Page 1       TOP OF DOC
[H.A.S.C. No. 109–26]










 Page 2       PREV PAGE       TOP OF DOC

MARCH 10, 2005




ROSCOE G. BARTLETT, Maryland, Chairman
ROB SIMMONS, Connecticut
JO ANN DAVIS, Virginia
CURT WELDON, Pennsylvania
JIM SAXTON, New Jersey
KEN CALVERT, California

GENE TAYLOR, Mississippi
 Page 3       PREV PAGE       TOP OF DOC
DAN BOREN, Oklahoma

Robert Lautrup, Professional Staff Member
Jean D. Reed, Professional Staff Member
John Sullivan, Professional Staff Member
Bill Natter, Professional Staff Member
Andrew Hunter, Professional Staff Member
Claire E. Dunne, Staff Assistant




    Thursday, March 10, 2005, Fiscal Year 2006 National Defense Authorization Act—The Navy's Future Fleet: Assessing the Strength of Today's Navy for Tomorrow

 Page 4       PREV PAGE       TOP OF DOC

    Thursday, March 10, 2005




    Bartlett, Hon. Roscoe, a Representative from Maryland, Chairman, Subcommittee on Projection Forces

    Taylor, Hon. Gene, a Representative from Mississippi, Ranking Member, Subcommittee on Projection Forces


    Crenshaw, Vice Adm. Lewis W., Jr., Deputy Chief of Naval Operations Resources, Requirements, and Assessments, Department of the Navy

    Magnus, Lt. Gen. Robert, Deputy Commandant, Progarms and Resources, U.S. Marine Corps

    Mattis, Lt. Gen. James, N., Commanding General, Marine Corps Combat Development Command, U.S. Marine Corps
 Page 5       PREV PAGE       TOP OF DOC

    O'Rourke, Ronald, Specialist in National Defense, Congressional Research Service, Library of Congress

    Sestak, Vice Adm. Joseph A., Jr., Deputy Chief of Naval Operations, Warfare Requirements and Programs, Department of the Navy

    Young, Hon. John J., Jr., Assistant Secretary of the Navy, Research, Development and Acquisition, Department of the Navy


Bartlett, Hon. Roscoe

O'Rourke, Ronald

Taylor, Hon. Gene

Young, Hon. John J., Jr., joint with Vice Adm. Joseph A., Sestak, Jr., Vice Adm. Lewis W. Crenshaw, Jr., Lt. Gen. Robert Magnus, and Lt. Gen. James N. Mattis

Letter to The Hon. Curt Weldon from William M. Balderson

 Page 6       PREV PAGE       TOP OF DOC
Mr. Bartlett
Mr. Weldon


House of Representatives,
Committee on Armed Services,
Projection Forces Subcommittee,
Washington, DC, Thursday, March 10, 2005.

    The subcommittee met, pursuant to call, at 9:06 a.m., in room 2212, Rayburn House Office Building, Hon. Roscoe Bartlett (chairman of the subcommittee) presiding.


    Mr. BARTLETT. The subcommittee will come to order.

    This morning we will receive testimony from witnesses representing the Department of the Navy and the Congressional Research Service on our Navy's future force architecture, shipbuilding requirements and the President's fiscal year 2006 budget request for the Navy's shipbuilding and conversion program.
 Page 7       PREV PAGE       TOP OF DOC

    Before we proceed, I would, again, want to note the dedication and professionalism of our men and women serving in our military services throughout the world, coalition personnel and those supporting them. I thank all of you for what you are doing.

    The security challenges confronting our nation today are daunting. We must fund current operations while we balance today's expenditures with the investment in research and development for the future.

    We also face a necessity to maintain the shipbuilding industrial base.

    Our purpose today is to ensure that for fiscal year 2006 and beyond, the Navy and Marine Corps are provided the proper resources to maintain sufficient force structure and to develop the correct capabilities to meet new challenges that surely lay ahead.

    Fundamental to this issue is accurately determining present and projected threats in order to develop the required capabilities to meet those threats.

    In my mind, while we have no peer adversary at present, we will certainly have one in the future. Thus, we are faced with the problem of fielding a Navy today that can handle threats ranging from irritations to more formidable regional threats.

    In my opinion, the Nation must balance its research and development investment to ensure that it can handle the major threats of the future while funding procurement to meet near-term requirements.
 Page 8       PREV PAGE       TOP OF DOC

    To meet those ends, the committee directed the Office of the Secretary of Defense to conduct two independent naval fleet architecture studies to determine the nature of our future fleet. These two studies intend to serve as a foundation for a logical, well-justified and stable construction and conversion program that can be well executed over the long-term.

    Sadly, part of our national shipbuilding problem is that industry is not commercially competitive. This has resulted in over-capacity that exacerbates rising construction costs for the Department of Defense.

    Industrial over-capacity coupled with military-only business threatens industry viability when faced with projected low construction rates for a few expensive ships each year.

    Secretary Young, I am very pleased that you have agreed to be with us today. I want to continue our dialogue from our recent hearing on research and development to gain a sense that the Navy's emerging force structure results from valid, realistic requirements and new concepts of operation rather than from seeking an arbitrary number of ships in the force structure.

    I have a number of concerns. To mention a few:

    In my view, given state-of-the-art technology available, we have too many people on our ships.

 Page 9       PREV PAGE       TOP OF DOC
    Further, we seem to have a new plan every year for how many and what type of ships we want to build.

    Finally, costs seem to be an independent variable. Ship costs seem to grow dramatically with each year's budget submission.

    Secretary Young, I look forward to your testimony and comments and those of the other witnesses on the details of the process that gets us to the mix of ships: numbers, size, missions and so forth that are assumed in this budget.

    As we begin this hearing today, the U.S. Navy now operates a combat fleet of about 290 surface ships and submarines, although the recent Quadrennial Defense Review recommended a force structure that equates to approximately 310 ships.

    The budget request includes a forecast of a low of 290 ships in fiscal year 2006 before rising to 309 by fiscal year 2011.

    While some argue that the end of the Cold War and the improved combat capabilities of today's modern warships permit a much smaller Navy than would have been required only a decade ago, it is important to note that the Navy's peacetime forward presence requirements have not changed significantly since the end of the Cold War.

    Indeed, in some respects those presence requirements for today's smaller Navy have increased, as illustrated by continuing large-scale presence, missions in the Mediterranean, the western Pacific, the Indian Ocean, and most recently in the Persian Gulf region during Operations Enduring Freedom and Iraqi Freedom.
 Page 10       PREV PAGE       TOP OF DOC

    For fiscal year 2006, the Navy's shipbuilding budget request is $8.7 billion. This year the budget request includes four, only four, new ships. From fiscal years 2006 to 2011, 49 construction of ships are planned, an average of about 8.2 ships per year.

    To accomplish this objective, we will need to overcome challenges to the increased costs of new construction.

    To address these and other important Navy force projection issues, I would like to welcome today's witnesses: the Honorable John J. Young, Assistant Secretary of the Navy, Research, Development and Acquisition; Vice Admiral Joseph Sestak, Deputy Chief of Naval Operations, Warfare Requirements and Programs; Vice Admiral Lewis Crenshaw, Deputy Chief of Naval Operations, Resources, Requirements and Assessments; Lieutenant General Robert Magnus, Deputy Commandant, Programs and Resources; Lieutenant General James J. Mattis, Commanding General, Marine Corps, Combat Development Command; and Mr. Ronald O'Rourke, Specialist in National Defense, Congressional Research Service, Library of Congress.

    I understand that only Secretary Young and Mr. O'Rourke will make formal statements prior to the questioning by the members.

    Before we begin, let me call on my friend, the gentleman from Mississippi, the Ranking Member of the subcommittee, Mr. Taylor, for any remarks he would care to make.

    [The prepared statement of Mr. Bartlett can be viewed in the hard copy.]

 Page 11       PREV PAGE       TOP OF DOC

    Mr. TAYLOR. Thank you, Mr. Chairman.

    First, I would like to, if you do not mind, invite our colleague from Maine and fellow shipbuilding compatriot, Mr. Allen, to come join us up here, even though he has moved on to another committee.

    Mr. Chairman, I do want to thank our panel for being with us.

    We are very fortunate to have each of you serving our country, and we are very fortunate to have you here today.

    I think you have said just about everything in your opening statement. My staff has drafted a beautiful opening statement. The only thing I do worse than speak is read, so I am going to spare you all that.

    But there are a couple of things I would hope we can talk about today.

    And when Secretary Young, in our private conversations—I do not think I am talking out of school. You have mentioned that you need a steady state of about $13 billion a year to maintain the fleet.

 Page 12       PREV PAGE       TOP OF DOC
    What I find interesting is that the budget you present to this committee has only $8 billion in it. And I would, again, be curious as to how you get from one to the other.

    If it is truly your belief that it ought to be $13 billion, why is it that you come before this committee—I would be curious of the in-Pentagon workings that caused you to go down to $8 billion and the conversations that took place and who is it within the Pentagon, if it is not you, who really thinks that we can get by on a $8 billion shipbuilding budget.

    We have, again, probably spoken about what I think is a favorable move on the part of the Navy as far as looking at multiyear financing. And I would hope that you would lay out to this committee a plan that you and Secretary England could live with.

    We are the lawmakers. I realize there is going to be some resistance on the part of the appropriators. But if the defense authorization bill calls for a change in that, the majority of our colleagues go for that, then it becomes the law of the land and that is the way we do business. I happen to think it would be a change for the better.

    I am always pleased to have our Marines here with us today.

    I would hope that at some point during your testimony you talk about the importance of moving the LHA(R) into actual construction this year rather than waiting for it later.

    I happen to have seen the Saipan on a recent visit to Roosevelt Roads. It is a beautiful ship. It is getting old. It is going to need to be replaced along with the other LHAs.
 Page 13       PREV PAGE       TOP OF DOC

    And last, I would like to hear your thoughts on where we are with a 288-ship fleet as opposed to the 375-ship fleet.

    Again, it is one of these things where I hear a lot of people wringing their hands, but I do not see a plan to do anything about it. And with $100 billion increase in the defense budget in the past four years, I just find it strange that the Navy has truly gotten the short end of the stick for the past four years.

    If this group cannot be an advocate for turning that around, I do not know who could.

    So, again, I want to thank all of you for your service to our country. Thank you for being here. And I hope at some point during your discussions, you could give me your thoughts on those subjects.

    Thank you, Mr. Chairman.

    [The prepared statement of Mr. Taylor can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    We are pleased that Mr. Allen has joined us. I understand he does not intend to participate in the discussion, but should he want to do that, we need an unanimous consent. The Rules Committee requires that. And if there is no objection, I will so order, that we have unanimous consent that if you wish to engage in the discussion you may do so, sir.
 Page 14       PREV PAGE       TOP OF DOC

    Thank you. Thank you for joining us.

    Secretary Young, your combined Navy testimony, and all of the testimony, will be made a part of the permanent record.

    So we would ask you to proceed with your oral statement.

    Thank you.


    Secretary YOUNG. Mr. Chairman, Congressman Taylor, members of the committee, I am pleased to again appear before the committee, returning to discuss the Department of the Navy's ship construction programs in the fiscal year 2006 budget request.

    I would like to again thank you for your personal and the committee's great support for all our Navy and Marine Corps programs.

    Mr. Chairman, you have kindly introduced the panel. I appreciate that.

    This Navy and Marine Corps team behind the panel has performed outstandingly in the year part on the Global War on Terrorism, which continues to underscore the high return on your investment in our combat readiness, our people and our unique maritime war-fighting capabilities.
 Page 15       PREV PAGE       TOP OF DOC

    All of our efforts reflect the ongoing efforts by the Department of the Navy to continue to increase the capability of the force while working within fiscal constraints.

    I would like to emphasize some key examples.

    In a remarkable action, the Navy reached agreement with our industry partners to renegotiate the CVN–69 carrier refueling overhaul, providing incentives that improved the performance and allowed us to return de-scoped work to the carrier.

    Teamed with the Missile Defense Agency, we implemented the Aegis tracking function in support of the ballistic missile defense program and recently completed the fifth successful SM–3 intercept of a ballistic target.

    The Research, Development and Acquisition (RDA) team worked with this Navy-Marine Corps team at the table and the Navy leadership and Marine Corps leadership to restructure LHA(R) from a plug-plus to an aviation variant using the proven LHD hull to save over $1.1 billion.

    With the support of this committee, we were able to take steps forward on that hull that helped both meet requirement and preserve the industrial base; we delivered the USS Virginia and four DDG–51-class destroyers in 2004; we completed critical design review (CDR) on nine of the ten DD(X) engineering development models; we contracted for the lead littoral combat ship (LCS) and cut the first parts; we undocked the first SSGN, and all SSGNs are under contract within the budgeted price.
 Page 16       PREV PAGE       TOP OF DOC

    As you know, the fiscal year 2006 request includes four ships, reflecting the Navy's transition to several new classes of ships.

    We have also continued to increase the level of R&D funding to support the development of these new ship designs and reduce technical risk in these programs.

    In addition to the new construction ships, the budget request includes $1.75 billion for the refueling and complex overhaul for the USS Carl Vinson as well as an SSBN engineering refueling overhaul.

    The fiscal year 2006 budget includes $66 million for MPF-Future development and design. MPF-Future is essential to the Navy's sea-basing strategy, and these funds are very important to the long-term health of segments of the U.S. industrial base.

    The current plan/build rate of one DD(X) per year through the future years defense program (FYDP) does not provide sufficient workload to sustain two yards in an affordable manner. We are committed to procuring those ships that the Navy needs in a manner that provides the best value for the taxpayer.

    The competition for DD(X) under consideration by the Navy provides several benefits.

    First, the competition will save approximately $1 billion for fiscal years 2006 to 2011 and $3 billion on the first ten ships. Further, the Navy will be able to focus on the design of critical subsystems and DD(X) and reduce risk and concurrency issues of concern to Congress and others.
 Page 17       PREV PAGE       TOP OF DOC

    The Navy continues to explore alternative financing approaches for ship procurement.

    As you know, last year the Navy requested research, development, test and evaluation (RDT&E) funds for lead-ship construction. This approach mirrors the approach used in every other weapons development program. The method would have allowed the Navy to work with industry to invest in a production process for the ship class, reducing costs for the class.

    Our fiscal year 2006 budget does include RDT&E funding for the second-source littoral combat ship.

    Our budget submission also includes two other shipbuilding financing approaches.

    We have requested authority to fund the procurement of LHA(R) ships and the new generation aircraft carrier over two years. This permits the department to level out the funding spikes associated with large-cost capital ships.

    The other financing mechanism in our budget is the inclusion of detailed design funding for lead ships in advanced procurement. Since designs for new ships span between 18 and 30 months, this jumpstart will permit design efforts to begin a year ahead of full funding so the start of fabrication will be closer to the year that the lead is authorized and appropriated, and the cost of that ship can be more informed by the design.

 Page 18       PREV PAGE       TOP OF DOC
    Mr. Chairman, out of respect for the committee, I will stop, leaving much more to say. I am grateful to the committee for the chance to offer a few examples of how we are changing, how we approach acquisition requirements and the delivery of capability in our shipbuilding programs.

    Congressional support of the shipbuilding program is essential to achieving this vision, and I thank you very much for the great help you have given us in the past and your consideration of this year's budget proposals.

    We look forward to your questions.

    [The joint prepared statement of Secretary John J. Young, Jr., Vice Adm. Joseph A. Sestak, Jr., Vice Adm. Lewis W. Crenshaw, Jr., Lt. Gen. Robert Magnus, and Lt. Gen. James N. Mattis, can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much for your testimony.

