SPEAKERS CONTENTS INSERTS
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??–???
2002
[H.A.S.C. No. 107–29]
HEARINGS
ON
NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2003—H.R. 4546
AND
OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS
BEFORE THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
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MILITARY PROCUREMENT SUBCOMMITTEE
MEETING JOINTLY WITH
MILITARY RESEARCH AND DEVELOPMENT SUBCOMMITTEE
ON
TITLE I—PROCUREMENT
TITLE II—RESEARCH, DEVELOPMENT, TEST, AND EVALUATION
HEARINGS HELD
FEBRUARY 20, 21, 27, MARCH 6, 12, 20, 21, and April 11 2002
MILITARY PROCUREMENT SUBCOMMITTEE
FLOYD D. SPENCE, South Carolina, Chairman
JAMES V. HANSEN, Utah
JOEL HEFLEY, Colorado
TERRY EVERETT, Alabama
HOWARD P. ''BUCK'' McKEON, California
J.C. WATTS, Jr., Oklahoma
MAC THORNBERRY, Texas
LINDSEY GRAHAM, South Carolina
JIM RYUN, Kansas
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JIM GIBBONS, Nevada
HEATHER WILSON, New Mexico
ROB SIMMONS, Connecticut
MARK STEVEN KIRK, Illinois
JO ANN DAVIS, Virginia
GENE TAYLOR, Mississippi
IKE SKELTON, Missouri
JOHN SPRATT, South Carolina
LANE EVANS, Illinois
ROD R. BLAGOJEVICH, Illinois
THOMAS H. ALLEN, Maine
JIM TURNER, Texas
ADAM SMITH, Washington
JAMES H. MALONEY, Connecticut
MIKE McINTYRE, North Carolina
CYNTHIA A. McKINNEY, Georgia
ELLEN O. TAUSCHER, California
ROBERT A. BRADY, Pennsylvania
John Sullivan, Professional Staff Member
Jean Reed, Professional Staff Member
Jesse Tolleson, Research Assistant
MILITARY RESEARCH AND DEVELOPMENT SUBCOMMITTEE
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DUNCAN HUNTER, California, Chairman
VAN HILLEARY, Tennessee
W. TODD AKIN, Missouri
CURT WELDON, Pennsylvania
JIM SAXTON, New Jersey
ROSCOE G. BARTLETT, Maryland
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
JOE SCARBOROUGH, Florida
WALTER B. JONES, North Carolina
BOB RILEY, Alabama
ROBIN HAYES, North Carolina
KEN CALVERT, California
ANDER CRENSHAW, Florida
RANDY J. FORBES, Virginia
MARTY MEEHAN, Massachusetts
JOHN SPRATT, South Carolina
NEIL ABERCROMBIE, Hawaii
ROD R. BLAGOJEVICH, Illinois
SILVESTRE REYES, Texas
THOMAS H. ALLEN, Maine
JIM TURNER, Texas
ADAM SMITH, Washington
LORETTA SANCHEZ, California
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ROBERT E. ANDREWS, New Jersey
MIKE THOMPSON, California
JOHN B. LARSON, Connecticut
JAMES R. LANGEVIN, Rhode Island
STEPHEN ANSLEY, Professional Staff Member
JEAN D. REED, Professional Staff Member
ROBERT LAUTRUP, Professional Staff Member
HARRY CARTLAND, Professional Staff Member
KATHERINE GORDON, Staff Assistant
C O N T E N T S
CHRONOLOGICAL LIST OF HEARINGS
2002
HEARING:
Wednesday, March 20, 2002, Fiscal Year 2003 National Defense Authorization Act—Navy Shipbuilding Programs
APPENDIX:
Wednesday, March 20, 2002
WEDNESDAY, MARCH 20, 2002
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FISCAL YEAR 2003 NATIONAL DEFENSE AUTHORIZATION ACT—NAVY SHIPBUILDING PROGRAMS
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Weldon, Hon. Curt, a Representative from Pennsylvnia, Chairman, Military Procurement Subcommittee
WITNESSES
Young, Hon. John J., Jr., Assistant Secretary of the Navy (Research, Development & Acquisition) Department of the Navy
McGinn, Vice Admiral Dennis V., USN, Deputy Chief of Naval Operations for Resources, Warfare Requirements, and Assessments, U.S. Navy
Brown, Ms. Cynthia L., President, American Shipbuilding Association
O'Rourke, Mr. Ron, Specialist in National Defense, Foreign Affiars, Defense, and Trade Division, Congressional Research Service
APPENDIX
PREPARED STATEMENTS:
Young, Hon. John J., Jr.
McGinn, Vice Admiral Dennis V.
Brown, Ms. Cynthia L.
O'Rourke, Mr. Ron
DOCUMENTS SUBMITTED FOR THE RECORD:
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[There were no Documents submitted for the Record.]
QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:
[There were no Questions and Answers submitted for the Record.]
NAVY SHIPBUILDING PROGRAMS
House of Representatives,
Committee on Armed Services,
Military Procurement Subcommittee,
Washington, DC, Wednesday, March 20, 2002.
The Subcommittee met, pursuant to call, at 2:08 p.m., in room 2118, Rayburn House Office Building, Hon. Curt Weldon (Chairman of the Subcommittee) presiding.
OPENING STATEMENT HON. CURT WELDON, A REPRESENTATIVE FROM PENNSYLVANIA, CHAIRMAN, MILITARY PROCUREMENT SUBCOMMITTEE
Mr. WELDON. [Presiding.] The subcommittee will come to order. This afternoon we will receive testimony from the Department of the Navy, the shipbuilding industry and the Congressional Research Service (CRS) on the Navy's shipbuilding plans as set forth in the President's fiscal budget for fiscal year 2003.
We hope to get three perspectives on the Navy's plans. First, from the Navy's senior acquisition official and senior officer responsible for the development of the Navy's requirements; second, from the shipbuilding industry; and finally, from a recognized expert in Navy force structure and shipbuilding issues at the Congressional Research Service.
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As we begin this hearing today, the U.S. Navy now operates a combat fleet of 314 surface ships and submarines. Although the recent quadrennial defense review recommended a fleet of about 310 ships, the budget request includes a forecast of only 307 combat ships by the end of fiscal year 2003. This fleet is only a little larger than half the size of the Navy of the 1980s that comprised almost 600 ships at its peak.
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 Persian Gulf, the Adriatic, the Western Pacific and, most recently, during Operation Enduring Freedom in the North Arabian Sea.
For fiscal year 2003, the Department of Defense (DOD) procurement budget request is $71.9 billion. Compared to the fiscal year 2002 appropriation of $61.8 billion, that is a much needed increase of 16 percent in the military's overall procurement accounts. Unfortunately, the Navy's fiscal year 2003 shipbuilding budget did not fare as well. The shipbuilding budget request for fiscal year 2003 is only $8.2 billion. And that is a decrease of about 14 percent compared to fiscal year 2002 shipbuilding appropriation of $9.5 billion.
The budget request for the next fiscal year contains five new construction ships: 2 DDG–51 Arleigh Burke class destroyers, one Virginia class submarine, one San Antonio class amphibious transport ship or LPD–17 and one Lewis & Clark class auxiliary cargo and ammunition ship, known as a T-AKE. The Navy's current Future Years Defense Program, or FYDP, through fiscal year 2007 plans an additional 29 ships that count toward the 310-ship goal—five in 2004, seven in both 2005 and 2006 and 10 in 2007.
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This rate of annual combat ship procurement in the current FYDP gives the committee cause for concern from three perspectives. First, the low rate, if sustained, would leave the Navy well short of its long-term combat ship requirements.
Second, substantial increases in the annual shipbuilding rate are not planned until the end of the FYDP when other modernization demands may compete with funds for this purpose—not may, will compete. We all know that. And finally, the low rate of combat ship procurement in this budget request may have a detrimental effect on our nation's shipbuilding industrial base, the skilled labor and the investment needed to sustain a robust capability to meet our future shipbuilding needs.
The five ships in the fiscal year 2003 budget request, combined with the additional 29 ships in the remainder of the FYDP, total 34 ships. That is a build rate of 6.8 ships per year for the next five years. The Navy has informed the committee that an average of eight to 10 ships per year is required in the long run to sustain the 310-ship fleet. If the 6.8 yearly build rate is sustained over the long term and the average life of a Navy ship is about 35 years, that will eventually lead to a 238-ship Navy.
Recent press articles suggest that the Office of the Secretary of Defense (SOD) has concluded that 340 ships are needed to meet the Navy's requirements for both presence and combat missions. Moreover, the chief of naval operations informed the committee last month that 375 ships are needed to meet mission requirements.
The committee is also concerned that attaining the Navy's eight to 10 ship annual procurement goal does not occur in this FYDP until fiscal year 2007, when 10 ships are planned. The committee notes that previous plans for increases in the shipbuilding rate have not come to fruition.
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For example, the fiscal year 2003 shipbuilding plan was first presented in the fiscal year 1999 budget request and seven ships were planned for construction. When both the 2000 and 2001 budget requests were submitted to Congress, eight ships were planned for fiscal year 2003. For fiscal year 2002, the Department did not submit a FYDP pending a strategic review. And now, with the actual fiscal year 2003 budget before us, only five ships are funded.
This is unacceptable. To the extent that the Navy's long-range shipbuilding plans require large sustained increases in funding for the Shipbuilding and Conversion, Navy, or SCN account, to maintain even the 310-ship fleet recommended by the Quadrennial Defense Review (QDR), there is risk. We are facing serious modernization challenges across the spectrum of military systems and in all the services, to include: tactical aviation, precision guided munitions, ground combat vehicles, support equipment and telecommunications that will require significantly increased funding over a sustained period of time to rectify.
By fiscal year 2007, when 10 Navy ships are planned, the shipbuilding budget will be in competition with all of those and other pressing modernization programs. We have to be realistic. We are in this situation because of a failure to commit the resources necessary to address growing problems in these areas for too long.
The committee is also very concerned that the procurement levels projected in this budget request may be insufficient to support a robust shipbuilding industrial base over the long term. Of particular concern is that a weak industrial base may lead to the gradual erosion of both real competition and innovation that is necessary to ensure that the Navy will continue to maintain its technological edge over any potential adversaries.
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There are currently only six major shipyards engaged in new construction of ships for the U.S. Navy. It has become increasingly difficult to support these facilities with the low level of Navy shipbuilding over the past decade. The consolidation that the industry has experienced to date has been in response to the lack of Navy orders.
Navy shipbuilding will continue to account for the commanding majority of new construction of large, technically complex ships in this country for the foreseeable future. The sufficiency of the Navy's shipbuilding plan is of paramount importance and concern to the industry. A failure to keep the major entities in shipbuilding industry adequately engaged in the design and construction of modern naval vessels may severely restrict the Navy's ability to procure advanced designs far into the future.
Given that the Navy's shipbuilding plan is so critical to the health of the industry, it is only appropriate that we have a representative of the shipbuilding industry here today to provide that perspective. I look forward to a frank and open discussion of the adequacy of the Navy's shipbuilding plan and the state of the U.S. shipbuilding industry.
Before we proceed, I would like to remind Members about a remark that Admiral Vern Clark, the chief of naval operations, made in testimony before our full committee last month. He said—and I quote—''Current aircraft and ship procurement rates will, if sustained, result in a Navy numerically smaller than today's and significantly smaller than needed to sustain the war. Such a fleet would be an invitation to greater operational risk and international instability.'' End of quote.
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With that, I would like to welcome our witnesses to discuss the Navy's shipbuilding plan.
First, the Honorable John Young, assistant secretary of the Navy for research, development and acquisition; second, Vice Admiral Dennis McGinn, the United States Navy deputy chief of naval operations for warfare requirements and programs (N–7); third, Ms. Cynthia L. Brown, president of the American Shipbuilding Association; and finally, Mr. Ron O'Rourke, national defense specialist, Congressional Research Service.
Before we begin, let me call on my friend and my colleague, the ranking member, who has been a tireless advocate to remind our colleagues of what is happening to our shipbuilding base in this country, from Mississippi, Mr. Taylor for any remarks he would like to make.
Mr. TAYLOR. Thank you, Mr. Chairman. I would also like to welcome our distinguished panel.
Mr. Chairman, I totally and strongly support everything that you have said. In my previous job, I was in the packaging business and got to go to different things. Some of them were pretty fascinating; some of them were not.
One of the less fascinating places that I used to go were slaughterhouses. And usually, when the guys put on the raincoats and grabbed the sledgehammers, something bad was going to happen to the cow.
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I am told that under the kosher rules of the Jewish faith that the animal is slaughtered so it does not feel any pain. And after listening to the Administration's talk on shipbuilding and someday we are going to fix it, it kind of reminds me of a kosher death of the United States Navy. It dies either way. But it is just not quite as painful. And you are kind of patting the animal so it feels a little bit better before its eventual death.
