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[H.A.S.C. No. 108–27]



FOR FISCAL YEAR 2005—H.R. 4200






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(H.R. 4200)

MARCH 30, 2004




ROSCOE BARTLETT, Maryland, Chairman
ROB SIMMONS, Connecticut
JO ANN DAVIS, Virginia
JIM SAXTON, New Jersey
KEN CALVERT, California
JEB BRADLEY, New Hampshire
JOHN KLINE, Minnesota
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GENE TAYLOR, Mississippi

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





    Tuesday, March 30, 2004, Fiscal Year 2005 National Defense Authorization Act—Navy Force Structure and Ship Construction

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    Tuesday, March 30, 2004




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

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


    Brown, Cynthia, President, American Shipbuilding Association
    Young, Hon. John J., Assistant Secretary of the Navy (Research, Development and Acquisition); Vice Adm. John B. Nathman, USN, Deputy Chief of Naval Operations (N–7) (Warfare Requirements and Programs) Department of the Navy; Vice Adm. James C. Dawson, Jr., USN Deputy Chief of Naval Operations (N–8) (Resources, Requirements and Assessments) Department of the Navy and Mr. Ronald O'Rourke, Specialist in National Defense, Congressional Research Service
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Bartlett, Hon. Roscoe

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

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


House of Representatives,
Committee on Armed Services,
Projection Forces Subcommittee,
Washington, DC, Tuesday, March 30, 2004.

    The subcommittee met, pursuant to call, at 1:05 p.m., in room 2212, Rayburn House Office Building, Hon. Roscoe Bartlett (chairman of the subcommittee) presiding.

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    Mr. BARTLETT. The subcommittee will come to order.

    This afternoon we will receive testimony from witnesses representing the Department of the Navy, the Congressional Research Service and the shipbuilding industry on the President's fiscal year 2005 budget request for the Navy's shipbuilding program and force structure.

    Before we proceed, I would like to commend our men and women serving in all of our military services throughout the world, coalition personnel and those supporting them, for their dedication and professionalism.

    The security challenges confronting our nation today are complex. We face the necessity to balance the expenditures to meet today's military requirements with the investment for the future through research and development. We also face the necessity to reach the proper balance between required capabilities and maintaining the shipbuilding industrial base, within our constrained resources.

    Our purpose today is to ensure that, for fiscal year 2005 and beyond, the Navy and Marine Corps continue to be provided the proper resources to achieve the right balance of force structure and capabilities to meet new challenges that surely lay ahead.

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    Fundamental to this issue is determining what the present and projected threats are and deriving from the best available information what capabilities are required to meet those threats. As was demonstrated in both Operation Enduring Freedom and Operation Iraqi Freedom, any future conflict will require the contribution of all the military services.

    This means, as we seek to determine what capabilities are required by the Navy and Marine Corps, we must also bear in mind the contributions of the other Services.

    In my mind, we have no peer adversary now. And I question if we will have one in the foreseeable future.

    Lacking a major threat, in my opinion, this nation should increase emphasis on research and development of truly innovative capabilities for the future rather than rushing to field the next generation capability immediately.

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

    I have a number of concerns. To mention a few: In my view, given state-of-the-art technology available, we have too many people on our ships. Further, we seem to have a new plan every year for how many and what type of ships we want to build. Finally, costs seem to be an independent variable—ship costs seem to grow dramatically with each year's budget submission.
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    Secretary Young, I look forward to your testimony and comments, and those of the other witnesses, on the details of the process that gets us to the mix of ships—numbers, size, missions and so forth—that are assumed in this budget.

    As we begin this hearing today, the U. S. Navy now operates a combat fleet of about 291 surface ships and submarines, although the recent Quadrennial Defense Review (QDR) recommended a force structure that equates to approximately 310 ships. The budget request includes a forecast of a low of 290 ships in fiscal year 2005, before rising to 309 by fiscal year 2009.

    While some argue that the end of the Cold War and the improved combat capabilities of today's modern warships permit a much smaller Navy than would have been required only a decade ago, it is important to note that the Navy's peacetime forward presence requirements have not changed significantly since the end of the Cold War. Indeed, in some respects, those presence requirements for today's smaller Navy have increased as illustrated by continuing large-scale presence missions in the Mediterranean, the Western Pacific, the Indian Ocean and, most recently, in the Persian Gulf region during Operations Enduring Freedom and Iraqi Freedom.

