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[H.A.S.C. No. 109–50]








MARCH 28, 2006

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

GENE TAYLOR, Mississippi
DAN BOREN, Oklahoma

Harry Cartland, Professional Staff Member
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Doug Lane, Professional Staff Member
Heath Bope, Professional Staff Member
Bill Natter, Professional Staff Member
Andrew Hunter, Professional Staff Member
Claire E. Dunne, Staff Assistant




    Tuesday, March 28, 2006, U.S. Navy's Future Submarine Force Structure


    Tuesday, March 28, 2006




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

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


    Casey, John P., President, General Dynamics Electric Boat Corporation

    Konetzni, Vice Adm. Albert H., Jr., (Ret.), U.S. Pacific Fleet, U.S. Navy

    Munns, Vice Adm. Charles L., Commander Naval Submarine Forces, Department of the Navy, U.S. Navy; Allison Stiller, Deputy Assistant Secretary of the Navy (Ships Programs), Department of the Navy; Rear Adm. Joseph A. Walsh, Director, Submarine Warfare Division (N87), Department of the Navy, U.S. Navy; and Rear Adm. William H. Hilarides, Program Executive Officer for Submarines, Naval Sea Systems Command, U.S. Navy

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

    Petters, C. Michael, Corporate Vice President and President, Northrop Grumman Newport News

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[The Prepared Statements can be viewed in the hard copy.]

Casey, John P.

Konetzni, Vice Adm. Albert H., Jr.

Munns, Vice Adm. Charles L., joint with Rear Adm. Joseph Walsh

O'Rourke, Ronald

Petters, C. Michael

Stiller, Allison

[There were no Documents submitted.]

[The Questions and Answers can be viewed in the hard copy.]

Mr. Bartlett
Mr. Simmons
Mr. Taylor

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House of Representatives,
Committee on Armed Services,
Projection Forces Subcommittee,
Washington, DC, Tuesday, March 28, 2006.

    The subcommittee met, pursuant to call, at 3:10 p.m. in room 2118, Rayburn House Office Building, Hon. Roscoe G. Bartlett (chairman of the subcommittee) presiding.


    Mr. BARTLETT. The subcommittee will come to order.

    Today we will receive testimony from the United States Navy, the Congressional Research Service, members of industry, and the retired submarine force commander concerning the Navy's future submarine force structure and the challenge of maintaining a viable and responsive submarine production industrial base.

    Today's hearing will focus on three questions: First, does the submarine force structure set forth in the Chief of Naval Operation's (CNO) long-range shipbuilding plan adequately support the national military strategy and combatant commander (COCOM) submarine requirements? Second, what strategies have the Navy and industry implemented to reduce the cost of designing and building submarines? And, third, could accelerating the procurement of more than one Virginia class submarine per year to 2009 have a positive impact on the Navy's long-range shipbuilding plan, help reduce submarine construction costs, and, last, retain the valuable expertise of submarine designers and engineers?
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    Concerning our first question, meeting combatant commander requirements, the subcommittee understands that the Navy's submarine force structure contained in the CNO shipbuilding plan has a goal of maintaining 66 submarines, of which 48 would be in the fast attack category. However, beginning in the year 2020, the Navy's inventory of fast attack submarines will decrease below 48 for a period of 14 years and eventually drop as low as 40 before slowly returning to 48 in 2034.

    In contrast, a 1999 report to reevaluate fast attack submarine requirements for the 2015 and 2025 time frames was conducted by the Chairman of the Joint Chiefs of Staff. The study concluded that a fast attack submarine force below 55 in 2015 and 62 in 2025 would leave combatant commanders insufficient capability to respond to urgent demands without creating gaps and filling other requirements of higher national interests.

    These force structure numbers are vastly different from the Navy's current plan, and the subcommittee will seek to understand what has caused this change in recent years.

    Concerning our second and third questions, submarine shipbuilding costs and retaining design expertise, the subcommittee understands that the attack submarine force level goal once determined is a primary factor to consider in assessing at what rate Virginia class submarines should be procured in coming years.

    Another factor to consider is the effect of annual procurement rates on unit procurement costs. Due to spreading overhead costs at the shipyards and suppliers, and reduced loss of learning between submarines at the shipyards, procuring attack submarines at two per year could reduce the unit procurement costs by up to $200 million.
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    The goal of the Navy and industry is to reduce the current cost of the Virginia class submarines from $2.4 billion to $2 billion by the year 2012. At that time the Navy is programmed to begin the procurement of two Virginia class submarines per year.

    The subcommittee is concerned the Navy's Virginia class submarine procurement rate is driven primarily by a limited budget divided among an array of immensely expensive platforms and not at a procurement rate that would meet future requirements or potential threats.

    To help us understand the complexity of these questions and gain insight of the Navy's future submarine force structure, we have two panels of witnesses with us today. For the first panel I welcome Ms. Allison Stiller, Deputy Assistant Secretary of the U. S. Navy for Ships, and our travel companion in our most very recent CODEL to the Pacific region. I just noted I hope her biological clock was working better than mine. With a 9-hour shift in the day, I got to sleep at 3:30 this morning, so I expect scintillating testimony from the witnesses so I remain awake.

    Also Vice Admiral Charles Munns, Commander, Naval Submarine Forces; Rear Admiral Joseph Walsh, Director, Submarine Warfare Division; finally, Rear Admiral William Hilarides, Program Executive Officer for Submarines.

    Before we begin, let me call on my friend, the gentleman from Mississippi, the Ranking Member of the subcommittee, always our traveling companion, for any remarks he would care to make.
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    Mr. TAYLOR. Mr. Chairman, I very much look forward to hearing this. Thank you for calling this hearing. In fairness, I would like to yield my time to either Mr. Simmons or Mrs. Davis, since they seem to represent submarine-building areas, and I am sure they are keenly responsible for this hearing being held. I think we need to hear what they have to say.

    Mr. BARTLETT. Thank you for yielding your time. We will divide that as they see fit between Mr. Simmons and Mrs. Davis.

    Mr. SIMMONS. Thank you, Mr. Chairman. I thank the Ranking Member, both of you, for your leadership and for your insight into scheduling this hearing, which comes at a time when I believe that our capability to design and build and deploy submarines is in crisis. I believe that this subcommittee and this Congress generally has a fundamental responsibility, a constitutional responsibility, to provide and maintain a Navy, and that in the area of sub surface warfare and the area of subsurface dominance, that capability is seriously at risk, and this year and the decisions we make this year are of historic importance and will be with us for many years to come.

    I will simply say that in my associations with the silent service, I have been repeatedly amazed over the last 20 years at the amazing things they do. But if the silent service has any weakness, it is that they are silent, that they don't speak out, because the risk of their missions and the nature of their missions, especially in ISR, Intelligence Surveillance and Reconnaissance, is such that if they talk too much, they place themselves and our national policy missions at risk.
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    So, I think it is incumbent upon us at this important juncture to do what we can do to draw them out, to discuss the problems that we face that you so adequately summarized from force structure in meeting our strategic obligations, in sustaining our industrial base and maintaining a capability that we have had unparalleled in the world for 50 years, but that, if we don't make the right decisions now, could be at risk in the outyears.

    So I thank you, Mr. Chairman, and I thank the Ranking Member for holding this hearing, and I yield back any time that I may have.

    Mr. BARTLETT. Well, since the Ranking Member could very well have spoken much longer than you, let me yield additional time to Mrs. Davis.

    Mrs. DAVIS. Thank you, Mr. Chairman. I am not going to take time away from the witnesses, because I don't think I could have said it any better than what Mr. Simmons said. I thank you for your interest in holding the hearing, and I thank Mr. Taylor for yielding the time to Mr. Simmons and myself. Again, I think Rob said it adequately.

    Mr. BARTLETT. Thank you very much.

    I understand the panel would like Admiral Munns to be the leading witness. Admiral Munns, the floor is yours.

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    Admiral MUNNS. Mr. Chairman, distinguished Members of the Projection Forces Subcommittee, Rear Admiral Joe Walsh on my left, Willie Hilarides on my right, and I thank you for the opportunity to represent the men and women of your Navy and your submarine force. You have asked some good and pertinent questions today, and we are eager to discuss them with you.

    We are a force that for 106 years of history has produced many and varied effects, often with strategic consequences. We are a force that has worked every day forward around the world, whether our Nation is engaged in major war, nuanced strategic conflict, varied or numerous skirmishes or building the peace, and I believe this will be even more true in the future as it is today.

    With regard to the current challenges and opportunities, the submarine force is fully ready to participate in the joint force and win in major combat against powerful nations. However, today America is engaged in a different war and one that I believe will be a long war.

    Today we are working every day as scouts for our force. On any average day, more than 60 percent of the operational attack submarines are under way, and of those, 38 percent are forward deployed for a lengthy period. These submarines are meeting all critical combatant commander requirements today. Additionally, the SSBN force is under way and is in a survivable posture should the President need to call it.

    In 2005, this past year, we deployed 31 attack submarines throughout the world on lengthy operational deployments. This included, as I think you know, the USS Virginia, which conducted a successful deployment on a tailored mission for a specific combatant commander requirement. That the Virginia was able to deploy only 11 months after her commissioning is a tribute not only to her crew, but to the design of the ship and the skill of the shipbuilders.
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    For those SSNs not in a maintenance period, or operations tempo (OPTEMPO), our operational deployment today is 46 percent. This indicates that our force is fully deployed, but with a little room for limited, short-term surge.

    U.S. submarines are at work every single day forward around the world providing maritime security, nuclear deterrence and supporting the long war on terror.

    Now, to discuss the shipbuilding and force structure question, the Chief of Naval Operations has developed a shipbuilding plan that builds the Navy the Nation needs, a Navy that is both affordable and meets with acceptable risk the future national security requirements outlined in the Quadrennial Force Review. Force structure requirements are validated through detailed joint campaign analyses, they are optimized through innovative sourcing initiatives, and they were then balanced with shipbuilding industrial base capacity.

    In July of this past year, 2005, the CNO directed and we, the submarine force, fully participated in an examination of existing force structure studies. Its focus was for a Navy that was able to fight the Global War on Terror, execute maritime security operations and win in a major combat operation. Nuclear-powered attack submarines were examined using a 2020 capability-based assessment. It focused on the required force posture for immediate response to any major combatant operation. This analysis also examined the present and future combatant commander demand for SSNs.

    Based upon this assessment, 48 was the number of attack submarines that presented an acceptable risk and still allowed an affordable plan for long-range shipbuilding.
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    Now, if I could, let me take just a minute to reveal what I consider our secret to success in this world, and that is our people. Joe, Willie and I represent submariners who make up just a small portion of the Navy, approximately seven percent. However, I would submit that their contribution is disproportionately large compared to our small size. They are talented, motivated; have chosen to serve this Nation in a submarine.

    Operating nuclear submarines is complex and demanding, so our standards are high. Submariners, though, feel a sense of purpose because they are busy and fully employed. Even while serving in a capacity outside of our undersea enterprise, such as joint staffs in Iraq and Afghanistan today, these sailors use their unique talents and their submarine force experience to make contributions to our Nation and defense.

    In summary, our submarines should continue to be deployed forward as scouts, walking the field. Day in and day out, they must build maritime security, seek out ground truth, and shape the environment to avert the next conflict, or, should it occur, be ready to engage quickly and decisively. A submarine force of 48 SSNs, 14 SSBNs, 4 SSGNs, is the right size and shape for our Navy and Nation. To sustain that we need effective design capability and a stable shipbuilding program, a program that builds two Virginia class submarines a year starting in 2012.

    Thank you very much for the time today. We are pleased to respond to any questions after Ms. Stiller's comments.

    Mr. BARTLETT. Thank you for your testimony. Be assured there will be questions.
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    [The joint prepared statement of Admiral Munns and Admiral Walsh can be viewed in the hard copy.]

    Mr. BARTLETT. Ms. Stiller.

    Ms. STILLER. Mr. Chairman, Congressman Taylor, distinguished Members of the subcommittee, it is a privilege to appear before the Projection Forces Subcommittee to discuss the Navy's submarine industrial base.

    Mr. Chairman and Congressman Taylor, thank you for allowing me to accompany you on our recent Asian trip. As of last night, we were still traveling back. It was truly an insightful visit for me.

    Rear Admiral Hilarides, Program Executive Officer for Submarines, and I are here before you today to discuss the acquisition side of the submarine business. The submarine industrial base is comprised of two components, construction and design. For the first time in more than a decade, the submarine construction base is stable and will remain so for the foreseeable future. The Navy is continuing to optimize the industrial base by working with its industrial partners to reduce the per-unit cost of the Virginia class to $2 billion by 2012.

    The design industrial base is in a more precarious position. The Navy has recognized the potential impact of losing a national submarine design capability and is taking steps to mitigate this risk. We have commissioned Rand to study this unique portion of the industrial base. The Rand study is expected to conclude this fall. We are also continuing to work with General Dynamics Electric Boat Division and Northrop Grumman Newport News to address the 24 design skills that we must maintain to assure we remain capable of designing nuclear-powered submarines in the future. The combined results of the Rand study and interaction with industry will inform us and allow us to make appropriate decisions for the future.
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    I look forward to the future and continued strong partnership with Congress. Thank you for this opportunity. I request that Admiral Hilarides' and my written testimony be submitted for the record. We look forward to answering any questions as well.

    Mr. BARTLETT. Thank you. Without objection, all of your written testimony will become part of the record.

    [The prepared statement of Ms. Stiller can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much for your testimony. As is my usual custom, I will reserve my questions until last. For too many years I sat in that last seat on the committee and never got to ask my great questions. So I now reserve my time. Frequently I don't need to ask any because they have all been asked by others.

    Mr. Taylor.