Just yesterday, I have got to tell you that I have heard what in almost 12 years is quite possibly the most appalling statements from a member of any administration which just shows a total disregard for our nation's Navy and a total disregard for our nation's industrial base. When Under Secretary of Defense Susan Thatcher came before this committee: a) could not even tell me how many ships were in this year's presidential budget; and b) said when I told her the answer was five and that we have got six major shipyards and could she please explain to me how we are going to keep six major shipyards going with five ships in the Navy, she was kind enough to tell me she would get back to me with the answer.
Secretary Young and Admiral, you all have got to a hell of a lot better than that. And I was very tough on Admiral Clark when he came by last week. And I was tough on the commandant when he came by. And I regret that.
But I told them on their watch, their legacy is going to be a 150-ship Navy. Unfortunately, it is also on Mr. Weldon's watch and it is also on my watch. That is the part that really ticks me off.
Now I cannot fix that unless somebody in your capacity starts saying, ''We need a bigger fleet'' and somebody in your capacity says, ''We are not going to fix it next year. We are not going to fix it five years from now. We are going to start fixing it this year.''
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The net loss of the United States fleet has been 21 ships a year, as far back as I can see. That is ridiculous. The world has not shrunk.
Now do not come to me later in the year and say, ''Gee, our sailors are spending too much time at sea.'' Well hell, that is the natural result of: a) the world is not shrinking; b) you have got to have ships on station. And if you have fewer ships, it means they are going to spend more time at sea doing the things that have to get done.
The defense budget has grown by $60 billion in the past two years. And you guys are getting fewer ships than the year before. And I want someone to explain the wisdom of hat to me because I have got to believe somebody in the Navy ought to be jumping up on the table and say, ''What about me?''
And if we just do it, without you all's help, then these guys over here say, ''it is Pork.'' And they get all the citizens and taxpayers groups out. ''They are putting ships in the budget that the Navy did not ask for.''
It is time to ask, Secretary. It is time to ask, Admiral. For all the reasons that I have outlined.
Ms. Brown is going to tell me about all the people about to get laid off at the shipyards. And guess what? They have got mortgages to pay. They have got kids to send to college.
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If they lose that welder's job, if they lose that blaster's job, that electrician's job, they are not going to come back. They have been burned by that shipyard. They are going to go find something else to do. And all those years of skill and all that training goes down the drain. We do not get them back.
And I will remind you that about 100 years ago right now, there was an empire that had been around for over 600 years, one of the greatest empires the world has ever known. It stretched all the way from the Balkans through Saudi Arabia. It was called the Ottoman Empire.
And over the years, they got a little lazy. And one of the signs of their laziness was they got to the point where they bought their warships from somebody else. At the time they ordered their dreadnoughts from England, they were at peace with England. It did not seem like a bad idea. They will just send them some money and they will get ships in return.
By the time the dreadnoughts were completed, they were at war with England. And those ships that were supposed to be serving in the Ottoman Navy shelled the Turkish Empire.
I do not think we need to be in a position where, through the loss of our industrial base, we are buying our ships from somebody else. And I cannot think of a more dramatic message than that. If we do not do something now, we are going to lose the industrial base. We will not be able to sustain six shipyards. We probably cannot sustain three shipyards at this rate.
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And it is got to turn around this year because, as Chairman Weldon pointed out very well, all this talk of fixing it in the out years never happens. And if you read the Constitution, you can only budget money for one year at a time. If we do not fix it this year, it does not get fixed at all, as far as I am concerned.
So Chairman Weldon, I want to compliment you on your opening statement. I am looking forward to what our panel has to say.
Mr. WELDON. Thank you, Mr. Taylor. We are very pleased and honored again that our ranking member is here. He makes all of our subcommittee hearings. And he is very busy. So I would like to offer him the opportunity to make whatever comments he would like to make.
Mr. Skelton?
Mr. SKELTON. Thank you, Mr. Chairman. I will take advantage of your kind offer. I would like to associate myself, Mr. Chairman, with your remarks and also with Mr. Taylor's remarks. They are right on.
I just came from the floor a few moments ago, where I spoke against the rule. You see, the proposal sent over to the Congress from the Administration includes a $10 billion so-called reserve fund. I tried to offer an amendment giving this committee the opportunity to authorize and the appropriators the opportunity to appropriate that $10 billion.
I was turned down. Had I been able to do this and subsequently I would plan to have offered an amendment in this committee, which would have increased the shipbuilding by two to a total of seven this year.
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I am convinced that everything these gentlemen said is right. We are headed to a 200-ship Navy, just sure as God made little green apples.
And I would do my best then to increase it to seven and nine next year and reverse the trend. We have to do it. I remember very well, Mr. Chairman, being here when we almost made the goal of the 600-ship Navy. You remember?
Well, that is not even a dream today. We have to fix it. I will do my very best. And I join the chairman and the ranking member of this subcommittee in so declaring. Thank you.
Mr. WELDON. I thank the ranking member. And as he knows, at his request, I agreed to sponsor his amendment. I am as appalled as he is that his amendment was not ruled in order on the floor.
And I have serious concerns about the budget resolution as it relates to defense, as do many of our colleagues on both sides of the aisle, especially as it relates to the Budget Committee attempting to supercede the jurisdiction of this committee in terms of our rightful responsibility of authorizing all funds for our military. And I will say it on the House floor tomorrow.
I want to thank all of you for being here. And again, you have heard the strong comments. And I am sure my other colleagues here will echo theirs as they speak.
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We have another hearing going on simultaneously with this, so Members will be coming and going. But we do appreciate you all being here. And we appreciate your service to the country in each of the capacities that you are serving in.
Secretary Young, the floor is yours. All of your statements are entered into the record in their full form. And so we invite you to make whatever comments you would like to make for whatever time you choose to take.
Thank you.
STATEMENT OF HON. J. JOHN YOUNG, JR., ASSISTANT SECRETARY OF THE NAVY (RESEARCH, DEVELOPMENT AND ACQUISITION) DEPARTMENT OF THE NAVY
Mr. YOUNG. Chairman Weldon, thank you. And distinguished members of the subcommittee, thank you very much for the opportunity to testify on the shipbuilding program in the fiscal year 2003 budget.
Two weeks ago, I testified before this committee about Navy and Marine Corps acquisition programs. I described our current capability and the principles guiding our efforts to balance the competing demands placed on the fiscal year 2003 budget as we plan for the Navy and Marine Corps of the future.
Our first priority was placed on sailors and Marines, their training and the readiness of their equipment. Next, the budget addresses the current readiness of our Navy and Marine forces through investment in spare parts and repair activities for the current systems, modernization of the existing platforms and procurement of new weapons, aircraft and ships.
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And then finally, the Navy made increases in the Research, Development, Test, and Evaluation (RDT&E) account to make investments in new systems and technologies for our naval forces of the future.
These principles are also guiding our shipbuilding strategy. First, we must improve and leverage the equipment that we now have and will use for years to come. Improving the sensors, installing data links and networking the command and control systems allows our current assets to fight more effectively. Systems such as cooperative engagement capability (CEC) and naval fires network will enhance the performance of our current ships.
Second, we are working to properly fund and carefully manage the ongoing shipbuilding programs. As we transition to new capabilities, we must first have a solid, stable foundation of funding, as well as a more businesslike approach in our shipbuilding programs. The Department's fiscal year 2003 budget represents a significant improvement in building that foundation.
Our first priority has been to control cost growth and eliminate the cause of prior year bills. Many factors have contributed to this cost growth: continual configuration changes; unanticipated challenges with lead ships; unforeseen cost growth in shipyard labor rates; low procurement rates for material and equipment; inflation and fiscal constraints; budget reductions and recisions; and overly aggressive budgeting to optimistic cost targets.
In fiscal year 2003, in this budget, we have taken several steps to forcefully address these issues. We have fully funded the shipbuilding programs to the current Cost Analysis Improvement Group or CAIG estimate or the program manager estimate.
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We have taken a round turn on change orders. Once we baseline a ship, any subsequent changes will be thoroughly reviewed for cost and schedule impact. This applies to both shipbuilding programs and programs for the equipment that goes into these ships. We will not add changes until there is full concurrence with funding and justification.
In conjunction with industry, we are reevaluating the efficiency of procuring small classes of ships from multiple yards. We have also worked to stabilize the DDG production line, adding two ships a year, 2005 through 2007, to create a smooth transition to DD(X) and CG(X).
And finally, we are placing greater emphasis on understanding the potential for technology or requirements change to growth the cost of our existing programs. Spiral development and backfinning of technologies will be preferred approaches as we try to ensure that we avoid future cost growth and make the proper trades amongst all our investment opportunities and priorities.
All of these steps are critical to our ability to build a ship within the planned budget. Cost growth on ship construction contracts has reduced the confidence of the Office of the Secretary of Defense and the Congress in our ability to manage these major capital programs and eroded our sound business foundation. The Navy is committed to restoring that confidence and building stable programs to ensure force structure requirements are sustained.
Looking ahead, the Navy continues to focus on building new and transformational ships to meet our future needs. Our fiscal year 2003 budget request calls for conversion of two submarines and construction of five new ships, as you noted: two DDG–51 class destroyers, one Virginia class submarine, one San Antonio class LPD–17 and one Lewis & Clark class T-AKE. Plus, there is incremental funding for the fiscal year 2002 LHD–8, resulting in 36 ships to be placed under contract.
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The budget request fully commits the Navy to the conversion of four Ohio class Nuclear-Powered Ballistic Missile Submarine (SSBNs) into Nuclear-Powered Cruise Missile Submarine (SSGNs) by providing the necessary funding for the engineering refueling overhaul and conversion to execute the full program. We have also requested funding for advanced procurement of the sixth and seventh Virginia class submarines and funds for procurement of the CVN 70 refueling complex overhaul, the service life extension of three landing craft air cushion craft (LCAC), and one Los Angeles class submarine engineering refueling overhaul.
Finally, the budget funds the development of the DD(X) family of ships, a critical component of the future of the Navy. In the fiscal year 2002 budget, the Congress played a critical role in providing the budget resources necessary to keep the stable foundation under our current programs. And the Department is grateful for your support.
The fiscal year 2003 budget builds on that foundation and these principles to prepare the Navy and Marine Corps for the future. Today, the forces of the Navy and Marine Corps remain forward deployed and are protecting America's strategic interests near and far as an essential part of the joint force.
While we face a number of challenges such as you have noted—recapitalizing an aging infrastructure and also fighting both symmetrical and asymmetrical threats—we are clear of purpose and focused on that future.
Thank you again for letting me testify today. And I look forward to your questions.
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[The prepared statement of Mr. Young can be found on page ?.]
Mr. WELDON. Thank you, Secretary Young, for your statement.
Admiral, the floor is yours.
STATEMENT OF VICE ADMIRAL DENNIS MCGINN, USN, DEPUTY CHIEF OF NAVAL OPERATIONS FOR RESOURCES, WARFARE REQUIREMENTS AND ASSESSMENTS, UNITED STATES NAVY
Vice Admiral MCGINN. Mr. Chairman, members of the subcommittee, thank you for the opportunity to appear before you today to discuss the Department of the Navy's fiscal year 2003 shipbuilding program. I would also like to thank the committee for your longstanding and strong support for Navy and Marine Corps programs and especially for your support for our truly outstanding young men and women in uniform, stationed around the world today, defending freedom.
The events of 9–11 and our subsequent operations in Afghanistan and in other parts of the world, have affirmed the requirement for ships deployed forward where our most vital economic, political and military interests are concentrated. With assured access to the battlefield, unfettered by the need to negotiate bases, our Navy and Marine Corps forces deliver timely and precise combat power from the sea.
Recognizing the importance of maintaining that capability, our fiscal year 2003 budget first and foremost funds pay and benefit improvements for our most valuable resource, our people, those young men and women. Second and contributing to our people's quality of service, this budget also provides for the tools, munitions, spare parts necessary to maintain forward presence and to execute the nation's requirements.
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Third, our budget funds the operations, maintenance and modernization of existing ships and aircraft, as well as the procurement of new platforms. Finally, our budget invests in the future, including the new technologies for ships that will transform our naval services.
Although we are clearly funding fewer new ships and aircraft than we desire and what we need, the 2003 budget represents the best balance between the Department's competing requirements and the available resources. In 2003, as Mr. Young has pointed out, we are procuring five ships and 83 aircraft, plus two ballistic missile submarine conversions and one submarine engineering refueling overhaul.
We funded prior year ship completion costs and we properly priced new construction ships commensurate with reasonable management risk to help us avoid future cost growth. We are pressing ahead with advanced programs and technologies in platforms such as CVN(X), DD(X), the Virginia class submarines and systems such as cooperative engagement capability, tactical Tomahawk and, in the longer term, electric drive.
As I said earlier, this program provides the best balance between competing priorities and resources and also between near-term compelling needs and our investment in the future. One of the Navy's very highest priorities is ensuring the platforms we field have the greatest amount of relevant warfighting capability.
While we could divert resources from other programs to fund more numbers of ships in this budget, it would be at the expense of warfighting effectiveness, the compelling need of today. Whether trading off actual offensive power or defensive systems or—perhaps even more importantly—networks and sensors that ensure we can work autonomously or as a full-fledged contributor to the joint battle space, it is imperative that those platforms we do fund have the right warfighting capability inherent in them to be able to fight and win—today and tomorrow.
