr. Chairman, I believe we have provided torpedo defense capabilities that will address the full range of torpedoes. We know that the ultimate criteria for torpedo defense success are for the crew and ship to survive and complete their mission.
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    Our investment plan improves our capability and we are working toward the objective of the complete defensive capability.

    Mr. Chairman, that concludes my remarks. I will be ready to answer any questions when you are.

    [The prepared statement of Mr. Gerry can be found in the Appendix.]

    Mr. HUNTER. Good. Thank you, Mr. Secretary. Admiral.


    Adm. MULLEN. Thank you, sir. Mr. Chairman, Congressman Sisisky, distinguished members of this Subcommittee, thank you for the opportunity to discuss littoral warfare and the surface Navy's readiness to meet the threats of the future.

    While our focus today is on procurement, I want to stress that we need to continue to invest in our most important resource, our people. The initiatives in the President's budget which speak to the compensation triad are extremely important, as is the targeted bonus money for the first time for our young surface warfare officers.

    Your continuing support for our men and women in uniform is vital and greatly appreciated. The surface Navy has dramatically realigned its resources to focus on those programs which will allow the Navy to influence events ashore.
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    The backbone of our surface Navy is our great Aegis Fleet. As a recent Battle Group Commander who operated in the Gulf last year with the USS George Washington, I can attest to the fact that operating in the littoral poses an enormously complex war fighting challenge.

    I am concerned with the threat of mines, submarines, and missiles. I am also concerned about the greatly reduced response times required of ships commanders; seconds rather than minutes. I have three major mission areas in my current job that I focus on: maritime dominance, land attack, and theater air defense.

    Maritime dominance is the pre-condition for conducting land attack and theater air defense. The future requires us to move away from platform-centric warfare to network-centric warfare.

    This will allow our combatants to combine their strengths to real-time data links such as Combat Direction Center. To counter potential threats in the littoral, new self-defense systems are under development, including hard kill systems, like the Rolling Airframe Missile and the Evolved Sea Sparrow Missile, as well as soft kill systems, such as the Advanced Integrated Electronic Warfare System, and the Nulka Decoy System.

    We are pursuing a two-prong strategy in undersea warfare. First, we are planning on providing our combatants with an organic mine hunting capability. Not every combatant will have this capability, but each Battle Group will.

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    Second, our Anti-Submarine Warfare Systems will employ multi-static and bi-static acoustics, improvements in ships torpedo defensive systems, continued support of an embarked SH–60 helicopter program, and improved surface launched torpedoes, such as the Mark 54 light weight hybrid torpedo.

    From this foundation of maritime dominance, the surface Navy will stand poised to execute theater air dominance and land attack. The two facets of the theater air dominance, about which I am most concerned, are defeating the Anti-Ship Cruise Missiles and providing theater ballistic missile defense.

    To accomplish this, we are improving our Aegis Weapon System and its tremendous spy radar. We are evolving our extremely successful standard missile. Sea-based theater ballistic missile defense can provide flexible deterrence and war winning leverage independent of host nation support.

    Success in our mission of land attack means offensive, long-range, responsive, and lethal precise fires, not previously resident in our surface combatants.

    The Navy currently has acquisition programs which will produce a five inch, 62 gun for Aegis ships capable of delivering a rocket-assisted projectile to an objective range of 63 nautical miles, and an advanced gun system for DD–21 to an objective range of nearly 100 nautical miles.

    I would like to comment briefly on Force structure. Numbers count. Today, the stated requirement is for a Navy of 305 ships in 2005. I was delighted to see the additional eight ships in the President's budget.
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    It is a beginning. Six to eight ships per year will not sustain the minimum essential force levels for a 300 ship Navy. You must be there to have an impact. You must have numbers to be there.

    In the surface Navy, we are evolving our current Forces. The USS Winston S. Churchill, the EG–81 will christen in Bath, Maine on the 17th of April and commission in 2001.

    She will be the fist DDG with our new gun and its long range munitions. She will incorporate the organic mine hunting capability, and the introduction of an area-wide theater ballistic missile defense capability.

    In order to preserve the relevance of our cruiser Force, our Aegis Cruiser Force, we are pursuing a program called the Cruiser Conversion.

    This will modernize these ships to address the TBMD threat, as well as contributing to the land attack and self-defense missions. Their service life will be extended, which is a must in these times of diminishing numbers of ships.

    Last, Mr. Chairman, I want to say how proud I am of every member of this team. I am blessed to be able to visit many of our defense contractor partners in this endeavor.

    I am always overjoyed in meeting the proud Americans, from all over our country, who build superb systems for Sailors, Soldiers, Airmen, and Marines to take into combat.
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    I am equally thankful for the support you and this great Subcommittee routinely give the Navy. I look forward to working with you in any way I can to continue to improve our Nation's defense. Thank you for the time and the privilege of addressing you today.

    I stand ready to respond to your questions, sir.

    [The prepared statement of Adm. Mullen can be found in the Appendix.]

    Mr. HUNTER. Thank you Admiral. General.


    Gen. KRUPP. Good afternoon, Mr. Chairman, Congressman Sisisky, and distinguished members of this Subcommittee. Thank you for affording me the opportunity to appear before you this afternoon to discuss power projection and Force protection, as it pertains to littorals.

    Before I begin, I would like to reiterate that I am a member of the—staff and today I am representing the Chief of Naval Operations.

    I was a Marine, and as the Director of the Expeditionary Warfare, getting the Forces to the fight, possessing the prerequisite lift to accomplish that mission, and in protecting those forces, those are my priorities.
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    I would like to take a moment to talk to you about three areas of expeditionary warfare:

    (1) amphibious ships;

    (2) tactical unmanned aerial vehicles; and

    (3) organic mine warfare.

    I will not repeat anything that Mr. Gerry just said. In about a year, with the commissioning and the completion of LHD–7, the Navy will be able to fulfill its requirements of the Quadrennial Defense Review of maintaining 12 Amphibious Ready Groups.

    About two years after that event, the LPD–17 will be introduced to the Navy. The LPD–17 is truly a combatant. It has war fighting capabilities and quality of life enhancements that have not previously been incorporated in amphibious ships.

    As you all know, our Amphibious Ready Groups are a major contributor to the Navy's strategy Forward From the Sea, and are critical to supporting the Marine's strategy, Operation Maneuver From the Sea.

    With those 12 Amphibious Ready Groups made up of LHDs, LPD–17s, and LSD–41, 49 class ships, we will have by far the most combat capable amphibious Force that this Country has ever seen.
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    Now, I am proud to report to you today that in the near future, due to your strong support and direction, we are going to introduce a new system into the Naval inventory; the tactical vertical take-off and landing, unmanned aerial vehicle.

    Just last spring, again, due to your strong support, we were able to conduct demonstration trials in Yuma, Arizona. This summer, once again, due to your strong support, we will conduct ship-board demonstrations.

    The tactical UAV I am talking about is very different from the pioneer UAV. This tactical UAV will have the capability of taking off and landing from every air capable platform in the Navy.

    This Unmanned Aerial Vehicle will support the Battle Group Commanders, the Amphibious Ready Groups, as well as the Marines ashore. This UAV is also critical to Force protection.

    As you have already heard from Mr. Gerry about mine warfare, let me just say that organic mine warfare is critical to the protection of our Forces and critical of our ability to respond expeditiously to a crisis.

    Once again, thanks to your strong support the fiscal year 2000 President's budget has afforded us the opportunity to accelerate the development of the systems that make up organic mine warfare.

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    In just a few short years, we will field this capability for all our Battle Groups and Amphibious Ready Groups. Expeditionary warfare in today's chaotic world is relevant in my opinion.

    I believe we have been and I also we will continue to be the force of choice in response to the global crisis. I firmly believe that in expeditionary warfare, we are heading in the right direction with the current and future amphibious ships, with the addition of a tactical UAV, and with the addition of our organic mine warfare capability, we will add to our ability to project power and provide the necessary protection for our Naval Forces.

    I would like to thank the Subcommittee for your continued support, your continued interest, and your sincere concern for our Sailors and Marines. Mr. Chairman and members of the Subcommittee, I stand ready to answer your questions.

    [The prepared statement of Gen. Krupp can be found in the Appendix.]

    Mr. HUNTER. Thank you General Krupp. General Huly.


    Gen. HULY. Good afternoon, Mr. Chairman, Congressman Sisisky, and members of the Subcommittee. I am Brigadier General Jan Huly. I am the Director of Operations at Headquarters Marine Corps.
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    I want to thank you for this opportunity to appear before you today. This Subcommittee has always been very supportive of the Marine Corps. We look forward to working with you in the future.

    In preparing for this topic, I had to ponder just what littoral warfare protection meant to me as a Marine. I concluded with the following workable definition. It is providing a Force with a secure environment, and the necessary means to perform its mission successfully and efficiently.

    Today, Marines are operating in the littorals successfully and efficiently. In my current assignment, I coordinate and monitor their operations throughout the world. I also monitor our total Forces operational readiness.

    I can report to you that your Forward Deployed Forces today are ready. They are out there doing what they are supposed to do in the manner in which you expect Marines to do it.

    This operational readiness comes at a price. As the Commandant of the Marine Corps has previously reported, and by my own observations, this expense of readiness is at the cost of modernization, facility infrastructure, and our quality of life.

    Our current budget proposals have gone a long way in taking the first critical steps in solving some of our most pressing needs.

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    However, without sustained funding support, I see that these problems will manifest themselves in a decline in our future readiness, in the vulnerability of the security of our Forces, in the ability of our bases to support our Forward Deployed Units, and in the overall capability of our forces to influence world events favorable to our Nation's interest.

    We, in the Marine Corps, continue to work with the other Services, the Department of Defense, and Congress to overcome these problems. We look forward to any support you can offer us in the future.

    We are also looking forward to how we will conduct warfare in the 21st Century. As has been previously mentioned, the Marine Corps convened the Operational Maneuver From the Sea Working Group down at Quantico, Virginia to study how we are going to operate in a littorals 20 years from now. I was honored to be a member of the Executive Steering Committee of that group.

    By no means did we answer all of the questions or the concerns of the future. We did develop a vision of where we need to go to be successful and to save lives.

    While the group's efforts and the Marine Corps' analysis of them are not yet complete, I can report to you that we will need help.

    First off, we are going to continue to need the help, cooperation of the United States Navy in getting us there. We are also going to need your support in making this vision a reality.

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    Some specifics I noted; having basic, adequate sealift, whether it is amphibious ships, maritime pre-position ships, or the littoral to get us ashore are always of concern to Marines.

    Being able to clear zones of the enemy, through either naval surface fires or eliminating his mines and obstacles, are also a high priority to me.

    Having the proper communication and information systems for the adequate command and control, up-to-date doctrine, modern equipment are all going to be a necessity.

    Further, we will need to explore and develop new technologies to support and sustain our operational basis from the sea. Where these things all might be out in the future, the research, development, and the funding for them begins now.

    In summary, successful and efficient execution from the sea by properly trained, equipped, and manned Marine Corps organization will be the best protection for our Forward Deployed Forces in the littorals.

    Mr. Chairman, I greatly appreciate your concern and your assistance. I look forward to the opportunity to answer any questions you may have.