    Mr. TAYLOR. I will gladly yield to Mr. Simmons.

    Mr. BARTLETT. Okay. Mr. Simmons.

    Mr. SIMMONS. Thank you, Mr. Chairman, and thanks to the Ranking Member.

    I have a couple of questions, but let me focus for just a brief moment on what Ms. Stiller said about the Rand study and the fact that it will be ready this fall.
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    What will also occur probably by this fall is the Electric Boat Corporation may lay off up to 900 designers, and what will happen by this fall is that the Electric Boat Corporation may lay off over 2,000 builders. I think that this will place the design industry—because most of the designs that we have produced and deployed over the last 50 years, most of them, the majority, have come out of Electric Boat in Groton, New London. This design industry will be at its lowest point in history, or at least in the last half century. So, the study I don't think will be of much use.

    What the people tell me at the gate and in the community is we need work. We don't need anybody to study the situation. The situation is serious. It is as serious as it was back in June of 1968 when Admiral Rickover testified, and I quote from his testimony, ''There is a great scarcity of submarine design personnel in this country.'' This is Admiral Rickover. ''The effect on our submarine design capability is obvious. Of course, we shouldn't build submarines just to keep people busy; however, these designers are the scarcest class of personnel in ship design in the United States. We don't have enough qualified submarine design people.''

    That disaster back in 1968 was averted, and the concern that I have is are we averting that disaster today? Can we afford to wait? Will the problem be so aggravated if we don't act before the end of this year? Is this study timely, or should we be acting more quickly?

    Ms. STILLER. Sir, I believe the study is timely. As you know, we are finishing up the Virginia design, SSGN design. We are at a peak. As a natural fall-off, there would be lay-offs. The design area is going to come down.

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    What we are really looking at in the Rand study is what is the critical skill sets we absolutely must maintain so when we are ready to design the next submarine, we are poised for that and we have not atrophied to the point that we would have a hard time recapitalizing. We recognize there would be a dim, and we want to figure out where we would be at the steady state so we don't atrophy too far.

    Mr. SIMMONS. As a follow-on to that, in the last significant lay-off of design personnel, which was a few years ago, 90 percent never returned. So these are not people who go out the gate with a pink slip and sit on the porch and wait for the call back in a year or two. They go away. We never see them again. As a consequence, you degrade the design team because you lose the synergy that these people bring to the business.

    A second point is the State of Connecticut over the last several years has invested in an apprenticeship program where young personnel have been brought in. They are about 50 percent through that program. It is a five-year program. They will be the first ones hit by the lay-offs and are being hit by the lay-offs as we speak.

    So this whole next generation of young men and women whose desire is to work in the design of submarines is being lost. That is why I say, again, this, to me, is an emergency and a crisis. How can we sustain these capabilities? How can we keep these young people halfway through their apprenticeship designing the most complicated machines in the history of man, how can we keep them viable? We can't allow this to happen and expect them to come back in a couple of years. Won't that increase costs in the outyears?

    Ms. STILLER. Sir, the way we have to look at—I agree with you, we have to look at the demographics of the design force as well as the critical skills. That is what we are doing as part of the Rand study. As I mentioned in my opening statement, we are also involving both General Dynamics Electric Boat and Northrop Grumman Newport News in discussions, so we are coming up with the solution we think will best work and be the best model for the future. So we are taking that into account.
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    I agree with you, you don't want to lose the young talent that you have developed as part of the Virginia design and SSGN design. So we have to look at ways that we can maintain that base so that they are poised for the next design.

    Mr. SIMMONS. Admiral Munns, you very kindly came to Groton last summer for a field hearing that was sponsored by the Chairman and Ranking Member, and I thanked them for their participation and attendance. My recollection of your testimony at the time was that when you were asked what is the right number of fast attack submarines, my recollection is that your response was 54 is about right. Fifty-four is about right. Now the QDR is talking about 48.

    The proposed shipbuilding plan does not produce enough attack submarines to meet the Navy's current stated requirement between 2020 and 2034, so what does this reduction in production of submarines mean for risk? Are we placing our submariners at risk? Are we placing our Nation at risk, because the numbers seem to be going substantially below what you testified was about right, 54 submarines?

    Admiral MUNNS. Thank you, sir. As I remember from last summer, the way I tried to answer that question was to say that the submarines we have today is about right, and that was 54. I believe 48 is a good number, 48 in the future. The point I will make is we will be able to operationally employ submarines for days at sea at work in the future with 48 as we do today with 54. The difference is the preponderance of submarines we today have in maintenance periods going through their cycle of maintenance, it is a hump today. We have affectionately called it the submarine maintenance hump. But that hump will be over here in a few years. So if you look at numbers of ships deployed doing work, that will be the same as today. So I believe that is one of my benchmarks for being comfortable with the 48 number.
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    Second and last, I would say as we testified last summer the study we referred to had not yet concluded. The study looked at all aspects of warfighting as well as forward presence, and it found the sweet spot of 48, which is what CNO has grabbed ahold of.

    I balance that, as I have just said, with my experience today, and I believe that is an appropriate number with an appropriate risk for our future.

    Mr. SIMMONS. Is it not true that we have decided to move away from the 50/50 allocation of submarines east coast and west coast to 60/40 because our requirements in the Pacific are increasing, and the threat in the Pacific is increasing; and doesn't that suggest that as we move these assets to the Pacific, which I don't quibble with, that we are increasing our risk in the Atlantic? Aren't we overstressing the force because of the COCOM requirements and other requirements of the force? Aren't we at risk of wearing out the force?

    Admiral MUNNS. Yes, sir, it is true that we have proposed a reallocation of the SSN home ports from roughly 50/50 today to 60 percent in the Pacific and 40 percent in the Atlantic. That was a finding of the Quadrennial Defense Review, which we agree with.

    I would go on to say that preceding the movement of those home ports, we have been sending submarines where they need to be regardless of where they have been home-ported. As I said in my statement and also testified last summer, last year we sent three ships from the Atlantic to the Pacific to do work in the Pacific, and then they returned back to the Atlantic.

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    So I see that as optimally positioning our forces where we see the next few decades' worth of work being.

    Mr. SIMMONS. Admiral Munns—Mr. Chairman, I see it is still a green light. I don't want to abuse my time.

    Admiral Munns, we talk about the force being adequate, and we talk about the future submarine shipbuilding plan as meeting our budgetary obligations. But the term ''adequate'' suggests to me that there are missions that are not getting done, that there are missions that cannot be done, and it would seem to me as we move into the out years where there are even less assets, where we go down to 40 submarines from 48, even more missions are not going to get done.

    What missions are not getting done? I know we are in open session; maybe we can't discuss that. Maybe I should say for the record are there missions that are not being done because we do not have an adequate number of submarines and submariners to run them?

    Admiral MUNNS. Yes, sir, there are missions not being done. When you look at our force as I have described, which the best way to describe it is as the scout for our Nation, the scout for our defenses, you would want those scouts to go as many places as you had scouts for. So there are clearly other places we could do go, other activities we could do.

    As I testified last time, the combatant commanders have asked for 18 submarine years' worth of work, and we supplied a little over 10. But I would go on to say we have structured and prioritized those demands—not we; we, the submarine force, we, the joint staff—and ranked them into critical and so on and so forth. As what they classify critical, the things they really have to do, we are meeting all of those requirements with our force today, and with a 48 force going forward, as I have suggested, with less maintenance time that will be true as well.
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    Mr. SIMMONS. I thank you, Mr. Chairman. My time has expired.

    Mr. BARTLETT. Thank you very much.

    Let me recognize Mrs. Davis next. What we do is to recognize the Members in the order of seniority at gavel fall. For those who come to committee after gavel fall, it is in the order of their appearance at the subcommittee hearing.

    So, Mrs. Davis.

    Mrs. DAVIS. Thank you, Mr. Chairman. I think my colleague asked about everything. I think I have a few here to still hit with.

    Admiral Munns, if I wrote it down correctly, the last comment you made in your opening statement was that what we need is a stable shipbuilding program starting in 2012. With that in mind, and listening to the responses that you gave to my colleague Mr. Simmons on the industrial base on the designers and so forth, what sort of considerations did the Navy take into account with regard to the design base, the industrial base when you decided to slip it from two submarines a year to 2012? I think I just asked that right. Do you hear what I am asking? What did you take into account with regards to our industrial base, because it is a concern to me. Answer that, and I will say something else.

    Admiral MUNNS. I would suggest it is a question for both of us. Let me take the warfighting side of that first. This is to get to the 48 number. We looked at the warfighting requirements as we see them in wartime plans today, as our combatant commanders wrote them into war plans today, and as we look at the day in activity you would want a scout to do, and looked at where our submarines were located and how could we supply those demands.
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    So, that is in the context—and one other thing. We looked at the rest of the force, too, aircraft carriers we have and so forth. In that context we came up with an acceptable warfighting number as being 48. We then looked and worked with the infrastructure to see what could be built and at what price could we build it, and that also came in about 48.

    I will let Ms. Stiller talk to that.

    Ms. STILLER. Yes, ma'am. When we put together the total shipbuilding plan in its entirety, we do look the industrial base implications of all the ships and submarines as we lay them out in the plan. Right now, with the one a year until 2012, we have money loaded in 2010 and 2011 for advance procurement, to go to two a year in 2012. We looked at the industrial base from the production side.

    Like I said, on the design side we are having Rand do the study right now, because we do realize we have an issue with the design industrial base on the submarine side of the house. On the surface side of the house we are in great shape from the design, because you have got DD(X) going on, CVN–21 design going on, and MPF(F) getting ready to ramp up. So the design industrial base for the surface side of the house is in fine shape, but we do need to consider where we need to go in the submarine design base.

    Mrs. DAVIS. I guess my concern is when Vice Admiral Munns responded to Mr. Simmons, and you talked about the mission, and he asked you if missions were not being done, and you said yes, and I know you have got critical missions and then you have got missions, but, still, you can't just let those missions go by and not be done. They are good for training, if nothing else.
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    If you allow the design force, which I understand is in Connecticut, but he is my colleague and I love him—if you allow the design force to go by the wayside, that is going to be a trickle-down effect where we won't have the industrial base to build them either because you won't have a design. I don't want to get to the point where I think it is England that has a shipbuilding problem now. I don't know how much you can say about China, but I think you are all very well aware of China. That is a great concern of mine.

    I guess I don't have any real comfort here when you tell me there are missions not being done because of the budget. This goes back to the original question I think the Chairman said, is this 48 budget-driven or mission-driven? That is a question.

    Admiral MUNNS. The study the CNO and the Navy did, all us did together last summer, was to look at it all. I think we realized that the complexity of the world today, you can't come to an isolated answer from any one corner. CNO Mullens particularly has been inclusive about bringing all perspectives into the problem. So from my perspective, it is the mission perspective. There are clearly things we are not doing that I think would be valuable for our Nation, but in the end, with coming up with this aggregate number, which we believe works from all perspectives, we will be able to do enough missions to satisfy the critical demands of the combatant commanders and for our national security.

    Mrs. DAVIS. My time is up. So you sort of got off the hook unless you want to answer me, Ms. Stiller.

    Ms. STILLER. Sure. From the industrial base side, there are two separate issues that we have to look at, and that is the production industrial base, which right now at one a year we know what that level is, and at both Northrop Grumman Newport News and Electric Boat. Where we really have to focus, and that is why we are doing this study this year, is as we are completing Virginia design and SSGN design work and don't have another submarine design in the near term, we have to examine how best to maintain that part of the industrial base. Construction of Virginia as it is designed right now isn't going to help maintain that industrial base unless we do minor modifications to it, to the submarine. So we have to look at what is the best way to maintain that industrial base. I think that the study will be timely for us to be able to influence the 2008 budget.
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    Admiral MUNNS. If I could, Mr. Chairman, I did not mean from my answer to imply that we should not worry about the design base. It is a very important issue. It is one I think we must tackle this summer. I am interested in it because we need it to reduce the cost of the Virginia. Part of that design base is going to help us reduce the cost of Virginia to allow further production. It will help us with SSGN, just coming out now. Clearly there is another submarine design in our future, and they have to be there for that.

    So I just wanted to make sure that I talked from the mission before, but that design piece is very important.

    Mrs. DAVIS. Mr. Chairman, thank you very much. I believe just from the answers that we are hearing, there really are—they really are restricted budgetwise more so than missionwise. I think their hands are tied on answering us that way. I hope we can do something to get the costs down and be able to give our men and women in the military what they really need.

    Mr. BARTLETT. Thank you.

    Mrs. Drake.

    Mrs. DRAKE. Thank you, Mr. Chairman, and good afternoon and thank you for being here with us.

    We have talked a lot about 2012, and we have talked about $2 billion per hull for the submarines. It was my understanding that the industry thought they could do $2 billion hulls in 2009. So are we making the assumption that if we push back to 2012, the industry would still be able to meet that cost of $2 billion, or would we be making the assumption that $2 billion would have to be increased?
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    Ms. STILLER. When we talk about the $2 billion, we are talking in 2005 dollars. So the whole discussion is normalized to 2005 dollars. If we went to two a year in 2009, right now the average submarine cost in 2005 dollars is about $2.4 billion a submarine. If you go to two in 2009, we think there is about a $200 million savings, so you would be down at $2.2.

    We believe that there—and I will let Admiral Hilarides give you some examples of things we think need to be done, but we think there are design productivity that can be done that could help get the submarine down to $2 billion a copy by 2012, but there is some work that has to be done to do that.

    Admiral HILARIDES. Yes, ma'am. The things that can be done are some things as simple as changing the way we paint the ship, changing the way we coat the ship, those things that help the shipbuilders become more productive and individual workers get more done on any given day.