    Be assured that there will be opportunity to expand on issues you would like to expand on during the question and answer period.

    Mr. O'Rourke, your testimony is also included in the record. Proceed as you wish, sir.

 Page 19       PREV PAGE       TOP OF DOC

    Mr. O'ROURKE. Thank you.

    Mr. Chairman, Congressman Taylor, distinguished members of the subcommittee, it is an honor to be here today.

    You asked me to testify on a number of topics, and I will go through them quickly here.

    First, regarding Navy force structure goals, we do not have an officially approved unambiguous plan for the future size and structure of the Navy. That has been true since at least February 2003, if not earlier, and the Navy's testimony last month on potential force ranges did not do much to change this.

    Ambiguity in Navy force planning is making it difficult for business leaders to make decisions on things such as workforce management and facilities investment.

    It is also making it difficult, if not impossible, for Congress to conduct effective oversight of Navy budgets and programs by reconciling desired Navy capabilities with planned force structure and planned force structure with supporting programs and budgets.

    Navy and DOD officials stated that under capabilities-based planning, numbers of ships and aircraft are not as important as the total amount of capability in the fleet. That is true insofar as the goal is to have a Navy with a certain desired set of capabilities and not simply one that happens to have a certain number of ships and aircraft.
 Page 20       PREV PAGE       TOP OF DOC

    But that is not the same as saying that a Navy with a desired set of capabilities cannot be translated into a planned force structure that includes certain numbers of ships and other systems.

    Although the Navy has some force planning issues to work through, it arguably should become possible at some point to translate a set of desired Navy capabilities into a more tightly focused number of ships and other systems.

    Regarding the new studies on Navy fleet architecture, the Center for Naval Analysis (CNA) study parallels fairly closely current Navy thinking on the size and composition of the fleet. It uses essentially the same kinds of ships and formations as those planned by the Navy and recommends a fleet of 256 to 380 ships, which overlaps with the Navy's force ranges.

    CNA's 380-ship fleet is similar in composition to the Navy's 375-ship proposal.

    If an alternative fleet platform architecture is defined as one that uses ship types, or formations, that differ in some significant way from those currently planned, then the CNA fleet arguably would not qualify as an alternative fleet platform architecture.

    The Office of Force Transformation (OFT) report, in contrast, presents an essentially clean-sheet proposal for a radically different future Navy. It employs eight new ship designs. Four of these are a medium-sized aircraft carrier, a missile ship, an amphibious assault ship and a mother ship for small combatants, all of which would be based on a common merchant-like hull.
 Page 21       PREV PAGE       TOP OF DOC

    The other four designs are a small, fast aircraft carrier, a non-nuclear-powered submarine equipped with an air independent propulsion (AIP) system, and two types of small, fast surface combatants that would be similar to the LCS but smaller.

    The OFT combines these designs into three alternative fleets totaling roughly 550 to 850 ships. In each case, the small surface combatants would account for about 75 percent of the ships.

    The OFT believes its force would have certain advantages compared to the Navy's planned fleet.

    The OFT report also poses a significant potential business challenge to the six shipyards that have built the Navy's major warships in recent years.

    In summary, the OFT report fundamentally challenges current Navy thinking on the size and composition of the fleet and presents a force that arguably would qualify as an alternative fleet platform architecture.

    Regarding the industrial base implications of the Navy's shipbuilding plan, 21 of the 49 ships in the plan are LCSs that are to built in yards other than the 6 yards that have built the Navy's major warships in recent years.

    The 28 ships that would likely be built by the six larger yards equate to about 4.7 ships per year, or less than one ship per year per shipyard. Such a rate would result in relatively low workloads, revenues and employment levels at the six larger yards.
 Page 22       PREV PAGE       TOP OF DOC

    The plan defers CVN–21 by a year. The estimated acquisition cost of this ship is now $13.7 billion. That is $2 billion higher than the estimate from a year ago, and some portion of this increase may be due to the one-year delay.

    For submarines, the most pressing concern may not be the production portion of the industrial base but the design and engineering portion, which is facing the prospect, for the first time in about 50 years, of not having a new submarine design to work on.

    The gap between the final DDGs and the first DD(X), combined with the one-per-year DD(X) rate, may raise questions about the future financial health of the two surface combatant yards.

    If the Navy holds a winner-take-all competition for the DD(X), then the sequences for the yard that loses could be very serious. Potential scenarios for the losing yard, particularly if it were Bath Ironworks, could include closing or mothballing the yard.

    Regarding funding approaches, incremental funding, or advanced appropriations, could mitigate budget spikes associated with procuring very expensive ships that are procured once every few years. The ships that best fit this definition are aircraft carriers and big-deck amphibious ships.

    The current full-funding policy relates to Congress's power of the purse. Congress imposed the policy on the Department of Defense (DOD) to strengthen discipline in DOD budgeting and to improve Congress's ability to control DOD spending and carry out its oversight of DOD activities.
 Page 23       PREV PAGE       TOP OF DOC

    The policy is consistent with the Antideficiency Act and has been periodically reaffirmed over the years by Congress, the Government Accountability Office and DOD.

    In discussing proposals for incremental funding, or advanced appropriations, it is important to note that current ship-funding practices are not as rigid and puritanical as they sometimes seem.

    DOD's sealift ships and Navy auxiliary ships, for example, are now procured through the National Defense Sealift Fund where they can be funded incrementally.

    In addition, incremental funding is already being used to procure aircraft carriers and big-deck amphibious ships. Examples include LHD–6, LHD–8 and CVN–21.

    And Congress, in recent years, has provided advance procurement funding, not just for long-lead components but also for advanced construction activities at shipyards.

    In discussing incremental funding, or advanced appropriations, it is possible to overestimate the potential effect on reducing instability in Navy shipbuilding plants.

    Mitigating budget spikes can help the Navy avoid instances of having to move ships from one year to another. But a more fundamental cause of instability in Navy ship procurement programs may be evolution and uncertainty in Navy thinking about what kind of fleet to build.

 Page 24       PREV PAGE       TOP OF DOC
    If so, then the primary means for improving stability in Navy ship procurement programs would be to encourage the Navy to better define its thinking on this issue.

    It is also possible in discussing incremental funding and advanced appropriations to overestimate their effect on increasing the number of ships that can be procured.

    By mitigating budget spikes and not moving ships from one year to another, incremental funding and advanced appropriations can avoid cost increases associated with disrupting ship procurement profiles and thereby marginally reduce the total cost of the Navy's shipbuilding program.

    It is possible to construct presentations showing how a decision today to begin using incremental funding, or advanced appropriations, could increase, perhaps dramatically, the number of ships on which construction can be started in the near term.

    Such presentations, if not tempered by cautions about how this would also reduce the number of ships that could be funded in future years, can mislead audiences into concluding that incremental funding, or advanced appropriations, can dramatically increase the total number of ships that can be procured over the long run for a given total amount of funding. That is just not the case, no matter how much it might be desired.

    As a general matter, incremental funding, or advanced appropriations, simply trades an inability to afford something now for an inability to afford something later.

 Page 25       PREV PAGE       TOP OF DOC
    It cannot turn one ship per year into two ships per year, and it cannot turn a level of funding sufficient for six ships per year into one for ten ships per year.

    The Navy has proposed procuring lead ships through the R&D account where they can be incrementally funded. An alternative would be to treat detailed design and non-recurring engineering costs, which are currently attached to the lead ship, as the final stage in R&D process, and fund them through the R&D account while still fully funding the actual construction cost of the lead ship in the shipbuilding account.

    This can be viewed as an intermediate option between the traditional approach for funding lead ships and the Navy's proposal.

    In summary, the question of whether to use incremental funding,or advanced appropriations, is a potentially significant one institutionally for Congress, because it relates to Congress as power of the purse and its ability to conduct effective oversight of DOD programs.

    Incremental funding, or advanced appropriations, can help mitigate budget spikes associated with procuring ships such as aircraft carriers and big-deck amphibious ships. This might achieve some benefits in terms of improving stability in Navy shipbuilding programs and reducing shipbuilding costs, but any such benefits are likely to be at the margin and should not be overestimated.

    With regard to sustaining the shipbuilding industrial base, one option, aside from procuring more Navy ships, would be to make it easier for yards that build complex combatants to compete for commercial ship construction work. One approach for doing this, which OFT proposes, would be to make Navy combatant ships more like commercials ships.
 Page 26       PREV PAGE       TOP OF DOC

    An option for better supporting the aircraft carrier industrial base would be to accelerate CVN–21 to fiscal year 2007, which might be facilitated with incremental funding, or advanced appropriations.

    Regarding submarine procurement options, the OFT report proposes substituting four AIP-equipped submarines for the nuclear-powered submarine in each carrier strike group.

    If AIP submarines are built to U.S. requirements, the equal cost ratio of substitution might turn out to be closer to 3-to–1, or something less than that.

    Non-nuclear-powered submarines, even those equipped with AIP systems, are not well suited for certain missions, including missions that require long, completely stealthy transits from home port to the theater of operations. The OFT report recognizes this by proposing to transport the AIP submarines into theater aboard a transport ship.

    A significant risk of a plan to begin procurement of AIP submarines, while continuing to procure one Virginia-class boat per year, is that financial pressures in future years could lead to a decision to increase procurement of the AIP submarines while reducing Virginia-class procurement to less than one per year.

    Such a decision would result in a total submarine force with more AIP submarines and fewer SSNs than planned, and consequently, with potentially insufficient total capability. This possibility is a principal reason why SSN supporters in the past have strongly resisted the idea of initiating construction of non-nuclear-powered submarines in this country.
 Page 27       PREV PAGE       TOP OF DOC

    A different option would be to start design work now on a new nuclear-powered boat incorporating the Tango Bravo technologies now being developed. The goal could be to produce a design with capability equivalent to the Virginia class and a procurement cost one-half to two-thirds that of the Virginia class.

    The idea of designing such a submarine has been discussed by Navy and industry officials. Such a submarine could be more easily procured within available resources at a rate of two per year, which the Navy would need to start in fiscal year 2012 or fiscal year 2013, and sustain for a period of about 12 years after that to avoid dropping below 40 SSNs.

    If design work on a Tango Bravo submarine is begun now and pursued in a concerted manner, the first boat might be ready for procurement by fiscal year 20ll, which would permit procurement to be increased to two per year starting in fiscal year 2013.

    Starting work now on a Tango Bravo design would provide near-term support to the submarine design and engineering base, addressing an issue that I had mentioned earlier.

    Some or all of the $600 million programmed for a new undersea superiority system could be used to help finance such an effort.

    Regarding surface combatants, there are several options for better supporting the two surface combatant yards between now and fiscal year 2011, including accelerating the first one or two DD(X)s by a year, procuring additional DD(X)s, procuring additional DDGs, procuring additional amphibious ships, or transferring construction of LCSs to these yards, or modernizing Aegis cruisers, or modernizing Aegis destroyers perhaps more extensively than now planned by the Navy.
 Page 28       PREV PAGE       TOP OF DOC

    Another option would be to accelerate and expand procurement of large and medium deepwater cutters for the Coast Guard.

    In terms of fiscal year 2011 and beyond, the reduction of the DD(X) program to one per year is a signal that unless budget conditions change, the procurement rate for the DD(X) and CG(X) may never be more than one per year. Such a rate could be judged unsatisfactory in terms of maintaining force structure at desired levels and constraining average unit acquisition cost.

    Dissatisfaction on one or both of these points could lead to a decision to terminate the entire DD(X)/CG(X) effort.

    If such a decision were made in the near term, a single DD(X) might be built as a technology demonstrator and a second one might be procured to give the other yard experience in building the design.

    If such a decision were made at a later point, a larger number of DD(X)s might be procured.

    But in either case, if the DD(X)/CG(X) effort is terminated and no new surface combatant design is ready to be put into immediate procurement, it could place enormous stress on the surface combatant industrial base.

    The submarine industrial base went through something like that in the 1990's when the Seawolf program was terminated and the Virginia class was not yet ready for procurement.
 Page 29       PREV PAGE       TOP OF DOC

    One option for responding to this possibility would be begin design work now on a new surface combatant that would be substantially less expensive than the DD(X) and be ready for procurement around fiscal year 2011. Such a design could be more easily procured within available resources at a rate of two per year, which is rate that would maintain the surface combatant force over the long run at levels closer to what the Navy might want and be easier to divide between two yards, should that be desired.

    One option for a less expensive surface combatant would be a ship about the same size as today's 9,000-ton Aegis cruisers and destroyers. Such a ship could use many of the same technologies being developed for the DD(X) but cost substantially less.

    Its payload would be smaller than the DD(X)s but still fairly sizeable.

    Another option which has been presented by CBO would be a 6,000-ton frigate, which would have a smaller payload and cost substantially less than a DDG–51.

    Mr. Chairman, that concludes my statement, and I will be happy to respond to any questions the subcommittee might have.

    [The prepared statement of Mr. O'Rourke can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you both very much for your testimony.

    As is my usual practice, I will ask my colleagues on the subcommittee to ask their questions and make their comments first.
 Page 30       PREV PAGE       TOP OF DOC

    I will begin of course with my friend and Ranking Member, Mr. Taylor from Mississippi.

    Mr. TAYLOR. Thank you, Mr. Chairman.

    Again, I appreciate both Secretary Young and Mr. O'Rourke.

    Mr. O'Rourke, I think you laid out a very accurate portrayal that multiyear funding is not the savior, but certainly it helps in the short term. It does bring some predictability.

    One of the things that I think you missed, though, is that with the spikes, the stops and the starts, the yards have no predictability of employment. That is obviously a cost factor. The suppliers have no predictability. There are no economies of scale.

    And I would think that if—much like as toward the tail end of the DDG buy, where the yards had some predictability, the suppliers had some predictability, I do think there are economies involved in that that you failed to mention.

    But other than that, I am in total agreement that multiyear certainly makes it a bit easier for us, but it is not a savior.

    The other thing I would remind all my colleagues of is that this Congress, in a very close vote, burdened the next ten years of Congresses with a prescription drug benefit that is going to cost $1.5 trillion. So that is obviously this Congress putting a burden on future Congress.
 Page 31       PREV PAGE       TOP OF DOC

    We are getting ready to pass a highway bill that for the next five years will say where money goes.

    And so, again, it is not out of the norm for other portions of Congress to make commitments for future Congresses. And in the case of defense, we obviously make commitments. When we buy a carrier, that is something that is going to be in the American inventory for 30 to 50 years. That is a commitment that we have to maintain.

    So without finding any serious flaws in your statement, I would ask you to at least consider those factors.

    Secretary Young, I have to echo what my Chairman said. I do not think that we are making a good decision going down to one supplier of DD(X)s. I think the solution there is more ships, not fewer shipyards.

    We are down to six shipyards in this nation. And I, for one, believe those who say that you can prevent wars through strength. I am seriously concerned that we are telegraphing to future foes that we really do not care what is happening 15 years from now.

    If you are buying 4 ships, they are going to last for 30 years, you are looking at a 120-ship fleet. That is not a good message to be sending to potential adversaries.

    And as I pointed out to a young major a couple of weeks ago, I am going to do it again. Fifteen years from now some other young major is going to have three or four stars on his shoulders. We need him to have all the assets that today's four stars have. We do not need to, because of some present difficulties, be burdening future secretaries of the Navy, future admirals, with diminished capabilities that invite someone to start a war with the United States of America.
 Page 32       PREV PAGE       TOP OF DOC

    I know you have a tough job.

    But I was just wondering, given the month or so that you have had to look at your budget—I know that nothing that comes out of the Pentagon is written in stone. I am told that already the Air Force is talking about restarting the C–130J line because they realize that the thought of stopping it was a bad idea.