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We are making significant progress toward network-centric warfare through the development of naval fires network, information technology 21. And we are accelerating the area air defense commander capability in our cruiser conversion program.
Although we had to make difficult tradeoffs, the right balance of investments is critical in remaining the preeminent and relevant maritime force in the world.
A central aspect of warfighting wholeness, of course, is the substance and the purpose of today's testimony, the Navy shipbuilding programs. We recognize that one of our greatest challenges is to increase the procurement rate of new ships to sustain our force structure in the near term and not in the far term.
Historically, our force structure needs were based on a strategy to fight and win two major theater wars from an open ocean, blue water perspective. Today, with the 2001 quadrennial defense review as a foundation, we are looking at a new force sizing construct that focuses on operations in the littorals. Outlined by the secretary of defense last month, our nation requires a force that can deter in four areas, fight in two others and fight a major war, winning decisively in one.
Although we continue to refine both the total number of ships required and the precise composition of our force, we do know that such a force will require more ships and more ships that are netted and distributed. We also know that we need this force to be forward and sustainable, to be decisive in influencing events ashore and to be able to be sufficiently agile to fight both traditional naval forces, as well as any unpredictable asymmetric threats and to be lethal.
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To achieve this force, we need to start building more ships at the right time with the right capabilities and for the right cost. In terms of cost, Secretary Young will capably address questions regarding our Navy's ship acquisition strategy. But suffice it to say, we are in complete agreement with his and Secretary England's cost saving initiatives, funding methods and plans to implement more efficient shipbuilding business practices.
Commensurate with cost savings and control measures, we must develop a shipbuilding strategy that is robust with respect to the capabilities of the ships and the warfare of systems that are fielded and stable with respect to annual investment in our shipyards. We must also have the ability to transition from rapid prototype to production ships as quickly as possible.
We must increase the inherent flexibility of our ship designs to enable fast, seamless insertion of new technology and mission modules. Shortening this historical cycle will have the simultaneous effect of accelerating requirements and acquisition processes and changes in the way programs and budgets are developed to produce these systems.
I believe and I fully agree with the comments made in the committee today that we are at a critical crossroad with respect to the recapitalization of our battle force. In programs like DD(X), we are making choices that will affect what the shipborne Navy will look like and will be capable of for the next 30-plus years.
We require your continuing support to allow us to be innovative with our designs and funding methods and to make the necessary investment in technology and experimentation. In this period of achievable transformation, we must have the flexibility to prioritize our investments, to ensure technologically superior ships are available when and where required.
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Once again, Mr. Chairman and members, I want to thank you for your support for our Navy and Marine Corps team and for the opportunity to testify before this committee today. I look forward to your questions.
Mr. WELDON. Thank you, Admiral.
Ms. Brown?
[The information referred to can be found in the Appendix on page ?.]
STATEMENT OF MS. CYNTHIA L. BROWN, PRESIDENT, AMERICAN SHIPBUILDING ASSOCIATION
Ms. BROWN. Thank you, Mr. Chairman, Congressman Taylor, very much, members of the subcommittee, for the opportunity to testify on the Navy's shipbuilding procurement budget and the impact this budget is having on the shipbuilding industry's ability to meet the security requirements of America.
The American Shipbuilding Association is the national trade association that represents the six largest shipbuilders in the United States. They are: Bath Iron Works of Maine; Electric Boat of Connecticut; Newport News Shipbuilding of Virginia, Ingalls Shipbuilding of Mississippi; Avondale Industries of Louisiana; and National Steel and Shipbuilding Company of San Diego.
These six shipbuilders are owned by two corporations: General Dynamics and Northrop Grumman. The industry has consolidated dramatically in the last few years.
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The American Shipbuilding Association also represents 20 supplier companies, which are our primary builders and designers of systems that go in our ships.
This committee is well aware that there exists a tremendous disconnect between Navy ship procurement and Navy budgets—Navy requirements and Navy budgets. This presents a grave danger to the shipbuilding industry and to the Nation.
The Navy's fleet today numbers roughly 314 ships and it is dropping quickly. During the 1980s, under President Ronald Reagan, the Navy ordered an average of 19 ships a year in its effort to reach a 600-ship goal. During the 1990s, the Navy ordered an average of only six ships a year.
While we in industry thought the Navy's shipbuilding procurement rate could go no lower, it has. While this fiscal year's DOD budget represents a $48 billion increase over fiscal year 2002's budget, it represents a cut of $400 million in naval ship procurement, from $6.5 billion to $6.1 billion, and funds only five ships. When conversion and procurement budgets are compared, the budget is $1 billion below last year's and $5 billion below the previous administration's last budget request, which included $11 billion for eight ships.
At this low rate of ship procurement, the fleet will continue its nosedive toward a force of 180 ships. And the unit cost of ships will continue to rise.
Long before 9–11, commanders-in-chief of the Navy and Marine Corps were on record with Congress that they could not continue to adequately defend America with fewer than 360 ships comprised of 15 aircraft carrier battle groups and 15 amphibious ready groups. These Commander-in-Chiefs (CINCs) were on record that the fleet was stretched perilously thin. They said they could not perform their mission with 12 aircraft carrier battle groups and only 12 amphibious ready groups.
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They reported of having to divert battleships from critical strategic regions of the world in need of a continuous American presence to fight wars and contingencies in Iraq, Kosovo, Bosnia, the Straits of Taiwan, et cetera. They recounted the problems of a 300 percent increase in the operating tempo following the Cold War and their difficulty in meeting that high operating tempo with a fleet half the size of their Cold War fleet.
They talked about—they testified—the training that was suffering for our sailors and our Marines, that maintenance costs were skyrocketing on overworked ships and that leave time for sailors and Marines was being cut short between deployments. This is their description of a fleet stretched perilously thin.
Despite Navy articulated requirements of a minimum 360-ship Navy and an acknowledgement by the Department of Defense of the need for greater expeditionary forces and increased access to bases in the Pacific, the 2001 quadrennial defense review restated the 1997 requirement of 305 ships as the baseline requirement.
What are ships? They are expeditionary, forward, mobile bases that can operate around the world without the permission of a foreign government. This capability was demonstrated in spades in Afghanistan.
In order for the Navy to sustain a force of even 305 ships, it must procure 10 ships a year of the following classes. It must procure one aircraft carrier every four years. This budget proposes buying one every six years. It must procure two Virginia class attack submarines each year. This budget proposes one.
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It must procure four surface combatants, DDG-51/DD(X) a year. This budget proposes only two. It must procure two LPD class amphibious ships to maintain our 12 amphibious ready groups. This budget proposes one.
And it must procure LHD, one every three years. This budget proposes buying one every seven years.
The fiscal year 2003 budget is half that required to sustain even a 305-ship Navy. For each year that less than 10 ships are procured, additional ships must be procured in subsequent years to make up for the shortfall to sustain the 305 Navy.
As you can see on this chart, over here to my right, the nation enters 2003 with a 42-ship deficit in maintaining 300 ships. Said another way, the Nation is already on course to drop to 258 ships, based on previously enacted budgets.
A declining Navy, combined with the fact that it takes four to eight years to build each warship, speaks to the urgency of investing immediately in naval shipbuilding. No matter the age or capability of a ship, it cannot be in two places at the same time. Numbers do matter.
Statements have been made that the reason more ships are not budgeted is because of the $644 million that had to be requested to cover prior year shipbuilding bills. While the reasons for these prior year bills exist are many, as Assistant Secretary Young very well described, and vary program by program, the overriding reason is low rates of ship procurement and inadequate budgets to reflect the increased costs associated with buying so few ships.
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Industry was encouraged in tight fiscal times to use optimistic pricing assumptions. As quantities of ships procured fell, unit prices rose. While industry can certainly be faulted for signing up to optimistically priced contracts, the alternative was even fewer orders and more delays in placing those orders.
This would have significantly added costs to each of the ships budgeted. It would also have wreaked havoc in our ability to maintain our work force and put our own survival in jeopardy should the order for one ship be delayed.
Shipbuilding contracts were budgeted so close that there was no room for any change in circumstances within or outside of our control. Changes in ship procurement profiles, which deteriorated from one Navy future year defense plan to the next, caused increases in our overhead costs and disrupted our ability to efficiently manage and plan our workload.
Ship costs rose further as a result of the many factors that Secretary Young has already mentioned today. And I will not repeat them.
Industry accepts its responsibility for cost growth as a result of challenges in designing the lead ship of the LPD–17. While not completely in our control, we will shoulder the responsibility of rising wage rates. However, we have no control over low rates of production, rising energy costs, rising vendor costs, or customer-driven change orders that can be very disruptive and costly in the manufacturing process.
The only way to fix the funding shortfall in existing programs is to authorize and appropriate the funds necessary to cover these bills. In the future, these bills can be avoided by increasing and stabilizing the rate of ship production, minimizing change orders and budgeting to estimates. The unit prices of ships, however, will continue to rise if quantities are not increased to reduce our costs in the shipyards and throughout our vendor base.
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Do you need to go vote?
Mr. WELDON. Can we ask you to hold right there? We have got unfortunately four votes, one 15 minute, two fives and a 15. So I would predict we will be back by quarter after. Apologize for this. But you know the way things operate down here in Disneyland.
Ms. BROWN. Quite all right.
Mr. WELDON. With that, the committee will stand in recess until we return from voting.
[Recess.]
Mr. WELDON. The subcommittee will come to order. Ms. Brown was giving an extremely eloquent statement on behalf of the Shipbuilders' Association. So we will now turn the floor back over to you to continue your statement.
Ms. BROWN. Thank you, Mr. Chairman.
The only way to fix the funding shortage in existing programs on our prior years' shipbuilding bills—is where I was, I think, leaving off—is to budget, authorize and appropriate the funds necessary to take care of those prior year costs. And then in the future, to do a better job of disciplining change orders and also budgeting closer to the estimated costs and, of course, increasing and stabilizing the rate of ship procurement.
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The defense shipbuilding industrial base does not end at the gates of our shipyards. The industry is comprised of more than 9,000 companies in 47 states that employ more than 800,000 Americans. This figure does not include the second tier suppliers, which are numerous. Beginning in the coal mines, to the steel mills, to manufacturers of gears, engines, nuclear reactors, motors, pumps, propellers, controls, radars, missiles and the most advanced computer systems and software in the world are just a few examples of what it takes to design and build the most technologically advanced, lethal and mobile self-sustained cities—or bases—at sea.
Our industry has invested hundreds of millions of dollars in our facilities, in our technology, in our processes and in training our people to increase efficiencies to mitigate the cost of low rate production. While our investments have been on the rise, we have been forced to cut our workforce from 82,000 in 1991 to 52,000 today.
The industry is down to only two builders of nuclear ships, just two surface combatant builders and two builders of auxiliary and amphibious ships to meet the nation's defense requirements. In our supplier base, there are only two, and in many cases, just one supplier left of critical ship components. This state of the industry is a direct result of underbudgeting the nation's naval fleet requirement.
The industry does not have the financial means to make any more investments in light of the Navy's shipbuilding budget. We are facing huge layoffs over the next few years, as we deliver our backlog with very ships on the horizon.
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Let me point out, next year and over the next—beginning this year and over the next five years, we will lay off 15,000-plus people. Our people are highly skilled people. They are a resource that we will never get back. And we will not be able to build ships in the future for the Navy without these people.
The supplier base will continue to contract with us. The further contraction places this industry's ability to build the number of ships required to meet America's defense in jeopardy. Delay equates to decay.
The shipbuilding industry and the Navy are intricately linked. A shrinking Navy equates to a declining shipbuilding industry. Neither can exist without each other. And the nation is losing both.
I urge you in Congress to increase the Navy's shipbuilding budget this year by $3.6 billion. This increase would procure one additional DDG–51, one additional LPD–17, provide for an economic order quantity procurement of the Virginia class submarines to facilitate the Navy's ability to get the rate to two per year, increase funding to accelerate the LHD-class amphibious assault ships and restore the originally planned schedule to order the CVN(X) in 2006. The delay of this carrier by one year will add more than $1 billion to the price of the ship, not to mention threaten our ability to be able to build the ship.
While this increase will not fix the decade of neglect, it is an urgently needed first step in stopping the rapid deterioration of America's sea power capability. This increase would add ships to the budget request of only five. And it would lay the foundation to increase the build rate to more than 10 ships a year to rebuild and sustain a minimum fleet of 300 ships.
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We cannot wait, Congress, any longer for the Navy to act. We need your help. If Congress does not act now, the Nation will never have enough money or the industrial capability to ever recover from the hole we have dug ourselves into. I ask you: where would the Nation have been on September 11th without our armada of naval ships?
Thank you. And I look forward to your questions.
[The prepared statement of Ms. Brown can be found in the Appendix on page ?.]
Mr. WELDON. Thank you, Ms. Brown, for your testimony.
Mr. O'Rourke?