    For fiscal year 2005, the Navy's shipbuilding budget request is $11.1 billion. This year, the budget request includes nine new ships. From fiscal years 2005 through 2009, 48 new construction ships are planned.

    To accomplish this objective, we will need to overcome challenges to the increased costs of new construction such as those in the Virginia Class submarine and the LPD–17 programs.
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    To address these and other important Navy force projection issues, I would like to welcome today's witnesses. We have: first, the Honorable John J. Young, Jr., Assistant Secretary of the Navy for Research, Development and Acquisition; second, Vice Admiral John J. Nathman, U.S. Navy Deputy Chief of Naval Operations for Warfare Requirements and Programs; Vice Admiral James C. Dawson, Deputy Chief of Naval Operations for Resources, Requirements and Assessments; and finally at the witness table, Ms. Cynthia Brown, President, American Shipbuilding Association.

    Before we begin, let me call on my friend, the gentleman from Mississippi, the ranking member of the subcommittee, Gene Taylor, for any remarks that he would like to make.

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


    Mr. TAYLOR. Thank you, Mr. Chairman. And I very much appreciate you calling this hearing.

    I would hope it should not be a surprise to anyone in this room that I think the fleet is too small, that we are retiring ships that are too young, and that on occasion we have been way too quick to charter foreign-flag vessels for use. And I do have serious concerns about the industrial base as we grapple with the need to maintain our nation's industrial base with our budgetary constraints.
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    And quite frankly, with the new technologies that come along, it is my concern that as we search for these new technologies, we delay the acquisition of the vessels, we stop acquiring the vessels that we are making and that the industrial base—and in particular those people who work in those industries—suffer in the meantime.

    So I would hope we would have an opportunity to address some of these things. Again, we have a great panel of witnesses. I am looking forward to hearing from them all.

    Mr. BARTLETT. Thank you.

    Ms. Brown, your written testimony and those of the other witnesses will, without objection, be entered into the hearing record. Please proceed with your opening remarks so we have an adequate opportunity for members' questions.


    Ms. BROWN. Thank you, Mr. Chairman, thank you, Congressman Taylor, for this opportunity to testify today and all members of this subcommittee, thank you.

    If I could, Mr. Chairman, I would like to say that I have—I noticed in the room you do not have a picture of a ship. And if I could loan this hearing room a picture, I would like to do so, so that we can have a ship on display.

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    The American Shipbuilding Association (ASA) is the national trade association of the six largest shipbuilders in the United States that build all of the capital ships for the United States Navy. We also represent 30 companies that are dedicated to the manufacture, design and service of critical ship systems and components.

    The shipbuilding industry is in every state of the Union but for three. And I am happy to say that every member of this subcommittee has shipbuilding companies in your districts and your states.

    This subcommittee is well aware that fleet commanders have, for many years now, been calling for a much larger and more capable fleet than the 294-or 291-ship Navy that we have today. While their stated requirements have ranged from as high as 400 ships, the lowest level on record is the 310 ships called for in the 2001 Department of Defense (DOD) Quadrennial Defense Review. That study also acknowledged risks associated with a fleet of that limited size.

    Alarmingly, the fleet has already shrunk well below the minimum risk constrained requirement.

    One only has to look at the war in Iraq to understand that America needs a larger and more capable fleet. For the initial phase of the war, which was of relatively short duration, 70 percent of the Navy's surface fleet and 50 percent of its submarine fleet were deployed to Iraq.

    The remaining ships were either undergoing repair, defending our homeland or engaged in security patrols in other troubled regions of the world. This deployment rate was the highest since World War II. And it underscored why our naval fleet is stretched too thin.
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    The fleet has been cut in half since 1987. As the fleet has shrunk, there has been a corresponding decline in the defense shipbuilding industrial base.

    The average ship production rate enters the 13th year of just 6 new ships a year. Six ships a year is the lowest naval production rate since 1932.

    Thirteen years, however, is a historical first for the most prolonged period of such low production rates. If these shipbuilding budgets continue, the nation will witness the continued diminution of the fleet. And America will lose the industrial capability to ever rebuild her.

    I might add that, over the past 4 years, the average DOD budget has been increased by 28 percent. Yet naval shipbuilding has been cut by an average of 22.3 percent.