    [The prepared statement of Gen. Huly can be found in the Appendix.]

    Mr. HUNTER. Thank you very much, General Huly.

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    Mr. SISISKY. I guess we learned most of our problems from Desert Storm; fighting in the body of water like we had to do. Are you convinced that we are prepared now to do it again or are we talking about in the future?

    You heard the Chairman in his opening remarks that the Navy has been very well on research and development, but the problem is production. Can we expect production shortly? Do we have enough money in the budget to do that?

    Any one of you may answer. Mr. Secretary Gerry.

    Secretary GERRY. Sir, I believe the picture we paint today is far different than the picture back during Desert Storm and shortly thereafter.

    I think from a dedicated point of view, as well as the organic vision I spoke to that we have marched out smartly as far as addressing the problem areas that we encountered during Desert Storm.

    As you say, I guess it is a matter of putting your money where your mouth is. We are doing that. We have fully-funded the organic capability that we have talked about. We are maintaining the dedicated capability.

    In addition, I think since Desert Storm you will see that we have done quite well as far as we have deployed 20 of our 26 clearance and hunter ships.
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    In the 1995–1996 time frame, we deployed the Inchon, the command and support ship. We also, of late, have through the CNO I think a very good fleet engagement strategy for the mine warfare effort.

    As I said, resource-wise we are putting $700 million additional dollars. Secretary Cohen, just this past month and a half, put $315 million addition, outside of our budget. I think from the organic point of view, we are definitely funding the systems as best we can.

    I think we are looking in that particular area, any additional resources are not required at this time. It is more of a technological limitation that we are facing.

    Mr. SISISKY. Is your radar capability all right?

    Adm. MULLEN. From the ship's standpoint, sir?

    It was in Desert Storm that, that issue, the radar in the littoral, really became evident to us. We have investments in place to improve that.

    Just speaking from my most recent experience in the Gulf, that is still a challenge. In fact, it is the follow on spy upgrade radar, which will start to be able to really deal with that at the interface, if you will, of the sea and of the land.

    When you asked if we could do it again, we have, and again pulling from my most recent experience and speaking from the surface combatant standpoint, we have remarkably capable ships. As the Chairman pointed out in his statement, newer ships, clearly from an ability with the Tomahawk Weapons System to strike, which has been used.
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    We are pressed right now, from the standpoint of sustaining the operations and the CNO has said that. I think we would be in a Desert Storm scenario as well. From a capability standpoint, for what is required against a threat right now, I think we are in pretty good shape.

    Mr. SISISKY. How about the defensive system on small patrol boats? Have you been able to overcome that problem?

    Adm. MULLEN. Is this in reference to the—kind of problem or smaller than that?

    Mr. SISISKY. Small patrol boats that happen to be somewhere—

    Adm. MULLEN. Defending from them?

    Mr. SISISKY. Yes.

    Adm. MULLEN. Yes, sir. We have in fact invested in and are testing now a surface mode in the Rolling Air Frame Missile, which is the long-term answer to that threat.

    We have also upgraded the Close End Weapons System on a small number of our frigates and given it a surface mode. The long-term answer to that is the Rolling Air Frame Missile and its upgrade in the surface mode.
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    Mr. SISISKY. Thank you.

    Mr. HUNTER. Thank you Mr. Sisisky.

    Let me ask you, Admiral, to tell us a little bit about the two mines that hit did achieve a mission kill against the Aegis during Desert Storm.

    Was that a result of an inadequacy of material, personnel failure, or a combination? What does the ongoing program do that will prevent that from happening again? How did you look at that?

    Adm. MULLEN. Going back to my most recent experience in the Gulf, and as I said in my statement, the mines, missiles, and submarines is of great concern to me as a Battle Group Commander.

    Mr. HUNTER. I mean, we all agree it is a great concern.

    The question is are we doing anything substantively to keep that from happening or is the program just kind of moving ahead and we can expect we will are going to take a few hits when it happens?

    Adm. MULLEN. No, sir. I do not think we can expect to take a few hits. Clearly, what occurred in Desert Storm was not acceptable. It is the investment.

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    I would ask General Krupp, who is responsible for that, to speak to the specifics. I am following closely this investment to ensure that we are not in a position to have it recur again.

    Mr. HUNTER. Let me rephrase it a little different way.

    Did those hits that the mines gave us, did those fall into a category of what you would call expected battlefield casualties or were they a result of serious mistakes on our part that in the general scheme of operations should not recur? Do you see what I am asking you?

    Adm. MULLEN. It is a very challenging threat. It is low tech and that is why the investment.

    Mr. HUNTER. Was there any major operational mistake that lead to that happening? Secretary Gary if you want to jump in here.

    Secretary GERRY. I think the Princeton did not have the capabilities as far as mine reconnaissance, detection, and identification classification. That is precisely what our organic vision, our organic systems will do in the future.

    Mr. HUNTER. So, the Princeton did not have any organic capability.

    Secretary GERRY. The Princeton did not have that capability.
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    Mr. HUNTER. Was a capability attached to the Princeton from an external unit? In other words, who was in or what was in charge of protecting Princeton from that occurring? Obviously, we had a plan.

    Secretary GERRY. I would have to honestly take that for the record because I do not know by name. There was a Commander in the Gulf at the time who was clearly responsible for that theater of operations.

    Basically, the only system that we had at that time was what we called the Mark-1 Big Eyes, which is binoculars, and the Eyeballs. Since that time, I think we have made tremendous progress as far as we know the areas of our interest.

    We have oceanographic surveys that are being conducted on a daily basis that basically chart or map out the bottom of the ocean. In addition, we have Forward Deployed two ships to the Persian Gulf.

    As we speak, we have four MH–53 helicopters are airborne, or current airborne dedicated capability, on their way. Ships are operating daily in the training environment. We have two ships Forward Deployed in Japan.

    So, I think we have taken some very serious steps to make certain that what happened to the Princeton does not happen again.

    Mr. HUNTER. You talked about this organic capability that is coming on. When is it supposed to be here?
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    Secretary GERRY. The organic capability consist of four or five airborne sensors, one surface sensor, and one sub-surface sensor. We are going to deploy each of those systems as they become available, as they become ready, starting in the year 2001–2002.

    That is when the first system will be ready for production and ready for deployment. By 2005, we will have all of those systems integrated into the Battle Groups and Amphibious Ready Groups.

    Mr. HUNTER. You do not think you can get them there any faster?

    Secretary GERRY. As I stated earlier, I think as far as the organic systems are concerned, the airborne, surface, sub-surface that we have adequately funded those programs.

    What we are looking at right now is a technological push, if you will. We have to let the technology, as far as the development of the sensors, the lasers, and the sonar to develop.

    We are confident that we will maintain the schedule that we have laid out. I would be happy to provide for the record the precise Initial Operational Capabilities for each of those seven systems.

    Mr. HUNTER. Okay. Provide the IOCs for the record, if you could. Also, for this Subcommittee, provide in some detail the stop gap measures that we are going to take in the meantime, in case we have to deploy.
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    [The information referred to can be found in the Appendix.]

    Mr. HUNTER. It is going to be a sorry state of affairs if we have another mine incident here in a year or so. We say, wait a minute, this happened to us almost a decade ago. We went around, hired a few more people in the Pentagon, and got some good contractors working the problem, but nobody ever drove this to a deployment of something that would prevent the tragedy from occurring again.

    So, I would like to know and I think the Subcommittee would like to know, in detail, what your measures are before these IOCs. The IOCs in 2005, there is going to be full integration.

    Secretary GERRY. Correct.

    Mr. HUNTER. Mr. Taylor.

    Mr. TAYLOR. Thank you, Mr. Chairman.

    On the subject of shipbuilding recapitalization, I have a question for General Huly. Some mention was made of the 12 ARGs.

    I was wondering if the number of amphibious ships in the Navy's shipbuilding plan is adequate to meet the Marine Corps' needs?

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    I would follow up with a question to the Marine Corps. It is my understanding that in the near future, the Marine Corps is talking about sleping an LHA to provide at least one of those decks that you are looking for. I was wondering if you have done any cost comparisons as to new construction versus sleping one of those 30 old platforms?

    The second question would be to Secretary Gerry, when you get the chance. If we had as much trouble as we had in the Persian Gulf with very old technology mines, metallic mines, are you and your contemporaries looking at potential for mines being made out of composites and other non-metallic substances?

    What steps are being taken so that we just do not catch up with what was working then? I mean, if a 1917 vintage mine took out the Princeton, are we at least looking ahead to what the threats will be as you put together your package to try to protect the Fleet?

    Secretary GERRY. If I could answer that question now.

    The existing threat, the past threat of mines remains. We are also looking at far more sophisticated mines today and in the future; buried mines. Then I can get into a classified area, which I will be happy to do in the appropriate forum.

    There is no question that we are getting more sophisticated mines. What we are providing in our capability, as far as the organic mine warfare vision, is precisely that capability that accompanies the Battle Groups.

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    That is in stride with the Battle Groups and the Amphibious Ready Groups, so that we do not have to wait and rely exclusively on the dedicated capability, which resides in Texas. That dedicated capability will always remain important to us. In providing the organic system of systems that we are developing, we will have the sensors and the lasers for the entire water column to classify and identify mine-like objects.

    Once identified, we will have the capability, autonomous and tethered, to neutralize or kill those mines, without the diver and the mammals. That is our objective.

    So, I think by the time we reach 2005, we will have a capability which will allow us to protect our sailors and our ships from the old primitive mines, as well as the more modern mines.

    Mr. TAYLOR. Mr. Chairman, along with you, if there is to be a classified briefing on this, I would hope that I could attend.

    I do know we built some coastal mine hunters a few years ago, but it did not seem like anywhere near enough to protect 12 Carrier Battle Groups and 12 Amphibious Ready Groups.

    At the appropriate time, I would also like to give the Marines an opportunity to answer the question on the LHD.

    Gen. HULY. Sir, while I have the opportunity, I would like to just jump on the mine issue. I, too, am very concerned about mines. They are not necessarily in the context of the deeper water and the more shallow waters that we have been talking about.
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    My observations are eight years ago, just about to this month, we concluded Desert Shield, Desert Storm; a tough nut to crack that we could not crack at that time for the Marine Corps were the mines and the obstacles that were placed in the shallow waters and on the beaches.

    It precluded us from conducting an amphibious operation. Though we were able to pose a threat to do that, we could not actually get across the beaches. I think we need to make more progress today.

    If I look at the introductions to our capability to counter that in the last eight years, there has been really no progress. Though there has been money dedicated to this, potentially there is some technology out there on the horizon.

    We have got a long way to go, I believe, before we really crack this nut. Some of the things that we are looking at potentially might not be as good as they could be if we were looking at other things and we dedicated more money to that effort.

    So, those are my thoughts on where we are going with mines, from the very shallow water, 40 feet of water and up to the beaches.

    Your first question, I believe, sir, was on the number of amphibious ships. As you know, we currently have 12 Amphibious Ready Groups in which we deploy rotating our seven Marine Expeditionary Units. We have gained some successes in modernizing the amphibious fleet that is out there. The LPD–17 and its class of ships will be greatly appreciated and are certainly needed by the Marine Corps.
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    I believe that the Navy has a recapitalization and a construction program for as long as we are just deploying 12 Amphibious Ready Groups, and we are keeping the rotations down to our current schedule, and there are no cuts in the Shipbuilding Program, and everything proceeds as contract, and we suffer no casualties to our amphibious ships, we will have enough.