    Have you or the Secretary been in a position to come back and say maybe we need the DD(X) now, maybe we need the LHA(R) now?

    You know, we are getting ready to pass a supplemental that is going to help out other accounts in other ways. Can that be tweaked in such a way as to free up more money for this year's shipbuilding account to get you to the $13 billion that you say you need?

    Secretary YOUNG. I am the assistant secretary for acquisition so I buy what the Navy requires and budgets.

    From my visibility point and from the Secretary's comments, we believe we have struck the right balance in the budget to buy ships to meet the requirement.

    If there were more money, we would buy more ships, I think. But the Secretary has indicated that things like LCS could be much higher on that priority list because of the capability they would bring quickly to the fleet.

 Page 33       PREV PAGE       TOP OF DOC
    So we believe we have struck a reasonable balance in the budget going forward.

    Mr. TAYLOR. If there were a situation in the Strait of Taiwan three years from now, five years from now, and you were facing the threat of some of the newer Chinese submarines, if you were given a choice of a DD(X) to respond to that threat or a littoral combat ship, what would you prefer?

    Because that is a very real decision that we have to make now in order to have that ship five years from now.

    Secretary YOUNG. I think Admiral Sestak can add a lot more life to this.

    Mr. TAYLOR. I open that up to——

    Secretary YOUNG. We have done some work there that says—what we need to keep explaining to people, DD(X) is an extremely capable ship. Because of its signatures and quietness, it can go into waters that even today's DDGs have a difficult time with in terms of mining.

    And because of the radars on that ship, it brings greater capability for air protection to a carrier strike group than even a DDG today.

    So DD(X) brings a lot to the table, and that is why it is an important pathway to CG(X) for us.
 Page 34       PREV PAGE       TOP OF DOC

    The fight, which Admiral Sestak can talk about far better, is a combined fight where LCSs have a role in submarine and mine detection, surveillance and clearing that lets DDGs and DD(X)s go in and perform other missions as part of the sea-shield, sea-strike, sea-based capability.

    So maybe I will give him an opportunity.


    Admiral SESTAK. Thanks, Mr. Taylor.

    I would love to go into specifics on this, but I will have to stay at somewhat of a general level.

    Later on, as we talk about some of Mr. O'Rourke's points about the range of ships that the CNO said, I can go into some detail on the assessment we have done.

    Let me just say that for the scenarios that we have run is, we have seen that with the LCS, as compared to a DDG or a DD(X) doing a similar role in anti-submarine warfare (ASW), that we have had an increase of detections by those off-board sensors that a littoral combat ship can put out there, the arrays it can put down there on the floor of an ocean, the unmanned vehicles it puts out there to tow an array to listen, of 30 percent as compared to—and this is a number of LCSs as compared to a number of DDGs or DD(X)s, whereas upwards of 20 percent of the kills that were sustained were because they were cued by the sensors that the LCS put down.
 Page 35       PREV PAGE       TOP OF DOC

    So the importance of the LCS as compared to the DD(X), not that the DD(X) and LCS importance of the LCS as compared to the DD(X), not that the DD(X) and LCS—DD does not play a role closer to the sea base, but to be just—the hard part for us is, a submarine gets under way from a port, and then there is another submarine sitting right there watching them go by. And he watches another one go by and another one go by and another. He can only follow one.

    Until they transit those couple hundred sub miles up to where the sea base is, on the other side of that place you talked about, we do not know where they are.

    And so the value of LCS, for the first time, is to put unmanned sensors on the floor of that ocean and on the surface to keep the constant surveillance.

    Even the study that was done by the Office of Secretary of Defense has said the major capability in ASW we must address is the ability to have continuous surveillance on these submarines.

    We can pick them up, we know they are going, but we have to keep track of them, because we do not know when the red flag goes down to start the war.

    And so, LCS, sir, in the modeling and the simulation extensively done, has truly shown its worth there in ASW of these unmanned off-board sensors.

    [The joint prepared statement of Vice Adm. Joseph A., Sestak, Jr., Secretary John J. Young, Jr., Vice Adm. Lewis W. Crenshaw, Jr., Lt. Gen. Robert Magnus, and Lt. Gen. James N. Mattis, can be viewed in the hard copy.]
 Page 36       PREV PAGE       TOP OF DOC

    Secretary YOUNG. Can I add——

    Mr. TAYLOR. Yes, sir.

    Secretary YOUNG. In 2006 we will have 72 cruisers and destroyers, and many of those will be new DDGs. Because of the DDGs that we bought, with the support of the Congress, that number in the 2011 to 2014 timeframe will go up to 84 cruisers and destroyers.

    We have a robust and fairly young supply of capable ships at a time when we are looking at the numbers of our carrier strike groups—as you know, there is a proposal to retire a carrier—and the number of expeditionary strike groups.

    So we believe the force structure tailoring we are doing is adequate.

    I can certainly see, as you suggest, a time when we have to build probably more, like, two—and I think as Ron O'Rourke said—surface combatants a year. Would like to be in a situation where that second—the incremental cost for that second destroyer that we would have to build for force structure purposes would be a lower cost.

    And there is no question in a two-yard strategy that will be a lower cost.

    And it is difficult to foresee force structures—and this Admiral Sestak's to comment about—where we would buy three to five destroyers as we have done in the past.
 Page 37       PREV PAGE       TOP OF DOC

    And so lacking those kinds of numbers, it is a struggle in the industrial base to allocate—I mean, it will be allocation and not competition under any circumstance at one or two destroyers per year.

    But the force structure tells us that is where we are headed, and then the LCS will increasingly participate in these mission spaces and be part of that, you know, whatever the number of final force structure is for cruisers and destroyers.

    Mr. TAYLOR. If I could get back to my question: Given the very real situation that we have, where we cannot get everything that we would like to, we have to prioritize in this year's budget, given that scenario, the very real possibility of something happening in the Taiwan straits five or six years from now, should the priority remain with the littoral combat ship or with the DD(X)?

    I thought the admiral was pretty clear in his answer. I am curious what your thoughts are, Mr. Young.

    Secretary YOUNG. The secretary has indicated, and I agree, that littoral combat ships are a very important capability, as I have not had a chance to say before. I mean, we boarded over 1,000 ships before Operation Iraqi Freedom (OIF) in the Gulf.

    Today we do certain maritime interdiction missions with billion-dollar DDGs when there are great advantages to having a 50-knot small ship to perform some of those missions, perform mine counter—we were building organic mining search capabilities on DDGs. It is not a great use of a capital ship that has enormous anti-air capabilities and other capabilities that need to be applied to the Sea Shield or the expeditionary strike group and the carrier strike group.
 Page 38       PREV PAGE       TOP OF DOC

    An LCS will live under that shield but can perform far more missions more affordably.

    Mr. TAYLOR. Mr. Chairman, thank you very much.

    Mr. BARTLETT. Thank you very much.

    For those members who were here for gavel fall, the order of questioning is seniority. And for those who came after the gavel fall is when they came.

    And so Mr. Simmons is next.

    Mr. SIMMONS. Thank you, Mr. Chairman.

    And thanks to the witnesses this morning.

    I wanted to point out an item on page three on Mr. O'Rourke's testimony—and I commend him on his testimony. It is a very interesting and very insightful piece across the board, and particularly for me, in submarines and shipbuilding.

    I want to point out, on page three, top of page three, where he discusses industry.

    And he says, ''Ambiguity concerning required numbers of Navy ships may make it easier for industry officials to pour into broad remarks from Navy or DOD their own hopes and dreams for individual programs. This could lead to excessive industry optimism about these programs.
 Page 39       PREV PAGE       TOP OF DOC

    ''Ambiguity concerning required numbers of Navy ships can also cause business planning uncertainty, such as in production planning, workforce management, facilities investment, company-sponsored R&D,'' et cetera, et cetera.

    Ambiguity is the problem, or at least part of the problem. And I think he is very insightful to say that if we are ambiguous, our hopes are high until we are faced with the reality of the programs and the production, at which point we realize that those hopes were taken in vain.

    And so what we are attempting to do here I think is to try to pin people down to reduce ambiguity, to make it easier for industry.

    In my district, Electric Boat submarine production, it is a controlled industrial area. You cannot hire somebody to go in the yard if they do not have a secret clearance. So you cannot just hire people to come in and lay them off for six months, a year, bring them back.

    And that is just one example of how ambiguity and the lack of clarity makes it so difficult for us to work in this environment.

    Point two, from ''Sea Power,'' an article by Bob Hamilton: ''The Navy and Defense Advanced Research Projects Agency (DARPA) plan to pour $97 million over the next four years into a new joint project called Tango Bravo intended to lead to the design of a new attack submarine that would have the capabilities of the current Virginia-class boats but would be half the size and half the cost.''
 Page 40       PREV PAGE       TOP OF DOC

    Half the size and half the cost—Mr. O'Rourke has mentioned the Tango Bravo project in his testimony as well. And the key to the Tango Bravo, or to the AIP proposal, would be that this keeps our designers at work.

    The third point, I will reiterate Admiral Rickover—you do not have to stand and salute, those of you who are in the nuclear Navy, if you are here—but Admiral Rickover, in 1968, testified that ''designers are the scarcest class of personnel in ship design in the United States. We do not have enough qualified submarine design people. If you lose them, you do not get them back.''

    And then finally the production charts—the only production chart that keeps us above 40 submarines a year is two a year, and we are heading to the crash point in that. I think everybody knows that.

    So what I am looking for from Secretary Young and I am looking for from Admiral Sestak, and others who wish to comment is, I am looking for some clarity.

    A month ago the Chief of Naval Operations (CNO) testified before the full committee on the issue of the $600 million and undersea warfare.

    And Secretary England said, ''We are looking and thinking about new approaches in the whole area of undersea warfare.''

    Then I went on to say, ''Is this going to be earmarked for sub-surface warfare transformation?'' And the Secretary said, ''That is correct. That is in the FYDP.''
 Page 41       PREV PAGE       TOP OF DOC

    Then we hear that, well, maybe not all of it is going to be for sub-surface warfare, or maybe it will not be for sub-surface war transformation.

    And then I hear from a guy on an airplane that, well, only $400 million is actually going to be for sub-surface. The rest is going to go somewhere else. You can learn amazing things on airplanes when you fly back and forth to the district.

    And so I am concerned about the industrial base, I am concerned about the designers, I am concerned about the Tango Bravo issue, I am concerned about where these dollars are really going to go, and I am concerned about the ambiguity.

    Could anybody in our panel clarify this uncertainty for me?

    Secretary YOUNG. Well, there are several. Maybe I will comment on each of them and then give my colleagues a chance and then come back and see how we have or have not answered your question.

    On the ambiguity issue, I think it is incumbent on the Navy team to do exactly what the CNO and Admiral Sestak and Admiral Crenshaw have done, and that is continually look at how we can best perform the mission of the Navy. Those ideas and thinkings have helped LCS come to fruition, helped LHA(R) get changed to a more capable ship.

    So there is an element of change that is hard for people that is good, though, and necessary and not totally ambiguity.
 Page 42       PREV PAGE       TOP OF DOC

    There is another aspect of that that suggests that the Navy budget is something that is stable and within it we are just playing with shipbuilding. That is not true.

    There have been many things in the budget that have changed in cost, and frankly, Virginia has presented—even as you well know, this committee well knows—late last year $400 million in problems.

    We cannot just solve those problems and leave shipbuilding totally harmless. We have to look everywhere in the enterprise, and sometimes we have to adjust the shipbuilding plan because of things that were brought to us by those very industry partners concerned about ambiguity and uncertainty.

    The Tango Bravo activity is a very interesting activity, and I find the DARPA people to be extremely creative. The secretary went and spent some time hearing their ideas and is very supportive. The Navy is a partner with them, sharing the cost of the program.

    Having said that, this is a paper program, and I suspect many of the members have seen many paper ideas. And so I am not prepared to tell you that this will result in a sub that is half the size and half the cost. And some of my experiences say otherwise.

    We spent a lot of time with the CNO and his team taking DD(X) from 18,000 tons to 14,000 tons, and they are still people who feel like that lost capability.

    One of our challenges, though, is vessels tend to want to be bigger so you get the maximum amount of capability on them.
 Page 43       PREV PAGE       TOP OF DOC

    So making those comprises to half size are unquestionably not worked out. They are just paper ideas and discussions that we need to pursue.

    The undersea superiority money is 2006 program request before the Congress, so we do not have those funds authorized and appropriated yet.

    But the intent of our request is to look at the undersea superiority mission, the missions that need to be accomplished so we have dominance in that space, and look at every way to accomplish those missions—airborne sensors, satellite sensors, unmanned undersea vehicles, submarines, surface ships—everything that can bring a capability to that puzzle to perform a mission and do it better. Because today we think we do it well, but we need to do it better as we see the world changing.

    And so we are going to look across the space, and that money is guaranteed to no one. It is not guaranteed to a new submarine design or any such concept; it is guaranteed to the best ideas that compete.

    And Secretary England has been very clear, and I believe Secretary Rumsfeld and his team have been very clear: They want a clean-sheet-of-paper look and then to make that investment in the best ideas that will continue the Navy's undersea dominance in the future.

    Admiral SESTAK. Mr. Simmons, it is a great question.

    When we build a ship, we build a ship that my 3-year-old daughter, if she is ever in my position, will be riding 50 years from now.
 Page 44       PREV PAGE       TOP OF DOC

    So we are very conscious that we have to look at the long time—30 years at least.

    And I think the chief of naval operations this year has truly begun to show you the story of stability.

    Several years ago he said 375. That 375 was based upon a concept of distributed operations. And a year ago last November he said, ''Now do modeling and analysis for me. Tell me what it is going to be 30 years from now.''

    And so the range he came up with, 260 to 325, broken down by classes of ships individually, has begun to say, ''I know the capabilities resident upon platforms that I know.''

    He had us do what Mr. Taylor asked: compete a capability on a platform of ASW on the DD(X) and the DDG with LCS.

    He said, ''Begin to do for me of an LCS that nobody has done before in the oceans of the Navy.''

    You all remember General Schwarzkopf in the mother of all briefs when the reporter out there said to him, ''Why didn't the Marine Corps go a little faster across those mine fields that they thought was going to be there?'' And he turned around and said, ''Have you ever been in a mine field?''
 Page 45       PREV PAGE       TOP OF DOC

    For the first time, the United States Navy is not going to put a man or a woman in a mine field. We are going to put unmanned vehicles in that mine field, and that begs for something.

    Look back 30 years. Thirty years approximately ago we had 830 ships. Five years later we had 500. Ten years later we had 580. We have 300 now.

    Go back 10 years from that 30 years, we had 950. Go back 10 years before that, we had 5,000.

    The challenges we face is, you cannot give a point solution. They tried to do that without the modeling and simulation we finally have in the cups for our hands.

    It does not replace, totally, military judgment. But what it begins to do is, take a variety of challenges that I cannot just take a good idea—I watch Admiral Cebrowski's studies, I read everything Ron O'Rourke puts out, or Center for Strategic and Budgetary Assessments (CSBA).

    I see good ideas. But I am in a different business. You can think the unthinkable, fathom the unfathomable, but you have to pay cash. And for me, I have to pay cash in military war-fighting capability.

    I have to take all these various variables—how many ports in Korea do you want me to protect? With that SM–3 missile, we are now five for six on—and protect that port from theater ballistic missiles raining down from North Korea—two ports for the Army, three airfields, four airfields.
 Page 46       PREV PAGE       TOP OF DOC

    Thirty-two coalition ships sit in the Persian Gulf, or Middle East today, helping us do mil operations. Do I depend on 30 years ago that they are going to be there? If not, that 260 to 320 shows you I am prepared to fill it in with 12 other surface combatants crew-swapped to fill that gap.