STATEMENT OF MR. RON O'ROURKE, SPECIALIST IN NATIONAL DEFENSE, FOREIGN AFFAIRS, DEFENSE AND TRADE DIVISION, CONGRESSIONAL RESEARCH SERVICE
Mr. O'ROURKE. Mr. Chairman, distinguished members of the subcommittee, it is an honor to appear before you today. I will submit my statement for the record and then summarize some of its main points right now.
To begin, the Administration's plan will procure an average of 6.8 ships per year that count against the 310-ship goal. That is a lower average rate than under the final two Clinton Administration plans. But it is a higher average rate than the earlier Clinton Administration plans.
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The plan does get up to 10 ships in the final year of the FYDP. It does so in part by including three relatively inexpensive auxiliary ships. That is similar to the Clinton Administration plan from three years ago, which got up to nine ships in the final year of the FYDP, also by including three relatively inexpensive auxiliary ships.
We talk a lot about the steady state replacement for shipbuilding. But the Navy has been below the steady state for so many years now that attention may need to shift more to the catch-up rate for shipbuilding, which is the higher rate that will be needed to make up for all the years when the Navy was below the steady state rate.
Navy shipbuilding fell below the steady state rate in 1993. And if the Administration's plan is implemented, a total of 86 new ships will be procured between then and fiscal 2007. That is 47 fewer ships than we would have procured if we had been procuring them during these years at the steady state rate.
This 47-ship backlog of deferred procurement will not cause an immediate reduction in the size of the Navy to less than 300 ships. After 2010 and particularly after 2020, however, when the large number of ships procured in the 1970s and 1980s begins to retire, this 47-ship procurement backlog, if not by then redressed, will become apparent and the size of the fleet will drop below 300 ships.
Eliminating this 47-ship backlog after the FYDP would require an annual procurement rate of 11.2 ships, starting in fiscal year 2008 and continuing for the next 20 years. This higher rate of 11.2 ships is the post-FYDP catch-up rate.
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Procuring 11.2 ships per year is going to cost somewhere between $12.5 billion and $15 billion per year. That is more than twice the amount that the Administration has budgeted in the 2003 column for actual construction of new ships.
This post-FYDP catch-up rate can be reduced to something less than 11.2 ships if a larger number of ships are procured during the FYDP. And my statement contains a chart showing what those numbers might look like.
The Administration has suggested that this year's budget, in effect, requests seven ships rather than five because it contains funding for two Trident conversions. Now, it is certainly fair to include the Tridents when you are talking about the total amount of money in the budget, the total amount of work that the budget will generate for the shipyards and the contributions these submarines will make to the general purpose forces of the Navy.
But in terms of achieving the steady state replacement rate of 8.9 ships per year, including the two SSGNs is questionable. The Navy can achieve the steady state replacement rate in three ways. It can buy new ships. It can take ships that do not count toward the 310-ship goal and convert them into ships that do count against the goal. Or it can take ships that already exist and extend their service lives beyond what they have already been certified for.
The SSGN conversions would not do any of these things. That does not mean the SSGNs will not be valuable operationally. It is simply to say that, in comparing this year's budget request to the steady state replacement rate, the request includes five ships, not seven. You do not replace a 310-ship fleet, in short, by converting ships that are already in that fleet.
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The Administration has suggested that procuring ships at or above the steady state rate is not an urgent, near-term priority because the average age of the fleet is currently 16 years. And that is less than the 17.5-year halfway point for a 35-year fleet.
Now average age can be useful in gaining an initial indication of the near-term urgency for procuring ships. It is, however, a single point measure that does not take into account certain factors.
First, although current fleet age is 16 years, it is now rising steadily. And the Navy projects it will soon reach or exceed 17.5 years. Second, average age says nothing about variation in age by ship class. And the Navy has some ship classes that are considerably older than 16 years.
Third, average age says nothing about the composition of the fleet. Certain parts of the fleet, though relatively young, might nevertheless be in need of procurement so as to acquire capabilities that they do not currently have. Fourth, average age does not reveal how a decision to procure ships at a low rate in the near term can add to the catch-up rate, which is the issue I just outlined.
And last, a decision based on a current low average age to build ships now at a relatively low rate could set the stage for a boom and bust cycle in naval shipbuilding as the lower rates that we are doing now and the higher rates that we are doing later are each echoed 35 years later. Such a boom and bust cycle, in addition to being potentially difficult to finance, could strain the shipbuilding industry and increase ship costs by putting shipyard facilities and workforces through a roller coaster effect that could lower average worker productivity and discourage investment in more modern production facilities.
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For these reasons, current average fleet age is best used as a preliminary, rather than conclusive, indicator of the urgency of procuring ships in the near term at or above the steady state rate.
The Administration has noted that the Navy's aircraft are even older than its ships and has suggested that aircraft procurement is therefore a higher near-term priority than ships. Now without discounting the urgency of the aircraft procurement, there are two additional factors that can be considered when comparing aircraft to ships.
One, ships take four to six years to build, while aircraft take two or perhaps three years to build. Consequently, a decision to begin reducing the average age of the fleet by procuring new ships will take longer to begin showing results.
Second, the steady state replacement rate for aircraft in the Navy is about 200 per year. And the request this year is about 100 short of that. It would be difficult, however, to add another 100 aircraft to the Navy's aircraft request because the Joint Strike Fighter is not ready to be procured and because the Super Hornet production line cannot absorb an increase this year of more than about 30 or 40 planes.
In contrast, there are three Navy shipbuilding programs and perhaps a fourth that arguably could absorb increases in fiscal 2003, increases that would be enough to raise the total number procured to the steady state rate or even something higher than that. The first of these four programs is the DDG-51 program, as the Administration has acknowledged. The second is the Virginia class submarine program.
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The Administration has suggested that this program should be maintained at the current minimal rate of one boat per year until the first ship is completed and delivered to the Navy. Such an approach has rarely—if ever—been advocated for a submarine or surface ship program and would represent a much more conservative approach than the Navy has used in the past.
If this approach is intended as something specifically for the Virginia class program, it is not clear that that program offers reasons for adopting it because this program appears to be proceeding on track, as the Navy has testified, and with many fewer problems than previous U.S. submarine programs. The absence of prior year advance procurement funding for an additional submarine in fiscal year 2003 does not prevent Congress, if it wants, from fully funding an additional submarine in fiscal year 2003. It simply means that the funding will be obligated a little more slowly than normal, while the boats long lead time components are being built.
Congress can—and in the past has—fully funded nuclear powered warships for which there was no prior year advance procurement funding. That is exactly what Congress did when it funded two aircraft carriers in the fiscal 1988 budget.
The third program that could absorb an increase arguably in fiscal year 2003 is the T-AKE 1 program. Although design work on this ship is only now beginning, this is a basic, non-complex auxiliary ship. And the previous two shipbuilding plans from the Clinton Administration proposed procuring two or three of these ships in the 2003 column.
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A fourth potential program for an increase in 2003 is the LPD–17 program. And it is difficult to argue the case for this program, given the problems it has experienced. But the Navy itself is in effect making this argument by including a proposal to procure an additional LPD in its unfunded requirements list. In addition, the Navy testified to this committee earlier this month that the LPD–17 program team is now performing in a predictable and disciplined manner.
Using these four shipbuilding programs, one can put together alternative shipbuilding plans that would procure either nine or 11 ships in fiscal year 2003, rather than five. And I have included examples of those plans in my statement.
Now I am not saying these ships are not going to cost real money. Procuring six additional ships in 2003 could require something like $5.8 billion additional dollars. But under standards that have been used in previous years for judging the status of shipbuilding efforts, three shipbuilding programs or possibly four, if you want to include the LPD, can be viewed as ready from a technical standpoint to be increased to higher rates in fiscal 2003.
If Congress decides to make the funding available for these additional ships, the programs arguably are ready to absorb the increase.
I want to finish with comments about three programs: surface combatants, attack submarines and the LHA replacement effort. On the DD(X) program, the Administration is proposing to use a spiral acquisition strategy. Spiral acquisition is a product of the defense acquisition reform movement. And it can accomplish some important things.
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Spiral acquisition, however, poses potentially important issues for Congress in terms of conducting program oversight for three reasons. First, programs initiated under spiral acquisition are, by definition, not well defined at the outset in terms of system design, quantities to be procured, the schedule for procuring them and total program cost. These are all things that Congress traditionally wants to know in some detail before deciding whether to approve a program start.
But under spiral acquisition, they are purposely not well defined and are going to be defined only gradually, over a period of several years.
Second, years later, when Congress looks back at that program, it will not have well defined initial program benchmarks against which to measure the performance of the program. And third, because programs under spiral development are, by definition, subject to change and evolution over time, funding projections for spiral development programs will be even more volatile than funding projections for traditional programs.
There already is some evidence that spiral development is complicating congressional oversight of the DD(X) program. For example, there appear to be differing views, if not confusion, in DOD about whether the DD(X) to be procured in fiscal 2005 is to be something like the lead ship of a class or a one-of-a-kind test bed.
On attack submarines, the Navy is currently digging itself into a very deep procurement hole. This is something that I first testified on before this committee seven years ago and on other occasions since. We are currently about a dozen years into an 18-year period, during which a total of 12 attack submarines will be procured. That is an average rate of two-thirds of a submarine per year for 18 years.
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The submarine community in recent years has been through a repeated game of ''Lucy and the Football.'' When the Virginia class program was first presented to Congress in the mid-1990s, the first year for procuring two submarines was going to be fiscal 2002. But that year has been pushed back repeatedly, usually to the year just beyond the end of the FYDP. And it is now to be fiscal 2008, which is six years behind that originally envisaged plan.
As a result, maintaining a force of at least 55 attack boats over the long run will require an average procurement rate, starting in fiscal 2008, of more than 2.5 boats per year and continuing thereafter for the next 15 or 20 years. Achieving and maintaining the higher force levels from the 1999 JCS study on attack submarines would require an even higher procurement rate of three or four boats per year. These downstream procurement rates and their associated costs can be reduced somewhat by starting to procure two attack submarines per year within the FYDP and as early as fiscal 2003.
And finally, on the LHA replacement program, there is a growing urgency to the schedule for procuring the new ships if the LHAs are to be replaced at about the time they reach the end of their 35-year lives. Under current plans, some of these ships will not be replaced until they are 40 or more years old. In fact, LHA–5, under the Navy's plan, is currently scheduled to be replaced at age 44.
These are very advanced ages for these ships. In light of this, one option would be to accelerate procurement of the LHA–2 replacement ship into the FYDP so that LHA–2 and its sister ships can be replaced closer to age 35.
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Mr. Chairman, that concludes my remarks. Thank you again for the opportunity to appear before you. And I look forward to your questions.
[The prepared statement of Mr. O'Rourke can be found in the Appendix on page ?.]
Mr. WELDON. Thank you, Mr. O'Rourke, for your statement and for your analysis. And thank each of you for your statements and your analysis, based on your own perspectives. We appreciate that.
I know we have a number of questions, some of which we will submit for the record. For members, at this point in time, I want to, with unanimous consent, submit for the record the questions of Rob Simmons, who is chairing another hearing at this time. And to give members an opportunity to ask questions, I will go last.
So I will ask Mr. Taylor to start off the questions. Whatever time you need.
Mr. TAYLOR. Thank you, Mr. Chairman. I do once again want to thank our panelists for being here.
And Ms. Brown, I want to thank you for making us aware of the challenges that we have already faced and the challenges that we continue to face in the shipbuilding industrial base. And it is abundantly clear to me that a number of people have already lost their jobs. A lot more people are getting ready to lose their jobs if something does not change.
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And for those people, there is a sense of urgency. That means their mortgage is on the line, their ability to send their kids to college. It is even bigger than the need to defend our nation.
Admiral, in looking at that, because I can see a direct reduction. So when the Navy orders fewer ships, we have fewer people working at places like Avondale and Ingalls and Newport News. There is a direct correlation.
During the break, I asked someone to take a look at how big the fleet was in 1990 compared to now and the number of admirals in 1990 compared to now. Pretty interesting. The fleet shrunk by 43 percent. Number of admirals shrunk by 13 percent.
One of the things this committee does is authorize the number of admirals. And I am just curious. What is it going to take to get the folks in blue to have that same sense of urgency about the shrinking fleet? Because I really do not see it, admiral.
To a certain extent, I do understand. I study Latin America and I understand those folks getting out of line and staging coups on a periodic basis. And I do very much respect the American military for being good soldiers and sailors and airmen and taking orders. But at some point, somebody has got to stand up and say, ''We are not getting our fair share.''
And I am just curious. What is it going to take for the United States Navy to stand up and say, ''We are not getting our fair share'' because I do see this as a national vulnerability? And at some point, we are going to get burned. I think complacency, that Secretary Rumsfeld warned us about a year ago, came back to haunt us in September.
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I think the complacency of the fleet is going to harm us. And so can we head this off before there is a disaster? Or can we start doing something now?
Vice Admiral MCGINN. Congressman Taylor, I assure you there is not any complacency anywhere in the Navy, let alone in the flag ranks, about the shipbuilding rate or any other subject. We have for many, many years, across all of the department, had to balance requirements, valid requirements based on warfighting analysis, against the resources that are available to fill them. And as you well know, certainly as well as we, the difference between the requirements and the resources that you have available constitutes risk.