    As I said, we looked at the Operational Maneuver From the Sea. I am not sure that you are going to want to just deploy Marine Expeditionary Units today, the way they are currently configured, 20 years from now.

    I think if one were to ask the war fighting Commanders in Chief what their requirements are for Amphibious Ready Groups and Marine Expeditionary Units out there, they would say they do not have enough.

    I think it is perhaps time to take a relook at the foundation in which we have determined the number of amphibious ships we have. Generally, one refers back to the Department of the Navy Lift Study of 1992. I think that perhaps it is time we took a relook at that and did another Amphibious Lift Study and looked at truly what we might need out there 20 years from now to lift the Marine Expeditionary Unit of the future.

    Hand-in-glove with the amphibious ships goes our maritime pre-position Force. I can address some questions on that, if you have those, and the future of those ships as well.

    As far as sleping the LHA or placing it with an LHD, we have looked at that. It is General Krupp's job really to be in the shipbuilding business. We believe in the Marine Corps that our needs will best be served by not sleping an LHA, but by coming up with an LHD and perhaps modifying the current version of the LHDs.
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    We believe that not only are there economies to be gained by doing that in the future for the life of the ship, for the type of the ship that we get, but it will give us the capability that we are truly going to need with our upcoming MV–22s and with our Joint Strike Fighters of the future. It just does not make as much sense to us to slep an LHA for the cost in which you can get a new LHD.

    Gen. KRUPP. Sir, if I may add a little bit to that, since I am the sponsor of the amphibious ships. Right now, we are conducting a Development of Options Study which will conclude or come to a conclusion in the June time frame. We are looking at whether it is more cost effective, efficient, and whether it meets our requirements in the future to slep an LHA, to modify an LHD, or build a new platform in LHX. So, right now the jury is still out.

    We have not come to any conclusion on what the right answer is. As this Subcommittee is aware of, there is advanced procurement dollars in 1999 in an O4, for a replacement LHA.

    The Navy has put in an O5, sufficient money for a new ship in 05 to replace the LHA. We all recognize that something needs to be done as the LHAs reach the end of their service life starting in 2011.

    Secretary GERRY. Mr. Chairman, could I also make a clarification? One of the areas that you, Mr. Chairman and Mr. Sisisky, have mentioned is the very shallow water. That clearly is one of the problems we face.

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    I think, as I mentioned, we stood up the very shallow water detachment in 1996, which consist of Navy warfare specialists, Marine reconnaissance folks, and explosive ordinance disposal personnel, as well our Marine mammal deaths.

    Their very specific role is to clear the area from 40 feet to 10 feet. We have two systems that we are ready to make a decision on this year, as far as production, and that is SHABRE and DET. SHABRE is the Shallow Water Assault Breaching System and DET is the Distributed Explosive Technology. Between those two systems, one laying down a linear charge, and the other laying down an array, we will cover from three feet to the land craft zone.

    So, we are right on the verge of, I think, tackling that very, very critical area to allow the amphibious assault, which the Marines need to do.

    Mr. TAYLOR. General Krupp, if I could just follow up then I am going to be out of your hair, Mr. Chairman.

    Mr. HUNTER. The gentleman can take all of the time that he wants to. He is asking excellent questions. We appreciate the depth of his questions.

    Mr. TAYLOR. General Krupp, getting back to the question of sleping the LHA or going with an LHD. When do you anticipate the study being completed?

    Gen. KRUPP. The study will be complete in June of this year, sir.

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    Mr. TAYLOR. June of this year.

    Gen. KRUPP. Yes, sir.

    Mr. TAYLOR. Early June, I hope; defense authorization, you know, there is a time line for everything.

    Gen. KRUPP. Yes, sir.

    Mr. TAYLOR. Okay. Mr. Chairman, you have been very generous. I have some questions for the record, if you do not mind.

    Mr. HUNTER. Without objection.

    [The questions referred to can be found in the Appendix.]

    Mr. HUNTER. Mr. Brady.

    Mr. BRADY. No questions, Mr. Chairman.

    Mr. HUNTER. Okay. Mr. Hayes.

    Mr. HAYES. No questions, Mr. Chairman.

    Mr. HUNTER. Okay. Gentlemen, let me ask you a couple of questions here. We have talked, Admiral Mullen, about evolving Aegis to handle the more capable anti-ship missiles that we are seeing.
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    In your estimation, is the evolution of the defensive system, the Aegis Shield, going along in terms of actual capability achievement at the same speed as the offensive missiles are developing?

    Adm. MULLEN. For the theater ballistic missile type defense?

    Mr. HUNTER. No. I am talking about anti-ship missiles.

    Adm. MULLEN. Yes, sir.

    Mr. HUNTER. You have got some real fast stuff you are looking at.

    Adm. MULLEN. Yes, sir. The evolution in addition to just the Aegis piece, equally important is the evolution of the missile piece. I spoke earlier to the Rolling Air Frame Missile evolution.

    We have not completed operational testing yet, developmental testing, and that system has gone very well. The other system, which is a very important part of that is the evolving Sea Sparrow Missile, which we have just recently started flying. That is designed to get it in fact further away from the ship.

    Handle the more sophisticated threat out through about the next 10 to 12 years. Beyond that, we would have to upgrade that particular system.
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    Mr. HUNTER. In terms of the systems you are developing right now, the evolution that you are monitoring and handling, are you moving as fast as the bad guys are in terms of actual production and capability achievement?

    That means not stuff on paper, not it is going to be manana with the contractor before they can come out and test this stuff. Are you getting this capability ship-board as fast as the offensive missiles are developing and being deployed?

    Adm. MULLEN. Yes, sir. As far as the most significant threat, we are. RAM will complete our—valve this year and it will be installed on ships throughout the fleet. ESM will follow shortly thereafter.

    Additionally, we have got an electronic system, the Advanced Electronic Warfare System, which will also be introduced to the fleet in the near future.

    At this particular point in time, I cannot say whether we can produce them faster, per se. If so, it is not significantly faster than the current introduction schedule.

    Mr. HUNTER. Could you do something for the Subcommittee? That is simply do a little report, if you could for us, on any ways in which the evolution of Aegis to handle these more capable anti-ship missiles could be evolved quicker.

    Adm. MULLEN. Yes, sir.

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    Mr. HUNTER. You get to field the capability quicker, I guess.

    Adm. MULLEN. Yes, sir.

    [The information referred to can be found in the Appendix.]

    Mr. HUNTER. General Krupp, you talked about the new UAV that is going to do everything in the world; land on every ship; right?

    Gen. KRUPP. Yes, sir.

    Mr. HUNTER. You know the history of UAVs, we had all of the UAV boys up here at one point and they were shocked and amazed when each guy told them what the other guy could do.

    the history of it has been that we have loved UAVs until we had to actually produce something. Then we wanted to go back and invent another one. Tell me a little bit about how close you are about getting this UAV fielded. What is it called again?

    Gen. KRUPP. It is a tactical vertical take-off and landing UAV; a VTAL UAV.

    Mr. HUNTER. How far are you from fielding this thing?

    Gen. KRUPP. Sir, we have ship-board demonstrations this summer with land demonstrations the last spring. We plan on down-selecting. We expect that we will be able to introduce this to the fleet by 2003. So, I think we are pretty close. We are moving out very smartly on this program.
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    Mr. HUNTER. Are you going to be able to introduce it by 2003?

    Gen. KRUPP. Yes, sir. That is the plan right now. We have an acquisition strategy that starts in 2000. As I said, with the down-select the same year, and then introduction to the fleet two years later.

    Mr. HUNTER. Are you getting any information or any help from existing UAV systems?

    Gen. KRUPP. Yes, sir. There were three craft that flew in Yuma for demonstration purposes. We are going to have to take two of those and use them for ship-board demonstration purposes. Then we will open it up to industry for more competition.

    We are using some technology and some information from systems that are currently field at the Pioneer, for instance. We are adding on top of what the Pioneer offers us right now.

    So, we are taking old technologies—the Hunter Program, as you know, went along with DARO. We have taken a lot of technologies from the Hunter Program as well. So, we are not starting from ground zero.

    Mr. HUNTER. Okay, good. Let me go briefly to the small diesel submarine threat, which we are seeing proliferated to some degree. These little diesel submarines, if they do not have to much, are pretty quiet.
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    In terms of your ability to defend against ordinance launch from these subs, primarily torpedoes, do you see any vulnerability at this point or on a scale from one to ten, Admiral Mullen, have you taken care of this problem?

    Adm. MULLEN. As far as the surface combatants are concerned, the introduction of the system to follow a system called Mouse Trap, which was our first independent system. We are integrating that into our sonar detection system, if you will.

    That literally for the first time in the almost 31 years I have been in the Navy will give me an ability to detect a submarine, which I am very excited about. It is that combined with the decoy system where we can launch decoys. I am much more confident that we can both detect it and evade it.

    Mr. HUNTER. Even little subs that are not moving much?

    Adm. MULLEN. Yes, sir. We will be able to detect a torpedo. That is what this really is.

    Mr. HUNTER. Okay.

    Adm. MULLEN. The concept is to put those combatants in the position to be able to both detect and counter that threat, not just the torpedo, but the shooter, followed by the ability to sanitize the area.

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    Mr. HUNTER. How close are we to fielding Mouse Trap?

    Adm. MULLEN. We have got seven systems which are going out there as we speak. So, it is moving to the fleet right now.

    Mr. HUNTER. Okay.

    Adm. MULLEN. It has been tested and tested very successfully.

    Mr. HUNTER. Okay. You see we have read about littoral warfare. It has been a great subject for Rotary Club meetings, and I am sure countless discussions in the Pentagon, and lots of speeches.

    Before we got into littoral warfare, we had big, old attack submarines; big, old amphibious ships; and big, old combat ships like Aegis.

    Then we went through all of these speeches and we still have, in terms of shipbuilding, big, old combat ships like Aegis; big, old amphibious ships; and big, old attack boats with plans to build more of the same.

    My question is understanding that littorals provide, even with all of the things that we are doing, some modicum of danger in the areas that we have talked about to American vessels, one thing that this Subcommittee did a couple of years ago, was put in money for a fast patrol boat.

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    The idea was that this could be a fast patrol boat kind of a super patrol boat that would be fairly fast and have the ability to do multi-missions in a number of areas where perhaps you would not want to take a big ship and move it in that close.

    So, we funded that. You might provide for the record perhaps how you folks are treating that program. I would just like to have your thoughts as to whether or not that is worthwhile.

    I used to have a new species of fast patrol boats that could take on perhaps or enhance your capability in some of these roles that you just spoke about.

    Adm. MULLEN. Mr. Chairman, there currently is no Navy requirement for a fast patrol boat. I am sure you are aware of that.

    Mr. HUNTER. I know it. You got the big three: big old amphibs; big, old destroyers; and big, old attack boats. Then we go out and give the same speeches.

    Adm. MULLEN. Yes, sir. I am not sure how big and old those Aegis ships are either.