    There are design changes that are relatively simple that can also make the ship easier to construct, easier to make modules larger and do the outfitting before the hull comes together.

    Then a third category of design changes that would be what I consider large design changes to the ship, that dramatically change the way a certain part of the ship is built. For example, you might change the bow arrangement to dramatically simplify the vertical launch system and the active sonar.
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    Those design changes do require investment in designers to go do that work. That is a two-fer, if you will, that helps keep that design base at work, and also helps us reduce the cost of the submarines. We have identified much of the funds for that to help us get the costs down, and we are spending those dollars today to go reduce the cost of the Virginia class.

    So I think we have a reasonable plan. We need some time to do those design changes. We need time to see the learning come through, get the two shipbuilders down the learning curve. I think when you put those together, two per year plus the design changes, $2 billion in 2012, measured in 05 dollars, is achievable.

    Mrs. DRAKE. Thank you.

    Also I was curious with this older Los Angeles class of submarine, which is nearing the end of its life, and I think it will see retirements there, does the proposed buy that we have done for the Virginia class, does that factor those in? We have already offset those in our Virginia class buy to have the 48 submarines?

    Admiral MUNNS. Yes. The 48 submarine number and the build rate of two Virginias per year starting in 2012 starts as those Los Angeles classes will be going away as a result of the 33-year hull life.

    Mrs. DRAKE. Thank you.

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    Mr. Chairman, I would like to close by saying I think Congresswoman Davis asked the most important question, and that is are we making decisions based on need or on budget, and I think this committee is committed that we need to make that on need and our national security, and it should be our job to figure out how we purchase what you need, and at the same time, we have talked a lot about it today, to support the industrial base. We can't afford to lose this workforce. We talk about it all the time, how to get workers back, refinery workers. We just can't afford to do it. Thank you for coming.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Langevin.

    Mr. LANGEVIN. Thank you, Mr. Chairman.

    I want to thank the panel for your testimony here today. Let me begin with you, Admiral Munns, if I could.

    I appreciate Admiral Munns' effort to end some of the guesswork in our shipbuilding plan by establishing a long-term goal of 313 ships. What concerns me is that between 2020 and 2034, the submarine fleet would experience a significant drop below the Navy's target of 48, reaching as few as 40 in 2028 and 2029.

    Given the investment of other near competitors in their naval fleets and undersea vessels, I am very concerned about the national security implications of having such a reduction in our submarine fleet precisely when other nations' capabilities will be expanding. So I know you see the challenges to accelerating the production of the Virginia class, but do you think that having 40 attack submarines is an acceptable risk, and what would your recommendations be to improving that scenario?
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    Admiral MUNNS. That is a good question. I think clearly that operating with 40 ships out in those decades in the future is something we are going to have to work very hard at to mitigate the risks that will be there. There will clearly be risks there; 40 is less than 48.

    Let me talk about the risk a little bit. The first point is any year we delay beyond 2012 getting two a year will make that 40 number worse, so it is very important to get at the two a year.

    How do we mitigate? First is the Virginia class will spend much less of its time in maintenance than our past submarines have. If I go back to the 637 class a few decades ago, they spent about 24 percent of their life in shipyards getting repaired. We think going forward with Virginia, it will be much more like 11 percent. So those are operational days where they will be of service to the Nation, and we will get more out of that lower number.

    Second, it is just the capability of the ship. I look at what Virginia can do compared to my first ship, the Sea Dragon, and there is no comparison. The Virginia can go three times as deep, three times as fast. It has sensors that can see more than twice as far. It has communications and weapons unheard of in the early days. So there is a capability level for each one that is much more than what we had before.

    Last, I would just end with it is a balanced look out there in the future, so it is not the submarine by itself, but it is the submarine in combination with the fixed arrays that we have, with other air platforms and the battle group that we will have to use to mitigate in totality.
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    Mr. LANGEVIN. In working with my colleague Mr. Simmons, he and I share much the same perspective on our submarine fleet. In your prepared statement you know that OPTEMPO is at 46 percent for SSNs not in maintenance, and you say this indicates that our SSN force is fully employed with some room for a limited short-term surge. So my question is does the U.S. submarine force anticipate fewer or more missions in the next 20 years, and if more missions, if the submarine force is already fully employed, how will a smaller fleet meet the threat? And if fewer missions, can you explain how that is possible given current trends?

    Admiral MUNNS. As I said, there are more missions than we can fulfill, so we will probably always prioritize the missions. Today we are satisfying all the critical missions of the combatant commanders, and we all have crystal balls, many of them cloudy, but I think that that demand will stay about the same.

    As we go forward, though, the number I suggested for OPTEMPO was outside of maintenance, so I have already said we think we will get more efficient on the maintenance side of the house. We will get beyond this maintenance hump we are in right now, so that will allow us to do with 48 submarines what we are currently doing today with now 53.

    Mr. LANGEVIN. I see that my time has expired, but I want to echo many of the comments that Congressman Simmons has made. I have made the comment, and my colleague Mrs. Drake mentioned that we have an a lot of work to do in terms of being able to protect our submarine-building capability. We all share the concern that we are getting dangerously close to that capability being jeopardized if we are not careful to preserve our design and industrial production base and the craftsmen and all the work that goes into actually building a submarine. We clearly cannot lose that capability. It is near impossible to reconstitute it once it is gone.
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    Thank you, Mr. Chairman. I yield back.

    Mr. BARTLETT. Thank you very much.

    May I ask, what percent of combatant commanders' requests can we now not respond to?

    Admiral MUNNS. We respond to about 60, a little over 60 percent of the requests. So there are about 40 percent that we do not respond to today.

    Mr. BARTLETT. Okay. I would like to go back to that 1999 study which concluded that if we fell below 55 in the 2015 time frame and 62 in the 2025 time frame, that that would be sort of unacceptable. I look at the world that we are in, and I would submit that probably in 2006, China looms as a considerably larger threat than it might have been in 1999. You would agree with that?

    Admiral MUNNS. Yes, sir.

    Mr. BARTLETT. Is there general agreement from the witnesses that today China looms as a greater threat than it would in 1999?

    Also I don't think that the rest of the world has gotten to be a lesser challenge since 1999, has it?

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    Admiral MUNNS. No, sir.

    Mr. BARTLETT. So if the rest of the world is not a lesser challenge, and if China is a greater challenge, and if the 55 in 2015 and 62 in 2025 were marginally unacceptable floors, then 48 is really too low, isn't it, and 40?

    Admiral MUNNS. I would say they were different studies. The 55 in the 1999 joint staff study was solely an SSN study looking at what the SSN missions would be and what it could do to satisfy those.

    Mr. BARTLETT. Let me suggest that a major difference in those studies was the level of risk that you were encouraged to assume. I would like to spend just a moment on what acceptable risk is. How many levels of risk do you recognize? Could you list them for us?

    Admiral MUNNS. I would suggest there is an infinite number of levels of risk. There is risk in everything we do, and our job is to balance—accept some, mitigate some, and then press on.

    Mr. BARTLETT. But aren't there three or four generally accepted levels of risk, like high risk, moderate risk? What are those levels? There is a red line, the high risk, a moderate risk, and a low risk. Are those the four levels that we generally refer to when we are talking about risk?

    Admiral MUNNS. It sounds reasonable.
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    Mr. BARTLETT. Red line, the sky will fall; high risk, you really wouldn't want your son there; moderate risk, if we are forced to by the budget, we will go there; and low risk is where you would like to be?

    Admiral MUNNS. Yes, sir.

    Mr. BARTLETT. That is a reasonable assessment of these risk levels?

    Admiral MUNNS. Yes, sir.

    Mr. BARTLETT. If I suggest that the study in 1999 was probably looking at low risk, you were encouraged to look at moderate to high risk in this study, would that be a correct assessment?

    Admiral MUNNS. With these as new vocabulary and with a quick answer here, I would suggest that that study we did last summer accepted moderate risk as compared to the previous study which you said accepted low risk. I would agree with that.

    Mr. BARTLETT. Of course, we would like all of our weapons systems to put us at low risk, and it is our job on this subcommittee to argue that there probably ought to be less money for something like future combat systems and more money for our submarines, because the level of risk to our country would be greater if we accept a higher risk level for submarines than for the future combat system.
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    In the grand scheme of things, I don't know where this comes out, but it is very clear to me that the numbers that we now have recommended to us are more budget-driven than they are threat-driven, and we are rationalizing they are okay numbers by accepting a higher level of risk. Is that an unfair assessment of how you got here?

    Admiral MUNNS. No, sir.

    Mr. BARTLETT. Thank you very much.

    Mr. Simmons, I know you have a lot of questions. Those that are really important for this panel to answer, if you will ask those.

    Mr. Taylor, do you have a question sir?

    Then we will turn to Mr. Simmons.

    Mr. TAYLOR. Again, I want to tell you how much I enjoyed traveling with you, Ms. Stiller. I found you are a brilliant light, and thank you for your time. Do you ever get to see Secretary Rumsfeld?

    Ms. STILLER. No, sir.

    Mr. TAYLOR. I was hoping you had his personal post office box, because I don't mean to ignore you guys, but I have answered about 2,000 cards today, including one from a Medal of Honor recipient, a guy 16 years old that dove on two hand grenades at Iwo Jima and lived.
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    His name is Jack Lucas. And he wanted to tell the Secretary what a crummy idea the increase in TRICARE copays are. I just wanted to pass that on. He and about 2,000 other folks this morning have passed on that message. And if you have the Secretary's post office box, I would be glad to forward all of these. Anyway, that is not you.

    But the reason I say that is that does point to the fight over resources. One of the points the Secretary made in this very room is that he would rather spend those resources on other things. I happen to disagree with him on this. I think keeping our promises is something we have to do. Whether it is that kid enlisting today or that chief petty officer who is about to retire or the chief petty officer who retired ten years ago, we have to keep those promises. And I would hope that, you know, we never forget that as we are fighting over resources for the future force.

    Admiral, one thing that we all on this trip had an opportunity to visit, and to a certain extent we waxed nostalgically over a Nation that was building a ship a day, or, in the case of Andrew Higgins down in New Orleans, turning out thousands of landing craft and patrol torpedo (PT) boats over the course of a month. I am not so sure we are ever going to get that luxury again.

    I hope—and I want to hear your thoughts on this—I would hope that the Navy war plan, regardless of whoever the world class foe is, if there is a—hopefully never—but if there is a major conflict again, envisions that we have to go to war with what we have the day that it starts, that we are not going to have the luxury of turning out a year later victory ships or turning out landing craft by the thousands in a safe location like the West Coast or New Orleans. I don't see that luxury ever coming again.
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    With that in mind for the next seven years, are you comfortable if you had a running-start war that day, unanticipated—and I sure as heck didn't see Panama coming, I sure as heck didn't see the invasion of Kuwait coming, so I am pretty confident I won't see the next one coming. So I am not so sure too many other experts saw those two coming. Are you comfortable over the next seven years that if you had a running-start war, that you have the force you need?

    Admiral MUNNS. Yes, sir. I think there are two points there. One is the complexity of our submarines today—I will let Joe Walsh here help answer that. And the second was if there was a running—if we had a running start and go in right today, am I comfortable? My answer is yes.

    I would suggest that we are in that war today. Submarines are out every day, around the world, acting as the scout that I suggested. They are in all the places you would suspect they that they would be, providing for the intelligence and the understanding of those places. So we are there. And we could flex from there to wherever this crisis popped up. I am pretty comfortable with that.

    Now, the complexity of the machine, I agree with you. A few months ago I was at a session with a retired World War II skipper of the Sea Devil. He related to me that from the time the keel was launched on Electric Boat until it sunk its first Japanese ship in World War II was 302 days.

    So from keel laying, building, training, going through the Panama Canal, loading torpedos, and getting on war patrol is 302 days. I would say we are never in that world again. Our machines are so much more complex than that one was, that is not the world we are in. We will go to war with what we have on hand.
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    Admiral WALSH. Just with respect to the level of comfort over the next seven years in submarine force structure, the next seven years between now and 2013, seven years from now, is essentially constant. In 2013 we will have 53 submarines, which is what we have today. It is in 2013 that we start the decline that was spoken about this afternoon, reaching 48, going below 48 in 2020.

    Mr. TAYLOR. If I may, Admiral, I can't believe that any of our foes get weaker between 13 and 20.

    I was just absolutely amazed at the level of sophistication in some of the shipyards we saw, the capital investments that are being made.

    So what is it about 2013 to 2020 that makes you think that that becomes an acceptable risk—not you, but the Navy?

    Admiral WALSH. Right. In fact, the Navy believes that the capabilities of potential competitors will improve between 2013 and 2020. So we agree with you that the capabilities of some of these Pacific nations will improve, particularly in the area of undersea warfare.

    The analysis that we have done was focused on the 2020 time frame. Clearly, we are trying to predict the capabilities of a potential peer competitor nation in 2020 versus the capabilities that our Navy will have in that time frame.

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    We have actually done three different independent analyses using three different methodologies to come up with what the force structure number for SSN force structure is, and all three of those methodologies basically drive to about the same number: 45 to 50, with 48 kind of the sweet spot. Some use the old plans that we presently have today which require more numbers in total to fight this fight. Some require in the force structure assessment more to be forward sooner. And then others are based on baseline security posture where it is the numbers that you have on any given day in the Navy.

    And then we assess the risk, both in peacetime presence requirements and then in the warfighting requirements. And how much risk you take is based on your assessment of how much warning you think you will have. If you think you are going to have little warning, obviously we mitigate that or are trying to mitigate that by having more ships in the Pacific.

    We are specifically pushed, having the SeaWolf class submarines, which are our fastest and the ships with the most fire power, out in the Pacific. If we have some level of warning, we can move ships from Pearl Harbor, San Diego. If we have less warning, ships in Guam are the answer to less warning scenarios.