So we spend a lot of time where, particularly in the number of ships in the fleet, in our build rate, coming up with viable ways to manage that risk. Some of these ways are making sure that we are deploying our ships in a pattern that covers the critical needs of the warfighting CINCs forward. Other ways are to make sure we have the right kinds of capabilities on the ships that we do have in our fleet and certainly in the ships that we are building for our future.
I think that hearings such as this that offer us the opportunity to go on the public record and to state what our requirements for our ship overall fleet size is and also the composition of that fleet size by ship type is a great venue to state that requirement. Then, it highlights the need to get us more resources. And I am not coming over to the Congress to request more resources. That is not my responsibility. That is not my job.
But it is my job—and I will carry it out very, very carefully and urgently—to state that we have a requirement to buy more ships and to maintain a fleet size that is larger than the direction that we are headed. We are, if you continue to do things the way we are doing, project out, we get down to a fleet size that is ridiculously small.
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But it is our responsibility—us in uniform and our civilian counterparts—to make sure that we change the conditions that are leading us to that smaller size, in the form of more resources devoted to shipbuilding, as well as to the way we spend those dollars, so that in future, having taken care of the prior years shipbuilding bills, coming up with better business practices and buying exactly the right kinds of ships, we get more ships for the dollars that we spend in the overall shipbuilding account.
Congressman Taylor, I share your sense of urgency to get on with this task. And we are working it very, very hard. And where we are not building the adequate numbers of ships, we are going to continue to mitigate the risks in other ways through fleet deployments and capabilities.
Mr. TAYLOR. Admiral, all that is fine and good. But in testimony this morning, we were told there is not one carrier anywhere near Korea should the North Koreans decide that President Bush was not just talking about an axis of evil. He intends to do something to them.
We all know that it was the Chinese who saved the North Koreans in the 1950s. Okay? So they sit back and say, ''Well, it is coming anyway. So while they are attacking South Korea, we might as well go ahead and go for Taiwan.''
As I recall, the other two nations were Iraq and Iran. So they decided to block the Strait of Hormuz. How are we going to respond to that? I mean, we have gone from ''what ifs'' to ''what is next?'' in the last six months.
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I do not see the force being shaped for it. I do not see the requests for it. And I truly do not see a sense of urgency. I have been to a country in Latin America where they have an airborne school. They do not have a single airplane to deliver the people who graduate from that school. Are we going to get to that?
I mean, we have a Merchant Marine Academy and we do not have a merchant marine to speak of. Are we going to continue to have a Naval Academy and no ships? Is it just some sort of an education program? Where is the sense of urgency? Where does it start? And who does it start with?
Let's get to specifics. How many ships within the Navy did you all ask for this year? Not what the Secretary of Defense asked for. How many did you all ask for, in kicking your submission up to them?
Vice Admiral MCGINN. I will have to take that one for the record. I do not have a precise number for you right with me. But I can take that one for the record, congressman.
Mr. TAYLOR. Two questions: how many did you or the Chief of Naval Operations (CNO) ask of the Secretary of the Navy? How many did the Secretary of the Navy forward in his request to the Secretary of Defense?
Vice Admiral MCGINN. Yes, sir. We will take that for the record.
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Mr. TAYLOR. In getting to the 375-ship fleet that now, at least we have a number that the CNO is kicking about. What was the mix of that between service combatant, submarines and auxiliary ships?
Vice Admiral MCGINN. The mix in submarines, for example, was 55, QDR attack submarine number: 12 aircraft carrier battle groups, 12 amphibious readiness groups. And we had about 160, as I recall, surface combatants. The mix of that was between the ships like DDG–51, our Aegis class cruisers and DD(X), projecting out into the future, as well as a new class of ship, the littoral combat ship.
But all totaled, came up for surface combatants, to right around 160 ships.
[The information referred to can be found in the Appendix on page ?.]
Mr. TAYLOR. Ms. Brown, I am curious, under this year's budget, if enacted without changes, how many shipbuilders around this country lose their jobs in the next 12 months or in the 12 months starting October 1?
Ms. BROWN. Well, if I include this year, this year, we are going to be laying off roughly 340 employees. Next year, 4,000—3,951 to be exact; in 2004, 4,437; in 2005, 2,830; and in 2006, 3,472 people. This totals, congressman, 15,027 jobs. And we have been conservative on these numbers.
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We will not have the people to build a Navy. These people are highly skilled. These are our engineers, our tradesmen. And when we lose this resource, it will not be there. It is not about facilities. It is about people.
People do not move from the North to the South—there are a few exceptions, but very few or the West Coast to the East Coast. We must save these people. And the Navy's plan totally ignores this. And then they say, in 2007, ''We are going to be able to legitimately, with a straight face, order 11 ships.'' There will be no one to build them.
Mr. TAYLOR. Secretary Young, I have served now, this is my third administration. And all three of them, in the case of the Corps of Engineers, intentionally low-ball the budget, knowing that Congress will restore those funds to keep the levies from breaking and channels from silting up.
Please tell me that there is some sort of a scheme within the Administration where, at the last moment, you all are going to come to us and ask for some more ships this year? And I would also remind you that my friend Mike Parker got fired for telling the truth, as far as the Corps budget. So you might want to keep that in mind if you have a mortgage.
Secretary YOUNG. If you do not mind, sir, I would like to keep my job. Can I tell you, I think the President's budget is as you see it for 2003.
What I would like to say to you is a couple of things. We have to be conscious, when we make a request to the Congress, of balancing the priorities, as I talked about to start with, but also where we can spend the money and where we can defend the program.
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And as I had a chance to mention to you in a previous discussion, two years ago, we asked for two LPDs. And because we were having problems with the design of the ship, those ships were taken. And the Navy lost $1.5 billion of obligation of authority.
Last year, through a lot of help from people like you, we got a T-AKE. But at first, it was lost and subject to the conference.
So there was a discussion about what we could put in the budget this year. There are four Virginia class submarines funded and advance procurement for two. And it is a new class of submarine. We do not get the first one until 2004.
There are four LPDs funded right now. We get the first LPD–17 in about 2004. And there is advance procurement for two.
So the pipeline of these—and the same for T-AKE. There are three T-AKEs funded. And in each of these ships, we are requesting an additional one this year. That seemed like a prudent measure. We have a pretty full pipeline and three new classes of ship to prove to you that we can deliver.
My confidence is growing in LPD. I think the company has made some significant strides in providing to us they can design, finish design and build LPD–17 now. And that ship replaces ships that, as you know, are 34, 35 years old. It is critical to us.
T-AKE is in the same category. We need to make good progress there.
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And Virginia class has come along very well. I believe the best answer I can offer to your question is there is, to some extent, a plan. And that is, with our ability to see that these programs are now producing these new vessels on schedule and for a known cost, we are going to be working, as Admiral McGinn said, to look very hard in building the 2004 program, at whether there are opportunities to increase the rates in each of these classes of ship. And hopefully be able to do so and come to you, everyone in the Congress, confidently and say, ''We can build these ships. Please support our request for the funds.''
But we have got to get to that point. And we also, within the resources, we have to find savings to pay for those ships. And we are undergoing those drills right now. We have some drills in the category of disinvestment where we are trying to look at whether there are ways to save money, do business more smartly. Because you are right. We will have to come up with resources to increase those numbers.
But that is, if you ask what the plan going forward, that is an outline of a plan going forward.
Mr. TAYLOR. Secretary Young, I am curious. Why wasn't there a stronger effort on the part of the Navy, knowing the reluctance of some, both within the Administration and also in parts of Congress, not to fund the LPDs, knowing that there is a critical need for surface ships, knowing there is a critical need for submarines, knowing that some of the carriers are now over 30 years old, why was there not an effort on the part of the Navy to say, okay, if we cannot spend it on that, give us another destroyer. Or let us make a down payment on an LHD. Or let us make a down payment on a carrier?
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Why roll over and die, as you did last fall? I mean, basically you did. You rolled over and played dead. And you are not doing any better this year.
Secretary YOUNG. Sir, internally, I and others fought to try to get additional funds for a DDG. But as the secretary described, when they went through the process and he talks about filling the buckets of money, when you filled the personnel bucket and the spares bucket and the flying hours bucket and all, we ran out of money. Still within that, we all fought for and the secretary has testified another DDG would be important to us.
And late in the game, our efforts were partially successful, I guess. We have $74 million of advance procurement to put with the $125 that the Congress was able to provide last year. And we are trying to get to funding that additional DDG. And that is important to us.
I cannot say we rolled over. We looked at other options. But as we have tried to outline, when the buckets were filled and we were out of money, we became victims of that in trying to add more ships.
Vice Admiral MCGINN. Mr. Taylor, if I could? We are not complacent about our shipbuilding rate. There are tremendously aggressive and robust debates inside the process in the Pentagon, just as I am sure there are here on the Hill.
And people feel very, very strongly in the Navy about the need to recapitalize our ships, our aircraft, our weapons, to take care of our people, to make sure we have the operations and maintenance funds, the base support funds. And we absolutely are not sitting back, letting the size of the fleet decay without robust debate and discussion.
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When that discussion ends for a particular cycle, the end game, if you will, for the submission of a budget, we are all required by law to support that budget. And we do. But the debate does not stop.
We are in the process now of putting together our budget for 2004 and out. And this is continuing.
And the last point I would make is that one of the challenges that we have in conducting this debate and in winning the arguments is taking into consideration the changing circumstances that we deal with externally, circumstances like: the fact that we were not at war, as you know, on the 10th of September; that the shape and size of the global war on terrorism is evolving as we speak; that the state of technology and critically the shipbuilding industrial base has changed, certainly in terms of corporate structure and organization; and that technology is allowing us to do things in ways for the future, in terms of building ships, in the kinds of capabilities we build into them, that were not there before.
All of that by saying we do urgently debate. And sometimes, we are more successful than others. We clearly have to sharpen our arguments and get the resources necessary to fill those validated requirements for ship size and a fleet size and a fleet composition that we need.
Before I came to Washington, back to Washington in October of 2000, I was a fleet commander. I know what it is to operate with a fixed fleet size and to have to very carefully plan the rotational cycles, the training cycles, to take into consideration operating fund budgets and the stress and strain on our people.
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So I have carried that spirit of the fleet here. And I assure you that my fellow flag officers feel that same way.
Mr. TAYLOR. Admiral, I hope you will not get me wrong. I do appreciate your service. I appreciate the times you have had to put your life on the line. I appreciate even simple things like just being away from your family on your kids' birthdays and things like that. And I would be remorse if I did not say that.
Vice Admiral MCGINN. Yes, sir.
Mr. TAYLOR. But I also would be remorse if I did not point out to you that in the time I have been here, off the top of my head, I received 15,000 letters from people saying, ''Build more B–2s.'' I am going to guess I have received 100,000 over military healthcare issues.
Do you know how many letters I have had saying, ''Build the fleet up?'' I bet you I could count them on two hands. Someone is not getting the word out there. You have a Navy League. Use it.
Vice Admiral MCGINN. Yes, sir.
Mr. TAYLOR. And you are not. And if anyone in this room represents the Navy League, you are not using the moms and the dads. I do appreciate you being good sailors and not trying to overstep the rules that you abide by. But you are not using the moms and dads, the aunts and uncles. You are not using the retiree organizations. And this is a democracy.
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Vice Admiral MCGINN. Yes, sir.
Mr. TAYLOR. And by and large, the people get what they ask for in this town. And you are not asking.
Mrs. JO ANN DAVIS OF VIRGINIA. Mr. Allen?
Mr. ALLEN. Thank you, Madame Chairman. And thank all of you for being here today.
This is my sixth year on this committee and in this Congress and the sixth year of seeing a Navy shipbuilding budget that falls short of what we need to maintain a 300-ship Navy. And there is a certain rhythm to this process. I know you all appreciate it. But I have the same problems that Congressman Taylor does.
One of the dramatic changes, of course, after the election, was the military thought—I think a lot of people thought—that this Administration would provide more for defense than the Clinton Administration. That would be to be expected. And that is true.
And I want to run through some of the numbers. In the two years we have of Bush Administration budgets, the overall defense budget has risen by $85 billion, or 27 percent. The overall Navy budget has risen by $15 billion, or 16 percent.
The overall procurement budget has risen by almost $6 billion, or nine percent. The Missile Defense Agency budget has risen by $2.5 billion, or 47 percent. But the new ship construction budget has shrunk by $4.9 billion, or 46 percent.
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Secretary Young, when you were talking about the process of filling the pots with money, one of the things that came through to me—and this is not about you personally—but one of the things that came through to me was that for this administration, the last pot to fill is Navy ship construction. That is the last pot.
And I think that, in many ways, deferral of construction on new ships is being used to pay the bill for other programs.
I have used these charts once before. For those of you who have seen them, I apologize. But the first one on the right, when the President said during the campaign, ''Help is on the way,'' even those who were not voting for him thought that would mean more money for shipbuilding.