    Am I going to be permitted to have ships home-ported overseas 10 to 20 years from now—Bahrain or other places?

    Heaven forbid if we ever lose that port where we have our carrier out there.

    And then I have to sit back and say, ''Hey, what is the intelligence warning I am going to get for each of these major scenarios?''

    We did this study a year ago last November. We are only showing the fabric, not the texture.

    But the story is this: We actually now know that 375 was not necessary. And matter of fact, it was not only unaffordable, I had a better place to put that money.

    I have watched the analysis. I have watched us go from one to seven DD(X)s as we put a Marine Expeditionary Force (MEF) ashore for the Marine Corps.

    And here is the problem: Adding one more DD(X) does not do it. Adding two more will not help me any. Because there is a system on board that amphibious ship called the supporting arms coordination center. And every time a Marine calls for fire, I cannot get the data out to the DD(X).
 Page 47       PREV PAGE       TOP OF DOC

    I have watched the analysis. Some good network sensors in there means that I could do it much better with fewer DD(X)s.

    So, Mr. Simmons, I sit back and I have watched us take the three major operations of major war that we are tasked by Mr. Rumsfeld to plan for in the next decade. And I have watched us do it in all sorts of scenarios—minimum warning, longer warning. I have watched us tee up all these variables that LCS versus DD(X), submarines and unmanned vehicles, and then I have watched us try to come to grip with what is changed here. We have had two wars. We have had a Global War of Terror. And I try to come to grips with how we are going to address that.

    And that 260 to 325 says: If I can get 325 with minimum sea swap, betting on the come that things are going to be done a certain way, this is the capabilities I need on these platforms.

    And then I sit back and I say: You know, if that Middle East force of our coalition allies walks away, I am going to need 12 more ships, but I am going to sea swap them. And now that range begins to come down.

    So we do know the resident capability we need. We know the variables that are out there. And we can walk you through the various platforms that are needed, and we can show you a much more stable plan that we could take time with to the future.

    That plan has just come out now. And so there is a cohesiveness to our approach in the future.
 Page 48       PREV PAGE       TOP OF DOC

    Mr. SIMMONS. Mr. O'Rourke, would you wish to comment on any of these questions?

    Mr. O'ROURKE. Just very briefly on two things: first, the $600 million——

    Mr. BARLETT. Excuse me for just a moment and then we will continue.

    The bells are ringing, as you hear. They are calling for a vote, just a single vote. That is a 15-minute vote, which means if we ask the staff to alert us when there are 5 minutes remaining, we need that long to get there, we will go and come back very quickly.

    We may proceed, but we may have to stop almost in the middle of a sentence, because the staff will tell us when we have just five minutes remaining and then we will have to break and go.

    Thank you very much.

    Mr. O'ROURKE. First, on the $600 million fund—that is a bit of a Rorschach test right now. People who look at that each interpret it differently in terms of what kinds of activities it might support.

    As Secretary Young as indicated, DOD will—at some point they currently plan to look at their options and then allocate that money. Congress also has the option of looking at that and giving DOD some direction on that matter.
 Page 49       PREV PAGE       TOP OF DOC

    In terms of force ranges, I think it is legitimate for the Navy to express its future force structures in the form of ranges than point estimates. But the ranges that the Navy put out in its testimony last month are quite broad.

    And I think although the Navy has some force planning issues that it needs to work through, they should work through them with an eye toward narrowing down that range so that it does not present other parties, in Congress or industry, with the degree of ambiguity that those parties currently have to contend with.

    Because even though its convenient for the Navy to keep its options open and express these numbers widely, that ambiguity imposes costs on others which also have to be taken into account.

    If the Navy can work to close down those ranges and express them more tightly—with the proviso that they might change as certain assumptions change from time to time—then we might get to a situation where the Navy will still have the flexibility it needs to respond to changing circumstances, but Congress and the industry have a firmer basis for doing what they need to do.

    Mr. SIMMONS. I thank you, Mr. Chairman. I have taken more than my share of the time and I apologize for that.

    I would say that Mr. O'Rourke has referred to the $600 million as a Rorschach test. Some would say without specificity it is a slush fund. And I guess that what I would recommend to the subcommittee is that we work with the Navy to try to refine where those dollars might go.
 Page 50       PREV PAGE       TOP OF DOC

    Thank you, Mr. Chairman.

    Mr. BARLETT. Mr. O'Rourke, is that Rorschach because each person is entitled to see what they wish with those ink blots?

    Mr. O'ROURKE. That was the analogy, yes.

    I think until such time as the Navy or Congress begins to provide more details on exactly how that money will be spent, people will look at that and come to their own conclusions about what kinds of activities it might support.

    I have already seen this in asking various parties what they think that money is for. They give me different answers. That is the definition of a Rorschach test.

    Mr. BARTLETT. Thank you very much.

    Mr. Marshall, we can begin with your questioning and comments and will continue if you have more after the break.

    Mr. MARSHALL. Thank you, Mr. Chairman.

    Mr. O'Rourke, I guess I was struck part of your testimony, your opening statement—and I would invite all present to comment on this.

 Page 51       PREV PAGE       TOP OF DOC
    You know that where the Air Force is concerned, we are struggling whether or not we are going to buy additional refueling tankers, and if so, how we are going to go about doing that, and the proposal on the table is that we are going to lease them. So we will buy them right now, we will equip them right now, we will pay for them over a long period of time into the future.

    You spent some time talking about the full funding policy. On page 25 of your written statement you say, ''For DOD procurement programs, the full funding policy requires the entire procurement cost of a usable end item, such as a Navy ship, to be funded in the year in which the item is procured. The policy applies not just to Navy ships but to all weapons and equipment that DOD procures through the procurement title of the annual DOD Appropriations Act.''

    I guess I would like your thoughts about what the Navy should do, as is being suggested, to replenish our fleet and the Air Force of refueling tankers, with regard to any or all of the weapons platforms the Navy is interested in acquiring right now, what the pros and cons are.

    And I guess I am generally interested in the Navy's thoughts about this. It looks like the Navy feels it is constrained in a way that the Air Force does not feel it is constrained in.

    And I was also sort of struck by your explanation of the justification for the full funding policy.

    I guess that is the five-minute bell——
 Page 52       PREV PAGE       TOP OF DOC

    Mr. BARTLETT. No, sir, that is the ten-minute bell. We have five more minutes.

    Mr. MARSHALL. Oh, we do?

    Mr. BARTLETT. You all will get a five-minute call. We do not.

    Mr. MARSHALL. I guess I understood that.

    Mr. O'ROURKE. In terms of the full funding policy, I do think it is important to remember that it applies not just to ships but to all items that are procured through the procurement title of the DOD Appropriations Act. So ships in that regard are not funded differently than other items.

    In terms of the tanker leasing issue that has been discussed over the past two years or so, that raised a number of procedural or budgeting issues, including whether this was in fact a lease as opposed to a procurement, or whether it was a procurement in the form of a lease. And people took different views on that.

    In terms of whether the Navy should look at different kinds of arrangements, I guess the points that I want to make are that current funding mechanisms are not as rigid and unbending as they are sometimes made out to be.

    We already have some flexibility in the system. We can get DOD sealift ships and we can get Navy auxiliary ships through the National Defense Sealift Fund (NDSF). That is where we are already procuring them. We have been doing that for the past several years, and ships procured through that account are not subject to the full funding policy in the same way, because the National Defense Sealift Fund is outside the procurement title of the DOD Appropriation Act.
 Page 53       PREV PAGE       TOP OF DOC

    We have also either explicitly or implicitly funded ships that are being procured in the shipbuilding account using de facto or explicit incremental funding. And I cited three ships as examples of that.

    And the full funding policy nominally says that advanced procurement payments are to be used for long-lead components, but in fact, they have been used with others purposes in mind for advanced construction activity of the ship itself at the shipyard.

    So the current funding practice, as it has evolved in recent years, has more flexibility in it than it sometimes appears to have.

    In terms of incremental funding, or advanced appropriations, making greater use of those, the point I want to make is that raises a significant institutional issue for Congress.

    Congress imposed the full funding policy on DOD many years ago, and did so not in a casual or light manner. They did so because they had strong concerns that incremental funding did or could do certain things that Congress found to be undesirable.

    That said, incremental funding, or advanced appropriations, can mitigate the budget spikes associated with procuring very expensive ships that are procured once every few years. That can avoid instances of having to move ships from one year to another just to accommodate things.

 Page 54       PREV PAGE       TOP OF DOC
    That can improve stability in shipbuilding plans—which is what Mr. Taylor was focusing on—and at the margin of—reduce the total cost of the Navy shipbuilding effort by avoiding the cost increases that might occur when ships are moved and shipbuilding production schedules are perturbed.

    But the potential benefits of incremental funding in improving stability in Navy shipbuilding plans, or in reducing the cost of Navy ships, should not be overestimated.

    Mr. MARSHALL. Well, I understood you in your—I am sorry, let me just follow up a little bit.

    I understood you in your opening statement to say that the full funding policy was imposed to try to force fiscal discipline, and also that some incremental funding policy—or in the Air Force instance, the leasing policy, I guess it applies to that mechanism as well, that funding mechanism as well—would not result in the long run in permitting us to have two ships, or two planes, where we might, if we were just doing it year by year, have had only one.

    Can you explain what that means?

    Mr. O'ROURKE. I guess the point is that if you were to start using incremental, or advanced appropriations, today, you could pull into the near term ships or other items that might otherwise have occurred in later years. So you can start construction work on these items sooner than you otherwise would.

 Page 55       PREV PAGE       TOP OF DOC
    But by the same token, you reduce the number of things you can procure or fund in later years.

    Mr. MARSHALL. Does that have an effect on what Admiral Sestak's daughter is going to be able to do, if in fact she is in his position 50 years from now, his 3-year-old daughter?

    Mr. O'ROURKE. These are ways of moving money around. Over the long run, these mechanisms cannot dramatically increase the total number of ships that can be bought for a certain total amount of money.

    Mr. MARSHALL. I guess that is not my question. My question would be—and I understand that.

    Mr. O'ROURKE. Well, if Admiral Sestak's daughter——

    Mr. MARSHALL. Well, hand is going to be constrained. If she is in Sestak's position 50 years from now—let's say we move toward incremental funding, toward leasing, toward just going ahead and acquiring what we wish to acquire right now rather than struggling with ''can we afford it?''

    Mr. BARTLETT. Excuse me, I have to break in. We have had the five-minute call, maybe about a minute ago.

    I am really interested in incremental funding. And I hope, Mr. Marshall, you can return after the vote so we can continue this——
 Page 56       PREV PAGE       TOP OF DOC

    Mr. MARSHALL. I would like to.

    Mr. BARTLETT. Because there is a mistaken impression, I think, that incremental funding will buy more ships. That just ain't true. But we need to get that on the record very clear.

    I appreciate your questioning.

    Let's break now and come back after—thank you.


    Mr. BARTLETT. The subcommittee will reconvene.

    Mr. Marshall, would you like to continue your line of questioning?

    Mr. MARSHALL. Thank you, Mr. Chairman, I would.

    It seems to me that whether you call it incremental financing or you lease, in each instance, as a result of the fact that you are obligating the government to pay a certain amount of money in the future, and particularly in those instances in which there are carry costs associated with it, a lease really is no different than a loan, and in many commercial transactions you simply choose one or the other based upon the advantages that it may give you in different scenarios on down the line and different tax implications.
 Page 57       PREV PAGE       TOP OF DOC

    It seems to me that basically what we are doing is adding debt to the debt we already have, and that the very least of what we are doing is constraining future options as a result of the fact that we have more debt.

    But there may be more to it than that. There may be other ways in which Admiral Sestak's daughter will be constrained 50 years from now besides simply the carrying load of the debt that we are incurring as a result of these different mechanisms that we are choosing and not really showing on the books that debt.

    Mr. O'ROURKE. These alternative funding mechanisms can, at the margin, reduce Navy shipbuilding costs. And so they might take an amount of money over 2 or 3 years that might be sufficient for, let's say, 20 ships and turn it into an amount that is sufficient for 21 ships.

    And that is because every once in a while you are avoiding a spike in a budget that would have moved some ships around and perturbed some shipbuilding construction schedules.

    And the avoided additional expenditures of those perturbations can instead be used every once in a while to get perhaps an additional ship.

    So Admiral Sestak's daughter, 50 years from now, might be in a fleet that has a marginally larger number of ships, not a whole lot larger, but a few ships larger. I do not think the benefit here should be over-estimated, but it is possible and it will add, in the scenario you are asking, a few ships to the total size of the fleet.
 Page 58       PREV PAGE       TOP OF DOC

    Now, in terms of constraining downstream flexibility—absolutely. That is factor to take into account in deciding whether or not to make use of incremental funding or advanced appropriations. Because it does create commitments in future-year budgets that reduces the flexibility that Congress, or DOD for that matter, would have in future years to respond to changing strategic or budgetary circumstances.

    If some portion of those future-year budgets has been committed by prior-year Congresses and you, for some reason, need to make a change in that future-year budget to respond to changing budget circumstances or changing strategic circumstances, that change would now need to fall more heavily on the part of the budget that was not already committed, and the changes on that remaining part would therefore be proportionally deeper and the programs could be effected proportionately more deeper as a result.

    Secretary YOUNG. Could I comment on several of the points, Mr. Chairman?

    Mr. BARTLETT. Yes, sir.

    Secretary YOUNG. One thing we are talking about here is a four-to eight-year process, which is building a ship that is being dealt with annually by leadership in the Pentagon and the Congress, that inherently—those two do not—those gears do not match for getting perfectly planned stability.

    And then a comment that suggests that incremental might add stability has to be balanced with the other side of the argument that says incremental could add instability.
 Page 59       PREV PAGE       TOP OF DOC

    There is nothing to say that the process will not lead those incremental amounts for the ship to be trimmed here and there because of budget pressures that are going to continue to exist, and I may end up stretching even the incremental ships at higher cost.

    So there are two sides to it, and there is no guarantee that that will lead to stability.

    You have noted the tanker issue. I think the Navy-Marine Corps team has tried very hard to live within its budget top line. That has been Secretary England's fundamental goal.

    The tanker process and incremental processes create bills at or beyond the FYDP that arguably must be paid or faced in terms of buying out the lease or termination costs. All those others must pay bills, and if you want the capability, you have to continue those processes. So they definitely do present must-pay bills in the long-term for the force structure you want to do.

    There was a comment made that ships are not different, and I have to comment that ships are indeed very different.

    In the Joint Strike Fighter program, we are building 15 System Development and Demonstration (SDD) aircraft. In shipbuilding we ask right now—because of how the authorities were given us last year, a shipbuilder, a program manager—if it were you, sir, you would be given several billion dollars, a lot of money, but told, for the next seven to eight years you have to design and build a ship that has never been designed or built before.
 Page 60       PREV PAGE       TOP OF DOC

    And so you would probably tend to be very cautious about meting out your money. You may not choose to buy a robot or make an investment in an assembly line process because you do not know if your money is going to get you to the finish line.

    But in Joint Strike Fighter and other programs, we annually adjust the budget, have R&D funding, and set up those production processes for other programs, let people build Engineering and Manufacturing Development (EMD) SDD prototypes, and then come to the Congress with a very good basis for full funding and procurement of that program.

    In shipbuilding, we are trying to change that and increasingly ask you for the authority to build the lead ship in RDT&E so we can do the same things and take some of that uncertainty out for program managers.

    But we have multiple funding restrictions.