    With respect to peacetime presence and the risk we take there, today the requirement to meet the critical requirements is to maintain about a 10–0 presence. We will be able to maintain 10 submarines forward all the time with a force of 48 submarines.

    With less than 48, we understand that we will be taking risk because we will not be able to maintain 10–0 forward. That number with a force of 40 will be about 8.5 submarines forward on any given day. And then we have to take our risk based on where we think the world is at that given time.
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    So as we go below 48 in around the 2020 time frame, if it appears there is less risk in the European Command (EUCOM) theater, we may take one submarine out of EUCOM and maintain the same presence requirements we have today in Pacific Command (PACOM) area, if PACOM area is the area where we have the most concerns.

    So we understand that as we go below 48 that we are incurring risk, and it is obviously ours to manage that risk.

    Admiral MUNNS. I would add one point to that. The individual capability of each of those 48 ships is much more than what we have today in an aggregated sense.

    The weapons, the sensors, the connectivity, the networking of the ship is much more powerful. And so we have modeled that and war-fought that in the 2020 time frame.

    Mr. TAYLOR. And we have a young lieutenant commander sitting behind you. Are you confident that when she or one of her peers is in your shoes 10 to 15 years from now, she will inherit the kind of force that you inherited?

    Admiral MUNNS. I will answer that. And Joe is in a similar——

    Mr. TAYLOR. What really got me thinking about that, Admiral Roughhead was nice enough to have lunch with us and he was talking about the importance of mil-to-mil contacts taking place by his young lieutenant commanders, young lieutenants, because, like he said, he is out of here, we are all out of here at some point, and they are the ones that are going to need these contacts 10, 15 years from now.
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    Admiral MUNNS. Yes, sir. Very much on my mind and, similarly, with Joe. But I have a son who is now a lieutenant junior grade, 2 years on his submarine out in Pearl Harbor, so I every day think about what he may face 15 years from now.

    Mr. TAYLOR. Last, you know—and I guess the industrial base is very much on my mind—I am told that one of the things that prohibits corporate America from investing in my opinion as they should in their shipyards, is that there is more profit to be made in other parts of the defense budget, particularly information technology or missile defense or some of the other things.

    Are we at the point, given that if it is their attitude, well, we are not going to invest in it because there is just not the return there—I mean, there are two ways you can approach that. You can say, well, we are paying you too much for other things and we need to take a look at those books. Or you can say, if you guys don't have the will to do it right, maybe we should take this back and make it a government function.

    Has the Navy even considered that?

    Admiral MUNNS. Well, one of you two answer that. I would say, first of all, of the people I see on the deck plate building submarines as I go visit——

    Mr. TAYLOR. I am not talking about the guys in the yard. I am talking about the corporate decision makers. I am talking about the tip-top of that pyramid.

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    Ms. STILLER. I know that the industry folks are going to be on the next panel so I won't try to totally steal their thunder. In the case of submarine procurement, Admiral Hilarides and his team has actually put in place capability improvement programs so that the shipyards can—and I will let Admiral Hilarides describe it and he will do a much better job than I will—the shipyards can come in with ideas that will help and produce the ability of Virginia class. And we have made that commitment. It is almost like a matching kind of fund that the corporations have also had to match.

    We have also done that on our aircraft carrier contract too for CVN–21 where we have made investments with the corporations to facilitize the yards. We don't have that across the board in all of our ship contracts. It is something we need to look at and we are looking at corporately within the Navy.

    But again, I will let—I will defer to the corporate colleagues to answer how the corporate decisions are made.

    Mr. TAYLOR. Ms. Stiller, again, what is your—for want of a better term—gut reaction? Are you seeing that commitment industry wide?

    Ms. STILLER. It varies industry wide. I will tell you, it doesn't—not all yards invest as much as others. We have seen it on the submarine side. And I think because of the incentives we have put in place, that has helped. We have seen it right now at Newport News on the carrier side, because the contract structure has helped. We haven't, like I said, seen it necessarily on the surface side of the house as much.

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    Mr. TAYLOR. Thank all of you. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you, very much.

    Mr. Simmons, I know you have a lot of questions. Those that must be answered by this panel, ask them now. If they are questions that need to get on the record and might be answered by the next panel, why reserve them until then. So the floor is yours.

    Mr. SIMMONS. Thank you, Mr. Chairman. I think that my colleagues have drawn out many of the important issues that this panel needs to respond to. Let me just attempt to make one more point and then I will yield back.

    In 1968, again, and I will refer to the history, because I think we are in a historic point and I think we should all understand that we are in a historic point. And our country and our Congress, our Navy, have been at this point before and have overcome those adversities.

    But in 1968, testifying before the Congress on the loss of engineering talent, Admiral Moorer said, in the Navy we have this problem because there is no commercial use for submarines. There is currently no commercial use to submarines. Consequently, unless the Navy builds submarines, these people who are capable of doing so then seek some other type of employment.

    We are seeing this as I speak: upwards of 3,000 people bleeding out of the gates of the premier design construction facility in the world.
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    If the amount of design work that was being done was significantly reduced, then these talented personnel would be dissipated throughout American industry, and it would be very difficult to call them back together.

    I mean, that is a historic statement. Do you agree with any—disagree with anything that is being said in that statement? Any of you?

    Admiral MUNNS. No.

    Mr. SIMMONS. So you agree with the statement. I believe that statement applies today.

    My final question to Ms. Stiller is, the design force is bleeding at a point that they will reach the lowest level in history, in the last 50 years. The workforce is going out. Traditionally, workforces can be reconstructed if they are out for less than two years. After two years they lose their clearance. Once they lose their clearance, they have to be recleared. That takes a year. So you can't get them back quickly.

    But, more significantly, your subcontractors, which is a force that has gone from around 11,000 down, I believe, to under 7,000, and now it is looking at 3,000, those contractors are going away.

    How can you guarantee to us that in three years we can recover all of that and get on with the business of designing and building two a year or the next generation of submarine? How can you guarantee that to us? Do you guarantee that to us?
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    Ms. STILLER. Nothing is a guarantee. But——

    Mr. SIMMONS. Well, that is an important statement.

    Ms. STILLER. But I will say in the submarine area, about 80 percent of the vendors, sub vendors, are sole-sourced now. We have been in that situation for some time. So it is a matter of at one a year, they are still there producing for us. And when we ramp to two, they are hopefully poised as well to be able to go to two a year.

    So I don't see any further degradation in the vendor supply base because they are there to support the one-a-year at this moment on Virginia.

    Mr. SIMMONS. And let me respond to that, and I am not a business person but I deal with a lot of people who are in this business. If they see early procurement in this year's budget, several hundreds of millions of dollars for early procurement for two a year, then they know it is worthwhile to pay taxes on that equipment and to maintain that workforce, because they know the work is going to be there.

    But when they look at this program, which has been delayed year after year, after year, after year, for two a year over the last decade, then they probably are going to say, you know, it is not worth it.

    And this goes back to what Mr. Taylor said. These folks are in business. They are in business.
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    They have to make projections, they have to decide how many years they are going to pay the municipal or the State property tax on the equipment, that they have to do a certain widget for these things, where the two-a-year makes a difference, but one a year doesn't cut it. And how many years, how much longer are they going to keep personnel on staff with no guarantee that we are ever going to reach that two a year?

    I think this is a far more serious problem than has been expressed at this panel. But I think you captured it when you said there are no guarantees. But, you know, the security of the United States of America and the future capabilities of our sub surface force need guarantees.

    Mr. BARTLETT. Let me ask a question, and I will yield to Ms. Davis for another question in this round. The major reason that we buy so few subs is because they cost so much. Would you agree?

    I notice all of the witnesses are in agreement. And one of the things we were supposed to talk about at this hearing was getting the cost of subs down. There are a lot of ways we can do that. And I wanted to ask you about just one of those.

    To what extent do the users sit at the design table very frequently to get that last 2 percent or 5 percent capability—may cost you 100 percent more money—and when we simply have the users giving us their requirements, and there is not a dialogue at the table?

    I am concerned that many times we are paying 100 percent more for that next 2 percent or 5 percent than we need to pay. Are they at the table? And who is the adjudicator who decides when it is good enough?
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    Admiral MUNNS. I believe that is a great question. Let me start, and then Ms. Stiller and Admiral Hilarides.

    Today, and about nine months ago, we formed what we call an undersea enterprise. This enterprise is all of the components of the undersea force, not just the operational component. So, for instance, Admiral Hilarides sits on a board of directors with me. And we work all these kinds of issues. The one we are working today is the reduction of the cost of the Virginia class. So he and I sit there together and ask exactly that question that you have posed.

    So while it is new, in my perspective we have it in place now. And it is the way we are going to go forward.

    Admiral HILARIDES. Sir, if I could, Virginia design completed, really completed from a requirements standpoint a couple of years ago, and the Virginia is at sea or was at sea and is now under a post-shakedown availability.

    So those requirement trades were made. There was a broad discussion between the operators and designers, acquirers, that I represent. And those trades were made at the time.

    The cost as the ship is built today is greater than it was intended to be in 1995, 1994, when the budgets were put in place. That growth can be pointed to a couple of key areas: the delay in construction of two a year dramatically increases the cost. And every time there is a delay, the cost in the total ship class, which is 30, goes up, for example. Very few requirements were added once the design was decided and we started building the ship.
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    And today, my motto is ''just say no'' to design changes and those requirement changes that the Admiral referred to.

    As we go through the cost reduction process, I proposed to Admiral Munns' requirements changes for costs—for those costs changes that I talked about, and we discussed them very carefully—the decision not to put tile on the inside of a ballast tank might have an acoustic impact. And we discussed those in the board of directors. And we make those decisions, those risk decisions, very carefully in the full light of day.

    So I think the team is the strongest it has ever been, and the operators are right up there at the table with requirers, and there is no daylight between us, sir.

    Mr. BARTLETT. Thank you. Mrs. Drake.

    You have a question? Oh, Mrs. Davis. Mrs. Davis. Thank you.

    Mrs. DAVIS. Thank you, Mr. Chairman. Not really a question so much as it is, you know, we can talk a lot about the industrial base; and the industrial base is very important to me, as you know. But I guess from what I am hearing from the panel, what bothers me more than anything is when we talk about the risk that we can take—and I can understand Vice Admiral Munns saying moderate risk, we can handle that. But then this 7-year period that Mr. Taylor was referring to from 2013 to 2020 when we are down to 40 submarines—and I hear you saying that the Virginia class sub is more capable and, you know, with the operation and maintenance that we have been able to do, that we can keep them out longer.
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    But I use this comment all the time with aircraft carriers: The waters aren't getting any smaller. So it doesn't matter if you have 40 capable, if you don't have the 48 capable. And you said you could only put out 8–1/2 subs rather than 10.

    What if you need the 10? And I guess that is what concerns me.

    The whole gist of the panel discussion today, it still all comes down to, we really aren't giving what we really need to give to protect our men and women in the Navy and to protect our national security because of dollars.

    And that concerns me more than anything, Mr. Chairman. And I would hope that—I have sat on this Projection Forces Subcommittee since I got here; since it was changed to Projection Forces. And it appears to me that every budget that we get, shipbuilding gets slashed more than any other service, and more than any other part of any of our military budgets.

    I don't know why that is. I don't like it. I want to fight for it. I just think that we have to have sea bases, we have to have our Navy deployed. That is our first line of defense, as far as I am concerned, when it comes to our military and our fighting forward. And I don't know what we can do about it, Mr. Chairman, but we need to do something.

    Thank you.

    Mr. BARTLETT. The lady has a question that I have been trying to get an answer to. Each of our services has a budget, and they have a priority list of what they will buy with that budget. But I would like to know how, service wide, we interdigitate all of those priorities so that we draw the line at the right place.
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    And what the lady is suggesting is that we start out—we, the Navy starts out with a short straw to begin with. And I would like to be convinced that that is not true.

    Mrs. Drake.

    Mrs. DRAKE. Well, Mr. Chairman, that is pretty much what I wanted to ask. From sitting here, listening, it is almost like we want more, and you want us to have less. I would bet if you could give us what you really think, you would agree 100 percent with us, and the fault lies here in Congress that we are aren't giving you the money and you are all too nice to say that.

    So, Mr. Chairman, you and I have talked about this, and what do we do to determine what the real needs are, and then how do we fund it? And coming new to Congress, only being here a year, and having been a real estate agent, it is just amazing to me to see the way you do things in government.

    In real estate, you use other people's money to create wealth. Here, we say we have to pay for this in two years and set our own selves up.

    Do we actually have what would be a big—I guess that is what the QDR is—the plan for what we want, and then let us determine how do we get it quicker? Because I think you can hear our concern. You are sort of defending a plan that wouldn't be your plan if we would give you more money.
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    So, Mr. Chairman, that is the discussion we have to have.

    Mr. BARTLETT. That is said very well. And that is the reality of where we are.

    Mrs. DRAKE. Well, my other real estate observation is, never anywhere but government do you look at something and look only at the liabilities. I bet there isn't anybody in this room that looks very good if we only list our liabilities and don't list our assets. And we never do that for this Nation. None of us agree with deficits or national debts, but we never give ourselves credit for what we have done either.

    Mr. BARTLETT. Mr. Langevin has a final question for this panel.

    Mr. LANGEVIN. Thank you, Mr. Chairman.

    I want to go back to the issue of two subs per year and the cost issue. Obviously, this is an ongoing argument that we have heard, is that the Navy is not able to procure two Virginia class submarines before 2012, until the unit cost drops below the $2 billion per year per sub. However, until recently, the industry has argued it is impossible to get that unit cost without the two-per-year procurement rate, noting that economies of scale and greater supplier reliability are necessary to reduce costs.