But if you look at the fiscal year 2002 to 2005 budgets where you have some comparability, in fact, there are eight fewer ships in this Administration's budget than there were in the Clinton Administration's budget. And there are different ways of looking at this.
But the chart too has Secretary Rumsfeld's comments last year in which he said, ''The right shipbuilding number is nine. And it is about ready to fall off a cliff.'' Well, there is still no effort to do that.
You can see the shortfalls, 15 ships between 2002 and 2006. And I just want to say something about fiscal year 2007. This administration has said, ''Do not worry.'' In 2007, you can see right there on the chart, we will be building 11 ships. But by 2007, the loss in federal revenues from the Bush tax cut will climb fourfold to $152 billion a year.
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The math does not work, gentlemen. When Secretary England was before a group of us the other day, I said, ''The math does not work. The money is not going to be there.'' We are voting today on a budget resolution that is all spin and no substance. I mean, there is nothing. The math, the simplest math for this budget is no longer available.
And I know that is not your particular domain. But it bears mentioning.
Last, I want to call attention to the third chart. I was struck by the fact that a year ago, Secretary Rumsfeld said, ''The additional money we need for ship construction is $3 billion.'' That was just about exactly the increase going to missile defense. Of the $7.8 billion that is going to missile defense, about $3 billion is going to national missile defense.
Now there may be things on which we could, in my opinion—you know, you get my opinions when I have got the microphone here for a little bit—there may be things on which we could waste more money. But I do not see it, in my opinion.
At the end of the Clinton Administration, we were close to—the administration was close to negotiating away North Korea's missile threat. And when this Administration took over, the talks stopped. The threats began from our side. And now we are hung up, with no progress being made.
It would be a lot easier to negotiate away that threat than use it to support an additional $3 billion a year that could be going to more productive uses.
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I do, after all of that, I do have some questions for Admiral McGinn and Secretary Young.
I am sorry, Secretary Young, I missed a bit of your opening—I missed all of your opening testimony. And I do appreciate, I really do, that a third DDG is at the top of the Navy's list if additional funds can be found.
And I guess I would like you, supposing we can find the money. I know where I would take it, but I also know that our chairman here is the chairman. And I am going to lose that particular battle.
But if we could find money for a third DDG this year, do you agree that three DDGs a year is the right number just to sustain the industrial base in the two yards that build those ships? For either you or Admiral McGinn?
Mr. YOUNG. At some risk, but with some preparation, I will talk about that. There is a November 2000 update to a study that says three DDGs a year is the minimum to sustain the industrial base. But I believe there are certain assumptions in that study that have changed, not the least of which is LHD–8 is being acquired earlier than that study assumed.
That study made no presumption about the fact that we are now, because of the acquisitions by Northrop Grumman, building a quarter or more of LPD–17 at Ingalls. The study did not assume the investment, that you are extremely well aware of, in the land level transfer facility at Bath Iron Works. And the study really did not countenance the aggressive move by the companies, to their credit, to lean manufacturing, trying to reduce their overhead and size themselves to produce ships at lesser quantity.
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So I think the assumptions behind the study have changed to a degree. And while I do not have an additional study to support that, I think the strategy for LPD and the fact that we, at significant expense to the Navy, have laid in two DDGs a year in 2005, 2006, 2007 as a bridge to what was a non-existent bridge to DDG to DD(X).
It gives me some confidence that we have work that will get the industrial base through that period and hopefully to that point where in 2007 we do have 11 ships. And at least the one thing I can say to finish a comment I made earlier is those 11 ships, I think we have a lot of confidence that we can build.
Certainly, if it stays two DDGs, we can build those, two LPDs. We will have mature programs at that point in time. And we would like to build more ships. And the industrial base could certainly do that and build those additional ships more efficiently because they have implemented lean and sized themselves properly and made capital investments.
Mr. ALLEN. And I certainly would—
Ms. BROWN. Could I comment for just a moment on that?
Mr. ALLEN. Yes, certainly.
Ms. BROWN. We need every study. And we do not always need a study to tell us in the industry what the required rate is to sustain ourselves. And three DDGs is what is required. And it is a very mature program to sustain the industrial base.
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We have done all of these things on our manufacturing, our processes and our investment in our technology and our people, to mitigate the cost of low rates of production. But to say suddenly that we can ooze a little bit over here or shift a little bit of work here or there. If the numbers do not go up, the bottom line is the industrial base is going down.
Mr. ALLEN. And I would just add to that General Dynamics put in, I think, $200 billion into that land level facility. And we are worried in Maine. We are deeply worried by the proposal for just two DDGs.
I would add that the DD(X), of course, has slipped. I mean, it slipped a year for technical reasons. It slipped another year, I think, as a result of the failure to do the down select when it was first proposed. And so the gap that the bridge has to cover is now at least a couple years longer than it was before, in terms of planning as to when the DD(X) would actually go into production.
I just want to—let me just pursue this last point. I want to thank Ms. Brown for her comment about the pool of skilled shipyard workers in response to Congressman Taylor's question. We worry about that a good deal up in Maine because there are other places for these folks to go. And they are not trained overnight to build destroyers. And that we are worried, very worried about the potential loss of jobs.
But let me just say, the low ship procurement rate, it seems to some of us, are not having a favorable effect on the cost or will not, over time, have a favorable effect on the cost of production. And we worry a good deal that if the rate continues to drop, apart from all the other problems you are likely to see; that is, if we defer a sustainable rate for a number of years, the cost of the intermediate ships is likely to go up.
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And Secretary Young, I just wondered if you would like to comment on that point?
Secretary YOUNG. I cannot disagree with you, sir. I mean, there is no question that at low rate of production, we pay a premium for the ships. We also will pay a premium for splitting small classes of ships between two yards.
So a key part of my job is to try to buy what the Secretary of the Navy and the CNO and the commandant want us to buy and do so as efficiently as possible. And there are a number of discussions underway, some of which I know you are well aware of, to try to give us the best possible chance to load yards to do what they can do best—build the classes that we have on the books efficiently and set ourselves up for a good, healthy competition on DD(X).
Mr. ALLEN. Okay. Thank you all very much.
Thank you, Mr. Chairman.
Mr. WELDON. I thank the gentleman.
Now we will yield to the gentlelady from Virginia. And I thank her for sitting in the chair.
Ms. Davis?
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Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman. And thank you all for being here to testify.
And Secretary Young, I probably should not have frustrations towards you, but you are there, so you get it. You know, when you started out your testimony, I heard words like ''first priority,'' ''cost growth,'' ''running it like a business.'' But I hear anything but that.
You just stated to my colleague that you know that you are going to pay a premium for low production. And I guess I am just having trouble coming to grips with why in the world the shipbuilding account for 2003 is $1.3 billion less than it was in 2002? I mean, what is the justification for that when you have Secretary Rumsfeld who sat right there in that chair and said, as my colleague stated, that shipbuilding was about ready to fall off a cliff.
I kept hearing how in the Clinton Administration, we did not build enough ships and we were going to ramp up. And we are doing anything but that.
We have got the CVN(X) carrier. I have Newport News Northrop Grumman in my district. The CVN(X) carrier, we had General Ralston in that very seat this morning testifying and Admiral Blair, both testifying they have been without carriers. And if we had another theater of war over there somewhere, they could not do it. They would have to do it land based versus sea based, which would be difficult, as we all know.
I just guess I am looking for justification.
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Where are we going with this? Why is it the shipbuilding account that has been lowered? Why was it robbed for everything else? You cannot build a carrier overnight.
We have slipped the CVN(X) out a year. Now we are going to be short a carrier when—I do not remember if it is the Eisenhower or the Enterprise. One of them is retiring the same year that the CVN(X) was supposed to come online.
We have slipped it a year. We are going to have at least no less than a year there. We are going to be down to 11 carriers versus 12. Twelve is too low, as I understand from the Navy anyway.
I mean, I just need some justification. I am not hearing it. Help.
Secretary YOUNG. Justification, I do not, but I can offer an explanation and try to tell you.
Mrs. JO ANN DAVIS OF VIRGINIA. Try that.
Secretary YOUNG. The Secretary and the CNO—and I will let Admiral McGinn speak from that point of view—but they are in strong agreement. We have got to keep our people. We have got to keep the ones we have. We have to recruit additional people.
And not only that, but we want to take care of them. We want them to stay in the force and be prepared to fight.
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And to do that, we have to make up for some things that were missing in that red Clinton line. Spares, healthcare. The Secretary has testified—and maybe you had a chance to hear—we added $4 billion of the increase for military personnel: salary, health, sea pay, housing allowances, civilian healthcare. We added $3.4 billion to Operation and Maintenance (O&M) for steaming, flying hours and spares.
Those are significant chunks of money that were not in the red line budgets there. And when those decisions were made and those—as I continue to use the Secretary's words—those buckets were filled, we used up the increases that were out there and we did not have the funds to do some of the things you are talking about.
They are no less important to us. People are, as Admiral McGinn very accurately testified, accepting some amount of risk in what we are doing. But we are also, there was a measure of logic to what we are doing in the business side of it, which I talked about for a minute and I am not sure you were able to hear.
But we have come to the Congress and asked in the past for ships that we did not get funded. Two LPDs in 2001 and the Navy lost $1 billion of obligational authority.
This committee has been great. That has not been an issue here. Last year, there was a T-AKE at issue. And fortunately, it survived conference. But there was a question because we are moving into new classes of ships: Virginia class, T-AKE, LPD. We need to prove to ourselves, to OSD and to you that we can build those ships. And we can then confidently come to the Congress and request those ships and have them appropriated.
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And this committee again has been a great help in all those issues in providing the funds that we have been able to ask for. But there has been anxiety about whether we could defend these programs. But that confidence is building every day.
As you know, Virginia class is going very well. LPD is going better and better every day.
So I would offer you that explanation and tell you we are working to get to where you want us to be in the future. And that is a big part of what Admiral McGinn is doing every day now as he looks to the 2004 POM and sets the requirements for that.
Mrs. JO ANN DAVIS OF VIRGINIA. I will tell you where I really want us to be is to not lose the industrial base, which I have got a great concern with what Ms. Brown said. Newport News Northrop Grumman with slipping, just slipping the CVN(X) carrier out one year, we have got in the out years or we are going to lose a large number of those people that she was talking about might be laid off. You cannot get those people back—not at a good price, anyway.
And I do not know how to answer my constituents on that. And I do not know how to answer the Navy and those people that I talk to. Because we are without the ships. I mean, the ship rate is too low.
Mr. YOUNG. Newport News is a very busy yard for us right now.
Mrs. JO ANN DAVIS OF VIRGINIA. Right now is the key word. Right now, this year and maybe next. After that, not.
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Secretary YOUNG. Yes, ma'am. But I just wanted to make a different point, if you would grant me, and that is we need them to perform on the work they have right now, on the carrier new construction and the overhaul. And they are short skills in certain labor categories to do that work. And when that work slips and the cost grows, I will have some prior year completion bills that will eat my ability to buy additional ships.
I am not placing any blame here. It is just, we are trying hard to avoid that prior year completion bill so we can buy additional ships in the out years. And that will be definitely our intention to do that.
But we definitely also have to perform on the work we are doing right now. And I need them to work very hard on the work they have.
Mrs. JO ANN DAVIS OF VIRGINIA. I think we would all agree that the carrier has shown its value in the war in Afghanistan. So being without carriers, whether you are trying to say they need to do their job so you do not have those shipbuilding costs and they do not have the personnel, I just see we are going to have it worse. In years to come, they are not going to have the personnel and your shipbuilding costs are going to skyrocket.
Ms. BROWN. Congresswoman, could I comment on that too?
The problem that we have said, time and time again, is we need stability, higher stable rates of ship production, a plan that we know that we can manage our workload, that we can plan for that workload and manage our workforce. Every year, when it is like this. And it might be a blip of repair work that is in there right now, that has increased.
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We have laid off in the past years. So then we have to go out to try to recruit people, train them.
And in the non-nuclear area, it costs upwards of $50,000 a person to train. And it takes three years to train a first-class welder, five years a pipefitter. These skills are very—and I am not even talking about our engineering force here. Very, very technical and very costly.
And that is why we keep saying stability. And that stability gives you, the taxpayer, value for his money, cost savings. And we have a stable workforce. And we can offer a career opportunity for every shipbuilder throughout their life.
Mrs. JO ANN DAVIS OF VIRGINIA. Thank you.
Thank you, Mr. Chairman.
Mr. WELDON. Thank you, Ms. Davis.
Secretary Young, in your view, is it simply the amount of funding budgeted for shipbuilding that is keeping us from procuring nine or more ships per year?
secretary YOUNG. I am sorry?
Mr. WELDON. Is it simply the amount of the funding budgeted for shipbuilding that is keeping us from procuring nine or more ships a year? Is it just the budget?
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Secretary YOUNG. I guess I would offer a personal opinion. And that is that it is the shortfalls and the fact that military pay raises and the pay account continues to grow, the fact that healthcare costs grow unexpectedly and the fact that spares and flying hours have been historically underfunded and our equipment is aging and costs more to operate. All those factors are making two-thirds of our budget—MILPERS and O&M—grow at rates beyond what we expect. And so they are, in some cases, squeezing procurement out.