    And in NDSF, we do not really have that authority. The NDSF is a checking account-like fund where you can do procurement and R&D in the same money, but the Congress has given us every indication that we should fully fund ships within that program.

    We will get some rules for you for the record, but I believe it is beyond indication; it is reality.

    T-AKE was moved as an Shipbuilding and Conversion, Navy (SCN) program into NDSF, but more importantly, the ships that are causing the spikes—subs, carriers, destroyers—are not NDSF ships. They are in the SCN program. And there we have all the burdens of different rules on full funding.
 Page 61       PREV PAGE       TOP OF DOC

    Thank you for the chance to comment.


    Admiral CRENSHAW. If I could just add, I think from the budget perspective, these alternative funding mechanisms, for me, are about leveling my investment through the years instead of having to deal with these spikes.

    Because when spike years come, I do not have as much flexibility to do things that I need to do. And trying to level those spikes out allows me a bit more flexibility and therefore some stability in how I am buying and the choices that I am able to make when I do not have to deal with those big spikes.

    It is not a one-size-fits-all. It is a very complex issue that incremental funding works well with certain cases, and other cases what we are allowed to do with advanced procurement may help us in that stability piece.

    So it is a system of systems that we need to work with in order to do that.

    I agree that in the long-term—and I think Admiral Sestak, who has done some studies on this, will back me up—the incremental funding, for instance, does not necessarily buy us more ships per se, but it does allow us to be more efficient and I think free up some change.
 Page 62       PREV PAGE       TOP OF DOC

    Over the period of a 30-year shipbuilding plan, onesie, twosies can mount up, can make a difference.

    [The joint prepared statement of Vice Adm. Lewis W. Crenshaw, Jr., Secretary John J. Young, Jr., Vice Adm. Joseph A., Sestak, Jr., Lt. Gen. Robert Magnus, and Lt. Gen. James N. Mattis, can be viewed in the hard copy.]

    Secretary YOUNG. The Chairman is exactly right. There is no indication incremental funding will buy more ships. And if it is handled in an annual process, with the potential for cuts and adjustments, it may be no better than the process we have right now.

    If it were handled as a multiyear, where all of the ships for a five-year period were essentially multiyear, incrementally appropriated and locked in, it has the point you made that that locks out some people that are going to be in leadership positions from making changes to those, but it would add that stability.

    Mr. BARTLETT. Mr. Secretary, is it fair to say that if we knew where we were going and could communicate that effectively to the shipbuilders, that there would be no advantage of multiyear funding, that only gives them some assurance that next year and the year after that is going to be—is predictable.

    But if we had a program which was in fact predictable—you know, if I shop and I use trucks, and my truck lasts five years, and so I need to buy a truck every five years, there is no benefit to me incrementally funding those trucks if I know for sure I am going to buy one every five years.
 Page 63       PREV PAGE       TOP OF DOC

    But I think the big problem is that we do not know where we are going so we cannot tell the shipbuilding industry where they need to be going, and they see a little stability when we have a multiyear funding for a big ship.

    Don't you think the real thing we need to do is to know where we are going so we that can effectively communicate that?

    Secretary YOUNG. I think that is definitely true. And we have made adjustments, and some adjustments were made for us to the budget, but we lay out a five-year plan where people can see very well where we are going.

    Mr. BARTLETT. But there are two ships less this year than was anticipated, right?

    Secretary YOUNG. That is true.

    Mr. BARTLETT. So when they look and us and say, ''You guys really do not know where you are going, do you? Because last year it was six ships, this year it is four ships.''

    Secretary YOUNG. But many of the capital ships, aside from some slippage, are still in the program. Of the two ships less this year, one is an LCS, which the Congress directed us in law not to buy, and one is a T-AKE, which we adjusted, A, because we want the yard that is building T-AKE to have some stability and bridge to a potential future ship called TAOEX, so we changed T-AKE to one a year for three years instead of building it out with them not having work.
 Page 64       PREV PAGE       TOP OF DOC

    And second, for two years in a row, the Congress has taken two T-AKEs, and it has been a conference issue that has been difficult for the Navy.

    So the two ships that are out this year had participation with the Congress.

    Mr. MARSHALL. Mr. Chairman, if I could?

    Mr. BARTLETT. Mr. Marshall?

    Mr. MARSHALL. What I am hearing—and I may not be hearing it clearly. I have consumed a lot of time here and so what I might just do is ask some of you, Mr. O'Rourke, in particular, to come to my office and let's just talk about this so that I have a better understanding of it.

    What I am hearing is that given your circumstances being able to level out the funding so that you do not have these spike years when you have to spend a God-awful amount of money on one platform, which leads Congress almost inevitably to delay other platform expenditures that you had been planning, and so consequently industry is going to say, ''Oh, my God. If that is the way life is going to be, we are going to have these carrying costs in years that we do not anticipate in the future, we have to plan for that now, which means that we are going budget more money for the cost of a given platform,'' which means we pay more money for the cost of a given platform, given that industry cannot expect—or can expect, actually, given our past history—that they are going to be years when we just drop off one or two because we are going to buy this big ticket item.
 Page 65       PREV PAGE       TOP OF DOC

    So you are trying to solve that problem.

    And if I understand you correctly, Mr. O'Rourke, in your summary here, you did not say to me that we are adding that effectively, that we are adding financing costs effectively. You said we are not going to get more vessels, we are not going to get more platforms as a result of this.

    There is a little bit of loss of fiscal discipline here, but in the long run, if we are able to do this, it is financially to the advantage of taxpayers. It does have the effect perhaps of constraining us more, constraining future Congresses more than they otherwise would be constrained.

    The tanker lease situation, to me at least, does add debt. I mean, there is just no other way of putting it. It not only constrains but it adds debt.

    So you are suggesting, if I understand correctly, that you do not really have the debt problem in what you are suggesting, but there is the constraint problem. And then there are advantages to the advantages that I just described.

    I think that is what you are saying, and I sure would like to know more about. I think that is what we are talking about here.

    I will ask maybe Mr. O'Rourke, maybe Secretary Young, to come over to the office and get me educated.
 Page 66       PREV PAGE       TOP OF DOC

    Mr. BARTLETT. Thank you very much.

    Ms. Drake.

    Mrs. DRAKE. Thank you, Mr. Chairman.

    Gentlemen, I would like to thank you for being here.

    I share the same sentiment as Congressman Marshall. I am sitting here thinking I am going to invite some of you to come to my office and really have a conversation.

    Because as a new member of this committee, I keep hearing the same themes over and over again. There is an incredible frustration that we do not feel like we have accurate information. There is a tremendous fear that we are doing this based on the budget and not based on our long-term goals and what we need to be successful in the future.

    All of us are concerned about China, about North Korea.

    General Magnus, I read a quote of yours which says that you are uncomfortable about what we are doing for 10 to 20 years down the road.

    Now, you may have been misquoted, because we have all been there, but I think that is a feeling that we all share.

 Page 67       PREV PAGE       TOP OF DOC
    And then some of the questioning from Congresswoman Davis, when she asked very directly, ''How many aircraft carriers were in the budget?'' and the answer was 12, and of course we know today it is 11.

    So the biggest question I have is: How do we get the information that makes us feel comfortable? Where are these studies that are supposedly done from the 108th Congress and they are sitting somewhere being analyzed?

    We want to know what are the people in the field saying that they need and what they see long-term plans for our Navy and how many ships we need.

    Where are they? Who has them and when are we going to get them? And when are we going to have a comprehensive package—whoever wants to start.

    Admiral SESTAK. I will start.

    Ma'am, we would be happy coming over to your office. We can walk you through our entire—and we only touched the surface with Ron O'Rourke a couple of weeks or two ago, only touched the surface, to get in all the details with him and it took a couple of hours just to do that.

    But we would be happy to come over to you, show you our own assessment of why we came up with the range of 260 to 325 ships.

    We will show you in each individual scenario the three powers that be that we may have to contend with in a major war, why we came up with what we did, as well as the Global War on Terror.
 Page 68       PREV PAGE       TOP OF DOC

    At the same time, just so that you are aware, there is a series of studies that are co-hosted, so to speak, by the Joint Staff and Office of the Secretary of Defense (OSD). They are within the JCIDS, which is the Joint Capability Integration and Developmental System. It is how the services come together jointly to do analysis to determine the requirements.

    It is a glass that I would characterize as not half empty, not half full, but one-eighth full and starting to grow.

    The same results are coming out of the joint study on how well and how quickly we can draw down adversary forces and the amount of force capability needed to do that.

    A lot of these are internal. Two studies you have over here is one from Admiral Cebrowski, one from the Center for Naval Analysis, but we are happy to come over and show you our own internal analysis, which has led to the report of 260 and 325 ships—if that addresses your question.

    In it you will see individual things like, why did we come up X amount of very important DD(X), in particular since it leads us to CG(X)—absolutely critical component—in order to provide the ballistic missile defense, not just for the Navy, but for our sister services ashore in the future.

    And we can run you through how we came up with this, based not on opinion, not that I used to be, somebody can say, the fifthly commander ten years ago, but that upon the analysis, and then bring in the military judgment—if that will answer your question.
 Page 69       PREV PAGE       TOP OF DOC

    Mrs. DRAKE. General.


    General MAGNUS. Ma'am, thank you for the opportunity to speak. I think, also, I will try to, for the Marine Corps, give an unambiguous answer to an earlier question from Representative Taylor.

    We believe that the studies, which we have done and continue to do and are informed by, you know, wonderful researchers like Mr. O'Rourke, provide us great insights about behavior now and about future courses of action.

    But your Marines and sailors, who project force across the oceans and on to hostile shores in uncertain times, we face some realities.

    Although the quote was not exactly accurate, I think it was—I am concerned about the trends.

    The fleet that we have today and in the future is a far, far better collection of ships than it was five or ten years ago.

    Admiral Sestak has previously said that the capability that he would put to sea now in charge of a squadron or a task force is much better, ship for ship.
 Page 70       PREV PAGE       TOP OF DOC

    But, again, quality is important, and we get the quality that we want.

    And of course, there are the affordability concerns that have been discussed the last several minutes.

    But the quantity itself is a problem. It is a problem with having peacetime forward-deployed presence for a variety of crises, it is a problem for being rapidly surged, the right number of ships with fires and maneuver forces, it is a problem for major combat operations.

    Title 10 has the Marine Corps structured for three infantry divisions, three aircraft wings and such associated support.

    We are kind of unique amongst the services, and we are proud, along with special operations forces and the other forces, to be early on and first to fight, as all of our military are doing today.

    The right technology is important. The right quantity of that technology is also important for men and women who are going in harm's way.

    Unambiguous answers from the Marines? We need 28 to 30 amphibious assault ships operationally available off of foreign shore to do a major combat operation. That implies that the battle force has got to have some larger number of ships, given that ships will inevitably be in some maintenance condition and not able to respond in a timely manner.
 Page 71       PREV PAGE       TOP OF DOC

    That is at least 10 LBD–17s in those 30 ships. That is at least ten LSD–41s and–49s—those ships are already here, not under construction. And that is at least 10 large-desk amphibious ships such as the LHD–8, that is now under construction, and the LHA(R), which is before the Congress this year—30 operationally available ships, a larger number, more like 35, in the battle force to generate that 30 in a reasonably timely manner.

    The ten LPD–17s are contingent on the fact that we have a lot of potential, great expectations, and we believe it will largely be realized in MPF-Future. MPF-Future will replace the current 16 MPF and MPF-enhanced ships with up to 18 MPF-Future ships.

    Those ships may be in several configurations—an aviation ship, a surface lift ship that has well-deck-like capabilities, or a combination aviation and surface lift ships—and those combinations will tell us whether it is 18 or some smaller number of ships, including retention of some of the current MPF ships in a dense pack configuration, and we are before the Congress also intending, during the FYDP, to buy out those existing, which are currently under lease.

    We have joint high-speed vessels. The Army, the Navy and the Marine Corps have a total of nine vessels—I believe six are Army and three are Navy—and we see a huge potential for those, and we are using them now.

    Unfortunately, those are foreign leases because that is the only ones that are available. But they are not only being used for experimentation; they have been using real-world operations during the Global War on Terrorism—tremendous leverage in shallow water, operating in archipelagoes and moving troops.
 Page 72       PREV PAGE       TOP OF DOC

    Mrs. DRAKE. Excuse me, you said those are under foreign lease because they were the only ones available.

    General MAGNUS. That is right.

    Mrs. DRAKE. So we do not currently have, within the Navy, the ships that we would need.

    General MAGNUS. Yes, ma'am, those ships are currently Australian-and Norwegian-designed vessels, and others are available in the world fleet.

    But U.S. yards do not yet develop those, but that proposal is to have U.S. yards build joint high-speed vessels, which along with the MPF-Future ships, along with the amphibious ships that I talked about—those are the kind of capabilities that we need to see on out through the years so that Admiral Sestak's daughter will have the forces that are necessary to protect America's interests overseas.

    [The joint prepared statement of Lt. Gen. Robert Magnus, Secretary John J. Young, Jr., Vice Adm. Joseph A., Sestak, Jr., Vice Adm. Lewis W. Crenshaw, Jr., and Lt. Gen. James N. Mattis, can be viewed in the hard copy.]

    Mrs. DRAKE. Thank you.

    Mr. O'ROURKE. Just very quickly, my own view is that Admiral Sestak's work, the work being done in his office, is a step in the right direction toward getting Navy requirements more clearly defined.
 Page 73       PREV PAGE       TOP OF DOC

    And I think it would be helpful to industry and to the Congress if that work were to continue so that the total force range could be narrowed down—and right now there is about a 25 percent ambiguity factor in that range—and also so that detail could be provided in terms of numbers of different kinds of ships that make up that total, which we currently do not have.

    So as the admiral mentioned, I have been briefed on his work, I think it is a step in the right direction. I am hoping that the Navy can continue that work and narrow down that range of uncertainty and provide more details in terms of numbers of ships by ship type so that Congress and industry have a firmer basis for understanding this in detail.

    Mrs. DRAKE. Have you seen the reports that have been done?

    Mr. O'ROURKE. I have seen the two reports that were mandated by the fiscal year 2004 authorization bill. In fact, my testimony contains a summary of the results of those reports.

    They were meant to be independent of the work being done by the Navy, so they are other people's views on that issue.

    Now, one of those reports turned out be pretty close to what the Navy is saying anyway, a CNA report, and the OFT report was quite different.

    The work that Admiral Sestak is referring to, that is his own office's work, and that will become the official basis for determining and articulating Navy requirements in the future. And so that is separate from the two reports that you mention.
 Page 74       PREV PAGE       TOP OF DOC

    My hope is that Admiral Sestak's work can be refined further so that these ranges of uncertainty can be narrowed down and so that more detail can be provided on numbers of ships by type of ship.

    Mrs. DRAKE. Thank you.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    I would just like to note that we have those reports and we will make them available.

    Mrs. DRAKE. You do have them?

    Mr. BARTLETT. We do. We have those reports. We will make copies available to you.

    Ms. Davis.

    Mrs. DAVIS. Thank you, Mr. Chairman.

    Thank you, gentlemen, for being here today.

 Page 75       PREV PAGE       TOP OF DOC
    Let me just say, I think it was you that said it, Admiral Sestak, I think you said betting on the come that these work this way—it was either you or Secretary Young, I do not know which, in your——

    Admiral SESTAK. It has got to be Mr. Young. [Laughter.]

    Mrs. DAVIS. It was just about 30 or 40 minutes ago. In my opinion, that is a pretty large bet. Because if things do not work that way and we only have—and you were referring to the, whichever one of you said it, were referring to the 325 ships—so that if things do not work that way, and you are at that larger number and you have failed, then it is too late, you know, four to eight years, you said yourself, to build a ship.