    I know that industry has been bending over backwards to get that number down. They want to build subs. It is what they do, and the Nation needs them.
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    With industry now indicating that 2 billion per sub may be attainable, what would be the earliest we could produce two subs per year?

    Admiral HILARIDES. Sir, the statement that you got to beat the two billion before you get two really isn't quite right. The intent is to program four billion in 05 dollars, which would really be around five.

    And if we can buy two, we get two. If we can only afford one in that pot, then the rest goes back. And that is a different way of stating it, but that two-per-year gets you halfway, halfway to the goal as we discussed.

    The question is, could you get to the two billion earlier?

    It is not clear to me that we have time to incorporate those changes necessary to get the cost out and get down to that target in advance of 2012.

    It is not clear, and I don't see a clear path to that. I think we have a clear path to the 2012 $2 billion ship.

    Mr. LANGEVIN. I hope that that is a point that industry will address when they testify next. But you know, I really have to ask, you know, if we are not going to be able to move up that timetable or even if we can't guarantee two subs per year at 2012, what incentives does the industry have to produce subs at $2 billion per year per sub if the Navy can't guarantee a sufficient procurement rate?
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    Admiral HILARIDES. If I could, if you were to accelerate a submarine, you would have to give something else up out of the shipbuilding budget. By the CNO's shipbuilding plan, he is going to increase the Shipbuilding & Conversion, Navy (SCN) account from 10 to over $13 billion as measured in 05 dollars. So across all of shipbuilding in this time period, SCNs going up; and it is going up significantly, 30, 35 percent.

    The balance in the program that Admiral Munns has referred to is all the other ships that are being built at the same time. And so if you decide to move up an SSN, you have to give up something else, because all of the other accounts in the Navy and across DOD are fully pressurized. And so the only way to get the resources to do it would be to give something else up. And that is not in our purview to challenge, and so 12 is the right balance for the Navy, as Admiral Munns indicated.

    Admiral MUNNS. I would just add that a piece of the answer to you is CNO Mullen's personal attention and commitment to a stable shipbuilding program. I believe that is new. And I believe that is very important. And so that is what we—we will have to work together with those behind us here, but it is certainly the right direction to head.

    Mr. LANGEVIN. I just want for the record—and I appreciate what you are saying, and I share with those thoughts.

    But am I hearing that, irrespective of whether industry can get to $2 billion per sub, it doesn't matter; that we are not going to move that timetable up and we are not going to get to two subs per year before 2012?
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    Admiral MUNNS. I believe CNO has testified and has answered to Representative Simmons that we are exploring options of looking at the total package for what might come sooner. He answered a very specific question but left some middle ground between the one that he answered and 2012. That is my personal view of what he said. I don't know that for sure.

    Ms. STILLER. My only comment was going to be to Admiral Hilarides' point. There is design work that has to happen in order, we think, to get to the two billion a year. And we have to let that occur as well.

    Mr. LANGEVIN. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you. Mr. Taylor has the final—final question for this round.

    Mr. TAYLOR. Quick follow-up one from one of the staff. In the case of the Los Angeles class submarine, toward the end of their lives do they become hull challenged, reactor challenged, or—I am going to throw in a third element—or have they technologically been left behind by competitors?

    Admiral MUNNS. They have not been technologically left behind; rest assured there. Each that we have, we have an aggressive maintenance and modernization program. So they are some of the best we have.

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    Whether it is hull life or reactor life depends upon each one and how hard it has been run. And so there is a mixture between the two.

    Mr. TAYLOR. As a rule, do they wear out about simultaneously?

    Admiral MUNNS. Yes, sir.

    Mr. TAYLOR. That is part the initial design?

    Admiral MUNNS. We design and, in fact, operate so that they run out at the same time.

    Admiral WALSH. The hull life of the ship is 33 years. We have refueled some of the first flight 688s, which had a core that had less duration, with a new core that has about a 33-year ship life. We refueled those ships about halfway through their life at the 15-year point. So those ships will have excess fuel and run out of hull life first; for the follow-on ships, they run out of hull life about the same time they run out of reactor life.

    Mr. BARTLETT. Thank you very much and I really want to thank this panel. We will excuse you and welcome our second panel. Thank you very much for your testimony.

    Our second panel is Mr. Ronald O'Rourke. Mr. Ronald O'Rourke is a Specialist in National Defense from the Congressional Research Service. Mr. John Casey is President of Electric Boat Corporation at Groton, Connecticut. Mr. Mike Petters, the President of Northrop Grumman at Newport News, Virginia; and, finally, retired Vice Admiral Albert Konetzni, former Submarine Force Commander, U.S. Pacific Fleet.
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    Let's begin with Mr. O'Rourke. Sir, the floor is yours.


    Mr. O'ROURKE. Thank you. Chairman Bartlett, Congressman Taylor and distinguished Members of the subcommittee, it is a pleasure to be here today.

    With your permission, I would like to submit my statement for the record and present a brief summary of it here.

    Mr. BARTLETT. Without objection, the written statement of all of the witnesses will become a part of the permanent record.

    Mr. O'ROURKE. The issue of attack submarine force structure is one that has been building in Navy planning for some time. I first testified on it before this committee 11 years ago, in March of 95.

    At that hearing, I noted that the Navy was starting on a trajectory that could reduce the SSN force to 41 boats by the mid–2020's. The briefing chart you see over here on my right is the exact same chart that I used in that hearing 11 years ago.

    In the 11 years since, not much has happened in Navy planning to materially change the situation. SSNs are now expected to serve 33 years instead of 30. So the projected bottom now occurs a couple of years later, in the late 2020's. And the projected bottom is now 40 boats rather than 41. But the situation is essentially the same as it was then. So this isn't an issue that comes as a surprise to the Navy.
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    As the committee has noted, the Navy projects the SSN shortfall will begin in 2020 and extend through 2033, a period of 14 years. During the 2 years when the force bottoms out at 40, it will be lacking 1 boat out of every 6 that are required.

    The bottom will occur, just as the four converted Trident SSGNs will be leaving service. So the SSGNs will not be available to compensate for the reduced number of SSNs when the force bottoms out and in the years just after that.

    The SSN shortfall could lead to a reduction in the number of boats available to meet regional combatant commander requests for deployed SSNs. In recent years, an SSN force of more than 50 boats has been able to meet about two-thirds of such requests, so unless regional combatant commanders reduce their requests, the fraction satisfied may drop below two-thirds.

    A shortfall in SSNs could create wartime operational risks, particularly during a situation of simultaneous major combat operations.

    Although other Navy platforms could perform wartime SSN missions, these other platforms might not be able to perform them with the same degree of covertness or in the same locations as SSNs. As a result, some of these missions might not be performed as effectively.

    Although the deepest part of the SSN shortfalls lasts only a few years, potential adversaries can know years ahead of time when this period will occur and make preparations to take advantage of it.
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    To avoid dropping below 48 SSNs at any point, 8 SSNs need to be added to the shipbuilding plan. If they are added in the outyears, where the Navy already plans to procure two SSNs per year, that would produce 8 years in which three SSNs per year are to be procured.

    Procuring three SSNs per year while also meeting other Navy needs might pose a significant affordability challenge. If so, then another option would be to add SSNs in the near term, where the Navy currently plans to procure one boat per year. The Navy currently plans to shift to two-per-year production in fiscal year 12. Accelerating this by three years to fiscal year 09 would reduce from eight to five the number of downstream years with three SSNs.

    Alternatively, for each year that the start of two-per-year production is accelerated, the force would bottom out one boat higher. For example, if two-per-year production is accelerated by 3 years to fiscal year 09, the force would bottom out 3 boats higher, at 43 boats instead of 40. In addition, the shortfall period would be reduced from 14 years to about 8.

    Regarding options for maintaining the submarine design base, which the committee has expressed an interest in, there are three or four options that I would be happy to talk about if the committee would like.

    Navy officials have warned that accelerating two-per-year production could throw their plans out of balance, because it would leave less funding available for meeting other needs. That is true. And it is something for Congress to take into account.

    Navy officials have stated that changing the shipbuilding plan could introduce instability in the demand signal sent to the shipbuilders. Although stability is an important factor in constraining shipbuilding costs, other factors such as volume are also important. Congress may wish to consider whether the stability argument can be overemphasized as a device for attempting to discourage congressional consideration of alternatives to the Navy's proposed plan.
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    Mr. Chairman, this concludes my statement. And I will be happy to respond to any questions the subcommittee might have.

    Mr. BARTLETT. Thank you very much.

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

    Mr. BARTLETT. Mr. Casey.


    Mr. CASEY. My first time I would work this thing; we all set here?

    Mr. Chairman, Mr. Taylor, distinguished Members of the committee, I have had the pleasure of meeting each of you individually over the last few years, and I understand the deep respect you have for the submarine force. And I have a deep respect for you as well, because I understand you have a keen interest there, and you are trying to get to the bottom of these very, very difficult issues.

    So, good afternoon. I am John Casey, president of General Dynamics Electric Boat. I am distinctly honored and privileged to speak to you today on behalf of the women and men of Electric Boat, 11,400 extremely talented individuals.
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    Again I want to thank the committee for conducting this hearing to discuss the Nation's submarine force and the submarine industrial base. I deeply respect those who operate our submarines and the critical role they play in our national security.

    I provided very brief written testimony for the record and I believe you will make it part of the record, as you stated.

    Today I am here to emphasize only three very simple issues: first, Electric Boat's unique submarine technology base; second, submarine acquisition costs and the relationship of volume; and third, the importance of close cooperation between Navy and our industry.

    Starting with Electric Boat's unique submarine technology base, it is in fact at risk for the first time in 40 years. The Navy submarine research and development forecast does not include a new submarine design, a fact that has been stated many times today already.

    Consequently, thousands of highly skilled Electric Boat submarine designers will be lost, and years of investment and training will be wasted. We have already begun these reductions, and in less than two years nearly half our workforce will be lost.

    Electric Boat and the Navy are working on a plan to leverage Electric Boat's design capability, including modifications, as stated, that can reduce the cost of Virginia class ships and the acceleration of the Navy's next generation strategic submarine design.

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    Let me talk briefly about the experience of one of our allies after they failed to sustain their design workforce.

    When it came time, United kingdom did not have the capability required to complete the design or sequence the construction of their Astute class. Their submarine industrial base eroded because of an extended gap between designs and low-rate submarine production, similar to the situation we are discussing today. The United Kingdom turned to the United States. They ultimately turned to Electric Boat for assistance.

    If our Nation loses the capability to design and build nuclear submarines, to pose a hypothetical question: Where will we turn?

    Now is the time to increase submarine procurement to two shipments per year. In 1996, Congress authorized construction of Virginia class submarines. Accordingly, the 30-ship Virginia program acquisition plan was developed to satisfy force level requirements and provide the volume necessary to sustain the industrial base.

    Unfortunately, we have seen that two-ships-per-year Virginia acquisition plan delayed by a decade, to fiscal year 2012.

    Current Navy plans will procure seven ships over the period from fiscal year 2009 through 2013. Industry's proposal accelerates procurement of two ships per year in fiscal year 2009, providing the volume the Navy needs to build submarines more cost efficiently.

    This plan enables industry to achieve the CNO's stated two billion per unit cost as measured in fiscal year 2005 dollars.
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    There are three essential elements in the plan:

    First, additional volume; two ships a year commencing in fiscal year 2009.

    Second, continued efforts of industry and the government to reduce costs through our continuous improvement programs.

    And, third, incorporation of design modifications to reduce ship production costs.

    Industry and the Navy must work together to reduce submarine costs. Electric Boat leads the industry in shedding excess production capacity, reducing overhead and infrastructure costs, and developing tools and methods to preserve critical skills and capabilities at low rates of production, with continued prudent capital investments in design and manufacturing capabilities, allowing us to deliver superior products.

    Meanwhile, we have already reduced our workforce by several thousand people to position the company for today's low rates of production.

    Our actions have saved over $2 billion between 1993 and 2005. Over 95 percent of those savings accrue to the United States Government.

    Our continuous efforts to improve production efficiencies have resulted in a 25 percent reduction in labor costs, if you compare the lead SeaWolf, the previous class of ships, to the lead Virginia. Even better, Electric Boat's second ship, the Hawaii, is on track to a 50 percent reduction compared to previous class of submarine warships.
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    We can not achieve these cost reduction goals alone. Government-furnished equipment accounts for almost 40 percent of the cost of a Virginia class submarine. Obviously, cost reductions of Navy-provided materiel must also be realized to achieve the CNO's goal of a $2 billion submarine.

    In summary, the successful history of this Nation's submarine force and its vital role in our national security is a testament to Electric Boat's commitment and unequaled contribution to producing the finest, safest, and most technologically advanced submarines in the world.

    The full depth and breadth of Electric Boat's technical and production capability has been clearly demonstrated in the past two years alone. During this period we have delivered three unique submarines: The USS Virginia, USS Jimmy Carter, and USS Ohio.

    In designing, building, and delivering these three highly complex warships, Electric Boat has set an unprecedented pace for transitioning submarine technology from concept to warfighting reality. Electric Boat, our teammate Newport News, our industry partners, and the Navy are working together.

    Our Nation deserves a long term, stable submarine program that meets force level requirement. We have a plan to build those submarines at the lowest possible cost. We respectfully request your support to make this plan a reality for the benefit of the Navy and its supporting industry, the United States taxpayer, and our national security.
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    Thank you. That concludes my comments.

    Mr. BARTLETT. Thank you very much.

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

    Mr. BARTLETT. Mr. Petters.