    Mr. HUNTER. I do know this. We cannot afford to lose too many of them in the littorals.

    Adm. MULLEN. Yes, sir. I understand, sir.

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    Mr. HUNTER. You might want to send something in, instead of them, if you have to do a mission.

    Adm. MULLEN. We certainly cannot afford to lose any ships in a littoral. The multi-mission requirement is one that over time the Navy has supported very strongly. I still feel that way with our ships in the future.

    What I am concerned about when you get to a smaller ship is what capability does that ship bring? How much ordinance? How much sustaining power? Those kinds of things: how do you get it there? We are talking about half way around the world. That is a challenge for a small ship.

    I commanded one many years ago. If you can get it there, and that is possible, how are you going to use it? That, more than anything else, it is that sustaining capability for the mission areas that is of concern, and which has not gotten us to a requirement yet.

    Mr. HUNTER. Those are all good questions.

    I guess my request is that you take a look at that program. We got briefed on it the other day. The Navy researchers told us they have done some exciting things.

    They are very interested in this platform helping out in some of the roles that you have spoken of, and see if it does not have some value, understanding all of the problems we have in small ships.
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    On the other hand, there may be some values that out-weigh those—

    Adm. MULLEN. Yes, sir. I will be glad to take a look at that.

    Mr. HUNTER. If you could take a look and get back with the Subcommittee on that, that would be great.

    Adm. MULLEN. Yes, sir.

    [The information referred to can be found in the Appendix.]

    Mr. HUNTER. Mr. Hayes, do you have any questions?

    Mr. HAYES. No questions, Mr. Chairman.

    Mr. HUNTER. Mr. Bateman?

    Mr. BATEMAN. No questions, Mr. Chairman.

    Mr. HUNTER. Mr. Pitts?

    Mr. PITTS. No questions, Mr. Chairman.

    Mr. HUNTER. Mr. Hansen?
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    Mr. HANSEN. Mr. Chairman, if I may, I have got some people waiting for me. I do not like to read statements, but I would like to read a quick statement, if I could, and then send to Admiral Mullen some questions I would like him to respond to, if he would be gracious enough to do that.

    Adm. MULLEN. Yes, sir.

    Mr. HANSEN. Last year, the Subcommittee, with considerable reservation, approved the Navy's reprogramming request for a Tactical Tomahawk. While I support the—desire for a new Tactical Tomahawk, I believe this zeal, along with continued under-funding of all procurement and R&D accounts is leading us a little astray.

    We have already lost the last 100 missiles which the contractor, Otis, at a fixed price. We have shut down the production line for Tomahawk, even as we have shoddled 400 in the last year at an average of 100 per year since 1990.

    The engine manufacturer will completely close his manufacturing line this May, unless we take some action. In the National Defense Authorization Act of Fiscal Year 1999, this Subcommittee expressed particular interest in the measures that would be taken by the Navy to ensure our Tactical Tomahawk Program, which includes the potential for a second source for missile system production, and also provides for a qualified second engine for the production phase of the program.

    Secretary Dalton's letter of September 25, 1998, essentially ignored that direction and pressed ahead with the sole source lifetime guarantee to the same contractor who failed to perform on the last fixed price contract for the Tomahawk.
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    The letter also asserted that the Navy would not be purchasing a comprehensive technical data package for the missile or facilitating a second source for the competitive acquisition of either the missile or its engine.

    The belief expressed in Secretary Dalton's letter that no further benefit would be achieved by competition for the Tactical Tomahawk Missile production, flies in the face of both common sense and the Department's assertion that competition is the key to driving costs out of Pentagon operation.

    It is also a remarkable parallel to assertions that were made early in the Tomahawk Procurement Program. At that time, the Navy said that as much cost reduction as possible had been achieved through annual competition of the missile procurement over a period of several years from approximately $2.2 million per missile to approximately $1.6 million per year per missile.

    It recommended that a single contractor be selected for the remainder of the Tomahawk Production Program. Congress directed otherwise. Potential prime contractors for the missile continued to compete annually for the production contract for several more years, resulting in further reduction of their price of a Tomahawk Missile to approximately $1.2 million.

    Annual competition for the production contract was probably a major factor in the reduction of the missile unit cost. Approval of the reprogramming request for the Tactical Tomahawk was a controversial issue within this Subcommittee and involved questions of the proposed sole source award of the program of the current Tomahawk Missile prime contractor.
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    A major consideration in the Subcommittee's agreement to the reprogramming request was the potential for the Navy to achieve competition in procurement for Tactical Tomahawk Missiles.

    Now, what I want the views of the Admiral on, and I will give these questions to him because I do not have time to listen, and I would love to, but I have got some folks waiting.

    (1) Will the Navy purchase a full technical data package for Tactical Tomahawk that will allow the Government to protect its position and facilitate a competitive environment?

    In my opinion, acquisition of the technical package is a must, regardless of whether or not the development program for Tactical Tomahawk Program is a sole source award.

    (2) Has the Navy completed or do you support an independent cost analysis of the contractor's proposal for the production phase of the program?

    I do not believe this Subcommittee should support such a long-term decision without this analysis.

    (3) I question the wisdom of forfeiting the last production of 100 fixed price Tomahawks because of its effect on the production line and vendor base of this weapon of choice.
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    Now that those fears have come to pass, can you tell me what, if any, concrete steps the Navy proposes to replace the 400 plus Tomahawks lost in the last year and maintain the critical vendor base?

    (4) Is it true, and I really want to know the answer to this one. Is it true that the current engine manufacturer has produced every single Tomahawk engine on time and at below cost? What is your opinion of the performance of this engine system?

    (5) How is it that every person who testified before this Subcommittee says competition is the key to saving, but when it comes to a specific decision for major programs, such as the Tomahawk, the C–17, the Apache in the Army, we see more and more long-term sole source awards where we have not even provided the security of acquiring the technical data package?

    [The questions referred to can be found in the Appendix.]

    Mr. HANSEN. Admiral, thanks for bearing with me on that. I appreciate it. I would like to give you those questions. I would really appreciate it I could have an answer to those things.

    Adm. MULLEN. Yes, sir.

    Mr. HANSEN. We were over in—and Admiral Moore told us about all of those that he had shot; how effective they were; how they feel that their mission was complete and did a good job.
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    On the other side of the coin, he was very concerned about the inventory. Now, what are we waiting, 2002, before this new one comes on board, when we do have engines? We do have Boeing ready to do it.

    I am kind of curious too. When we get out in the field, we see the people on the front lines are very concerned about this issue.

    Mr. Chairman, I appreciate you bearing with me and allowing me to do that. I would like to leave these questions with the Admiral.

    I will yield back whatever time I have left.

    Mr. HUNTER. I thank the gentleman for his questions.

    I think the appropriate follow on is so there. So, Admiral, if you can get those answers back, that is of importance to the Subcommittee too. We are concerned about the Tomahawk.

    Adm. MULLEN. Mr. Chairman, I certainly can. I can take inventory. A couple of those for the record and I could speak to a couple of them now, if you would like; however the Chair would like to do this. I will be happy to get them all back for the record as well.

    Mr. HUNTER. Would you pull that mic up a little closer please?
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    Adm. MULLEN. Yes, sir. I could respond to a couple of those questions directly right now and I will have to take a couple of them for the record, just to make sure from the detail standpoint I am accurate.

    Specifically, this has been a very successful system for us for a long time and its recent performance shows that, as far as what we are going to do about the inventory which has been reduced over the last year. You used the number 400.

    We actually have in the President's budget a request to remanufacture upwards of 330 or so weapons, which was about the number that was expended in Desert Fox. The Navy has submitted to OSD a request to in fact put make that a part of the emergency supplemental to do that.

    That will in fact increase the usable inventory; the kind of weapons Admiral Moore was talking about when you saw him in the Gulf. The CNO has stated that, that has us in a position, from an inventory standpoint, that we think is adequate right now.

    The long-term inventory issue is certainly one that we are all concerned about and we will have to watch that very carefully. I will have to get for the record the full technical package, the response to that.

    The independent cost analysis, I will have to get that back to you as well. The overall driver for the decision that was made last year, which the Navy appreciates the support of from Congress was in fact an opportunity to upgrade the quality of the missile.
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    What we saw was a significant reduction in unit cost. That really was a very important piece for the reason that decision got made. By and large the Navy, I think, has taken a position where we also recognize, and certainly in many of the systems that I have that I am involved in that competition is very, very important.

    Whether or not every engine has come in on time and below cost, to go back to each and every engine, I will have to go back and take a look at that. I will get back to you, sir, on that particular point.

    Mr. HUNTER. Thank you very much. Here, I have got something for you here, Jim. Jim, before you leave, I have got something for you to do.

    Mr. HUNTER. Any final questions for our panel?

    [No response.]

    Gentlemen, thank you very much. We appreciate you taking some questions for the record. We may put a few more together before you finish. Thank you. We appreciate your testimony.

    We now have Mr. Michael Hammes, Deputy Assistant Secretary of the Navy for Ship Programs; Mr. Jerry St. Pe, Chairman of the Board of the American Shipbuilding Association; and, of course, our old friend, Mr. Ronald O'Rourke, National Defense Specialist, CRS.

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    Mr. HUNTER. The Subcommittee will come to order.

    Secretary Hammes, you are an old friend of the Subcommittee. We appreciate you being with us again. You may proceed.


    Secretary HAMMES. Thank you. Sir, it is an honor, Mr. Chairman to be here today and have the opportunity to discuss shipbuilding with you and your distinguished colleagues on the Subcommittee.

    It is also a pleasure to do this with Mr. Jerry St. Pe, one of our industrial partners who also represents not only his shipyard, but the major shipbuilders that support the United States Navy.

    I also do this with Mr. O'Rourke, a noted analyst in Naval shipbuilding who has assisted us and this Subcommittee with a lot of shipbuilding issues in the past.

    I have submitted my statement for the record. The details are there. I would like to move on, in the aspect of time, and give you a quick overview of our shipbuilding plan.

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    Mr. HUNTER. Without objection, your statement and all statements will be accepted into the record. Just feel free to summarize and tell us what we need to know.

    Secretary HAMMES. Okay, sir. Our focus in the fiscal year 2000 budget is to continue the stability and acceleration of our shipbuilding programs; particularly in the area of low shipbuilding rates, which certainly were an issue in the past and currently. Our focus is to maintain stability of the New Attack Program, which is also in acceleration.

    Keep the LPD–17 Program stabilized. There are two ships there. Three DDG–51 Multi-Year Stability Program, as well as the acceleration of the TACDX in the year 2000 to replace our logistic ships.

    In terms of transitioning to the future, we have built the R&D Program for the DD–21. The contract is under award. We have built the R&D Program for the CVNX, an evolutionary strategy which we think is very coherent over two ships to the next carrier of the future.

    We are building the technology insertion into the New Attack Submarine and the technology development in submarine technology. So, we have built the program that will transition the Department and the Marine Corps to the future; these new platforms for the 21st Century

    We have stabilized our current programs and now our focus is trying to build these ships at a high enough rate to maintain a 300 ship Navy. Our current program is not quite there yet, in terms of the rate of ships.
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    That is my statement, sir.

    [The prepared statement of Mr. Hammes can be found in the Appendix.]