    Since the fall of the Berlin Wall, the defense shipbuilding industry of this country has been reduced by more than half. More than 30,000 jobs for our highly trained engineers and production people in the shipyards have been eliminated. And more than 150,000 skilled engineers and manufacturers have lost their jobs throughout the supplier base.

    A decade-and-a-half of underinvestment in naval power has left the country with just two shipyards to design and build nuclear warships, two to design and build surface combatants and two to design and build our auxiliary and combat logistics force ships. The loss of any of these six remaining shipyards will result in only one source for these highly sophisticated ships.
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    In the supplier base, we used to have two or three manufacturers of each of the many critical ship systems and components. Today, only one remains for each of many of these components. And that remaining manufacturer is often hanging by a thread.

    For example, 75 percent of the critical component manufacturers on the Virginia Class of submarines are the last and only source of their product.

    In short, the fragility of the defense shipbuilding industrial base cannot be overstated or ignored. This alarming security situation means that any disruption, delay or reduction in shipbuilding production programs will have significant cost implications for every program in the Navy's budget and immense implications for our nation's future as a sea power.

    There are several recent examples to demonstrate this fragility. Last year's Department of Defense budget proposed gapping the LPD–17 program by one year.

    Congress—thank you—you reversed this decision. Had you not, the shipyard would have been forced to lay off more than 2,000 highly trained shipbuilders. This would have raised the shipyard's cost in building future LPD–17s because of the investment it would have had to make to recruit and train 2,000 new employees when scheduled production resumed.

    Yes, some of the former employees would have returned; but others would not. A year gap would have impacted productivity of the returning skilled workforce. And it would have taken years to train the new hires to achieve the skill level of the employees they replaced.

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    It costs a minimum of $50,000 to recruit and train each shipyard production worker to achieve the minimum proficiency in their trade. Multiply this figure by thousands and it is easy to understand the high cost of training. Shipbuilding disruptions cost money—costs which are passed on to the taxpayer in higher priced ships.

    In the supplier base, that one-year gap in orders for LPD critical ship system components could have forced some companies out of business. And it would have significantly raised the cost of components not only for the LPD–17 program, but for other ship programs for which they also supply components and systems.

    We cannot afford to have history repeat itself. In the late 1980s, the Navy decided to end production of the Los Angeles Class of attack submarines as it transitioned to the final design and production start of the Sea Wolf Class.

    When the Soviet Union fell, the Sea Wolf program was canceled after just three boats. The sudden and dramatic break in submarine production, before the follow-on SSN–774 was ready to move into production, brought the submarine industrial base to its knees.

    The Sea Wolf builders were forced to lay off thousands of people and re-engineer the shipyard to survive low rates of production in the transition to the next submarine program. Hundreds of critical system and component manufacturers were forced out of business. And those that survived the hiatus did so as much smaller companies.

    Early termination of the Sea Wolf program also drove up the unit cost of each Sea Wolf because there were only three boats to help absorb the research, the development and the overhead costs of the entire shipbuilding supplier base.
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    It was a struggle for survival that came at a high cost to the nation. The country has yet to recover from this cost because of the continued production of just one SSN–774 a year.

    The Navy's Future Year Defense Plan (FYDP) proposes the construction of nine new ships in fiscal year 2005, with the most notable addition being the first ship of the new class of DD(X) destroyers. The American Shipbuilding Association commends the administration for the increased numbers of ships proposed in 2005 over previous years and strongly supports the budget request.

    There are, however, very serious industrial and security risks associated with the budget in 2006 as the number of ships again drops to six.

    In 2006, there are zero multi-mission surface combatants in the budget. The budget terminates production of the DDG–51 at the end of 2005 as detail design for the DD(X) begins with construction commencement of the first ship of the class in mid-2007.

    This year-and-a-half production gap poses a tremendous risk to the naval shipbuilding industrial base. If extended, this gap will result in thousands of job losses in both surface combatant yards and their suppliers as the industry transitions from a mature production program of the DDG–51s to the new class of destroyers.

    It is imperative that Congress support the schedule and full funding of the DD(X) program.
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    As I stated earlier, all of you on this subcommittee have shipbuilding companies in your districts. I would urge you to reach out to them to find out what the impact or the effect of this transition will be on them.

    The other shortfall in the Future Year Defense Plan is the submarine program. Production of the Virginia Class needs to be increased to two per year as soon as possible to realize reduced unit costs for each submarine and to stabilize the specialty nuclear manufacturers.