    Mr. PETTERS. Thank you, Mr. Chairman. Chairman Bartlett, Ranking Member Taylor, distinguished Members of the Projection Forces Subcommittee, on behalf of the 18,000 shipbuilders at Northrop Grumman Newport News, thank you for this opportunity to appear before you and discuss the Navy's projected submarine force structure and the implications for submarine construction.

    I have submitted for the record some very detailed comments.

    Today I would like to summarize those for you. And there are four key points I would like to make:

    First, the nuclear submarine production industry in America is alive today, thanks to the wisdom of the Congress and the investment that the American people have made in this industry.
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    Second, the team at Northrop Grumman Newport News and General Dynamics Electric Boat (EB) is strong and functioning very well. EB delivered the USS Virginia, the first of the new class of submarines, in 2004. And the Navy reports that it is performing superbly, as you have heard earlier this afternoon. At Newport News we are on the verge of delivering our first ship of the class, the Texas, this spring. It is also our first submarine delivery in a decade, and one we are anticipating with great excitement.

    Third, I have spoken in other forums about the needs of the shipbuilding industry for stability if we are to successfully deliver ships to the Navy at a cost the Nation can afford.

    With the recent delivery by the Navy of a 30-year shipbuilding plan, the industry can see that stability may be within reach. Continued commitment will be critical to ensure this plan is fully funded.

    Fourth, stability is critical to the shipbuilding industry, but volume is essential if costs are going to be reduced in any meaningful way. In the case of the Virginia class submarines, the sooner we reach production of two submarines per year, the sooner we will see the desired reductions in the costs of these submarines.

    In fact, I am confident that the Block 3 ships will derive the full benefit of the teaming structure to include the lessons learned, the process and facility improvements, and volume production.

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    And if the current positive trends continue for the submarine building costs and the government successfully executes its plans to reduce the costs of government-furnished equipment, and we increase the rate of submarine production to two ships per year under multiyear procurement, I am also confident that the Block 3 submarines can be delivered to the Navy in accordance with the plan you heard earlier, two boats for $4 billion in 2005 dollars.

    Finally, I strongly believe that the teaming agreement and its unique sharing of work and profits is absolutely the best way for shipbuilders to achieve this goal.

    As a shipbuilder focused on nuclear submarines and aircraft carriers, I know that I may be a bit parochial as I look at my ship programs in isolation, and I have no doubt other shipbuilders do the same with their programs. Balancing national priorities is a responsibility best left to those who serve the Nation in the civilian and military leadership of the Navy, the Department of Defense, and the Congress.

    At Newport News, we believe the investment the country made in the teammate agreements carried with it a commitment for us to be a good partner with Electric Boat and the Navy. In effect, we committed to reconstitute our submarine workforce efficiently to optimize our submarine construction facilities and processes to most economically produce the Virginia class and to actively work at delivering successive submarines at lower costs.

    We are fulfilling those commitments. We have made and are continuing to make substantial investments in both our facilities and our people, and we are relentlessly focusing on process improvements, all of which I have detailed in my written testimony and all of which are required to maximize the success of this program for the Navy and for the industry.
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    The initiatives we have undertaken in these areas are critical to the long-term success of the Navy. At Newport News, we have seen indications that our efforts have taken hold and our investments are beginning to pay off.

    In 2005, for example, Newport News redelivered four ships to the Navy. Each of these ships was redelivered under budget.

    This year, with a successful delivery of the Texas, the wisdom of the Congress in returning Newport News to submarine production will be confirmed.

    In closing, history has shown how one submarine operating or believed to be operating in an area can keep an entire fleet in port. This is an asymmetric platform. The Nation and the Congress have decided to invest in these asymmetric platforms and they have done so by ensuring that the United States has an unmatched industrial capacity to produce technologically superior submarines. We should use it.

    Thank you, and I look forward to your questions.

    Mr. BARTLETT. Thank you very much.

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

    Mr. BARTLETT. Admiral Konetzni.

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    Admiral KONETZNI. Thank you, sir. Mr. Chairman, and ladies and gentlemen—I am sorry. I told myself when I retired September 1st, 2004 that it is over. I have nothing more to do with this wonderful business called the military and submarining and the like. I am here on my own. I have nothing to do with companies that do business. I left my bride this morning. We are still living temporarily. I truly apologize for the typographical errors in my statement. My secretary is my bride. She quit on Saturday afternoon. I said, we are just going to send it. I do apologize for that.

    But I am honored to be able to be here and to provide a couple of thoughts. Like the other gentlemen here, I will just paraphrase to some degree the statement that I submitted.

    I won't mince words. I will tell you that every word I say today, Mr. Chairman and ladies and gentlemen, I have said before in uniform, or I wouldn't be here. I can't go both ways.

    I think regarding the submarine community, this Nation is past the crisis. I think it is an emergency. And it is not like other emergencies that I have dealt with in my 38 years in the Navy. Guam was an emergency because I just didn't like being the commander out there, lying to my Commander in Chief about the number of submarines I am supposed to have available in the western Pacific in the old plan, when I didn't make it 60 percent of the time. But that was okay. Guam took a long time. The fights were phenomenal. But like lots of things, the intellectual argument finally won and we have some submarines in Guam. And I feel good about that.
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    I laugh how we talk now about the 60/40 split. Some of us submariners, we like to call ourselves bubble heads, came across the table at each other in 1995 and 1996, because I felt very strongly about that split. It had to do with the war plans. But those issues were going to take care of themselves. They were intellectual arguments. They would take hold. They had nothing to do in many ways with financials. They had some political implications, moving ships from new London, wherever they might be. We are past, in my mind, the crisis mode. I think we are in emergency.

    I will paraphrase my comments. Warfighting is all about risk.

    I take a look at submarine construction worldwide. It is up. I went to my Korean friends and celebrated the 10th anniversary of their submarine force. They understand battle. They understand ship construction, how important it is. More about that later.

    I look at China. I would never, ever have tried to grow China ten feet tall. I think that history shows that, for the most part, they subsume cultures; and they are proud of that. But there are certainly some unbelievably true stories about punishment, punishment of Vietnam. It back-fired. Taiwan is a difficult spot for China.

    But I look at their behavior:

    They fielded 12 new submarines in 2004–2005.

    Today they have 63 submarines; 50 percent of those submarines, as you all know, are modern and very highly capable.
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    New boats, nuclear boats as well as modern diesels, are entering the fleet sooner than originally predicted. The Jin 1 SSBN on sea trials, carrying the JL–2 missiles capable of hitting the Continental United States from the East China Sea. Two Shang class SSNs, the follow-on to the HAN. Of course, the Xia has been around, the SSBN and the HANs.

    And they are looking at building six SSBNs and 12 SSNs by the year 2020. It reminds me of our country in the seventies and the eighties.

    Equally alarming is that they have built recently a very modern and the largest modern diesel fleet in the world, including the Yuan. We didn't even know it existed until it was in the water. Thirteen SONGs SSKs, an average of two per year. I have seen them operate. They are getting there. They put their skippers through some tough trials. They are learning from us. And, of course, 9 Russia KILOs, with three more on order.

    That force is bolstered by older MINGs, nineties vintage, as well as a combination of the older ones in the Romeos.

    At this pace, China will have at least 75 modern submarines by the year 2020.

    I don't take that politically correct argument that says they are capability and no threat. I think it is much more involved than that. I think that the Chinese are doing exactly what our Nation would do. They are reaching forward. They want to deny access to United States of America. And the United States Navy has two very critical access missions, mine warfare and anti-submarine warfare. And we are ready to give those up.
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    I look at the studies. Many things have been said about the studies. I personally would not spend another penny on a study because it is a taxpayer rip-off. We don't listen to the studies; why do them? They are always ignored. Fourteen—I am sorry—12 in 14 years.

    Even in 1999, the hero of my life professionally is Dr. John Hamre. Because of that study, the vice chairman of the Joint Chiefs testified in July of 1998 that the study would be available in September. I was really fortunate to have been able to meet with Dr. Hamre at the North Pole early in 1999. He made the big mistake of his life by asking me at 4o'clock in the morning, What do you think?

    Mr. Hamre himself, because he went back and took action and took names, and made that study continue and complete, he saved over 150 submarine years.

    My dear friend Chuck Munns today made a misstatement. Our problem in the past—but it is well past us—has not been letting go of the 688 class, the Los Angeles class submarines at the end of their hull life. Some of them have gone to 15 and 16 years.

    He helped us save many of those ship years.

    But the studies have been ignored. And quite frankly, when we take a look at studies we generally, as a Navy, only pick the lowest number. The study was talked about today, the shipbuilding. No one knows. It says 48 to 60. We lock right in. I don't know what ''sweet spot'' means. But between 48 and 60, that is kind of a sour spot in my mind.
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    I was in the Navy. I went to every meeting regarding anti-submarine warfare in the Pentagon. I had many private meetings after those meetings, because I was in uniform, and I spoke up because I do believe that intellectual arguments will carry the day.

    In 2004, we tried to reverse-engineer the number of submarines.

    My comment to Admiral Joe Sestak, who gave that brief—because I had never seen it before—was 37. This study is underwhelming, because it took a list of 10 assumptions, all of which had to come true to make 37 even possibly work.

    Some of that reverse engineering exists in this shipbuilding study.

    Comments like, well, gee, we got to get this and we got to get that, and we have to fit it in. And give me a break, are you a team player?

    The submarine leadership, I suspect, and I saw a little bit of it today, has been beat down, cajoled. I understand the rules; you do as well, ladies and gentlemen. I got it. But it is bigger than an individual. It is bigger than a promotion. It is bigger than us. It has to do with the United States of America.

    That 1999 study was a good study. The 68 to 72 submarines in peacetime operations are the highest priorities. Highest. I know all the priorities. It completely blew off, because we didn't have enough submarines, the ability to work with our allies. And here we talk about a 1,000-ship Navy across the world. Allies. It was a good study. It is more meaningful now than it was then.
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    Finally, readiness for war. It has been stated today, if you are going to win, you have to be ready. You need to train where you may have to fight. IS and R, intelligence, surveillance and reconnaissance is a series of words that has been used perhaps too often. You need to be there.

    Another one of my heroes, a surface officer, Admiral Denny Blair, when I told him you need to have two there all the time, he said why? I said here is why. You will step increase every day. You will go prompt critical when you look at what you will know, because you will have been there. We did it, and our ability to understand the technologies, the tactics and all of the things that occurred in that part of the world were enhanced phenomenally.

    Numbers do count. Missions that we do today are critical. I am amazed at the comments. The Annapolis just got back from a very important mission. Ninety percent OP TEMPO. That means in a 6-month period, you are out 5 months and one week. At the hardest part of the Cold War, I didn't operate like that.

    So how do you do ASW? I am convinced that anti-submarine warfare, that the rules of engagement will never change. It takes continuous collection, you need to know the submarine operating areas, you need to have deployable queuing, you need really constant tracking of enemy or potential enemy subs, you need search and localization, you need coordinated prosecution and counterforce attack. It has been that way since day number one. It won't change.

    Finally, ladies and gentlemen, if I may just give you the falsehoods. Submarines are not Cold War weapons. They are weapons of destruction. They are weapons that grant access.
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    Second, do combatant commanders exaggerate their needs? No. When I worked at the Fleet Forces Command, we looked at every combatant commander's needs.

    Finally, 2020 capabilities. Show me. They don't exist. Distributed network systems, Mr. Chairman, you are involved a little bit with that. I am on a study doing that. They are not there. There is no magic just yet.

    Finally, I hate to see this tarnishment of what the Defense Science Board said in 1999, that our submarine force is a gem in the national security arsenal of the United States of America. It is being tarnished. If we don't do something soon, I am convinced it will go away.

    Thank you very much.

    [The prepared statement of Admiral Konetzni can be viewed in the hard copy.]

    Mr. BARTLETT. Admiral, thank you very much for your testimony. You have confirmed my suspicion that we probably get the best and most honest testimony from our military people who have just taken off the uniform. Thank you very much for your testimony.

    Let me turn now to my colleague.

    Mr. TAYLOR. We have to go to Mr. Simmons.
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    Mr. BARTLETT. He yields.

    Mr. SIMMONS. Thank you, Mr. Chairman, and thanks to all of the witnesses for their very compelling testimony. From Mr. O'Rourke, we learned that this is not a new problem. It is a problem that is predictable, has been predicted, so the challenge for us in Congress today is to rise to the challenge. Those who have gone before for one reason or another have not risen to the challenge. But the time is now, it seems to me.

    To Admiral Konetzni, I thank you for your service, first and foremost, and I thank you for your continued service out of uniform trying to explain in clear terms what the nature of the problem is. I have said it before and I will say it again, the silent service is often too silent. It is just the nature of how they operate. So your voice in this discussion is a very important voice.

    I thank both of our witnesses from industry who are part of a team. I remember the days when submarine design and construction was competitive. Mistakes were made. People were hired and fired, layoffs, the uncertain roller coaster resulted, I think, in products that were not as good as what we are producing today. I am a believer in the team concept and have been for a decade, and feel that it has the capacity to give the United States Navy and our country the very best products in the world to maintain that sub-surface dominance, which is critical to our future in this world.

    But the question I would put to industry is, you have stated, I believe, that if we could move to two a year, we could reduce those prices. You have heard the previous panel say, well, there is a lot of problems in doing it now.
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    What is the problem, if any, of putting approximately $400 million of funding into the 2007 budget in anticipation of two a year in 2009, and what are the products if we don't do that?

    Mr. CASEY. I will attempt to answer your question, Mr. Simmons, from industry.

    First of all, we would applaud the CNO's efforts to bring stability to the shipbuilding plan. I think that is basically what the CNO is attempting to do. However, it doesn't feel very stable at Electric Boat, as you said in your opening remarks.

    There is really a number of parts to the cost of the submarine. To get to a $2 billion submarine, there are three essential elements.