    And I, unfortunately, I have some very large concerns about the future force posture of our Navy, and I think it has been said here, made very clear today, that your decisions have been based on the budget constraints versus strategy.

    Now, understanding that the budget constraints have made you become more efficient and come with the different strategies, my concern is that the strategy you have come up with has not proven itself yet.

    And then I sit here and I hear General Magnus say today, and he said it last week, that he is concerned about the trend we are going on in the Navy and the number of ships that we have.

    As I understand it—you know me. I have introduced H.R. 375 simply to get this conversation going on: What is the exact number of ships we do need?
 Page 76       PREV PAGE       TOP OF DOC

    I firmly believe you are totally wrong in going less than 12 carriers, absolutely and totally wrong.

    And I just understood from Secretary Young, the JFK is retired, it will no longer be in use as of June 2005 this year. That is three months from now. So three months from now we are doing away with the JFK. It will take till next May, you said, to totally disarm it—or whatever it is you do to it, disassemble it, whatever. But it is out of service effective June this year. We are down to 11 immediately.

    I would venture to say that gives General Magnus a bit of concern. Am I correct, General?

    General MAGNUS. Yes, ma'am.

    Mrs. DAVIS. And I am sure it gives the Pacific combat commander some concern.

    My question to you is that I think that our force requirements have increased, but yet I see our Navy going the opposite the opposite direction.

    And I have not understood—this is my fifth year in Congress, and every year I have seen the shipbuilding budget go down, down, down. Although the Navy's budget has gone up, shipbuilding has gone down. And I understand that a large reason for that is the cost of the carrier.
 Page 77       PREV PAGE       TOP OF DOC

    I have heard it today, the cost for that carrier, the reason for the spike, is the way we fund it and the fact that, you know, stretching it out another year, slipping in another year—and I fought that battle two years ago to bring it back. We did. Now we have slipped it out again.

    That uncertainty adds to the cost, is that not correct, Mr. O'Rourke?

    Mr. O'ROURKE. Well, that is my view. It is responsible for some portion of the increase in costs that we have seen over the last year.

    Mrs. DAVIS. Which then hurts the Navy because it takes money out of what you could be using it for other things.

    So somewhere, somebody is making bad decisions. And if it is us in Congress, then we need to know it so we can make the right decisions.

    If it is the Navy, then you guys just need to be totally blunt, gut-honest with us, and tell us what we should be doing. And I think you are doing that now, but you are doing it based on the budget that we give you rather than the budget of what you really need. That concerns me.

    Saying all that, I want to hear what you think, Admiral Sestak—and anybody else who wants to jump in—are the biggest disadvantages—not the advantages, I have heard all of those—the disadvantages of the fleet response plan (FRP) and the sea swap in terms of our future readiness?
 Page 78       PREV PAGE       TOP OF DOC

    And let me say on the fleet response plan: I am not sure we have addressed the maintenance issues in the fleet response plan. I would like you to comment on that as well.

    Admiral SESTAK. It is a great question.

    You want me to address the disadvantages. I have actually asked, ever since I have been a Commanding Officer (C.O.) of a ship, why the heck the Navy did not do this a long time ago.

    I came back as a commanding officer on an frigate (FFG). I was never more ready. I just was not.

    And we took this ship, and right as soon as I get back, everybody transferred. That is an exaggeration. About a third of the ship, in the next couple of months, transferred.

    We went into this overhaul, came back up. My part supply went down. I went from getting the parts priority one down to priority four. And the quality of service of my sailors just was not there.

    I remember the 1970's. I remember the 1970's when we tried to hold on to the little too much at times. I actually sent sailors up to the Philadelphia Naval Shipyard to take some parts off of places. And instead of fixing their radar, they were sweeping the desk until I could get a part.
 Page 79       PREV PAGE       TOP OF DOC

    To my mind, ma'am, what the fleet response plan has, if there is any downside of it, it is we have not explained it well enough.

    This Navy of ours can never walk away from forward presence. Never. It just cannot.

    The speed of response needed—if we had had a carrier in the Persian Gulf when Saddam Hussein came across back in 1990 or 1991, we might not be where we are today. We cannot walk away from that.

    But what we can do is explain to our sailors and to people that when I take a FFG back, I am very consciously going to have the personnel distribution system, I am going to have the parts system all teed up that we have a very methodical way that we transfer our crew.

    Services do it well sometimes. They either change out the whole crew one by one, that is a good way of doing it, or you change out the whole company, but you do not change out a third all of a sudden like we were doing.

    So the FRP has told us to look inside ourselves differently.

    What it permits us to do is, we know, for instance, with FRP, that as my units come home I am more ready.

    Five years ago we used to tell people—it was in documents, we were required to do this—to have two ships at least overseas, carrier battle groups, and one on each coast ready to go. That was the one that just came back or the one ready to go. So we would have four ready to respond to a crisis.
 Page 80       PREV PAGE       TOP OF DOC

    Ma'am, I am going to tell you right now, those two that came back, they went into the yards right away.

    And I am also going to tell you now, we have upwards of every day approximately—it varies a little bit—two overseas and four ready to go in 30 days.

    My point is this, that we know at times, from the FRP, that we have to surge suddenly. But right now, what the chief of naval operations has set up is, we watch certain nations when they do their exercises.

    And without going into great specifics here, think of the Yom Kippur War. Every year since 1967, when that war happened, the first war happened, Sadat did an exercise every year at the same time.

    Certain countries that we observe do the same thing, happens the same time of year. The whole force goes out, does basic, intermediate and then advanced training.

    Notice last year what we did with the FRP. We surged an extra carrier to several places around the world. And without going into specifics, notice it was in the summertime when one country in a certain part of the world was at the height of its training exercise.

    What this chief of naval operations has given to the COCOM, the combatant commander, is an ability, because of the way he has reshaped this, is to surge out there for a month or two when somebody might take advantage of a heightened readiness—under the guise of an exercise, as Sadat did—in order to be prepared to have two carriers on D-Day. Five on D-plus–20 is irrelevant; two on D-day makes a difference.
 Page 81       PREV PAGE       TOP OF DOC

    So, ma'am, my only complaint about FRP is, we should have probably done maybe a better job of explaining this to everyone, because it goes to the heart of changing everything we are doing for personnel, the parts, et cetera, to provide the COCOM the ability to surge in a surprise, or to surge out there to anticipate what might happen, and that is the flexibility it gives.

    Mrs. DAVIS. Can you comment on the maintenance issue?

    And also I hear you talking about carriers, and I am concerned about the maintenance of the carrier as it stays out there. And you talked about how many carriers we had to have out at one time.

    But how much longer life does the Kitty Hawk have?

    Admiral SESTAK. The Kitty Hawk has until—I think it was scheduled to come out in 2009, 2010; 2009 and 2010.

    Mrs. DAVIS. If it comes out in 2009, will we have the George H.W. Bush by then? Yes, we will.

    Admiral SESTAK. Yes.

    Mrs. DAVIS. Fingers crossed, I saw that, Secretary.

 Page 82       PREV PAGE       TOP OF DOC
    But we are slipping the CVN–21 out. We are retiring the JFK. Its potential, we will be down to ten carriers for sure, with the CVN–21 slipped out of here, potentially down to nine if it gets slipped out even further because it is such a big ticket items, if the Kitty Hawk retires, potential. You do not start the CVN–21 until——

    Secretary YOUNG. The risk would be 2018, I think, when Enterprise would come out.

    Admiral SESTAK. Right.

    Mrs. DAVIS. Okay.

    Secretary YOUNG. Or 2014.

    Admiral SESTAK. 2014, there is a potential for——

    Mrs. DAVIS. Either way we are getting down to——

    Admiral SESTAK [continuing]. About a year or two gap to go to at least 2010. There is a potential, yes, ma'am, you are right.

    Mrs. DAVIS. And then my concern on the FRP and the maintenance of the carriers—you are not sea swapping carriers, I know that.

 Page 83       PREV PAGE       TOP OF DOC
    Tell me, are the carriers in any danger with the maintenance?

    And then I want to hear General Magnus tell me what he thinks on readiness.

    Admiral SESTAK. There have been a lot of questions raised about on what the chief of naval operations has done on readiness, readiness since he has come in—and I will turn to my classmate, Lew Crenshaw, to give you—yes, he has poured a lot of money into readiness just for the purpose of making sure they can go.

    Now, we have had some lessons we have learned on conventional carriers. That did not just happen. That took years to get there.

    The point you bring up, ma'am, is very—you know, it is pretty astute—is what we did when we looked at a carrier, to get back at it. We knew that we were given a top line. I mean, so much national treasure comes to us.

    We know we have three powers in our nation: the power of our economy, the power of our military, the power of our ideals.

    We are very conscious that when we made these decisions to Mr. Young's side, that we cannot just throw requirements over to him and not worry about the impact on the industrial base. We are conscious.

    But my job was, when that budget at the end game came up, to say, what is acceptable risk of everything coming up?
 Page 84       PREV PAGE       TOP OF DOC

    Ma'am, we can come to your office and walk you through, as I have done to some staffers. Did we want to go to 11 carriers? Absolutely not.

    Could we afford of everything else to do it, we can walk through you three things. We can walk you through why going to 11 carriers with FRP gave this nation still six carriers that it could have 2 for, 30 in 30 days.

    I can then walk you through the operational plans for those three major Major Combat Operations (MCOs), and I will show you there is some additional risk.

    In presence, there are one or two months less that I might have a carrier out there. Well, I do not need it right now, but if I kept Personnel (PERS) and Operation Tempo (OPTEMPO), I would drop a month or two. There is an impact.

    We do not need that now, and I might have to ask the sailors to be away 185 days instead of 180. But there is some difference.

    I can also walk you through and show you, too, no matter which major conflict goes down—and this is not Power Point, we know this—that we can meet our requirement.

    The second major one, there might be a slight difference one out of ten times as I run the computer to see I might be a few days late but we need it also.

 Page 85       PREV PAGE       TOP OF DOC
    But ma'am, it gets to, maintenance is there. The CNO staked his first couple of years on that. Then he switched us to the FRP. Now, it is where to accept the risk.

    And, ma'am, I would be less than—we want 12, but when I looked at everything else, this was the place that I could still meet the time lines out there. So——

    Mrs. DAVIS. You want 12 but the money is not there.

    Admiral SESTAK. Yes, ma'am. But this is acceptable risk. And I would rather have that than, for instance, take away the ability for an air wing that struck, as I mentioned, 200 targets in Desert Storm, to be able to fund the links, to be able to fund the munitions that that one air wing can take upwards in the next decade of 1,000 targets.

    And so there was the third point, which I did not mention, is we are under a significant transformation.

    CVN–21—the potential to have 33 percent more capability from this platform, because it does not have to go into the yards as frequently, the ability, 50 percent longer nuclear things, to ensure that we save the money for that was absolutely critical to it.

    Mrs. DAVIS. Why slip it out of here, then?

    Admiral SESTAK. Pardon?
 Page 86       PREV PAGE       TOP OF DOC

    Mrs. DAVIS. So why slip it out of here, then? If it is that critical, why move it? Bring it back and let's build it as soon as we can.

    Mr. Chairman, I just want to have General Magnus respond to that.

    But I also want to say on the air wings, if we continue going down to ten carriers or less, I think you are going to be hearing from some air wings, because you are going to have to lose one.

    General Magnus.

    General MAGNUS. Ma'am, thank you very much.

    The CNO, over the last several years, has done a tremendous job, difficult job, in trying to get readiness stable and high. And I think the proof of that has been over the past three-plus years of war.

    Sailors and Marines have gone forward and have done things that have amazed us sitting here at the table.

    Readiness is not perfectly fixed. It may never be. But the CNO has done a wonderful job.

    And his next target was to get the modernization of the aircraft inventory and, in particular, get the average age of the aircraft down. The average age of the aircraft was approaching what was supposed to be the terminal age of the aircraft. And the CNO has also done a tremendous job with the Secretary of the Navy in doing that. Air procurement numbers are up very high.
 Page 87       PREV PAGE       TOP OF DOC

    And the capabilities of those aircrafts that are being replaced is a tremendous increase—Super Hornets replacing Hornets, Joint Strike Fighter to come, tilt rotors replacing the H–46 and on.

    The last thing the CNO wants to fix, assuming that we have done most of the work to help him fix the other two, was ships.

    And of course, given the increased costs of manpower even with the Navy taking down its end strength, the increasing costs of readiness, even with the supplementals, the baseline and the supplementals, the cost of readiness is up.

    And the increase in capability, and unfortunately cost of the ships, the top lines, have not supported us across the FYDP.

    So, hence, my concern, because the battle fleet numbers in aircraft and ships, they do ebb and flow over time.

    It should be unsurprising that older, less capable ships, particularly as they approach their safety margins, they are retired. In many cases they are retired prior to the introduction of the new, more capable replacement ship, and in many cases that may not be on a one-for-one basis, given the capabilities of the whole battle force.

    Retiring a carrier is like retiring an LHA. You need to do it to get the modern force.
 Page 88       PREV PAGE       TOP OF DOC

    And over time—and that is what we are looking at, is over the time of these investments and over the time of the generations that we will have these ships and the fleet—that is understandable.

    Slipping or cutting the replacements, though, is what concerns me. Because, then, over time the trend goes down. And of course, whether the number is 800 or 325 or 375 is less important than whether the Nation has the naval forces forward in peacetime and rapidly surgeable with the right quality and quantity of force to be able to do the nation's business.

    So the average numbers that you look over time—and you can multiply them out by the 30-or-so years that we average on the different hull lives—the average over time has a tendency to drive you down, and the driving down is because of overall affordability.

    So you asked a requirements question. We can give you a requirements answer.

    But the truth is, the retirement of a carrier without a carrier replacement, the retirement of an LPD without an LPD replacement, when you need that capability in the future does concern me.

    Mrs. DAVIS. Thank you.

    Thank you, Mr. Chairman.
 Page 89       PREV PAGE       TOP OF DOC

    Mr. BARTLETT. Thank you very much.

    As testimony to the importance of the subject we are discussing, there are three subcommittee chairs here, one of whom is the vice chair of the full committee. Mr. Saxton.

    Mr. SAXTON. Thank you very much.

    Mr. Secretary, I guess you and I have not seen each other for a long time, because when I came in the room I had to search and search to find you. I think you look different.

    I have two questions. One is slightly off the subjects that we have been discussing here, since I have been in the room at least. And that is—and it is very timely: Just two weeks ago we heard the report that we had a great success.

    And to the extent that I may, here today, I would like to congratulate the Navy and you, Mr. Secretary, and also the Missile Defense Agency for the great success that we apparently had with the tests in the Pacific on February I think it was 24th.

    I wondered if you might just briefly comment on that before I really get into the second subject that I want to discuss.

    Secretary YOUNG. I very much appreciate the opportunity.

 Page 90       PREV PAGE       TOP OF DOC
    I went out to the Pacific missile range facility for the test, and the test was unique in a couple of ways. It is a nice chance to make sure other members understand. You may understand.

    The ship was deployed and prepared but not alerted to the time or, you know, exact direction from which the target would come. And it was a shorter-range shot for the SM–3 missile itself. It did not need to fire both divert stages. So we stressed the missile against a somewhat shorter-range target.

    And then the third piece of that is the crew was in charge. While there were certainly engineers observing and all, the crew was in charge of the ship. The crew ran the radar for detection, the crew ran the radar and the missile fire control system, determination of when to shoot, and all of it went flawlessly.

    It was a direct hit, great credit to the captain of the ship and the crew for performing, you know, an unscripted test and doing it successfully. It shows the capability of both sea-based missile defense and that SM–3 that the Navy teams developed with MDA.