    In closing, I would like to point out that since the mid-1990s, my industry has consistently stressed—to the Department of Defense, to Congress and to anyone who will listen—the urgent need for higher, stable rates of naval ship production. I make this same plea to you today for one purpose and one purpose only: national security.

    Look at Great Britain, which ceased to invest in sea power and ceased to be a world power. As a result, Great Britain did not have a Navy capable of projecting sufficient power to South America in the 1980s to defend the Falkland Islands against a relatively small country with a very small military. Great Britain ultimately succeeded in the Falklands because of the help of the United States.

    Every day the nation delays in making investment in our naval fleet a priority, the country loses people from the skill base and facilities essential to our national security. Stretched and gapped programs dramatically escalate the cost of naval ships.

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    It takes three to seven years to construct each of our highly sophisticated and survivable warships. It takes the same number of years, if not longer, to train our highly skilled workforce. And the industry as a whole represents a capital investment of billions and billions of dollars.

    When America loses its shipbuilding industry, the United States will be forced to depend upon other countries to build and maintain a naval fleet to defend our homeland and our economic security interests. What country can we rely on to defend us?

    The fastest growing shipbuilding country in the world is China. The fastest growing economy is China. And China is investing heavily in building her naval power.

    Will China defend America?

    I want to commend Representatives Jo Ann Davis and Gene Taylor for sponsoring H.R. 375, which states that it is the national policy to build and maintain a naval fleet of at least 375 ships as soon as possible. Mr. Chairman, I want to thank you for cosponsoring this legislation and for every other member of this subcommittee who has cosponsored it. It is extremely important legislation that I hope the committee will have a hearing on.

    You can all act today to reverse the course of our nation by passing H.R. 375.

    Thank you very much, Mr. Chairman.

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

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

    Mr. Taylor.

    Mr. TAYLOR. Ms. Brown, thank you for being here today. And you touched on a lot of important subjects.

    I was wondering, in previous conversations you have touched on the subject of the leasing of foreign vessels and how every one that is leased is one less that will be built by a domestic supplier. I understand that for budgetary reasons—and I hope you can explain this to the committee—that DOD chooses to lease them for 69 months; and therefore, it is not scored. And in some instances, they have turned right around after a lease expires and done it again.

    In your opinion, what has been the net effect of that? And do we, at some point, much like the tanker issue that has gone on with the Air Force, do we end up paying more for something that we lease than something we could have bought domestically?

    Ms. BROWN. Thank you, sir.

    The leasing practices of the Department of Defense are of great concern to the shipbuilding industry because they are not short-term leases to meet short-term requirements or a surge requirement or a contingency. But they are very long-term leases. They are, in essence, a form of acquisition, which Congress expressed dire concern over in 1990 with the Budget Enforcement Act, about the need when it was demonstrated, that the cost to procure is less than the cost to lease.
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    And what is happening in the 59-month period, is that if you lease for 59 months, you do not run up against the scoring laws—or scoring regulations, actually—by OMB that require you to score the entire capital cost of the ship in the first year in which you lease it for the entire period of the lease, including the operating costs, the fuel costs.

    Subsequently is that we are seeing a greater reliance on leasing foreign-built ships for 59 months, 1 month short of 5 years, and then turning around and seeing that same ship leased again for another 5 years. In my view, a 10-year lease is a long-term commitment. And it is hurting further the industrial base of this country.

    Mr. TAYLOR. How many ships fall into that category, to the best of your knowledge?

    Ms. BROWN. I do not have the total number. But I do know that if we look at the list from the Military Sealift Command, at the most recent list that I have—which is somewhat dated; they update it every year—there are roughly nine ships that fall into that category. They were all built in South Korea.

    There are also, there has been a recent phenomenon where we have been leasing—seeing the lease of high-speed vessels built in Australia. The Army has three; the Navy and the Marine Corps have two.

    Those vessels were leased for the purpose of a pilot program for experimental purposes. My concern is: how many do you need for experimental purposes? And also, those vessels were deployed in Iraq.
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    Mr. TAYLOR. I would like to relay to you two conversations that I had. One is—and I am going to give him the opportunity to correct me if I misspoke. But sitting behind you is Secretary Young. And I thought I heard Secretary Young say that he felt like the DD(X) acquisition was on track, except for he had some concerns about the supplier not being able to deliver on time.