    The first element are the labor costs, and the labor costs can be broken down into the labor rates, the dollars per hour and the number of hours. I am very confident that we are on the right track on the Virginia class relative to bringing the number of hours it takes to build a ship down, to reduce them in the right direction.

    The first ship was in the range of 17 million man-hours. We are down before the end of block 1 in the range of 12 million man-hours. So we are definitely on the right trend. By the end of block two, I am very confident the number of hours will be good.

    Labor cost is another separate issue. Labor costs relate to volume. As we are building only one ship per year between both members of industry, and we are only delivering one ship from each of those two yards, basically the waterfronts involved in submarine construction, in particular, the delivery of the water-borne portion of that work, fluctuate in a significant fashion that makes it extremely difficult to drive costs down.
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    If we can get to two a year, I feel much more confident that we can stabilize, if you will, from the shipbuilder's standpoint, efforts to drive costs out of waterfront construction activities to delivery activities.

    From the supplier base, the contractor-furnished equipment, they have done remarkably well in reducing their costs. If we were to have ten ships from fiscal year 2009 for the next five years to distribute their manufacturing costs over a volume of ten ships, I am quite confident we could bring their material costs down in the ten percent range.

    The one challenge, of course, not knowing where we are sitting today, is the worldwide market for raw materials. We have to be able to sort of project that, and the more uncertainty or the further we plan that into the future, I think the more uncertainty exists relative to those raw material costs.

    Last, we have to work very closely with the Navy on the government-furnished equipment.

    So I think from a stability standpoint, I do not believe the Virginia class program today is being built in a fashion that is the most stable for industry. I believe if you look at the top line shipbuilding and conversion accounts for the Navy, it looks quite stable if it is flat and level.

    Hopefully that answers your question, sir. I am not sure if you want to add to that, Mike.
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    Mr. PETTERS. Yes, sir. All I would add, I think your question was what is keeping the $400 million out of 2007, I think that the straightforward answer on that is there must be other competing priorities. There are no issues in industry that are keeping the $400 million out of 2007. That has to be a balance of priorities in some other way. We are ready and stand ready to support whatever the plan is and whatever the approach to getting to two submarines a year, we are ready to do that.

    Mr. SIMMONS. My time has run out. As I understand the answer, so there are no impediments from an industrial standpoint to beginning that process now. That process could begin now from the industrial standpoint. I will have some more questions obviously.

    Let me recognize the gentlelady from Virginia, Ms. Davis.

    Mrs. DAVIS. Admiral Konetzni, if we could figure out how to get the guys on the panel before you in uniform to be as gut honest as you are in giving us what you thought, it would make our job easier here, and we could go back and fight for what we think is right.

    You are absolutely right about everything you said about China. I referenced that earlier. They scare me to death, quite frankly, with where they are going and where we are not going. Mr. Peters, I thank you for being here, and Mr. Casey and Mr. O'Rourke.

    Mr. Petters, as one of the members of the teaming agreement with Electric Boat, what is your greatest concern with constructing the Virginia class submarine right now?
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    Mr. PETTERS. My greatest concern with constructing the program is the insecurity of what the future of the program is. When we first signed a team agreement in the mid to late 1990's, we worked all the way through this, the commitment was that we would be building two submarines a year, beginning in 2002. When we went and put together the second block of plans for second block, I believe that the commitment, at that point in time was 2007 or 2008, was when we were going to go to two per year. Now we are starting to begin discussions on what does the third block look like, and we are looking at 2012.

    I don't know how to persuade the supplier base, future employees, further workforce, I don't know how to attract those folks if I can't say to them with some certainty what this workload out there is going to be. The shipyards are both making significant investment in their facilities based on these sorts of commitments from the Navy, and as this date continues to move out, the return on those investments goes down, and then our shareholders begin to worry about whether they should make those investments or not. So, my concern is that 2012 will become a phantom date as well.

    Mrs. DAVIS. I think that is probably the concern of many of us up here on the committee. You heard Ms. Stiller reference it, and you sort of made reference to it a minute ago when you were answering Mr. Simmons on the question of why isn't the other $400 million put in there to build this submarine, and you said competing priorities. I think that is the concern.

    When the budget comes out, the budget has X number of dollars for shipbuilding, so rather than fighting to get more dollars for shipbuilding, we end up competing. I would not want to be, especially with you, competing on whether we are going to put the money into the CVN–21 or a submarine. That is not what we should be doing. We need to build more submarines and keep the aircraft carriers coming and the DD(X) and the others.
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    Mr. Simmons, what you and I need to be fighting for is an increased top line for shipbuilding as opposed to anything else, because we may be fighting to get two submarines a year in 2009, but then we may be on opposite sides, because I may be fighting to put the money back in the CVN–21.

    Admiral Konetzni, you have been there, why does the shipbuilding budget, why is that the one that is cut the most every time we get a budget?

    Admiral KONETZNI. To be very frank with you, ma'am, I think that we have kind of become part of this culture that says that is the bottom line. It is that $11 billion a year, and you are going to have to deal with it. Oftentimes on active duty, I would go to the meeting and the question, even from Admiral Clark would be, what do I do?

    Well, I honestly think you make good intellectual arguments, you pile them up and say here it is. You try to stabilize it for these shipbuilders as well, because it is a critical piece of this answer.

    But what when we are not willing to do that and when we put it off and off and off, eventually it is going to come back and bite us.

    Just looking at the costs I see under this plan, there are some very, very large mountains. I think that you are right on. You take a look 2012 with our history of putting this buildoff for ten years, I have zero faith that 2012 is going to be the time.

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    Mrs. DAVIS. I tend to have to agree with you. I guess the other thing that concerns me is Admiral Clark and I would always have the conversation on how much he had put back into operation and maintenance, because over the years, he let the operation and maintenance go. It looks to me like the Navy may be putting money back in the operation and maintenance, but now they are letting the design and build go. I think we are going to be turning around, we fixed one problem, but we are letting another one go.

    With that, Mr. Chairman, we have our work cut out for us. I yield back.

    Mr. SIMMONS [presiding.] I thank the gentlewoman. I agree with her comment. We don't need to be fighting over the pie. We need to expand the pie. A rising tide lifts all ships, and the teaming arrangement that we have on submarines shows that working together pays benefits. Certainly you and I working together has paid benefits.

    I see Mr. Taylor stepped out, so I will go into my second round of questioning. Again to the shipbuilders, you have a substantial supplier base, but it has been contracting over the years. I recall 10 or 12 years ago, the supplier base was around 11,000. Now it is down to maybe less than 7,000.

    A lot of it is sole-source, because a lot of people have gotten out of the business because there is instability and there is no profit. Maybe they are sticking with it because they are patriotic. So I would be interested to know how you see us maintaining your supplier base over the next three years, and why should we not be concerned about that?

    Mr. CASEY. Mr. Simmons, as has been stated, over 80 percent of the procurement dollars that are spent for contractor-furnished equipment are based on sole source suppliers, meaning that there is no place else in this country to buy those parts.
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    In the early 1980's or mid 1980's, we had about 15,000 active suppliers. As you point out, in the 1990's, we have had about 11,000. We are actually down below 5,000 suppliers as we speak today.

    We have a long list of specialized suppliers who provide parts that can be used on submarines, and I think it is important to understand that should we get to two ships a year in fiscal 2009 in accordance with our plan, we are stretching these suppliers as it is. If we ask them to wait until 2012, they will have gone a duration of a decade and a half, a good 15 or 16 years at one ship a year, when, in fact, I do not believe that a lot of those suppliers ever anticipated operating at those volumes at those levels.

    I think it is extremely important, as you are probably well aware, we have a submarine Industrial Base Council. That Council has visited with our suppliers very recently and they are all very anxious to get a read from the United States Navy and United States Government as to whether we are committed as a country to building the product to which most of us have devoted our lives.

    So I think there is huge risk there and anything you can do to help would be greatly appreciated.

    Mr. PETTERS. All I would add is I think it is a cascading type problem. If you have a very robust supplier base, you can use competition to drive innovation and price advantage in that supplier base.

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    As Mr. Casey pointed out, we are in a situation where the volume has been so low we are down to basically 80 percent sole source, so competition is a tool in driving the cost innovation in our supplier base has been greatly, greatly reduced.

    What we are left with is coming up with creative approaches to multiple ship procurements, multiyear procurements that we came through with on block two. That worked as well as it could, and we need to make sure we expand that for block three. Whatever the build plan is, we need to make sure we grab ahold of that and use that to the fullest extent we can. We are missing the opportunity to use competition in our supplier base.

    Mr. BARTLETT. I thank the gentleman. The Chair recognizes the distinguished ranking member from Mississippi, Mr. Taylor.

    Mr. TAYLOR. Thank you, Mr. Chairman. I know you have a lot of challenges. One of the questions that pops up is, is there a way to improve the division of labor between your two companies in a way that benefits both of you if given a free hand to do this rather than a congressional mandate or a Navy mandate?

    Mr. CASEY. Mr. Taylor, we have worked very closely with our teammate Newport News to delineate each and every work item that exists on the Virginia class ships.

    Very recently, the second ship of the class, the Texas, has completed inspections that will lead to its in-service activity. As the program moves forward, we are committed as a team to work toward reducing the costs to the maximum extent possible.
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    There are certainly opportunities to make improvements. Very recently we reallocated one major section of the ship that starts with what is called the lock-out trunk and goes to what includes the reactor compartment. Basically it is a full 25 percent of the ship. That section of the ship was entirely assembled at Quonset Point. The wide aperture array is a very high tolerance or closely toleranced part of the exterior of the ship that was installed there, and it is in a new coating facility that we recently invested the capital, together with the Navy's incentive program, to putting the coatings on that section of the ship before it even gets joined to the remainder of the ship at Newport News. That is scheduled to be shipped down to Newport News in the next few weeks, by the end of the month of April.

    So there are certainly opportunities to continue working together, and we meet regularly to discuss all of those options, sir.

    Mr. PETTERS. Sir, if I could follow up on that, I would point out that we actually have a lot of latitude to divide the work or assign the work to the place where it is most efficient. When we sat down at the beginning of block one and said how do we want to allocate the work, we came up with a plan that said this makes the most sense. Over the course of block one, the folks on the deck plate have made suggestions and said, you know, this would be done a lot better if the other guys did it and it would be more efficient for the program.

    We have actually allocated over one million man hours of work between the two shipyards moving it back and forth trying to find the most efficient way to get that work done.

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    I think that is starting to stabilize now, and I think that the advantage of it stabilizing is you really now get to the serious production that naval shipbuilding can take advantage of, where people are doing the same thing over and over again. We are well into the construction of the 6th and 7th ship, and my view of that is that now it is time, these folks are starting to really wring out significant costs in the serious production. We have the latitude to do what we need to do to drive the costs down.

    Mr. TAYLOR. Mr. Casey, you mentioned government-furnished equipment. One of the things that just absolutely slapped me like a two-by-four, in looking at the Hyundai yard and the IHI yard in Japan, and remarkably so, even the Chinese yard, as inexpensive as their labor is, was the sophistication of the machinery, cutting the plate, welding the plate. Whether you want to make it the size of the crane, the size of the blocks being welded together, a lot of folks are investing a lot of money in shipbuilding.

    You mentioned government-furnished equipment. I have got to tell you, I don't recall my local yard ever coming to me in 16 years and saying, you know, if you could get us this, we could do it better.

    So when you mentioned that 40 percent of your work is done on government-furnished equipment, how does that happen? Who do you talk to in order to make that process happen so that you can do a better job of building submarines?

    Mr. CASEY. I think it is two separate issues you are raising, sir. One, on the government-furnished equipment——

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    Mr. TAYLOR. The reason I say that is, look, I know we are the only customer you have. You are not going to write this off by going out and building a commercial submarine, and you probably are not going to turn around and build a container ship next week. So the reason for the government-furnished equipment is we are the only game in town, you are the only game in town. So if you want it done better, the customer is going to pay for it one way or the other. That is why I think it ties in.

    So, tell me, what is the process that you use, or does the Navy use to initiate a decision to purchase a piece of equipment to stick in your yard?

    Mr. CASEY. I wouldn't suppose to speak on behalf of the Navy, sir, but we do speak regularly with the Navy and review with them the cost of integrating the components they buy into the ship. Obviously, when those components are delivered to one, the shipyards, they are integrated into the ship. So we are in very close and regular conversations with the Navy to minimize unnecessary costs associated with integration of those pieces and parts.

    Relative to the investments you saw in the Far East, I would love the opportunity to invite you up to our Quonset Point facility and see, on a much smaller scale, keeping in mind submarines are nowhere near as steel-focused as some of those huge tankers are. In fact, a submarine's real challenge is its density. The density of the fore-end of the submarine is like 560 percent of the density of one of these commercial ships you are talking about.

    So if we take and go up to Quonset Point, however, and look at their steel processing facility and recognize, we can take design data, digital data, and apply it directly to the plates that get formed, bent, and sure the weld sizes on the plates. It is a classic example of state-of-the-art work, sir.
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    Mr. TAYLOR. Do you go straight from your Computer Aided Design (CAD), is that information fed into a machine and does the machine make that cut for you, or do you feed that information, printed out in a set of blueprints and handed to an individual with a hand tool?

    Mr. CASEY. The former, sir.

    Mr. TAYLOR. It is all done straight into the machine?

    Mr. CASEY. Yes, sir.

    Mr. TAYLOR. What percentage of the steel in your hull would be machine cut rather than hand cut?

    Mr. CASEY. Virtually 100 percent of the hull is cut on a table of that sort. There are other specialty pieces and parts that do not go through that process. But the vast majority of the hull certainly goes through that process.