    Mr. SAXTON. Thank you very much.

    We are pleased that things went so well, and we look forward to future successes.

    This was, I believe, was the fifth out of six tries.

 Page 91       PREV PAGE       TOP OF DOC
    Secretary YOUNG. Fifth successful.

    Mr. SAXTON. This was the fifth successful try, and that is good news. We are glad our investment is paying off.

    Mr. Taylor and I had the great opportunity a couple of months ago to visit a shipyard in Denmark, one run by Maersk, or owned by Maersk and run by Maersk, I guess, and we were enlightened by a process used in Denmark to build ships, and appear to be competitive, in spite of the fact they have labor rates that they said were compatible with ours and in spite of the fact that their cost of doing business in many respects is compatible with ours.

    But they appear to be able to produce a product at a cost significantly less than we can.

    And I am thinking back to the old days when Mr. Taylor and I were on the Merchant Marine and Fisheries Committee. We used to sit around and try to figure out what we could do to make us more competitive—or competitive, I guess, not more competitive—competitive in the world markets of the world of shipbuilding, and were frustrated at most every turn.

    But in the case of the situation in Denmark, they appear to have many of the same kinds of economic situations that we find ourselves in, and yet they seem to be able to be competitive in the world market.

    We of course asked why, and they pointed out two sets of issues, which we found interesting.
 Page 92       PREV PAGE       TOP OF DOC

    One is technology—laser welders and robotics and those kinds of technical things that they apparently do different than we do.

    And they have also found—of course in their world and the European market, they have also found less expensive ways to produce components for ships than we apparently do. And frankly they do it, in their terms, offshore.

    And so I am wondering if there is something that we can borrow from the folks in Denmark in terms of the way they do business that would make us competitive again perhaps in the market, and at least if we cannot become competitive in the market, build ships here in a more economical way than we currently do?

    Secretary YOUNG. I meant to comment, I am sorry that my disguise worked on you, but in some cases it serves me well.

    Through the courtesy of Chairman Bartlett and Congressman Taylor, I had a chance to go visit that yard also. Excellent trip. There were several key lessons along the lines of what you said that I saw.

    One, that yard has steady volume, a guaranteed build rate from a parent company, and they make a choice about what to do with the ships.

    They have a fundamentally different model than our yards do in that much of the outfitting, the welding—not necessarily welding but some of the electrical work and other things are subcontracted.
 Page 93       PREV PAGE       TOP OF DOC

    So they have a pretty small core team building the ship, and they bring in teams to build as necessary.

    And then the ship is designed for production. Particularly the point you made, the laser welding is very impressive technology. But I think they even acknowledged to us in discussion that it did not work immediately. They had to go back and change the ship design to take full advantage of that laser-welding tool.

    I think in each of these places we can learn from them, and we have. We have partnerships with them and other yards that Chairman Bartlett allowed us to visit.

    So we are trying to capitalize on some of those tools. You will see those.

    Some of those get to that point I made earlier—I think you were here for it—in RDT&E we have an opportunity to choose to add a block of money and say we want to invest in a laser welder and we want to do a design study on what piece of the ship we can change to capitalize on that laser welder, and we think it will save, you know, a business case of five to one over the class of the ship.

    We have a tough time doing that these days, especially if our lead ship comes to us in SCN and everybody says make that ship fit in that budget and do not come back prior to your completion.

    So some of our funding models need to change.
 Page 94       PREV PAGE       TOP OF DOC

    And then with the Chairman's forbearance, the staff prepared some information on commercial shipbuilding in the past that may be as useful for the committee, for either the record or your information, that shows there was a time when our yards did build ships commercially, but it was largely related to subsidies. There were subsidies that allowed yards to make certain investments in their facilities. When those subsidies went away, there is a direct corollary between the commercial shipbuilding sales going away.

    Now, I will offer you that information since the Navy's researched it, if that is suitable to the Chairman.

    Mr. SAXTON. Well, we thank you for that.

    I would actually like to spend some time exploring on these subjects with you. Because obviously our defense dollars, if we can stretch them, it would certainly will be a great benefit to the Navy as well as to our national security in a general way.

    So thank you for that.

    Mr. BARTLETT. Thank you. I appreciate that question, Mr. Saxton.

    Last year our bill included the establishment of a commission, which is just now being staffed, to do exactly what you asked, and that is, to take a look at what we are doing and what other yards are doing and what we might be able to change so that we can be competitive.
 Page 95       PREV PAGE       TOP OF DOC

    As an industrial power, we represent 25 percent of the world. In shipbuilding we represent—somebody have the figure in terms of commercial shipbuilding? It is tiny.

    If this 25 percent behemoth could make only 10 percent of the ships in the world, we would not be here today talking about our industrial base, would we? Because that industrial base would be building more commercial ships than it was military ships, and we would be buying our ships a whole lot cheaper than we are buying them today, I suspect.

    So your observation is very astute. And we are looking forward to the results of this commission.

    And we hope that this will be a prestigious enough commission that when they come back, we are not just going to let their report gather dust on the shelf, that we are going to, with an up or down vote, without trying to manipulate it for local, provincial reasons, that we are going to implement what they say. Because everybody's going to be better off if we can do exactly what you suggest needs doing.

    So thank you for your questioning.

    And now, Mr. Weldon.

    Mr. WELDON. Thank you, Mr. Chairman.

 Page 96       PREV PAGE       TOP OF DOC
    Besides the magnetism of your personality and Mr. Taylor's, one of the reasons I joined this subcommittee was to help put the focus on the Navy and my concerns about where we are going with Navy shipbuilding.

    I am very concerned about the decline of the Navy surface ships and other vessels, and feel that we and the committee have to renew the emphasis on the importance of being able to project our forces around the world.

    So I am happy to be here.

    I am very concerned about the size of the fleet. I know my colleagues are, and I will be here to support you in the effort to make that case to the entire Congress and the administration.

    I want to echo the comments of Congressman Saxton on the Aegis success. From the standpoint of missile defense, I think the Navy is helping to write the book on how we can provide missile defense for the country. We appreciate the great work you have done.

    On a personal note, several weeks ago I had a very moving event that I attended at the old Philadelphia Naval Shipyard, which is now home to Kvaerner, for the last I guess formal event with the USS America. And the crewmembers of the America came back from all over the country. They flew in from the West Coast, from Florida, Oklahoma, and the last commanding officer was there.

    As we talked about the America and its role to the country and the fact that while there are many concerned that this ship was not going to be made available for positioning, but was rather going to serve one final purpose, and that was live-fire testing so that our Navy can learn more about how we can deal with the kind of threats that our carriers are expected to receive over the next several decades.
 Page 97       PREV PAGE       TOP OF DOC

    They did have a couple of requests, but I am not going to ask for specific responses, but I will throw them out on behalf of the crewmembers and the leaders of that great American warship, the America.

    For the first time, I guess, in the last 40 years, we have no ship named America now in the naval fleet. And that ship is scheduled to eventually go to the bottom of the ocean floor.

    One of the things they asked me to request was the possibility of the Navy naming the next group of carriers, the America group, the America class, and I would put that forward for your consideration.

    And, second, they asked if it was possible to have America painted across the tail end of the ship so that even though she went down there would be a lasting remembrance of the vessel and all the great work that she did.

    And the irony for me was that I was, this time last year, in Libya, and one of the sites that we were visiting was the home of Gadhafi that we bombed in 1986. And it was from the deck of the America that the planes took off and did such a great job in giving the Libyans the signal that we would not tolerate their terrorist activities.

    And here we are, almost 20 years later, and Libya has turned around partly because of that lesson and because of the capability of our Navy, in this case that warship and that carrier battle group, that we have taken a country that was going down the wrong path and are now taking the right path.
 Page 98       PREV PAGE       TOP OF DOC

    It is not always easy to show that kind of success, but in this case it certainly was.

    So I put forth those two suggestions, not on my behalf but on behalf of the crew members that served on the America for decades and decades in a number of very hostile environments.

    The other issue I was going to raise, I will not raise. We are going to have a private meeting with secretary about the gun for the ship, and we will talk about that privately. But that is a continuing concern to the Chairman and I.

    But I do want to raise another issue and ask you to look at it. It was just brought to my attention yesterday, and I am not sure of the details, but it does involve a constituent company.

    One of the companies I work closely with is the country's only producer and the world's largest producer of flares, decoys that are used by our tactical fighters. This company, Alloy Services, has gone to great lengths to ramp up their production to meet the added needs based on our commitment in-theater, as well as our commitment to North Atlantic Treaty Organization (NATO), and they are the primary supplier to NATO planes as well.

    They have been overly cooperative in working with the Navy and with the Pentagon in supplying the needs that we have. And what they are coming in and telling me now is that the Navy is in a process of reverse engineering their patented technology, and they actually have the documentation that that is taking place, in an effort to find a source.
 Page 99       PREV PAGE       TOP OF DOC

    Now, despite people shaking their heads in the back of the room, I want an investigation of this. If there is a legitimate need for a second source, I understand that. But I also want to make sure that we are not unfairly taking advantage of a company that went to the wall to assist us.

    So I would ask you to do a preliminary look at the statements made to me. I have no way to judge this. And I would hope that we are not taking patented information—some of the people I have talked to on the Hill said, ''Well, the Navy and the services do that all the time,'' which is why small entrepreneurial companies get burned. I hope that is not the case.

    And if there is a legitimate need for a second source, that is fine. But I hope we would not do that using the patented technology of an existing supplier who has gone to the wall to support our efforts and our needs.

    So I would ask you to look into that.

    And finally, on the multimission destroyer, I would ask of the critical technologies, the 12 DD(X) critical technologies, that we continue support for that effort in spite of the slippage of the actual vessel itself, because those technologies are, as you all well know, very critically important. We want to be supportive of that effort in the long-term and the short term. And so I would also make that request.

    And with that I again want to thank our Navy and Marine Corps for doing the outstanding job they do whenever they are called upon and the fact that you can project America's presence, not just in a negative way, but in such a positive way.
 Page 100       PREV PAGE       TOP OF DOC

    As I said to our combatent commanders, the best ambassadors we have for this country are the people who wear the uniform.

    Wherever we go, wherever we took a delegation—Roscoe was with me, we went to Indonesia. On our way—and by the way it was the Navy that took us to North Korea in a Navy vessel on both trips. It was the Navy that took us to Libya both times to meet with Gadhafi. Both the aircraft and the crew were all Navy personnel, and what a fantastic job they did.

    But on our last trip to North Korea with six members, four of them from the full committee, the Armed Services Committee, we went down to Indonesia and delivered 12 tons of medical supplies and relief supplies. And, again, the Navy performed just beyond anyone's expectations.

    But we got there and met with Marine Corps officers and Navy personnel that were airlifting supplies in for the people.

    You know, here in the midst of Indonesia and the hot desert climate close to the equator was America's presence. And it was not the presence of a diplomat, it was not the presence of some group from America; it was the presence of our military in uniform helping people, you know, not just doing what they normally do, but taking care of making sure that the children understood that America cares, making sure the medical personnel were given the proper support.

    And that is what our Navy and Marine Corps do so well and which we sometimes forget to thank.
 Page 101       PREV PAGE       TOP OF DOC

    And so I just want to say, Mr. Chairman, I know you and Mr. Taylor have been saying this frequently, we thank you for the great job that you do and the people who work for you do around the world on a 24-hour, 7-days-a-week basis.

    Thank you.

    Mr. BARTLETT. Thank you very much.

    I was of course with Mr. Weldon on our trip to Indonesia. As you know, they were very apprehensive of our coming. And their papers were telling them: Look at Kosovo and South Korea. The Americans come and they never leave.

    And so they were very apprehensive that if we came, we would never go. We assured them that just the moment they did not need us we were out of there.

    The thing that really impressed me, we have a two-star general there. He was interfacing with a three-star Indonesian general. And in just a few days that they had been working together, they had developed a rapport which was very obvious from seeing them.

    You know, we do not always do everything right internationally, but we did A-okay down there in Indonesia, and it was largely the Navy and Marines that were responsible for that.

    Thank you very much.
 Page 102       PREV PAGE       TOP OF DOC

    Maybe we ought to substitute you for the State Department more often. [Laughter.]

    Mr. WELDON. Do you want to quote him on that? [Laughter.]

    I did not say that, please, I did not say that. Roscoe Bartlett did. [Laughter.]

    Mr. BARTLETT. It is nice going last because most of the questions have been asked.

    I just was thinking, as I sat here listening, that if I came to this hearing without any preconceptions and sat in the back of the room that I might go away believing that our future Navy was more likely to be determined by budget constraints than it was any specific design goal that we had.

    Would that be an unfair conclusion for a listener to come to as he sat in the back of the room today?

    And I think that, you know, that it is obviously the conclusion I think that many people would come to, and that certainly is not the way that we need to determine what our future Navy is going to look like.

    We face a couple of problems we have to resolve before we can remove the ambiguity which is such a problem with our yards.
 Page 103       PREV PAGE       TOP OF DOC

    We have done two naval architecture studies: CNA and the Office of Force Transformation. They came to very different conclusions as to what the future Navy ought to look like.

    I hope we do not propose to do what we so often do in conference here and that is kind of split the difference.

    Mr. O'Rourke, what would be your suggestion as to who an honest broker might be that would look at these two reports and kind of rationalize where we ought to be going?

    Mr. O'ROURKE. Off the top of my head, there are various possibilities.

    You could look at a government-affiliated research organization other than the ones that did these studies, such as the Institute for Defense Analysis. You could look at a non-governmental organization, such as the Center for Strategic and Budgetary Assessments, CSBA, whose naval analyst, Bob Work, has recently done his own report on naval force architectures.

    So there are a number of possibilities.

    And in my role as a Congressional Research Service (CRS) analyst, I could look at them, too, and provide a summary of those studies.

    You have already spoken about the fact that I have already done a little bit of that on your behalf and I have incorporated that into the——
 Page 104       PREV PAGE       TOP OF DOC

    Mr. BARTLETT. Yes, thank you very much. You responded to our request to—these are big reports, and they need to be summarized and contrasted and compared for us. And you did a very good job of that. Thank you very much.

    Don't you agree that, since the two studies came to very different conclusions, that that requires that we somehow resolve this so that we know where our Navy ought to be going?

    Mr. O'ROURKE. I think that they are quite different from one another, and the OFT study in particular put a lot of new ideas on the table. And those ideas are quite interesting. Whether they are things we want to go ahead with or not I think is the question at this point.

    And so, yes, I think some kind of follow-on effort could be beneficial in vetting these ideas and seeing how well they hold up under cross-examination, if you will. And if they do, then they will provide a new set of options for policymakers to consider in structuring the future fleet.

    Mr. BARTLETT. I wonder if I could ask each of the panel members if you could prepare and send to us, anonymously, your recommendation as to how we resolve this.

    Because clearly, clearly we have a problem here. We have two very different suggestions of where we ought to be going.

 Page 105       PREV PAGE       TOP OF DOC
    And our committee wants to be responsible. We want to be moving our Navy in the right direction.

    So if you would all do that and get it to our staff in some—give it all to the Secretary and he will make sure it is given to us anonymously. Is that okay?

    Okay. Thank you very much. And we will look for that and be guided by that.

    We of course commissioned a commercial shipbuilding study. And there are two things that we absolutely must do before we can have any stability in our planning.

    One is to know where we want to go, and we have just been talking about that. We are not certain of where we want to go, and so we need to resolve that.

    And the other thing we need to resolve is, are we going to have to go it alone? Are the only ships the yards are going to be building are ships for us? Or can we stabilize the industrial base and reduce the overhead by helping to make our yards commercially globally competitive?