    Mr. HUNTER. Thank you, Mr. Secretary.

    You have obviously watched as the Services have presented what they believe to be about $20 billion of unfunded requirements above the President's last year's base line.

    Secretary HAMMES. Yes, sir.

    Mr. HUNTER. The Navy, 6; Air Force, 5; Army, 5; Marine Corps 1.75. What would that increase mean for the Navy in terms of increased shipbuilding? Understanding the President's budget this year is, what, six ships. Is that right?

    Secretary HAMMES. In the President's budget this year is six ships. Across the budget we did add eight ships, as well as I understand there is at least one ship that is on the Commandant's issue of any future plus ups.

    Mr. HUNTER. What would the future plus up or the proposed plus up of a $6 billion year for the Navy? That would mean what in terms of increased ships this year or the next couple of years? You said 8?

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    Secretary HAMMES. Yes, sir. I do not think there is any plan to increase the rate above what we have this year in 2000.

    Mr. HUNTER. If you take the plus up across the fit up, understanding that 6 ships a year builds to essentially a 200 ship Navy, what would the increase build us to? In other words, what are we doing in terms of if we pass this increase in terms of increasing shipbuilding?

    Secretary HAMMES. Currently, across the fit up with what we have it is just below 8 ships; 7.8 averaged, with the additional 8 ships that we have added in this year's budget across the fit up. To maintain a 300 ship Navy, we are going to have to build very close to 9 ships per year on a sustained basis.

    Mr. HUNTER. So, the bottom line is that the plus up gets us almost there to a 300 ship Navy, but not quite.

    Secretary HAMMES. No, sir. It is one to 1.5 ships off per year.

    Mr. HUNTER. Okay. Thank you very much, Mr. Secretary. We will have more questions when we go through the line here. We might even ask you a few merger questions here. So, gear up.

    Mr. ST. PE. thank you for being with us, sir.

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    Mr. ST. PE. Thank you, Mr. Chairman.

    Thank you for giving our industry an opportunity to share some views on what we all know is a very important subject.

    I represent the American Shipbuilding Association, which is comprised of the six large shipyards that continue to do business in the United States; Avondale Industries in Louisiana; National Steel in California; Electric Boat in Connecticut; Bath in Maine, Newport News, and Virginia; and my own company, Ingalls Shipbuilding in Mississippi.

    If you take the collective business base of all six of those companies, it represents about 98 percent of all shipbuilding defense dollars spent in this Country. I would submit to you the Congress and the taxpayers are good in getting their money's worth.

    My message here today is no different than one that I believe you just heard from Mike Hammes and that you will hear from Mr. O'Rourke. That is that our concern is the rate of shipbuilding underway in this Country, and how the low rate of shipbuilding clearly is impacting, not only maintaining a 300 ship fleet, but producing the kinds of savings that we all know can come about from sustained business in any manufacturing operation.

    Our own numbers in this industry say that if in fact we are to maintain a 300 ship Navy, a make up of destroyers, amphibs, submarines, and carriers we need a build rate of about 10 to 12 ships.

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    Clearly, it is the responsibility of the Congress, as well as the Commanders-In-Chief to determine whether or not a 300 ship Navy is adequate to carry out the mission. Clearly, the math is clear that at the rate of five to six ships a year, we are destined to be well-below 300 and probably somewhere in the neighborhood of 200 ships very quickly.

    Mr. Hammes and I have a little different number. I use 10 to 12 because it makes an assumption that we are not going to reverse this trend very quickly, and that it will get worse before we have an opportunity to make it better.

    This industry, the six shipyards that are represented by the by the ASA, over the past six years have spent about $1.3 billion in bringing into our facilities state-of-the-art technology in order to reduce overhead and improve efficiency.

    Most of that money is in facilities. A lot is in the training of our employees. When one look at the unstable rate of production in shipbuilding, it is not just about getting up and maintaining learning curves in terms of manufacturing, it is also about retaining skilled shipbuilders.

    It takes about 6,000 hours, about three years, to train a young man or a young woman to be proficient in some of the more critical skills in shipbuilding.

    Clearly, when you are in an environment in which you spend that kind of money to train them, and then lay them off, and then start the cycle all over again, it is counter productive to try to find ways to be more affordable and more efficient.

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    So, our message here this morning, I think, is consistent to what this panel will universally share with you and what I heard from the panel that preceded us. That is the rate of shipbuilding has to increase in this Country. It has to start soon.

    Thank you very much.

    [The prepared statement of St. Pe can be found in the Appendix.]

    Mr. HUNTER. Thank you, Mr. St. Pe.

    Our old friend, Ron O'Rourke, who has been with us in many slug feasts here. This is a fairly tamed day for you, Ron.

    Nonetheless, we appreciate your very careful analysis that you always afford this Subcommittee and the Full Committee in these critical areas.

    Tell us what your take is here on today's shipbuilding environment.


    Mr. O'ROURKE. Thank you for the opportunity to speak, Mr. Chairman and the other members.

    Mr. HUNTER. You might pull that mic up a little closer there, Ron.
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    Mr. O'ROURKE. I am going to have to apologize for my voice. I am in the recovering stages from a cold. My voice has been doing the most amazing things over the past two days. It is sort of like going through puberty again.

    If you will bear with me here, I think I will be able to make myself clear. I will summarize my statement here. I had four different focuses in my statement, the first of which was the overall shipbuilding rate and its relationship to the size of the Navy.

    That is the one that I am going to spend the most time on in my summary right here. As I have testified in the past, the challenge in maintaining the size of the Navy at its planned level of 300 ships is not so much in the near run between now and 2010.

    It is a greater challenge in the farther run, that is beyond 2010; particularly beyond 2020 when the ships that were built in the 1970s and 1980s begin to reach retirement age and leave service in large numbers. If we are not building ships between now and then at a rate sufficient to offset those retirements when they finally begin to occur, then at that point fleet size could drop below 300 ships.

    Now, if you assume a 35 year average life for Navy ships, then your steady state replacement rate for a 300 ship fleet is about 8.6 ships per year. The Administration, in its new six year shipbuilding plan, does come fairly close to achieving that rate; closer than it did in its previous six year plan that we were looking at last year.

    There are two caveats to that situation. One has to do with the mix of ships in the plan. As Congressman Sisisky mentioned a little bit earlier, the mix that is in the plan, especially in the final years where the Administration's plan does get fairly close to the 8.6 rate is something that can be viewed, in some respects, as a somewhat inexpensive mix of ships.
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    It is a mix that includes three auxiliary dry cargo ships in each of those final two years of the plan. Those are the least expensive of the major Navy ships that we are building. They are a lot less expensive than the other kinds.

    At the same time, that plan in its final years only includes one submarine per year. Now, when you get beyond the end of the fit up, we are not going to be building as many of these inexpensive auxiliary ships as we are in these years.

    We are going to be in a position where we are going to have to build more submarines. When you change the mix in that manner, you can drive up the total amount of money possibly that is going to be required to maintain 8.6 ships per year.

    The second caveat is that this 8.6 rate is something you have to maintain for a very long period of time; over a 35 year building period. Now, if you have some years when you fall below the 8.6, you are going to have to have other years when you are above 8.6 so that you bring the average back up over the 35 year period to the 8.6 rate.

    We have been below 8.6 since the early 1990s. We are programmed to remain below it for several more years. As a consequence, by the end of this fit up, we are going to have accumulated a ship procurement backlog, a shipbuilding deficit, if you will, of about 26 ships since the early 1990s.

    Working this backlog off, eliminating this backlog, is now going to require that we maintain a shipbuilding rate of 9.8 ships per year for about the next 20 years. All of these figures, moreover, are premised on a 35 year shipbuilding life.
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    Now, if ship life, as I think you mentioned earlier, is closer to 30 years, then all of these numbers are going to go up. The steady state replacement rate goes up to 10 ships per year. The backlog goes up to 45 ships by the end of the fit up. The rate necessary to work the backlog off goes up to 12.6 ships per year.

    Within this overall picture for Navy shipbuilding, the situation for attack submarines is particularly acute. We are currently about half way through a 16 year period during which we are programmed to build a total of 10 attack submarines.

    That is an average of about 5/8 of a boat per year for 16 years. As I have mentioned in other places, that is a great submarine building rate for the United Kingdom, but it is not a very good one for a Navy like ours, which is trying to maintain a force level of 50 boats over the long run.

    By the end of the fit up, the backlog in attack submarine procurement is going to be something on the order of 13 to 17 boats. For boats whose cost is something upwards of $2 billion apiece, that equates to a deferred procurement on the order of something like $26 to $34 billion.

    That is the whole that we are digging ourselves into at this point that we are going to have to dig ourselves out of to meet these numbers in the long run.

    Working off this backlog in submarines and keeping the attack boat force from falling below 50 is going to require that we move to a two per year rate in 2006 and to a 2–2/3 boat per year rate for several years starting in 2008.
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    That is a very difficult challenge to meet when you consider we are having trouble just getting one boat per year in the current fit up.

    If you do not get the rates up to those levels, then eventually by the time we get to the 2020s, the Attack Submarine Force is not just going to fall below 50, it could fall below 40 or even below 30, depending on exactly what rate we achieve.

    The 2020 sounds like a long time from now. In terms of naval procurement planning, that is right around the corner because of the time lines that we are facing here. It is also a period when the United States could be facing a renewed military challenge from major regional powers like China or even a rejuvenated Russian fleet.

    It is also worth mentioning that at the same time, the Department of Defense, not the Navy, but the JROC Officers, have testified that the Theater Commanders-In-Chief are currently demanding attack submarines at a rate that would justify a need for a 72 boat force, not a 50 boat force.

    When I look at this, the differences between the desired force level, the fiscally constrained force level goal, and the potential actual force levels that we are trending toward, those differences are growing quite large at this point. So, of all of the parts of the shipbuilding plan, this is the one that, to my eye, now appears to be in the most need of repair. The second focus in my testimony was the full funding policy for procurement of ships and the proposed alternatives to it.

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    The full funding policy, as you know, was imposed on the Department of Defense by Congress back in the 1950s to make the total procurement costs of weapons systems more visible and easier for Congress to track, and to instill greater discipline in DOD budgeting.

    The policy actually applies to all items procured through the DOD Appropriation Account, not just ships. It is frequently mentioned in connection with shipbuilding because of the large unit procurement cost of Navy ships.

    Now, in recent years, there actually have been several instances in which ships have been procured using funding profiles that appear to deviate to some degree from the full funding policy and the established exceptions to it.

    I summarized those cases in my written statement. Also, within the past few years, due to the decline in Navy funding for shipbuilding, there have been proposals for:

    (1) making greater use of multi-year procurement in Navy ship acquisition; and

    (2) also for using two other procedures that are not currently permitted under current policy.

    One is incremental funding. The other is long term lease authority, also known as charter and build. Now, in different ways, multi-year procurement authority and the other two proposed funding mechanisms essentially offer a trade off.

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    The trade off is improved program stability and the potential for reduced acquisition costs, and easier year-to-year Navy budgeting in exchange for reduced flexibility on the part of Government officials in terms of responding to unforeseen events that may otherwise have called for making year-to-year adjustments in the Navy's ship procurements plans.