    Interestingly enough, I had an opportunity—just by the luck of the draw, to sit next to a chief engineer for one of the suppliers on a flight up here recently. And I relayed my conversation with Secretary Young, to which the gentleman said, ''Well, heck, if they would ever just tell us what the finished—when they would just bless something as the final product, we will go up and draw the plans. The problem is, every time we think we are getting close to a final product, the Navy adds one more thing and that changes everything down the line.''

    My question to you is, speaking with the people that you represent, is this a common frustration? Do you see this on a regular basis? Or is this just a one-time episode dealing with the DD(X)?

    Ms. BROWN. I think it is a common practice when you are transitioning—when you are designing and developing a new class of ship. And this class of ship is going to be a superb class.

    It is going to be very technologically advanced, to incorporate many of the technologies, such as electric drive and the ability to reduce manning. And it will be a quantum leap in technology. Any time you are developing new technologies, there is that problem, I believe, with a new class of ships, especially one as technologically advanced as this one is.
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    I think that the one thing with that is that it is important, since you refer to the supplier companies, that while there is the year-and-a-half gap before the fabrication of the DD(X) will begin for the shipyards, there is a longer gap for the supplier base because you do not order everything that goes into that ship on the year in which fabrication begins.

    And that is a very high-risk situation for many companies.

    Mr. TAYLOR. I see the red light. Thank you very much.

    Thank you, Ms. Brown.

    Mr. BARTLETT. Thank you.

    Mrs. Davis.

    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman.

    And thank you, Ms. Brown, for being here to testify.

    Let me just start out by saying that the number of ships that I think we need has nothing to do with the shipyard that builds the carriers being in my neighboring district. It is not in my district. But it has everything to do with the fact that, in speaking to many members of the Navy, including Admiral Clark on record in the full Armed Services Committee.
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    When I have asked him, ''What is the number of ships that the Navy needs?'' And I have asked him, ''Is 375 right?'' And on record, he said, ''It is about right.''

    Having said that, the issue to me has a lot to do with what you have said. I hope and pray that this Congress does not allow it to get to the point where our naval ships are built in China or any other country other than the United States of America. The thought of sending our sailors and marines out on a ship built in China just does not sit too well with me.

    Having said that, you touched on an issue that is a little bit of concern to me, and that is the—the DD(X) is what we are going to, but what we have now? The DDG–51. The DDG–51, and you have that year-and-a-half break.

    You said it would be a problem to the suppliers and to the industrial base. What does it do to our industrial base to have that year-and-a-half gap? What does that mean to our suppliers and our industrial base?

    Ms. BROWN. Well, I think, as Secretary Young will stress to you, that it is critical that DD(X) remain on schedule, that there be no further gap than the year-and-a-half. Because it is going to be the shipbuilding, both the shipyards and the supplier base, if there is any schedule slippage whatsoever. It will be devastating to this industry.

    I cannot understate that.

    Mrs. JO ANN DAVIS OF VIRGINIA. The year-and-a-half is not a problem?
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    Ms. BROWN. If there is any slippage past the year-and-a-half. There is a different story for the supplier base because for them, as I stated to Congressman Taylor, it is not just a year-and-a-half gap for many of them. It is a longer gap.

    And I would encourage you and every member of the committee to reach out to your shipbuilding constituents in your districts to find out what that gap will mean to them.

    Mrs. JO ANN DAVIS OF VIRGINIA. In speaking to the head guys at Northrop Grumman who produce shipbuilding and the concern of losing our industrial base, what they tell me is when we lose those designers, those engineers, they do not come back because they go out and they get another job. And they do not come back.

    And that is their biggest concern, is losing those folks.

    And Mr. Chairman, that is exactly why I am so concerned about our shipbuilding industrial base. It is why I am concerned about the number of ships that we have.

    I hope, Mr. Chairman, that you will stand with me on this and that we will have a hearing on H.R. 375 and that we do not get to the point, at sometime in my lifetime and your lifetime, where we are sending our sailors out on a ship built in China. That just—and I do not think you want that to happen either.

    Thank you so much, Mr. Chairman.

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    Mr. BARTLETT. Thank you very much. And a little later, we will have an opportunity to talk about the 375-ship Navy and where we go from here.

    But the next person on our queue here is Mr. Kline.

    Mr. KLINE. Thank you, Mr. Chairman.

    Thank you, Ms. Brown, for being here. It is a pleasure to see you.