Mr. WELDON. But what you are saying is if we had more money, we could build nine ships a year. Is that what you are saying? I understand all the other factors.
Secretary YOUNG. Yes, sir. I would agree with a good bit of Mr. O'Rourke's analysis that, at this point in time, I have growing confidence that in Virginia class, LPD and certainly in DDG, a couple of other cases, we could build more ships if funds were provided.
Mr. WELDON. Mr. O'Rourke, in your view, is it simply the amount of funding budgeted for shipbuilding that is keeping us from procuring nine or more ships a year?
Mr. O'ROURKE. As I see it, it is primarily a financial question, rather than a question of the readiness of the programs to absorb an increase. The Secretary has talked about the need to have confidence that the Navy can execute these programs.
I do not know how much confidence the Navy should require for a ship like the T-AKE 1. That is a basic auxiliary ship, non-complex, similar to other auxiliaries and sealift ships that that yard has built. It is going to use very well established, commercial grade, e-drive technology.
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There is nothing about that ship that I see that poses a high technical risk. If the Navy, at this point, has no confidence or does not have sufficient confidence that the yard can build that ship at a rate that would include an increased rate this year, then you have got to wonder why they awarded the program to that yard in the first place.
And in terms of confidence for the submarine program, I have been around a few years. And I have seen troubled submarine programs. And by all appearances, the Virginia class is not one of them.
Vice Admiral MCGINN. I do not think that—
Mr. O'ROURKE. If I could complete what I was saying? The lead ship is about two-thirds complete at this point. And it has experienced only about 10 percent as many design changes as the lead Seawolf ship did.
In addition, as the Navy has testified, all four of these ships are progressing on schedule. And the design drawings for this class are more than 99 percent complete.
Finally, if you will recall, this particular submarine design does not appear to be a high-risk design compared to previous years' submarine designs. In fact, in front of this committee seven years ago, when this program was first presented to Congress, this submarine program, that design was criticized, in effect, by some witnesses for being too conservative and not risky enough.
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And so in my view, you can always raise the bar and say you want to be more cautious. But by the standards that have been used in past years for judging the maturity of programs and the readiness to absorb an increase if the funding were available, it seems to me we have three and possibly four programs that could absorb those increases.
And so from that standpoint, you can argue that it is primarily a financial question and not a question of program maturity.
Mr. WELDON. Now Mr. Secretary and admiral, you both indicated you wanted to speak.
Vice Admiral MCGINN. I just wanted to say, Mr. Chairman, that I agree with what Mr. O'Rourke has said. It effectively is not a question of confidence. We have got—Secretary Young has testified just a while ago—good shipbuilding programs and shipbuilding yards that we could put additional money into and get value commensurate with the investment in there.
So essentially, it is a question of money.
Mr. WELDON. Thank you.
Secretary YOUNG. Could I?
Mr. WELDON. Yes.
Secretary YOUNG. I think an element of the confidence I am talking about is confidence we can build the ships, but also confidence that we can request the funds and have them appropriated and authorized in the Congress. I have, as Mr. O'Rourke said, pretty good confidence in National Steel and Shipbuilding Company (NASSCO). I am very comfortable that that yard has done an excellent job on LMSRs. And they should do an excellent job on T-AKE.
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But it is a new ship. And there are three of them in the pipeline now. Do I ask for two or three more and have confidence that I can get those supported through OMB and everywhere? It is not a challenge.
I am not being critical. And we built this budget basically four to five months ago. At that time, LPD has made tremendous strides in these four or five months. And I would say a very different thing today to you about LPD than I would have said five or six months ago about that program.
So my confidence in these are growing dramatically. And I believe we can build these ships.
Vice Admiral MCGINN. One of the biggest frustrations we have in this process of allocating not enough resources against valid requirements is having to spread resources in an inefficient and uneconomical way. It was mentioned earlier in the hearing that, in many cases, we operate at minimum sustaining rates, far from economic order quantity. And we all recognize that we could get more ships for the dollar if we can raise to the economic order quantity in a particular design or a particular yard.
The problem is, where we are faced with a challenge of resources not meeting requirements, you do not want to kill one thing and therefore the industrial base that underlies it in order to buy something else at an economic order quantity. So until that rising tide lifts all ships, we are going to have to be making these tough—spread the allocation to make sure we are at least at minimum sustaining rate. So when we can raise that level of funding, we have something to show for it.
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Mr. WELDON. I have only chaired this subcommittee for eight months, but I have been on the Armed Services Committee for 16 years. And I hate to say this, but I do not have any shipbuilders anywhere near my district and I have a concern here. And my gut feeling is that the Navy consistently under-requests ships because they know the Congress will come through and plus up funding for programs that should have been requested in the original budget.
That is a bad way to do business. There is a lot of congressional support for shipbuilding, a lot of concerns because of job and because of the industrial base. But we should not leave it to the add-on process of the appropriators to plus up funding when we know full well there is the need there that there is there.
Admiral McGinn, the 2001 QDR left unchanged for the time being the previous administration's plan for a 310-ship fleet. OSD however has referred to a DOD report done last year that calls for a 340-ship fleet. And the CNO has spoken of the need for a 375-ship fleet.
Is the requirement for a 310-ship Navy going to be revised upward? If so, when is it going to happen? And what will be the new number? And what requirements drive the CNO to a number of 375 ships? And would be the composition of the 375-ship Navy?
Vice Admiral MCGINN. The principal change in the number, Mr. Chairman, has been the shift from a two-MTW strategy to a four-two-one. And that thought process has been certainly accelerated by what happened on 9–11 and the subsequent operations in the global war on terrorism.
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The numbers are in the process of being further analyzed. And as you well know from previous types of studies, the assumptions are absolutely key to what the outcome of the numbers is in terms of the total number and in terms of the composition. But I see a lot of similarity in the conclusions of many of these studies.
So in answer to your principal question, my judgment says that we are going to see that number revised upward from the QDR 2001 number and that that number will be finalized within this calendar year.
Mr. WELDON. Can you for the record give us what the composition of that number would be as you revise it upward?
Vice Admiral MCGINN. Yes, sir. I will provide that in a follow-up.
Mr. WELDON. Mr. O'Rourke, in your testimony, you indicated that the changing composition of the SCN account could complicate congressional oversight of Navy shipbuilding. I would like you to elaborate on why that is the case.
And you also indicate that the proposed spiral acquisition strategy for the DD(X) could also complicate congressional oversight. I would like you to elaborate on both, what you mean by ''complicate congressional oversight of Navy shipbuilding'' in that one particular program.
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[The information referred to can be found in the Appendix on page ?.]
Mr. O'ROURKE. First, in terms of the composition of the SCN account, what we have now is a situation where new construction ships—which, in the past, have been funded in the SCN account—are migrating out of that account to other places in the defense budget. And at the same time, we have had things other than new construction ships that have migrated into the SCN account.
And as a result of that, the SCN account is losing value potentially as the one place you can go to in the defense budget to understand total numbers of ships being procured, total funding for ship procurement and the relationship between the total amount of money in the shipbuilding budget and the actual number of new construction ships.
It used to be a simpler situation. And now it is going to get more messy.
Now there are reasons—potentially very good ones—for why all these changes are taking place. But we have taken a situation where Congress can go to one place and look to ascertain what the situation is and we will be changing it to a situation where Congress is going to hunt through the defense budget to try and find that information.
In terms of spiral acquisition on DD(X), this is an issue of program oversight, not only for DD(X), but for any program that is pursued under spiral acquisition. As I mentioned in my testimony, spiral acquisition is an outgrowth of the defense acquisition reform movement of the 1990s. And it promises to do some good things, such as getting useful increments of capability into the hands of our people sooner and exploiting their feedback in helping to determine how to revise the system and make it better and in mitigating technical risk as you are developing it and in terms of injecting new technology into that system during its lifecycle.
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It is agreed. Those are all good things to do.
But from the standpoint of congressional oversight, it puts Congress in a potentially complicated position because when these programs are proposed for initiation, Congress will have less detailed information than it traditionally has had and has wanted to have in the past on the design of the system, on the quantities to be procured, the schedule for procuring it and the total cost. Those are things Congress has wanted to know with some amount of clarity before it moves ahead with a program.
And they have wanted to be able to reach back, years later, and use those as benchmarks to judge the progress of the program. And they have wanted to have a certain amount of confidence in the funding projections that show what kinds of funding might be needed for a given program in the future. All those things are more uncertain and more volatile.
And we are already seeing evidence in the DD(X) program that spiral acquisition is leading to uncertainty, if not confusion, about what the program is or might be. And that makes it more difficult for Congress to know what it is they are signing off on, what they may be living with in the future.
For example, as I mentioned in my statement, we are not even sure at this point if that DD(X) in 2005 is to be something like a lead ship for a new class or whether it is going to be a one-of-a-kind test bed. We do not know what kind of ship the LCS is going to be. There is a great variety of opinion, within both the Navy and industry, about what that ship can or should be.
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And the replacement of the DD–21 program with the DD(X) program has created uncertainty about whether the future surface force is going to generate enough additional naval surface fire support capability to do what the DD–21 program would have done in redressing the longstanding shortfall in naval surface fire support capability for the Marines. And so if it is not handled there, is it going to be handled somewhere else?
These are some issues that are already arising as a function of the fact that we are getting into possibly this DD(X) program under spiral acquisition. I am not saying spiral acquisition will not do good things. But this is an ''eyes wide open'' situation. Congress needs to realize that when they sign off on a program to be pursued under spiral acquisition, it changes the rules under which Congress has traditionally decided on whether to go ahead with a program and to try and understand what that program as it conducts oversight in the years ahead.
Mr. WELDON. Secretary Young, before I ask Mr. O'Rourke to give us examples of this clouding of the account lines, do you agree with his assessment? And if you agree that this change is occurring of things being funded out of the shipbuilding account that perhaps are not really shipbuilding but are other activities, why is that occurring? And why is the Navy doing this?
Secretary YOUNG. Mr. Chairman, I cannot tell you how grateful I am for that question. And I appreciate the opportunity to respond.
I have been a principal advocate for funding DD(X), the lead ship, in R&D. We fund virtually every other new system—aircraft and other things—we fund the lead, several items of that class, in R&D and develop it. And I believe that this strategy enhances our ability, OSD's ability and your ability to oversee DD(X) lead ship construction so that we do not end up with an LPD-like problem.
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Every year, you will see us ask for the right amount of money to continue the lead ship construction. And every year, you will get a chance to look at it, instead of being presented with one shot at reviewing the SCN request for that lead ship, hoping we have all got it right. And then we go off and execute. And the next time you hear from us is when we need prior year completion in significant amounts, as we do on LPD–17.
So I think we are enhancing your level of oversight and our level of oversight. And further, we are doing something that is better, and that is we are trying to let the shipyard establish a process to build the lead ship and the whole class and make good decisions about the process to efficiently build that ship.
If they have a fixed SCN budget, the first choices they will make is to try to deliver that ship within the budget. And if they have a chance to make an investment in a process to better build that system, as you have seen in C–17 and others, that will fall off the table.
So in R&D, I can give them an opportunity to ask for a little bit more money the next year. You will get to see that request, hopefully authorize and appropriate it. And we will try to set up a process to build the whole class of ships efficiently.
And further, for each spiral, there is a specified—and Admiral McGinn can speak to this even better—a specified set of capabilities we are going to shoot for. And you will know how the dollars help us get to that capability.
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And to the next point, I would tell you absolutely DD(X) is the lead ship in a class. We have to get to this new destroyer that gives us better survivability, better produceability, reduced manning, less O&M cost. And so that first ship is not, in my mind, a test ship.
It is a lead ship. It is a ship on which we will do testing. It is a ship that may not deliver on day one with a full set of warfighting capability. And we may have to make some modifications to it. But on day two or year two, that ship is going into the fleet and become the first DD(X).
And I have discussed this with Secretary Aldridge and he agrees. We cannot build a $2 billion test ship. This is a fleet asset once we prove we can build it, design it, test it and then set up to build the remainder of the class.
Mr. WELDON. Do you want to add something?
Mr. O'ROURKE. Yeah, I think that is an example of how there is continuing confusion over the nature of that ship. I do not doubt Secretary Young for a minute when he believes what he says and that Aldridge believes it. But Admiral Szemborski does not believe it, nor does Dov Zakheim. So I do not know, as an observer from the outside, what to take away from that.
People are saying absolutely contradictory things about this ship. And this is something that can happen when you get into a program under spiral acquisition. I am not saying we should not do spiral acquisition on this and other programs. I am just saying this kind of confusion is the sort of thing that can occur.
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In terms of examples for what is migrating in and migrating out, things other than new construction ships that have migrated in have included a variety of nuclear refuelings for existing nuclear-powered ships and also—well, basically nuclear refuelings and also some service life extension programs for some older classes. That is not new construction. It is not shipbuilding. Nor is it conversion.
And that is what the account used to be. It used to be shipbuilding and conversion.