    Now, my testimony goes through the pros and cons of these alternatives to the full funding policy. The one point I want to make is that even if you use all of these alternative methods in combination, the resulting savings may not be enough to fund a Navy ship procurement rate sufficient to maintain a 300 ship fleet in the long run.

    If we are going to move, for example, from a procurement rate for submarines of five boats every six years, up to 2–2/3 boats per year, then that change by itself is going to require something on the order of an extra $3.5 billion per year in shipbuilding funds.

    The third of my four focuses in my testimony was shipyard ownership consolidation which has been very much in the news in recent weeks. Now, in assessing the merits of shipyard ownership consolidation, there are at least three things that you can look at.

    One are the savings, the potential savings from consolidation of facilities. The other is potential employment impact of these mergers and acquisitions.

    The third is the potential effect of these mergers and acquisitions on competition in Navy ship construction, ship design, and ship technology.

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    At this point, it appears that the savings from consolidation of facilities will be rather limited. That is because in this case, unlike the case in other Defense sectors, such as Aerospace where consolidation and ownership has often lead to significant consolidation of facilities.

    In this case with shipyard ownership consolidation, it will apparently not lead to the shutting down of any of the yards involved. In all cases, both actual and proposed, shipyard officials have said they intend to keep open the yards that are involved in these mergers.

    Even if you were to close down entire shipyards, the savings that would accrue as a result of the reduction in the fixed overhead cost of these yards, those significant and absolute terms would not be that significant in percentage terms when measured against the size of the overall Navy shipbuilding effort.

    Now, a couple of years ago, the last time I looked at this situation, I estimated that the total combined fixed overhead cost of these yards were on the order of somewhere between $300 million and $600 million. So, you could take three of these six yards and close them down, and reduce your fixed overhead costs by half.

    You would get a savings of $150 million to $300 million a year, which is significant in absolute terms. It is only something like two or three percent savings when compared against the overall size of the shipbuilding budget in the fit up, which is a little bit more than $9 billion a year.

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    We are not even going to get that because these shipyards are not going to be closed. They will be kept open. So, the savings will be some fraction of $150 million to $300 million a year; possibly a small fraction.

    Now, in terms of the potential employment impact of these mergers, this also may be limited by the fact that shipyard officials intend to keep all six of these yards open.

    There may be some consolidation in certain areas of white collar employment, such as executives, managers, and supervisors, centralized support personnel, and possibly some of your ship designers and engineers.

    The effect on blue collar production workers may be fairly limited. Now, the one possible exception to that has to do with submarine production workers; production workers at Electric Boat are concerned that a General Dynamics-Newport News merger might lead to a shift in submarine projection jobs away from Electric Boat and down to Newport News. Conversely, the submarine production workers down at Newport News are concerned that this merger could lead to shift in jobs from Newport News up to New England.

    General Dynamics has stated that it would keep both Electric Boat and Newport News in operation if this merger were to go through, but GD Officials could choose to optimize the actual arrangement for producing submarines in ways that might increase or reduce the amount of submarine production work at any given site or keep it about where it is.

    Now, when you look at the potential effects of shipyard ownership consolidation on competition in Navy ship construction, design, and engineering it should first be noted that there currently is little active use of competition in ongoing Navy ship construction programs.
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    So, the issue of competition actually revolves more around the potential for resuming competition at some point in the future. Particularly if the overall rate of Navy shipbuilding goes back up.

    When you look at this issue, one criterion to examine is whether shipyard ownership consolidation will bring under common ownership yards that currently are the principled two competitors for building a certain kind of ship.

    Consolidation to-date, General Dynamics has not done this. They have not brought any two such yards under common ownership. Further consolidation in ownership of shipyards might or might not do this, depending on the nature of the consolidation.

    Third, consolidation in ownerships of these yards might actually help competition in Navy ship construction if it strengthens the financial health of the individual yards involved and thereby restore some of the Navy's ability to generate uncertainty concerning its shipbuilding contract award decisions, which in turn can make it easier for the Navy to generate effective competition in Navy ship construction.

    An additional factor to consider is the effect of this ownership consolidation on competition and innovation in ship design and technology. Of these six yards, three have major in-house design and engineering staffs, while the other three have somewhat smaller in-house capabilities.

    Consolidation to-date in shipyard ownership has not brought major shipyard design and engineering staffs under common ownership. Further consolidation might or might not, depending on the nature of the consolidation.
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    Bringing major in-house design and engineering staffs together under common ownership may make it difficult to maintain effective competition in the future for the design of certain kinds of Navy ships or for specific ship technology areas.

    Conversely, however, bringing together previously separate major in-house design and engineering staffs might actually promote competition, at least in the nearer term by creating a new critical mass of design and engineering talent that can be applied to certain ship design and technology products.

    The fourth and final part of my testimony concerns the recent Navy-Coast Guard Joint Policy Statement on the New National Fleet Concept and the Coast Guard's Integrated Deep Water System Acquisition Program.

    The one point I want to make in conjunction with this is that the National Fleet Concept and the Deep Water Project raise important issues concerning coordination between the Navy and the Coast Guard in force structure planning and in procurement.

    They also raise important issues for Congress' oversight of the Navy and Coast Guard budgets. Specifically, these issues raise a question as to whether Congress should attempt to more closely integrate its annual reviews of the Navy and Coast Guard budgets, and whether there is adequate coordination between the Navy's Oversight Committees and the Coast Guard's Oversight Committees on issues that may affect or be affected by the implementation of the National Fleet Concept.

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    In other words, this is something that I think Congress needs to take a closer look at. If the two Services are moving closer together in their planning, then Congress needs to examine whether it should look differently at the way in which it annually reviews the budgets for these two Services.

    Mr. Chairman, Congressman Sisisky, and the other members, this concludes my presentation. Thank you again for the opportunity to appear before you. I would be happy to respond to any of your questions.

    [The prepared statement of Mr. O'Rourke can be found in the Appendix.]

    Mr. HUNTER. Thank you Mr. O'Rourke. Mr. Sisisky.

    Mr. SISISKY. Thank you, Mr. Chairman.

    Obviously, I was going to ask you whether you think six shipyards are too much. I will let somebody else ask that. I have got a vote, believe it or not, not on the Floor at 2:00 p.m., but another place in the Capitol.

    So, I have to leave. I want to thank all of you gentlemen. Mr. Secretary Hammes you heard Mr. O'Rourke, does the Navy have an argument with that?

    Secretary HAMMES. With which portion of his testimony?

    Mr. SISISKY. Well, the whole thing about how many ships for the Navy are we talking about.
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    Secretary HAMMES. The only comments I would make in amplifying what Mr. O'Rourke said is that while the percentage savings from some of this consolidation may be a low percentage of the total shipbuilding that we count, in many cases you are talking hundreds of millions of dollars.

    I disagree with his statement on competition a little bit.

    Mr. SISISKY. Excuse me. I was not talking about the shipbuilding. I am sorry. You really misunderstood.

    Secretary HAMMES. In terms of the rates of the ships—

    Mr. SISISKY. I am going to let somebody else ask the questions.

    Secretary HAMMES. In terms of the rates of the ships, the 8.6, I said 9. It is very close to that. The longer we delay that ramp up, he is correct. The number is going to increase to sustain it.

    Mr. SISISKY. I have been talking to people in the Navy. I have been expressing myself in this Subcommittee until I even bore myself to say the same thing. You do not have to be a rocket scientist to understand, particularly how this budget was formed and the savings that we will have.

    The price of oil has already gone up this weekend. The savings may not come. You know, what really got my attention, believe it or not, and I have said this before. A couple of years ago, I went to visit the 7th Fleet out in Japan, which is the furthest dispersed people we have in the world.
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    I went to say good-bye to the Independence out there. This was in December. It was heading back to CONUS to be cut up for steel. The next thing I know, I read it is in the Persian Gulf.

    It was strange since there was no carrier in the Western Pacific. Here is North Korea, South Korea, and the Peninsula and no aircraft carrier. Now, they did make accommodations by putting airplanes in Korea to take care of that.

    The problem with the airplanes in there is everybody knows that there are about 60,000 special operating forces of the North Koreans; that there would not be an airport or an field too long. It just dawned on me. I have been a very great critic of the Quadrennial Defense Review and the National Defense Panel because I believe it was driven by the budget rather than the threat.

    Certainly, as you look at the maps in the room that I am going to in a little while on the fourth floor of the Capitol, it has a huge map of the world. Every time I just sit there listening to witnesses, I have not seen the sea shrink any.

    I mean there is an unbelievable amount of water that we have. I said where we have made a mistake in the QDR and the NDP, they were right, not right, but they said they did not need more than 12.

    This is Carrier Battle Groups. I always believed that you needed 15. I might add, the Commandant of the Marine Corps will make a great argument on why you need 15 Carrier Battle Groups with all of the associate ships that go with it, but at least 13.
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    I cannot make anybody listen to me. I just see this and we are just blind. From the top person of the Navy, I will just bet them a dinner that in 20 years, you will not have a 300 ship Navy. I only bet them for dinner. I should only be here 20 years from now, not in Congress, but being on the earth would be a nice feeling.

    Mr. O'Rourke, you made a valiant effort there. I thought it was interesting, even how we are hypocritical of ourselves. I remember on CVN–76 trying to get incremental funding.

    The appropriators said no incremental funding. They did not say that on CVN–77. They did not say it on LPD–17. Obviously, if money is the problem, then we have got to look for other ways. That is one way.

    Of course charter and lease is another way. I will agree with you, Mr. O'Rourke, in ten years that catches up with you too. I would remind you that in the budget this year, we have even done that on Military Construction.

    We have taken $3.5 billion out of the Military Construction budget and said this part we can only build this year. So, we are hypocritical.

    To me, to do it fast, Mr. Chairman, we are going to have to be innovative and find a way to build ships. You are not going to be able to just push a button and say, we have got a problem somewhere in the world and let us send the ships.

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    You may not have them then. So, with that, I apologize. I have to leave. I thank all of you gentlemen for your testimony today. I did not have a question. I had a comment.

    Mr. HUNTER. Thank you Norm. I know your comments are well-taken. Mr. Bateman.

    Mr. BATEMAN. Thank you very much, Mr. Chairman.

    I thank the witnesses for being with us today. Your subject matter is one of absolutely compelling interest to our national security, and quite frankly is not something that allows me to leave the hearing room with a large measure of optimism that we are going to meet our national security requirements, unless we wake up to the fact that you are not going to have a 300 ship Navy at a fairly date in the next Century, unless we begin immediately to address it.

    Mr. Secretary, I would feel better if in the course of your presentation you had addressed more innovative possible ways by which we in the Congress permit the funding of vessels.

    I know there is a lot of controversy about incremental funding, advanced procurement, and these things, and long lease procurement. I think we have got to put these things to the test, and at least hear from the Navy an analysis that says can we get more of what everyone agrees we need more of.

    I do not think you will find that there is an advocate anywhere in the United States whose rational, who does not believe the Navy must be at least 300 vessels strong at any given point in time.
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    Then on anything like the funding profiles, anybody who has talked about or thrown out as a prospect, it is going to be difficult, if not impossible, to get there. Especially, when you look at the modernization challenges across all of the Services for a number of equipment, especially when you get to tactical aircraft.