    I want to pick up where Mrs. Davis was going with her question about the gap. We had the Navy/Marine Caucus luncheon the other day and had a chance to hear from the Secretary of the Navy and the Chief of Naval Operations the concern about the funding gap in DD(X), having to do with the provision of having to fully pay for the ship in the year that it goes in.

    I was trying to understand the impact that is going to happen. When the DDG–51 stops, we start DD(X) and then have the funding gap and then move—we hope—to full production.

    What literally happens in the shipyards when we reach that point?

    Ms. BROWN. Well, the gap that we are talking about is the DD(X), the first DD(X) is funded in 2006. And there is a gap not because of lack of funding; there is a gap automatically when you go design a new class of ships, you are doing the detailed design.

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    And so right now, the schedule is that fabrication of the ship will actually begin in mid-2007. So there is a year-and-a-half gap, not because of the funding gap, but because of the development time that is required. And that is why it is so important to keep DD(X) on schedule and fully funded.

    This impact on the shipyards is going to be that you are going to see winding down of production as you start to wind up new design and technology, so that you are going to have to be forced to lay off thousands of your production workers in that gap period. That is the concern there. And that is why the ASA so strongly supports making sure that DD(X) is fully funded and that schedule is held to.

    Mr. KLINE. Excuse me for interrupting. If it is fully funded and the schedule is held to, what you are describing now which starts fabrication in 2007, there is still a gap, though, right?

    Ms. BROWN. Yes, sir. There is a gap.

    Mr. KLINE. Okay, that is what I am trying to——

    Ms. BROWN. That is a year-and-a-half gap.

    Mr. KLINE. At the best.

    Ms. BROWN. At the best.

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    Mr. KLINE. Unless you were, for example, to continue building DDG–51, which is not anywhere in the schedule. But we are going to have the gap, even at the best of circumstances. Is that right?

    Ms. BROWN. Yes, sir. And that gap is going to be longer for the supplier base.

    Mr. KLINE. Right.

    Ms. BROWN. So you hit.

    Mr. KLINE. Okay. I got it. Thank you. Thank you very much.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Schrock?

    Mr. SCHROCK. Thank you very much. Before I make a statement, let me comment on one thing Mr. Kline said. I agree with him on the 2006 problem.

    But I think, as I recall during the Navy/Marine Corps Caucus last week, the SECNAV acknowledged the 2006 shipbuilding plan needed a look at, and he was going to fix it. So there is clearly some acknowledgment of that.
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    Let me first thank Ms. Brown and all the witnesses for appearing here today to provide their insight into planning for the Navy of the future. I believe the tremendous success of the Navy and Marine Corps team during Operation Iraqi Freedom and Operation Enduring Freedom is indicative of the good return on the investment our nation has made in our military and to the high caliber of their uniformed and civilian leadership.

    I believe the Navy's budget request is a practical and forward-looking plan that will operationalize the Sea Power 21 vision and goals and prepare the Navy to continue to do the nation's bidding. I am also very aware that the Navy and the Department of Defense have sent conflicting messages on the number of ships required in the fleet.

    This creates uncertainty for American shipbuilders, which is harmful to their ability to plan and manage their industry. In that spirit, I urge the Navy to continue to pursue better planning and process management practices.

    And I am concerned with the lengthy delays and rising costs that seem to infect all of our weapons procurement programs. As a nation, we just simply cannot afford that anymore.

    We must break the code on developing the new platforms we badly need within a reasonable timeframe and for a final cost that is close to their original prediction. Our ability to plan for the force of the future will hinge on our success. And I hope the debate we are having here today will contribute to that effort.

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    Ms. Brown, I want to thank you for bringing to this debate an understanding of the effects the decisions we are making have on the industry you represent. As you know, I have chosen not to cosponsor H.R. 375 because I do not believe Congress has been shown a credible case that the 375-ship Navy is required to meet the future threats.

    I fully acknowledge the conflicting signals that Navy and DOD have sent with regard to how many ships they desire and the hardship that uncertainty may cause for the industries that you represent.

    You will find no bigger fan of Admiral Vern Clark in Congress than this guy right here. I believe the vision and flexibility the Navy has demonstrated are indicative of how well they have handled the challenges they are facing.

    My question for you is: if the Navy and DOD were to publicly reach a consensus on the number of ships required and that number was closer to 310 than 375, would that number be sufficient to sustain the shipbuilding industry? And if not, why should this committee set a goal for shipbuilding without a threat analysis that indicates such a large fleet is required and, in turn, reduce our flexibility to invest in the areas that counter the most urgent threats?