    And we need to address those two things I think very quickly, because we cannot continue to do what we have been doing the last several years with the big ambiguity and the uncertainty in the future.

    Mr. Taylor has an observation question. I was told you did.
 Page 106       PREV PAGE       TOP OF DOC

    Mr. TAYLOR. Absolutely.

    Going back to my initial mumbling—General Magnus, I had asked early on if you could give me your thoughts on the LHA(R). I don't think you were able to get around to that.

    Second question would be, back to Secretary Young: Secretary Young, you told me you need $13 billion a year steady state. Why are you asking for $8.9 billion?

    And please do not tell us it is budgetary restraints, because we are running a $600 billion annual operating deficit. We just passed a $1.5 trillion prescription drug benefit.

    Please do not tell me this is the one place in the budget they are going to draw the line.

    General, first, please?

    General MAGNUS. Yes, sir. Thank you, Representative Taylor.

    I did take the notes on it and thank you for giving me the opportunity to respond.

    Mindful of all that has been said in the past several hours from the folks that are testifying here and the members about, essentially, that you have to pay for the ships eventually, and so that we have to be careful about predictability in what we want, predictability in the amount of money that is available and flowing that money at a way that is consistent with what the Congress needs and what the shipyards need, I think there is an opportunity here with LHA(R).
 Page 107       PREV PAGE       TOP OF DOC

    The ship has been funded in the FYDP. The Congress has supported advanced procurement funding last year for the LAHR. And we have I believe $150 million in the President's budget request this year.

    Additional funding this year could allow us to not only continue advanced procurement, but also—this is one of those where you have to take a look at what can we do with advanced procurement funding. If in fact there was some advancement of the construction that would be done on the ship, then in fact this would not be, you know, basically buying something that we could not afford, because the money has already been put in the future-years defense plan, and actually we would be pulling the work forward for a ship that has already been financed, but it has been financed, of course, in subsequent year's budgets.

    So this is not like getting an incremental funding and then somebody else has to pay the bill later on. This money has already been set aside in the budget.

    So I think there is a great opportunity here.

    And in response to a request from another member, Representative Skelton, the Commandant did provide a recommendation for one of the things that we felt that if we had more money we would have requested additional funding. And we did put in a recommendation for an additional $417 million for advanced procurement.

    And of course it would be wonderful if we could actually do some of the advanced construction that is now budgeted for later years.
 Page 108       PREV PAGE       TOP OF DOC

    Mr. TAYLOR. Thank you, sir.

    Mr. BARTLETT. I would just like to note that Mr. Taylor had his opening statement. And the opening statement of all of the members, if they wish to make them, will be included in the record.

    Thank you all very all much for your——

    Mr. TAYLOR. Just one more before you release them?

    Mr. BARTLETT. Sir? Oh, one more?

    Mr. TAYLOR. Before you release them, I was kind of hoping that Secretary Young would get back and answer——

    Mr. BARTLETT. Oh, I am sorry, okay.

    Mr. TAYLOR [continuing]. The $13 billion question——

    Mr. BARTLETT. All right.

    Mr. TAYLOR [continuing]. Which he has so deftly avoided so far.

    Secretary YOUNG. Well, unfortunately, I cannot tell you $13 billion is exactly the right shipbuilding budget. The CNO should speak for himself. He has talked about $12 billion to $15 billion as a long-term plan.
 Page 109       PREV PAGE       TOP OF DOC

    We do need a stable level of funding and we want to keep talking to you about tools.

    There is risk everywhere in the DOD budget and shipbuilding is no exception. The requirements that are articulated to me, and the budget we have, deliver a capability of the Navy.

    And Admiral Sestak, he can say more about that. They are going to continue to evolve those requirements, and hopefully soon we will have a shipbuilding plan, as he has articulated today, and then we will adjust.

    But I believe, and the Secretary has indicated, we have made the best balance of resources within the budget and believe we have accepted some risk, but not a risk that we cannot deal with.

    So I cannot tell you the budget is inadequate at this point in any particular area.

    Admiral SESTAK. Mr. Taylor.

    Mr. TAYLOR. Sir?

    Admiral SESTAK. If I just might, the CNO did speak about $12 billion, if he had one thing to try to do here, between the meeting time, to try to aim toward that.
 Page 110       PREV PAGE       TOP OF DOC

    But what if I could just take a moment off and to Mr. Chairman: I would be remiss not to address your issue about someone sitting in the back of the room and not thinking the Navy knew which way the sailors were set.

    Mr. BARTLETT. That is not what I said. I did not say the Navy did not know. I said that because of budget constraints that it would be a logical conclusion to reach that where we were going to be in the future is going to be more determined by budget constraints than your well thought out design goal. Okay?

    Admiral SESTAK. Got it, sir.

    Mr. BARTLETT. That is what I meant to say. If I did not say that clearly, thank you for——

    Admiral SESTAK. No, I appreciate that because——

    Secretary YOUNG. The one comment I did make—I am sorry, I did not know if you were finished yet.

    Clearly, with the DD(X) strategy, we believe we cannot efficiently buy one destroyer a year with a two-yard industrial base. And the industrial base has done a good job in several areas, submarines and others, in downsizing itself for lean production.

    The budget before us, I think to the questions you have asked me privately, will it sustain all the yards at their current levels? Clearly not, as we look to embark on a competitive strategy for DD(X). Because we do not believe we can efficiently buy the program that is laid out in the budget within the yard structure we have right now.
 Page 111       PREV PAGE       TOP OF DOC

    Mr. TAYLOR. Two last things, and I would presume you would want to do this off the record, Admiral Sestak, I would like your thoughts on the survivability comparison—again, I doubt you would want to answer this in open forum—a comparison between the littoral combat ship and the DD(X) in response to the threat from the SSN–22 Sunburn missile and in response to the—I am probably going to mispronounce this—the Sovremenny-class destroyers that have been transferred from the former Soviet Union to China.

    Admiral SESTAK. I think I can open that in fairly open forum.

    One on one, sir, one on one, there is no match. The DD(X) has much greater survivability.

    Its ability to shoot down an Antiship Cruise Missile (ASCM) is almost 20 percent going to be better than even the DDG, writ large—Cooperative Engagement Capability (CEC).

    But—but—in a networked battle group of which he, Lew Crenshaw, did the first test about 6 years ago—okay, 50 years ago——


    Sir, he really did take to sea the transformation of the Navy.

    With an E–2C up overhead, which is how we fight, linked through CEC, cooperative engagement capability, down to an Aegis ship, overlooking where the LCS is, that LCS in a battle force is as survivable from being hit as a DD(X).
 Page 112       PREV PAGE       TOP OF DOC

    In short, what we tried to put the money in was, we have theoretically put a SM–2 missile on an E–2C up here. What he sees on his radar, the DDG does not have to see any longer. He can shoot from 100 or 200 miles away, even if it is 10 or 20 feet. As you noticed, this missile is a tough one to hit.

    Coming down close, we can see it up here and fire this missile and go down on it. In that regard, in that battle force, the survivability of the LCS is the same as the DD(X). If hit, a one on one, there is nobody else there, it is night and day.

    Mr. TAYLOR. Last thing, Mr. Chairman—and I am really pleased you have called for the creation of this panel, but we have some very smart people sitting in front of us today.

    One of the things that I would wish that we could ask Mr. O'Rourke to do, with the assistance of the admirals and the generals present, is actually run the numbers on if we as a nation—and I know you and Chairman Hunter have had this conversation—if we as a nation were willing to actually fund the yards, or a yard or some of the yards, to install the laser welders, the laser cutters, the robotics that we saw at Odense and other places, would not that investment, in the long run, save the American taxpayers, money by a couple of things?

    Number one, maybe our cost per ships could go down or, which would be even better in my book, we could actually get back into making some commercial ships through those economies that are realized and therefore cover more of the overhead cost of the yards and, again, through all of that bring the cost per ship to the Navy down.
 Page 113       PREV PAGE       TOP OF DOC

    I am not so sure those numbers have ever been run. If they have, I would like to see them. And if they have not, I really think it would be a worthwhile expenditure of the citizens' money.

    Because we saw—I have to tell you, I am very proud of the shipyards out in South Mississippi. They are great folks. But immediately after touring Odense, I went back to Ingalls, and quite frankly I am not pleased to say, but I will say it, the yard in Copenhagen had much better equipment and we ought to be there. There is no reason on Earth we are not there.

    So, again, I would hope that would be one of the goals of this subcommittee, that we could ask Mr. O'Rourke and the smart folks sitting in front of us to at least run those numbers.

    Mr. BARTLETT. This of course is one of the things that the commission will look at. There is culture, there is organization, there is the modern instrumentation.

    There are a lot of things they will look at, and my anticipation would be that one of their recommendations is going to be exactly what you suggested.

    General Mattis, what question do you come here prepared to answer that we did not ask?

 Page 114       PREV PAGE       TOP OF DOC

    General MATTIS. I was wondering about that, sir. I thought I was going to get away free today. [Laughter.]

    As you know, Mr. Chairman, I come back after most of three years gone overseas, and I was the recipient of all the effort and support that this committee, the Congress, has given to the Navy and the Marine team. And, you know, it was a long ride home after the three years, and I was thinking about what I had learned.

    I think that with the major threats that we face right now, the use of the Navy and the Marines is going to be emphasized in the years ahead. I just see it is going to be required more to influence our friends, to support our friends, to threaten our enemies.

    I recalled, getting ready to cross the line going into Iraq, that we had offered $28 billion, I think, to the Turks to see if they could allow one of our divisions to transit through their country. And they of course said no.

    Just two years before, I had been off the coast of Pakistan, and the reason that we were able to conduct the naval ground campaign in Afghanistan after 9/11, while we went in there against Kandahar, was because of those beautiful gray, Navy amphib ships that allowed me to go to the Pakistani general staff and say, ''We will not land troops on your ground. We will not create a political problem with your fringe elements.''

    And President Musharraf was betting his political life and his country's future on us winning. And because those amphibs could come in at night, and we could land and head across his country, we were able to reassure our friends and of course move against the enemy in Afghanistan.
 Page 115       PREV PAGE       TOP OF DOC

    And if you look toward the future, whether it would be friends who simply for local political reasons cannot allow the buildup ashore, I think our sea-basing efforts, sir, our ability to put these forces where we choose on the high seas, and surprise the enemy where we choose at a time of our choosing, does not force our President's hand, does not have to commit to it early, I think this is the capability we must turn over.

    You know that we need at least 30 operationally capable amphibs right now. While that may go down in the 2020 timeframe, the LPD is critical to that capability, the LHA(R) is critical.

    Because I was very lucky when that fleet commander leaned across the table and said, ''Can you get the Marines from the Med and the Pacific together and go after southern Afghanistan?'' And I could say without a moment's hesitation, yes.

    Admiral Sestak's daughter has been noted several times here today. When the young folks today are on those gray ships out there somewhere, I just want to make sure they are as capable as I have heard today from all of you that you are committed to.

    [The joint prepared statement of Lt. Gen. James N. Mattis, Secretary John J. Young, Jr., Vice Adm. Joseph A., Sestak, Jr., Vice Adm. Lewis W. Crenshaw, Jr., and Lt. Gen. Robert Magnus, can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you.

 Page 116       PREV PAGE       TOP OF DOC
    Your observation about how important the Navy is to your being there was reflected by a lady at one of our town hall meetings. I am sure she did not have any Navy people in her family, because she said that the role of the Navy was to get the Marines to the theater. That is all she saw of the Navy's role.

    So obviously, as the general public out there looks at what you all do and the Navy do, that joint effort is very visible.

    General MATTIS. Until we can walk on water, Mr. Chairman, we are tied with our Navy ships——


    Mr. BARTLETT. Mr. Young, you had an observation?

    Secretary YOUNG. If I could add one comment.

    I welcome the chance to respond to what Congressman Taylor said, because, you know, in my time previously up here as staff, when the C–17 had problems, many of you were leaders in making a producibility investment in C–17s that is paid enormous dividends, including to the points General Mattis made.

    I think, you know, we are spending a factor of four or five times more on Joint Strike Fighter, and it will pay dividends for us as we build that aircraft.

 Page 117       PREV PAGE       TOP OF DOC
    But for modest more dollars, we could set up that engineering process and production process and some tools for DD(X) that would pay similar dividends, and they could be leveraged across to the commercial side.

    And so putting some light on this issue, which you have, Mr. Chairman, I think would be helpful. That is going to be the only path to restoring some of our commercial competitiveness the way we have basically managed to help do it through aircraft industry investments.

    Mr. BARTLETT. Just before Mr. Taylor makes an observation, I would like to note that you can look at my voting record. I am pretty stingy with the taxpayers' money. But this is one investment that I would have no problem making, because I think we would get it back in spades in future ships.

    Mr. TAYLOR. Mr. Secretary, I am just curious of the historical precedence for that. Has Congress done that before? Has Congress allocated money to a specific industry for them to get more efficient so that when we buy things from that industry, the cost has gone down?

    Secretary YOUNG. Well, I will provide the information on what was done for commercial subsidies, although you may know that far better than I do. There are other——

    Mr. TAYLOR. I am not opposed to it. I am just curious. I would like to be able to cite some instances where that has already been done.
 Page 118       PREV PAGE       TOP OF DOC

    Secretary YOUNG. We have done it in more program bases. Like, I believe the leadership here at the committee participated in an investment of, like, $300 million, which the company agreed to match. I think it was a shared investment between the company and the government on C–17s specifically, but it involved several manufacturing tools, robotic riveters and several things that paid dividends on C–17s.

    So we have done it more on a program basis.

    In some places we have done it on an industry basis through manufacturing technology programs or assistance programs—much smaller dollars.

    Mr. O'ROURKE. If I could add one thing to what the Secretary just said, there actually is a precedent of sorts right in the Navy shipbuilding arena, and that is the National Shipbuilding Research Program and the Advanced Shipbuilding Enterprise Project that was conducted within that.

    And during the time that it was under way, I think there were some Federal appropriations to help fund it, and they did run some numbers on what they felt the investments that were being funded would have in terms of return for reducing ship costs.

    So just as a baseline, it would be worth recovering the information about that particular effort.

    Mr. TAYLOR. Not to belabor the point, but for example, ten years ago folks at David Taylor were nice enough to let me tour. They had come up with what I thought were incredibly innovative designs for double-hulled tankers, long continuous welds, all the things we need to minimize hand labor, maximize the use of robotics.
 Page 119       PREV PAGE       TOP OF DOC

    But I never saw it put to use. Is that Congress's fault? Is it the Navy's fault?

    I mean, and quite frankly, if my memory serves me right, come 2015, all the world's oil tankers will have to be double hulled. So I would think there is still a pretty good market out there.

    We as a nation spent the money to do that research. What happened between A and B? Because it is obviously not getting done here.

    Do you know, Mr. O'Rourke? I am asking that in a form of a question.

    Admiral, would you know?

    Admiral SESTAK. I am aware of exactly what you are talking about, because we looked at it in some regards with the MPF–F, but I am aware of it and that is it. I cannot tell you why, you know, earlier it did not go on to the commercial.

    Mr. TAYLOR. Would you please?

    Mr. O'ROURKE. We will get it.

    Mr. TAYLOR. Thank you very much.

 Page 120       PREV PAGE       TOP OF DOC
    Mr. BARTLETT. That question, there will be a number of questions, I am sure, from our members. With the panel's permission, we will submit those questions for the record.

    Thank you all very much for your patience. We have had a 3-hour very important hearing.

    Thank you very much, and we are adjourned.

    [Whereupon, at 11:56 a.m., the subcommittee was adjourned.]