    It would seem to me that we need to have a very vigorous scrutiny and analysis of the potential for alternative methodologies for funding. I compliment Mr. O'Rourke for the fact that he, at least, is giving analysis to that.

    I think we need to do a great deal more of it. Having said all of that, when we get to the question of consolidations and shipbuilding, I find it a little difficult to accept the premise that if one corporation owns four out of six shipyards that build ships for the Navy, that you are not doing something for competition.

    I am certainly aware that the shipyard that I am most especially familiar with, while it presently builds for the Navy only submarines, nuclear submarines, and aircraft carriers, that it is a very, very competent and powerful competitor, should it choose to do so in building Naval surface combatants that are not nuclear powered.

    If they are going to be controlled by some other corporation, I rather suggest to you it is unlikely that they would ever emerge as a competitor in that field again. Maybe they should not.

    I find it difficult to say that there is no competitive impact, if you prevent that from every being possible to occur. If that merger requires, as a condition almost, that you cannot implement a Newport News-Avondale arrangement, which the Department of Defense has already approved, and which the Department of Justice has approved, then what then happens to Avondale?
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    If Avondale is left in an environment where it cannot, over time, compete and it disappears, what does that do to competition? Is that not a prospect that could arise? I do not see how you can address this without the recognition that there are very, very serious anti-competitive aspects.

    Not to appear to be lecturing, but in case anybody is listening and the word gets to the decision makers, when the Congress approved the teaming arrangement between Electric Boat and Newport News, it did so in the face of analysis, probably from Mr. O'Rourke and others, that says if you are going to maintain two nuclear capable yards, you are going to have to pay some premium for it.

    I think the Bottom Up Review included a finding that you could build nuclear submarines and all of the numbers that they were recommending in one yard, and it ought to be in the yard that could do it most economically.

    They also, I think, had to point out that 12 out of 14 of the last 688 submarines went to Newport News on a competitive basis. The ones who went to EB got there for industrial protection reasons. Now, all of a sudden, if you dangle $200 million as a theoretical savings, it overrides any anti-competitive notions. I hope that is not the direction the Navy and the Department is going to go in.

    Now, having hectored and lectured, let me ask our good friend, Jerry St. Pe, what is the view of your industry and the shipyards that you represent with reference to the Organization for Economic Cooperation and Development Shipbuilding Agreement and its Anti-Jones Act? Wherefore, it is anti-shipbuilding industrial base considerations.
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    Mr. ST. PE. Well, clearly, Mr. Bateman, the Shipbuilding Association is opposed to the agreement. We have been very, very active over the last couple of years in advocating its demise.

    If one went back to the very beginning of the negotiations, we had a high level of confidence that it would produce an agreement that clearly would bring parity and level the playing field as U.S. shipyards attempted to get involved in international commercial shipbuilding.

    As we understand the agreement today, clearly it would have an adverse affect it were passed. It would send out a false message of confidence that international subsidies were being removed, when in fact they will not be removed. So, we continue to aggressively oppose the agreement.

    Mr. BATEMAN. Am I correct that even if that agreement were in force, it would have left us in a position where the Korean over-capitalization and subsidization of its yards would have been unaffected even by International Monetary Fund advances to Korea that sustain and continue that over-capitalization to the point where a commercial ship built in Korea is offered on the world market at a price that is roughly comparable to the cost just of buying the materials elsewhere?

    Mr. ST. PE. Yes, sir. That is a fair assessment.

    Mr. BATEMAN. Thank you, Mr. Chairman.
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    Mr. HUNTER. I thank the gentleman. Secretary Hammes, I want to restate my question to you that I asked during your statement.

    You stated to the effect, as I understand it, that the President's shipbuilding plan, augmented by the $6 billion increase per year that the Navy has asked for would take you up to an 8.6 ship per year shipbuilding rate. Is that accurate?

    Secretary HAMMES. It is 7.8.

    Mr. HUNTER. So, 7.8.

    Secretary HAMMES. Yes, sir, it takes us up to.

    Mr. HUNTER. That is considering the $6 billion per year extra that the CNO said the Navy could use.

    Secretary HAMMES. Yes, sir. My understanding of that is there is not a lot of shipbuilding in that $6 billion. So, there is a potential one to two ships coming out of that, that would increase the 7.8 that I just mentioned.

    Mr. HUNTER. So, what you are saying is your 7.8 is not demonstrably different than without the $6 billion.

    Secretary HAMMES. That is right because probably it would buy one large, if not two very large capital ships which Ron O'Rourke discussed that there are ships that cost a lot more than others.
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    Getting the rate up after we funded the lower cost ships through the fit up. Increasing the rate requires a lot of capital cost to do that.

    Mr. HUNTER. Mr. O'Rourke, we have discussed the merger possibilities. I think it is important for us to review that and to analyze it. As I understand it, presently we have what I would call a fragile competitive array of at least two competitors in the four major areas: attack boats, surface warships, amphibious ships, and sealift.

    You have got Newport News and GD at least competing with respect to innovation insertion in the attack boat program. The Navy finessed the plans that the Congress came up with to build prototypes and then compete them with the so-called teaming arrangement.

    In pushing and arguing for the teaming arrangement, the Navy protested vigorously that they would have a great deal of competition in this area of innovation and technology insertion.

    If the merger goes forth, what does that do with respect to new innovation going into those boats?

    Mr. O'ROURKE. I think on the surface, it would appear to make it a lot more difficult to maintain the kind of competition for technology, ideas, and innovation in submarine technology, that the Navy and the yards at that time, which was in 1997, stated was going to be part of what would make it still acceptable and a good course to go on in terms of going with joint production of the submarines.
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    If you are going to bring both of those design and engineering teams under common ownership, then you would have to find some other way of reintroducing competition into the area of submarine design technology development.

    Mr. HUNTER. Well, how can you do that if the great majority of our submarine technology or innovative capability is housed in the design yards of the two companies to be merged? Where do you go to, to get the other side of the street.

    Mr. O'ROURKE. Right. One alternative, and I am not sure how many alternatives are out there, but one alternative would be to try and seek greater competitive tension between the public and private sector so that the private sector industry team could now somehow be put into more competitive tension with the Navy's own in-house designers and engineers.

    I am not sure that is something the Navy would want to do, or whether they have examined that. If you are of the view that, that kind of competitive tension is productive in producing innovations, then you are right in asking the question about how we would go about maintaining that kind of competition, if there were to be a merger of these two design teams. I am not sure what the answer to that question is.

    Mr. HUNTER. Secretary Hammes, do you have any reflections on that question? How are you going to do this if this should go forth?

    Secretary HAMMES. Yes, sir. First of all, I want to make a statement here. Then I am going to specifically address the question and the issue you brought up.
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    One, these merger issues are in the aspect of the Secretary of Defense approves them. They do all of the analysis down in the Office of the Secretary of Defense. The Navy supports that activity. So, what I am talking about here are the issues that we are addressing.
    Congressman Bateman, the issues you brought up are all on the table as a part of the analysis of this proposed merger. I do not know how we would maintain that technology insertion issue competition.

    We also have issues of the bigness, as well as the control of engineering and R&D dollars that would be under GD if Newport News was merged with them; particularly when you consider about the CVX and its R&D in the future.

    So, the issue is going to get down to the savings and what they are worth versus is there really competition in the nuclear sector, which is different quite honestly than the competition in the non-nuclear sector, whether I feel there is pretty robust competition.

    I think Mr. St. Pe would agree with that. It all boils down to that. The issue of can you create mechanisms that make sense to keep some of the competitions going that you just discussed, as well as the issue that Ron O'Rourke brought up about engineering, and whether there could be a benefit of looking at a way to create a different structure for that, because the engineering ownership for that large organization proposing the merger is considered a potential problem, as well as the total dollars control.

    I have no authority to take any position on this. This is the Secretary of Defense' turf. We are supporting the analysis of it.
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    Mr. HUNTER. Let me ask you a question with respect to that. As we got into this merger issue, it became clear that most of the design capability in shipbuilding does reside in fact with these private sector companies.

    We went over the design yard size and capabilities of each of the yards. Naval Sea Systems Command (NAVSEA) still retains a fairly substantial engineering design team; do they not? At least they have a lot of people employed.

    Mr. O'ROURKE. There are a lot of engineers on the Navy side. Most of those engineers are in the public shipyards. They do planning, lead yard planning, services for existing fleet. The core design capability of NAFC has declined very significantly in terms of new designs for new ships and new technologies over the past few years.

    Particularly as we transition to the new acquisition strategies like DD–21, where the design trade, the technology, and the performance trades are in the industry side of the equation, not in AFC or the Navy.

    Mr. HUNTER. Do you think NAFC has too many personnel right now in view of the dominance of the private sector of the design work? Do you think they are too small, to big, or whatever?

    Mr. O'ROURKE. No, sir. I think that they are still working on their down-sizing. I do not think that they are too small at this time, but there are still a lot of technology issues in the whole area of things that make sense for the Navy to do versus the industry.
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    Mr. HUNTER. Mr. St. Pe, do you have any reflections on the merger that you would like to offer to us? We are trying to get you into trouble here.

    Mr. ST. PE. Congressman, I do not think so. As you might expect, you know, we are more than just an interested spectator in this process. We, too, are eager to see the outcome. Clearly, the idea of how do you continue to stimulate and maintain ideas?

    The competition for ideas is the more challenging piece of this. If one sets that aside for a moment, there are savings that can come about from consolidation.

    I would agree with the assessment that whatever happens in this potential arrangement or any future potential consolidation, it is not likely to result in the shutting down of any of these six shipyards; not in our lifetime.

    Having said that, it is not necessary to shut yards down to reap savings and efficiencies. A lot of what we do can be consolidated; procurement of material, sourcing material. We have hundreds of people who buy things.

    It is a matter of maximizing the efficiencies that would be inherent in whether it is two yards or three yards. So, clearly there are consolidations. I think the discussion that has been focused here this afternoon on ideas is the more challenging one. I am glad somebody else is making that decision.

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    Mr. BATEMAN. Thank you. If we could return to the building rate to sustain a 300 ship Navy, I am not good at fractions, especially when you are dealing with fractions of ships.

    Given a fraction of 8, a fraction of 7, and the fraction equals 30 ships somehow leaves out of the equation that suppose it is 6 and a fraction ships of a particular type which are particularly more expensive?

    Where do you then come out in terms of a budget that is anticipated as being restrained or otherwise we would not even be going through this exercise?

    Is there any analysis being done with budget assumptions as to what kind of a Navy we would have in 2020 or 2025 at a given build rate with some assumption as to what the mix of what you are going to build is?

    It is not only important that we have a 300 ship Navy minimum, it is important that it have the minimum number of aircraft carriers, the minimum number of submarines, the minimum number of destroyers, cruisers, and whatever else the mix is.

    Is any analysis possible that gets us somewhere in terms of not only number that which must be built, but the number in various classes of vessels that must be built? Is any analysis being done on that?

    Secretary HAMMES. Sir, I suspect the CNO side has done a lot of analysis on what different dollar levels mean to force structure and in what priorities they may set on certain capabilities and ship types.
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    Probably they do understand the ramifications on the potential force structure of these ships. My job is to do the best I can to buy what they want as cheaply, as economically, and on schedule. So, I think that is the best way for me to answer that.