    Mr. TAYLOR. The miles of welds that undoubtedly occur, what percentage of them are done by machine versus by hand?

    Mr. CASEY. There are really three levels. There is hand level, semiautomatic and automatic. I would be guessing, sir, I don't have the data with me, but semiautomatic welding today is well over half, somewhere between half and 75 percent. Automatic welding is probably limited to the major hull welds.
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    One of the things that is unique about the submarine again is its density. There are certain positions, conditions, most surface crafts, for example, only one to yield one side of the plate. And I don't want to make a submarine designer out of you, but there are certainly some challenges we face that go far beyond what is expected. There is really five key things that makes submarines unique.

    Mr. TAYLOR. Walk me through those percentages again, roughly?

    Mr. CASEY. I am guessing that semiautomatic and automatic welding is somewhere between 50 and 75. I think you probably would find that number much higher in commercial, where it is probably a vast majority of the work that goes into those ships is steel.

    If you think about a submarine, it is less than half of the work that goes to building that product is associated with the steel itself. Much more than half of the ship is associated with the cabling systems, integration, the testing and so forth that goes into the very complex vessel we build.

    So I think there are certainly things we can learn from those kinds of shipyards. In fact, I would never say we knew everything.

    Very recently, and in my statement, I make reference to the Deputy Under Secretary of Defense study that went internationally and reviewed the various shipyards across the world. I think in five of the seven areas, Electric Boat was ranked above the international average. In two of the seven areas, I think we were ranked the highest in the world.
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    It depends on what particular segment of the process you are looking at. We are quite proud of the results of that study and they are detailed within my statement, sir.

    Mr. TAYLOR. Admiral, as you know, we would never dream of telling you or anyone else in uniform how to do your job. On the flip side, we are stewards of the public's money and we are the ones that order the things that guys like you, or in your life, just a few weeks ago, are responsible for.

    Now we have this balancing act. We never want to see something that we have bought underutilized. It gives me personal heartburn in a time when our fleet is shrinking to know we tied up the block one Ticonderoga class less than 20 years. It personally makes my stomach sick that we gave money to retire ships in less than 20 years.

    On the flip side, we have the responsibility to see that we don't get so caught up in our bookkeeping mode that a single sailor is harmed or dies by needlessly extending the life of a vessel, putting him out to sea that a fellow like you said would not be safe.

    So with that in mind, are we on the right path as far as the 688s? Are we retiring them about the right time, are we retiring them too soon, or should we be trying to extend the lives of the vessel knowing that the real treasure of America is on board that vessel and the last thing we want to do is have one of those kids die needlessly because we got cheap?

    Admiral KONETZNI. Sir, it is a battle I fought some time ago with some other people who are probably a hell of a lot more dedicated than me and smarter, and we didn't do too well.
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    Many of those 688 class submarines were, and they continue to be decommissioned at half their life, because you can save a couple of million dollars really quickly. The reactors, we have them. They are available.

    Now, some even in my uniform with the dolphins, say why go there, because you won't build the new ones. That is okay. But I don't like personally to throw the baby out with the bath water. I don't like to talk about the 2020 capabilities until somebody shows me those capabilities. We didn't use precision-guided weapons until we had them in our hot hands.

    So that battle has come and gone. And every year since 1995, when we had to save a couple of bucks, we said decom it. We will take the 150 young sailors and it will get better. I don't think that was a good decision.

    The same thing goes with the surface ship. The average age of the cruiser in this Navy, since we had cruisers is 21 years. What a ripoff to the taxpayer, not to modernize them and keep them on. I have studied this time and time again.

    So what have we done? I don't know what started this whole sequencing of, I hate to call it the revolution in military affairs, because I think that is a trite way to put it, but those in uniform, their loyalty is, in my mind, to protect the young people of the United States and protect the country. Somehow in the 1990's, we lost our way to some degree, and we didn't stand tall and say, wait, I can get more out of that. I can go ahead and maintain that ship better. I can upgrade that ship. That way, I can put this decision on Virginia class or CG(X) or DD(X) off another year. We threw those out and we don't have a good answer. We haven't had good answers about some of the platforms.
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    So we are in a situation right now, I believe, where we haven't done the maintenance on our ships properly in the past.

    When I toured the John F. Kennedy in the year 2002, I made a statement to the Chief of Naval Operations, I wouldn't put a child of mine in that engine room. We did that to that ship.

    So my point is, I think it is time for us in uniform to stand tall, come up with a good intellectual argument and a plan. I am very happy that the CNO has at least a shipbuilding plan. We have not had one for the last couple of years.

    Mr. TAYLOR. So, your opinion of the Navy's decision to discontinue the refueling of the Los Angeles class is——

    Admiral KONETZNI. What happens, sir, in the beginning, when the 1997 QDR came out, saying go down to 50 submarines. As everyone in this room knows, we had gone down very quickly in the Navy on our number of submarines. The 637s were out of there. All of the 41 for freedom were gone, except for the one I had out in the Pacific, the Kamehameha, which was a special ops boat, special warfare boat. And we decided to start taking off at halfway life, 17, 18 years, the Los Angeles class.

    The thing that regrouped that thought process was that 1999 study, because when Dr. Hamry got hold of it, he said wait, how can I put these ships on the chopping block and let them go away when I am coming up with numbers like 68 to 72?
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    Since that time, the memories are so short, the studies are so ignored, it was take them off, take them off, take them off, I think that that is unpatriotic. I think that that is patently wrong by those people in uniform.

    Ma'am, like you said before, the words that I say to you today, and, Mr. Chairman, I said these words in uniform. Now, not many people listened, but if some of them are coming true, and, sir, you are spot on. We have an obligation to balance our military. That is that which we have today, we wouldn't treat our cars the way we treat some of our platforms. We have an obligation to look toward the future to make sure we have a plan, and we have an obligation to make sure that we know truly what risks we are willing to take for this great Nation.

    I don't think we are balancing that. I think we have too many yes men, to be very frank with you, and yes women.

    Mr. TAYLOR. So getting back to the Los Angeles class, the decision not to refuel them, good decision, bad decision, should be made on a boat-by-boat basis?

    Admiral KONETZNI. I would say a bad decision. It is clear to me on the one hand if you do that, because so many of the class of 62 total were built during the 1980's and 1990's, that you do reach the end, you reach a point where they all fall off the cliff at once, so you have to be thinking ahead about that. But it is much better to use that core that you own, spend the $300 million to refurbish that ship, upgrade it, these are beautiful ships, engineering works of art, than to let them go and still put off this decision for two-a-year new construction because we are in a situation right now where we can't afford it.
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    That circular argument, I love it. It is kind of like saying I am going to buy a Cadillac as soon as I get it down to 1,000 bucks. Well, I will be dead and buried. It doesn't work that way. The right answer is two a year.

    It is that confluence, I believe, sir, of these decisions that were based on how am I doing, rather than what is right for the United States of America, that has put us in a bind that you face today, that we all face, sir.

    Mr. TAYLOR. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. O'Rourke, it is very clear we are going to have less submarines than we would like to have in the future, and that is largely because they are costing us so much money that in the prioritizing in the military we just can't get more. How can we reduce costs so we could get more?

    Mr. O'ROURKE. I think some of the other witnesses have already spoken to that to some degree. One part that I could add to what they have already said is to make more aggressive use of the economic order quantity (EOQ) authority that is within the multiyear procurement arrangement under which the bows are being bought. The EOQ authority permits you to take long lead items in the boats covered under a multiyear and bring them forward and buy them in a batch quantity and therefore get better prices on them. The Navy, currently with the multiyear for the Virginia class, is taking some advantage of that, but if you were to take greater advantage of the EOQ authority by bringing forward more of those long-lead items, then you could get more of those batch orders and bring down the prices of those items somewhat more than they have already been brought. So that is one option for bringing the cost of the ship down, that I think was not discussed by some of the other earlier witnesses.
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    Mr. BARTLETT. Thank you very much. Admiral, you mentioned that China was obviously embarked on a very aggressive upgrade of their military, particularly their navy and their submarines. You indicated that they were doing this to deny access. I gather you were referring to the potential Taiwan confrontation?

    Admiral KONETZNI. Yes, sir, I was. That is exactly what I was talking about. We have watched them operate, sir. It is history now, looking at the building programs and the like.

    It is clear to me that they see us interfering in the Taiwanese situation, coming over, I always use that term, with our white cowboy hats on, the good guys, and they are going to go ahead and ensure, and I don't blame them, that they restrict our access. And I think that is truly the way for them to think things. I think that we have commitments over there, and I think that we have to realize that that could possibly happen.

    What is upsetting to me is when I see some of these studies and that word ''capabilities,'' because I have been involved with some of them, I see these wonderful machines, I see the Secretary of Defense saying ''I want to be able to turn this around in ten days.'' some of us, not myself, but some have accepted that as that is the way it is going to be.

    I don't think that we have an option of getting all of that area ASW-wise cleaned in ten days, even in 2020. The same thing with North Korea regarding mining if they should have time to mine.

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    These platforms, these submarines, provide access for America.

    Mr. BARTLETT. I would like to suggest that I think many of us underestimate how important Taiwan is to China. It is a tiny little island. China is 1.3 billion people with a very aggressive economic growth of nearly ten percent. Why should they be so concerned with this tiny little island.

    I think, sir, it is because they see their empire unraveling like the Soviet empire unraveled. If Taiwan can declare its independence, so can Tibet and Mongolia and who else? I think that too few of us understand how important this is to them.

    Let us pray for a diplomatic solution to this problem, rather than a military solution to the problem.

    Let me suggest another reason for this very aggressive buildup of their Navy, particularly their submarines. China, more than perhaps any other country in the world, is acutely aware of how dependent they are on foreign sources of oil. They are now the number two importer in the world. Most of their oil comes through the Straits of Malacca. We can now deny them access to that oil. I think one of the reasons they are so aggressively building this blue water Navy is to make sure that they can keep open those supply routes for oil. I think if we understand these two imperatives of the Chinese, that we will be in a better position to position ourselves relative to that. Do you agree?

    Admiral KONETZNI. Sir, I could not agree more. Again, I am not the brightest light in the harbor, sir, but I have read a lot about history, and I will tell you, I think it is even more complicated regarding China and Taiwan.
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    They were embarrassed phenomenally when Japan took over Taiwan. They certainly were embarrassed by western nations. At least it is in their culture. This has been a sore point for years and years and years, and it reminds me about the business in this country about cultures. It is a little bit like North Korea.

    Mr. Chairman, you have heard, as have I, for 40 years that I can remember, 50 years of my life, that the North Koreans were going to implode. We Americans don't understand that the thought process that they have is that they are the patriots. They fought against the Imperil Japanese Army in World War II, and, for the most part, they look south and say they are the collaborators. That gives unbelievable strength to a degree that is the Chinese way of looking at it. They are hurt by Taiwan, and I don't think they will ever take their eyes off that ball, sir, just as you said.

    Mr. BARTLETT. I would like to ask this last question I have to both Mr. O'Rourke and to the Admiral. If we assume that there are four levels of risk, red line, high risk, moderate risk, and low risk, when our military people tell us that this shipbuilding program, the one for submarines, has acceptable risk, which of those four levels of risk do you think they are referring to? Red line, high, moderate or low? Which do you think is right?

    Admiral KONETZNI. Sir, it would be unfair for me to perhaps speak for other folks. I think the word risk is used too often and the business that goes with it, well, there are other ways. We can talk, there is economics, we can do this.

    The fact is the risk to not have sufficient submarines in the arsenal and not to do what I call the most critical, I got to be careful here, ladies and gentleman, but most critical IS and R missions are things, and it is defined very clearly, are missions that truly protect the United States of America from weapons of mass destruction and things that would put our way of life at risk.
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    We are not doing—right now 70 percent we are doing. So we are not doing 30 percent of those. You can't use that word, when you say risk and you say I want to have this 1,000 ship Navy across the world with our friends, and then embarrass our friends in South Korea, in Singapore and Australia, and say I cannot exercise with you this week, because all of that has been cut by 35 percent in the last 2 years. We do not have the assets.

    So, my feeling, sir, we are moving in a direction that puts our Nation in an access role regarding anti-submarine warfare, and I would say the same for mine warfare, that is severely risky for this Nation.

    Mr. BARTLETT. Sir, you have a multiple choice question. There are only four questions. Red line, high, moderate and low.

    Admiral KONETZNI. I would say red line.

    Mr. BARTLETT. At which risk level?

    Admiral KONETZNI. I would say red line and high, and we are going down the wrong path.

    Mr. BARTLETT. Mr. O'Rourke, at which risk level are we when we get to 40 submarines, if the four choices are red line, high, moderate and low?

    Mr. O'ROURKE. Let me first answer your original question, which is when the Navy says they are at acceptable risk, which of those four levels do I think they are referring to. I can only give you my own intuitive response, which is when they say ''acceptable,'' I intuitively believe they are referring to moderate or less risk.
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    Now, with regard to your second question, where do I stand on the risk issue, I think the risk is clearly greater at 40 than it is at 48, not only because the number is lower——

    Mr. BARTLETT. You have to choose one of those four. This is a multiple choice question. Red line, high, moderate or low risk at 40.

    Mr. O'ROURKE. At 40, I think we are flirting with high risk.

    Mr. BARTLETT. Would our two industry people agree?

    Mr. CASEY. I am not an expert in military matters, sir, but I think anything less than 48 is not a good thing.

    Mr. BARTLETT. Okay. We had a very good hearing. I want to thank you all very much. I will ask you to respond to questions for the record. We may have questions we need to ask you that have not come to mind now so that this record will be more complete and more meaningful. So thank you very much. Our subcommittee is adjourned.

    [Whereupon, at 5:50 p.m., the subcommittee was adjourned.]