In terms of what is migrating out, Secretary Young mentioned the DD(X). That is one example that is going to migrate out to the RDT&E account. And another example is the T-AKE 1 program, which is proposed for migration over to the national defense sealift fund. That actually responds to congressional interest, expressed by this committee and others, a couple of years ago.
It is very important to note though, when you take ships that were previously in SCN and migrate them to either R&D or to the national defense sealift fund, they will no longer be subject to the full funding provision, which applies only to things that you procure in the procurement title of the appropriation account. So when you take them and put them in these other parts of the budget, the Navy will be free to fund them using incremental funding or some other form of funding that does not conform to the full funding provision.
The full funding provision was instituted by Congress. It was imposed by Congress on the Defense Department about 50 years ago, in part to help Congress better understand and track the costs of shipbuilding and other programs. And if you start taking these programs and putting them into accounts where they are not subject to full funding, you are creating a situation where it can be more difficult for Congress in the future to understand what the total costs of these systems are and how the funding for them is being used.
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For example, we did the Large Medium Speed Roll-on/Roll-off Ship (LMSRs) a few years ago in the 1990s. And for example, in fiscal 1995, Congress ostensibly appropriated funding to buy two of those ships for about $546 million. And that is sort of how it looked when you looked at the budget presentation. In fact, that $546 million was taken by the Navy and applied to 16 different LMSRs in that program that were contracted for between fiscal 1993 and 1997. And they could do that because in the national defense sealift fund, you can move the money around.
I am not saying that is a bad thing. That sort of flexibility can actually help improve the efficiency of shipbuilding activity. But it does pose a challenge for Congress in understanding the costs of these systems and where the funding is being applied in a particular year.
And that is a tradeoff that Congress has to be aware that it is making if they are going to take ships from SCN and put them in these other places that are not subject to the full funding provision.
Mr. WELDON. Secretary Young, Mr. O'Rourke, in this one instance and in another instance, seems to be making sense to me, especially I have to ask the question. Why would you do ship repair and overhaul out of the SCN account? Should not that be O&M? Why would you do that out of the SCN account line?
Mr. YOUNG. I do not have a perfect set of history here. But I believe the first pass to that change was—I can only get myself in trouble here. I am not so sure that was not implemented initially through the appropriations process because of outlay scoring issues in tighter budget climates where outlays were driving the situation. I do not know if Ron remembers that history.
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Mr. O'ROURKE. Well, if I could take you back, I would say it started with the aircraft carrier, the conventional aircraft carrier service life extension program. The scope and time and funding required to do one of those was so big, it looked to many members of Congress and to people in the executive branch like it deserved to be in the SCN account like a real conversion or a new construction ship.
If you did that, then it was not that big of a step a few years later to put the nuclear carrier refuelings, which then became the precedent for putting the nuclear cruiser refuelings, which became the precedent for putting the submarine refuelings in there. So it was a stair step method. And we have gotten to the point where that account is chock full, potentially, of nuclear ship refuelings that are neither new construction or actual conversions. They do not really change the missions of the ships.
Mr. WELDON. Ms. Brown?
Ms. BROWN. Mr. Chairman, on that, to go back on the history, it was with the aircraft carrier refueling and overhaul, Congress did transfer those carriers into the SCN account because, if you will recall, many times there used to a thing called 60–40 and now 50–50 public-private ship repair. And in the private ship repair yards, when the nuclear carrier overhaul was counted against the private sector portion, it meant that the private ship repair
yards would get no additional contract opportunities for repair work.
And so it is a very unique and different beast there on the carrier refueling and overhaul. However, at the same time that the Navy has been arguing for years the need for flexibility in funding and budgeting its ships, what has happened is the past administration and followed by this Administration has been putting other work—repair work like the refueling of the submarines—into the SCN account to make the procurement account look larger.
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And that is taking their ability that they have and flexibility in the O&M account. My fear is, Mr. Chairman, if this trend continues, the conversion part of the shipbuilding account is going to be larger than the procurement.
Secretary YOUNG. Mr. Chairman, could I make one more comment?
Mr. WELDON. Absolutely.
Secretary YOUNG. But in the end, there is some agreement here that, over time, we need to grow the SCN account in total. I believe frankly, honestly it is a good thing that we have moved some of these overhauls into the procurement account for two reasons. One, we can tell you what we think it is going to cost and measure ourselves to that. And it avoids the competition in O&M against spare parts and contingency operations and a number of things.
It is not a bad thing that those funds are in the procurement account and protected for that specific purpose.
Mr. WELDON. I think what Mr. O'Rourke is saying is that you can make that decision. But Congress needs to be fully aware of the implications of making that decision prior to doing it, which I would say that many of our colleagues do not understand the implications of that.
Let me ask a question—
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Vice Admiral MCGINN. Mr. Chairman, if I could?
Mr. WELDON. Yes, admiral?
Vice Admiral MCGINN. I just wanted to go back to the DD(X) issue. It is truly a lead ship of a class. And I think that the confusion that Mr. O'Rourke refers to may be simply a matter of degree and focus.
The X in DD(X) is because it is the lead ship in the class. And as Secretary Young pointed out, we do prototyping in virtually every other thing that we build, and particularly airplanes. And it makes a lot of sense to do the same thing for the lead ship of a class.
We will be experimenting with it, however. But it is going to be a deployable asset. And it will be the first baseline that we will spiral capability. As technical risk is diminished, as cost savings opportunities appear, subsequent ships will take advantage of those technology opportunities and cost saving opportunities. And we will evolve that ship.
But it will be done in a way that takes advantage of the disparate rates of change of how you build ships—the whole mechanical-electrical—and how the tremendously rapid pace of information technology, for example, that would help us with combat systems and sensors.
Mr. WELDON. Secretary Young and Admiral McGinn and any of you, I have for a number of years been under the impression that the national defense features program would eventually take off. And yet that has not happened. I had high hopes for that.
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What is the problem? And why hasn't that program taken off?
Secretary YOUNG. I reviewed some material in advance, so I may not be as clear, as informed as you are even. But my understanding is it is still a difficult environment to take a U.S.-built ship and then add just the cost of the features to it and make that attractive enough for people who want to buy a U.S.-built ship, add defense features and then make it available like the civil reserve air fleet.
The study I saw recommended that we might have to take the next step of adding additional payments so that not only does that ship have defense features as well as a prepayment for the service we might want, but even a buy-down in the price. So the building of that ship in a U.S. yard is attractive vis-a-vis other cargo carriers who are buying their ships in foreign yards and getting those ships significantly cheaper.
So we may have to analyze taking a step beyond the fact that we have a robust aircraft industry and it is not too hard to go to a 747 freighter operator and say, ''We want to add certain features to your plane and have you carry freight in a time of crisis.'' We do not have a robust—unfortunately, as we have all discussed today—a shipbuilding industry and a shipbuilding operation, particularly in commercial ships.
So there may be a way to structure a features program that will be more costly than what we have seen in civil reserve air fleet and offer some sort of buy-down vis-a-vis the foreign yards to stimulate that interest in those ships.
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Mr. WELDON. I have met with some companies over the past five or six years that had a definite interest in an idea that I thought was worthy, and that is trying to get two bangs for the buck in terms of somebody building a ship which they knew they would make available if, in fact, it were needed by our military, if they simply put in some features that are important.
Ms. Brown, do you have any comments on that? Or any suggestions or ideas?
Ms. BROWN. Mr. Chairman, I know that Great American Lines has been one of the companies that has expressed interest. And quite frankly, I think it is a perfect example to where the Japanese government, one of our allies, could really step up to the plate if they are serious about burden sharing. The Great American Lines is trying to penetrate their auto trade. And of course, national defense features would be an element of their program.
But unless the government of Japan opens the car carrier trade to this shipping line, there will be no ships built and our sealift capability will not be augmented.
Mr. WELDON. Well, I agree with you totally. In fact, I am aware of that particular case. And in fact, I have met with both our former ambassador to Japan—when it was Tom Foley—and the Japanese government and have expressed to them my dismay that they look to us for the security that we provide off of their coast and support their military and yet, when it comes to our economic security and the fact that they could be using even a very small percentage of carriers to come back and forth—U.S. carriers—they have balked at that.
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And I think it is a case where our government needs to speak out clearly. Maybe there is something we can do in the bill. I would ask staff to look at that and ask you to come up with some ideas.
And Ms. Brown, from the shipbuilders, of what you think we could do to kind of tweak the Japanese government about, ''Yeah, we will be there to help you, but we want some response also so that we can enhance our sealift capabilities.'' And that is one way to do it without really causing anyone any burden.
I mean, the only ones that lose out there are those Japanese carriers that are benefiting overwhelmingly right now from trading the vehicles here in the U.S. And so I think it is something that we should pursue together.
Mr. Taylor?
Mr. TAYLOR. Thank you, Mr. Chairman.
Admiral, how many ships will the Navy retire this fiscal year?
Vice Admiral MCGINN. I would like to get back to you on that one to give you a precise answer.
Mr. TAYLOR. I would like the number for 2002, 2003, 2004 and 2005.
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Vice Admiral MCGINN. Yes, sir.
Mr. TAYLOR. And I would like to correct myself, admiral, and for the record note that on January 1st of 1995, the Navy had 435,000 sailors, 392 ships and 220 admirals. January 1 of 2001, we had 372,000 sailors, a loss of 63,000; 314 ships, but still 220 admirals.
We authorize the number of both.
Vice Admiral MCGINN. Yes, sir.
Mr. TAYLOR. Okay.
Mr. O'ROURKE. Representative Taylor, the Navy's budget book shows that we are going to be deactivating 11 ships in 2003, to answer the first part of your question.
[The information referred to can be found in the Appendix on page ?.]
Mr. TAYLOR. And how many ships come into the budget, sir? How many ships come into the fleet this year?
Mr. O'ROURKE. And deliveries to the fleet will include three DDGs, one Nimitz class carrier. So that is a total of four, against the 11 leaving.
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Mr. TAYLOR. So we have a net loss of seven.
Mr. O'ROURKE. Right.
Mr. TAYLOR. Secretary Young, you look puzzled.
Secretary YOUNG. No, sir.
Mr. TAYLOR. It is not a recent phenomenon, Mr. Secretary. It has been going on for some time.
Secretary YOUNG. Oh no, sir. I have no concern about the number. I just think we are also getting an LMSR. It still makes your point, sir.
Mr. O'ROURKE. Right. But that ship will not count against the battle forces of the Navy. That is a sealift ship.
Ms. BROWN. Correct.
Mr. TAYLOR. Mr. Chairman, I am going to go out on a limb here. But seeing as how we have made an offer to you, Secretary Young, if you want to come back before the committee and tell us that you want to put some additional ships in the budget, I bet you I could talk the chairman into scheduling that hearing. Okay?
Secretary YOUNG. I thank you very much for your offer.
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Mr. WELDON. Thank you, Mr. Taylor. And I want to thank each of you for your testimony and for your service to the country. We all know we are in an extremely difficult situation right now. We have been projecting a massive train wreck on this committee for six years. We are in the midst of it now.
And unfortunately, in spite of what the American people think, which is that we are putting a lot of new money into the defense budget, we are really not. We are paying for past bills. And we are taking care of quality of life issues.
But the modernization is not improving. In fact, shipbuilding is probably the best example. We are going the wrong way. We are going into a negative, a deeper hole.
And for those of us who are not going to be changing, like a lot of people do every two or three years because of a change of command or because the administration has to change, we have to live with this. And I can tell you, it is not a very pretty sight for us to look at in the future, in terms of where we are going.
And we heard a heard a lot of promises. We heard a lot of promises during the Clinton years. ''Oh, do not worry. The out year budgets will take care of it.'' Well, that never comes.
And so a lot of us, on both sides of the aisle, who do not have shipbuilding interests. I do not have any more shipbuilding interests. I used to, but they have been gone for decades. But I am concerned because of what I am seeing. And I can tell you, I am going to use this committee position to promote this issue throughout the tenure that I have as the chairman of procurement.
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I know Mr. Taylor—well, he will not need much prodding. He has already been there.
But we thank you for coming in. We know you are in a difficult position. But we hope you take back our sensitivities.
Mr. O'Rourke, keep speaking out. Your analysis is very valid. And we think it gives us the good, honest, independent effort that we need.
Not that we do not trust the Navy. We do.
But all of us need to have reality checks from time to time. And you give us those reality checks. And I want to invite you to continue to feed me and this committee information.
Mr. O'ROURKE. Thank you.
Mr. WELDON. Cindy, we know you are always going to be there. You have been tireless. And we appreciate the effort of your association and your ambassadors program and helping several years ago to begin to raise the awareness among the American people of the situation we are now in.
That is the kind of effort that is important. And your work with the labor unions, to bring them in as a key part of our team, is also critically important.
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I also want to thank committee staff. Mr. Sullivan, you did a fantastic job in terms of organizing this. Jesse Tolleson and Dan Hilton, also thank you for your work.
And again, thank you all for being here. We look forward to working with you. The hearing now stands adjourned.
[Whereupon, at 5:07 p.m., the subcommittee was adjourned.]