    I have done my own analysis, but I am not responsible for that analysis. It does not take too much to figure out that the issues are if you buy certain types of ships with the certain dollar amount that we currently have, there are programs that are very expensive that are probably going to suffer as we look at the quantity of force levels we can afford.

    Mr. BATEMAN. I admit the difficulty and perhaps even the impossibility of such an analysis because it would have to be replete with such assumptions that are pure assumptions that I do not know if it ends up being without value.

    To the extent it does lend itself to any helpful analysis, I think the Subcommittee would be very much benefitted from having it.

    Perhaps with a critique and any warning that might be necessary as to how reliable the analysis might be, given the difficulty of controlling whether the assumptions that are made are proved to be realistic.

    Mr. O'Rourke, I am sure we would be benefitted if you have anything you could supply us for the record on that.

    Mr. O'ROURKE. Some of that has been put into some of the reports that we have come out with previously.
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    Mr. BATEMAN. If it already exist, then please send my office a copy of it. It is something that I would be very interested in looking through.

    Mr. O'ROURKE. I will be sure to inundate them.

    [The information referred to can be found in the Appendix.]

    Mr. BATEMAN. Thank you.

    Mr. HUNTER. Thank you Herbert.

    Let me ask another question about a program that got a lot of visibility the last couple of years with the Marines. Secretary Hammes, maybe you could start off on this thing. What is the status of the Marine's Maritime Pre-Positioning Ship Acquisition Program?

    Buy American, they were going to at one time buy foreign ships, take them down to Earl Sheib and get them whipped into shape for what they thought was a pretty cost effective program. That did not work out from what the rumors are. Could you tell us what has happened?

    Secretary HAMMES. Yes, sir. First of all, there is a steel requirement for all three, for three ships with the capability of the MPFE Program that is currently structured.

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    The goal was to do this through conversions which we have not had the greatest track record; even on the conversions for the Army in terms of cost growth and schedule.

    Technically, they get very challenging because you may not know the condition of the ship. Then the mods can, quite often, have more of an impact on a ship than anticipated.

    When the program was envisioned, and first got started, the type of ship to be converted were RO–ROs. The market for those was relatively low on the world sector, in terms of demand. Potentially, some good ships would have been available. As the program stretched out, that market changed. The type of ships that have been submitted into the program by industry have generally required a lot of changes and with that a lot of risk.

    In the case of the first ship, it is going very well. It is on schedule. It will meet the Corps requirements. It will be within cost. The second ship has been a lot more difficult.

    It was a tough ship to convert. We had to basically change the contractor. We stopped the current contract. We are negotiating, right now, to try to get the program restarted.

    We own the vessel, which was one of the key issues in our ability to negotiate the original contractor out of the situation that we were in and he was in. We are trying to negotiate the conversion of that ship right now with our shipbuilder in Mobile, Alabama.

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    This program will still have risks. There is not enough money left for the third conversion. Unfortunately, that is what happens in these conversions, if there is not a sufficient budget to start with, as well as they always have inherently more risk because it is much more difficult to define the work than when you have an existing design, a new construction type of ship design, to build on.

    Mr. HUNTER. One suggestion we had back in those days when they were locking into that program was to simply take an LMSR out of the pipeline, after we had gone down the learning curve and we were building them fairly effectively, and do mods that were necessary to accommodate the Marine mission.

    Then add one to the production line, then presumably maybe another one or two. Does that make any sense now?

    Secretary HAMMES. If that will meet the Marine Corps requirement, I think that would make sense. I think if the mods were sufficient enough to tailor that ship to the Marine Corps' requirement, I think the Marine Corps would have to step up and say whether it did or not. In terms of acquisition, that can be done.

    Mr. HUNTER. Okay. Mr. Allen.

    Mr. ALLEN. Thank you, Mr. Chairman.

    First of all, my apologies to the Subcommittee. This is the time of year when we have lots of our constituents moving through. So, even if we arrive here in D.C. on a Tuesday, despite the storm, we have a lot of conflicting demands.
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    I very much appreciate the chance to talk with you. Of course, coming in at this time, I run the risk that you have already answered these questions. I would really like to focus, for a moment probably Secretary Hammes with you, on the 300 ship Navy.

    In particular, there are those say that we are not building at a rate that will sustain a 300 ship Navy. I really like your views of the current build rate, as compared to the current inactivation rate.

    Talk a little bit, if you will, about how you see those lines moving over the next few years. Obviously, I am very concerned that we are not building ships at a rate that will keep us at least at a 300 ship Navy. I would be interested in your views on the subject.

    Secretary HAMMES. Yes, sir. The current Navy plan, with the addition of 8 ships in this year's budget across the 6 years of the plan, builds at an average rate across those 6 years of 7.8 ships per year, or right at 8.

    To sustain a 300 ship Navy, we estimate that roughly we will need to stay at 9 ships. The longer we wait to do that, the higher that rate will have to go in the future to maintain 300 ships.

    That is why you hear different discussions on whether it is 10 or maybe a number even higher than 10, based on the law rates we have had in the past. To sustain a sustained production rate of 9 ships will maintain a 300 ship Navy.

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    Now, the problem and the issue in the budget is some of these ships are more expensive than others. Ron O'Rourke's earlier testimony pointed out that the Navy has capitalized the ships that are very important to is; particularly the TACDX to replace aging logistics ships. But those are relatively inexpensive ships. Therefore, the rate are up, but eventually we are going to face the issue of capitalization of the Submarine Program.

    Those are more expensive, as well as really at what rate we will build carriers. Traditionally, in the past we have built them between three and four years. Now, there they are turning out between four and five.

    Along with, I think, the DD–21 Program, as long as it is structured at three ships per year, we will be able to maintain our force structure and surface combatants. Still, we will require modernization of the cruisers to do that, as well as potential other modernizations.

    The issues that we have and how we retire ships quite often is not the age, but the ability to meet the threat and also the cost of continuing to operate these older ships. So, you have seen a lot of attack submarines go out only in that they were not the most modern submarines.

    The same thing is true on surface ships, as well as the aspect with the current bottom line, we cannot afford to operate them. So, we keep the most technology advanced ships and try to build to the future.

    Mr. ALLEN. Do you assume that the average life of a surface combatant is about 30 years? Is the average for all ships about 30 years or 35 years? I am curious to know what number you are using?
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    Secretary HAMMES. Surface combatants, smaller amphibs, and auxiliaries we assume right around 35 years. Carriers go longer. Some of them are going to approach 50 years before they are gone; the Enterprise. So, the carriers we generally plan on about 45 yrs.

    Mr. ALLEN. Is it easier to upgrade them as time goes by? Because of their size, is it easier to continually improve them?

    Secretary HAMMES. I think it is the issue of the capital investment and the nuclear plant. You get the fuel. Automatically, once you have refueled one time, you are going to get that kind of life out of it, the way those cores are structured today.

    So, we build the ships around the life of the core after we refuel the current carriers. Of course, the submarines are built on cores that last the life of the ships now.

    Mr. ALLEN. Mr. St. Pe, welcome. It is good to have you here. The OECD Shipbuilding Trade Agreement seeks to end shipbuilding subsidies worldwide, as I understand. It has not been ratified by the U.S.

    My understanding is that the American Shipbuilding Association opposes the agreement on the grounds that it allows subsidies to foreign yards, but kills the Jones Act, the Title II Loan Guarantees, and harms the industrial base.

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    That is what I understand the position of the Shipbuilding Association is. I would be interested in your views on what affect you think that agreement would have on the shipbuilding base in the United States.

    Mr. ST. PE. Congressman, our Shipbuilding Association is opposed to the agreement. We are opposed to it on the basis that we believe it will not end subsidies on the part of foreign shipbuilders.

    We are also concerned that it may stimulate and bring about the demise of such programs in this Country such as the Jones Act and Title II. At 9:00 a.m. in the Capitol, my own company signed a contract to build two new cruise ships; the first cruise ships to be built in this Country since 1940.

    In the absence of the Jones Act; in the absence of Title II, that program would not be possible. So, we are opposed to the agreement for the reasons you cited. We believe those reasons are valid.

    Mr. ALLEN. Congratulations. I have had a number of people tell me that cruise ships were one possibility for yards like Ingalls or Bath. That the complexity of those ships was sufficient that it would mesh rather comparatively well, I guess, with the work that you do now. I am pleased to hear that.

    Mr. ST. PE. Of all of the commercial ship opportunities, cruise ships most come closer to utilizing the kinds of skills that shipyards like ourselves, Bath, National Steel, Newport News, all of the shipbuilders already have in place to build the Navy work.
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    Mr. ALLEN. Thank you. Mr. Chairman, one more.

    Secretary Hammes, could we go back. I would be interested in your comments on the multi-year procurement. It seems to me that it helped enormously in getting the cost of the DDG–51s driven down so we could acquire 12 ships instead of 11.

    I would be interested in what prospects you see of negotiating a similar arrangement with the last six DDG–51s that are budgeted in the 2002, 2003 time frame.

    Secretary HAMMES. Congressman Allen, because of the savings and the stability of the current multi-year. It saved $1.4 billion, the equivalent of another DDG. We will continue to look at malt years.

    Our view is we need to execute either a new multi-year in 2002 and 2003 to buy out the class or use an extension mechanism; maybe an option contract off the existing multi-year.

    We are in a dialogue with industry on how best to do that. We intend to work out that strategy over the next few months with Bath and Ingalls Shipbuilding.

    Mr. ALLEN. Good. Thank you very much.

    Thank you, Mr. Chairman.

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    Mr. HUNTER. I thank the gentleman.

    Gentlemen, thank you very much for your statements. Is there anything further that you would like to say? Are there any concluding statements you would like to make? Anything else on your minds?

    [No response.]

    Secretary Hammes, just one last question for you.

    In your personal opinion, is the Navy's Shipbuilding Program under funded?

    Secretary HAMMES. Sir, what we do is do our best to submit you a fully funded budget to the Hill. For what we are structured to buy, we have enough money for that.

    But there are a lot of issued floating around the program of other requirements, other issues, and the environment we are in, the low rate of shipbuilding, and the full performance of them.

    We have some areas in some of the conversions and refuelings that we are concerned about whether there is enough money in them.

    When we talk about these conversion programs, it is an issue of capability versus dollars. For the basic work and delivery of the ship we have, we have funded enough money in the program.
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    Mr. HUNTER. In your opinion, what is the goal, the numerical goal, that we are building to?

    Secretary HAMMES. The Navy wants to build 300 ships and it is trying to do it through the fit up. We were not able to get there through this current fit up.

    Mr. HUNTER. So, if you are measuring what we have in the fit up against the 300 ship goal, is it under funded?

    Secretary HAMMES. Yes, sir.

    Mr. HUNTER. Okay, thanks.

    Thank you gentlemen. We appreciate it. We have got a few more questions for the record.

    [The questions referred to can be found in the Appendix.]

    Mr. HUNTER. So, if you can entertain those questions as we send them to you, we will get a few more questions off. We appreciate you being with us. We appreciate the attendance today.

    This Subcommittee is adjourned.

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    [Whereupon, at 2:30 p.m., the committee was adjourned.]


March 9, 1999
[This information is pending.]