    Ms. BROWN. Thank you very much, Congressman Schrock. And I have a great deal of respect for you and for all that you are doing on the committee and in the caucus, the Navy/Marine Corps Caucus.

    I would like to refer—so many times in this town, we talk about studies. We always want to study something. And of course, we have studied the shipbuilding industrial base to death.
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    Mr. SCHROCK. To death, yeah.

    Ms. BROWN. And many times, we have studied the requirements of our nation—security requirements—to death. Let me just put forth several of the studies that have been done on force structure requirements.

    There was, of course, it started out with the 1997 Quadrennial Defense Review, which came out with a 310-ship Navy, which said it was a risk-constrained Navy. Subsequent to that, we had the fleet commanders testifying before the Senate Armed Services Committee, the House Armed Services Committee and every other committee here about how they could not continue to execute their military strategy with the fleet that they had at the time of 346 ships because the OPTEMPO (Operations Tempo) had increased 300 times while the fleet had been going down from 594.

    Then there was the 2000 secretary of defense report to Congress on a 30-year shipbuilding plan that was submitted. ''Mitigating Future Risk'' was the title. And it called for a 360-ship Navy.

    In 2001, there was a Navy force structure—of course, the 2000-2001, the Navy submitted its force structure requirements to the Department of Defense for the 2001 QDR process. That input, I would urge the committee to have Admiral Sestak, who led that team, come and testify.

    My understanding from what I know—it was classified, but what he said to me was it was recommending a fleet of 360 to 400 ships. Following that, there was the 2001 joint chiefs of staff submarine force structure study, which said we needed a submarine fleet of attack submarines, I believe the number went as high as 72 and higher.
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    Then there was the 2001 surface combatant force structure study that said we needed a surface combatant fleet of 135 ships. The Marine Corps has long had a stated requirement, publicly before the committees, that it has a requirement to lift three Marine expeditionary brigades. That equates to 15 amphibious ready groups.

    There have been many, many more studies. So sometimes, Congressman, I say that if you do not like the answer in one study, go back and study it again. And you can study away the requirement. But I will leave it at that.

    Mr. SCHROCK. Mr. Chairman, let me just finish. I agree with you. Conflicting reports have been sent. But I think the latest QDR said 310, I believe.

    Ms. BROWN. That is correct.

    Mr. SCHROCK. Yeah, okay.

    Ms. BROWN. But the input was higher.

    Mr. SCHROCK. Okay. Again, if the Navy and DOD got together and said 310 was closer than 375, how would that impact the bases, as far as you are concerned?

    Ms. BROWN. Oh, yes, sir. Yes, sir. As far as the industrial base, the Navy has not been budgeting—or let me say it is not really the Navy, because that is not fair. The Department of Defense has not been budgeting for adequately to build or maintain a 300-ship Navy. That is why we are at 294.
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    It takes 10 ships a year, every year, for 30 years, to build and maintain a 300-ship Navy. The build rate has been at six for 13 years, as I stated.

    If we look into the out years, over the FYDP, as the chairman correctly pointed out, that the Future Year Defense Plan calls for an average of, I guess, 48 ships. So if you average it out, it is 9.2. I do not know what a .2 ship is, but an average of nine ships a year.

    Mr. SCHROCK. The tail and the bow, that is about it.

    Ms. BROWN. Right. The only way that you achieve that 9 ships a year average is because in year 2009, there are 17 ships. The out years have never become the now years.

    So the question, I guess, is 10 ships a year—the sustained steady rate of 10 ships a year would be a tremendous infusion of business for the industry. And it would sustain the industry and stop the job losses and the skill losses. Absolutely.

    But we are not there. And we have not been there.

    Mr. SCHROCK. Yeah, I know you do not blame the Navy. And I am not sure I want to blame DOD. The people I think we need to blame are the people that sit behind these nameplates. We are the ones that could make this happen if we wanted to.

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    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Calvert.

    Mr. CALVERT. Thank you, Mr. Chairman. I do not know if my microphone works or not. I got here late, so I apologize. So you may have brought this up in your testimony.

    Certainly, we are looking at our capabilities and our stable rate of production and the types of ships that we are building right now versus the types of ships that the Navy foresees building as far as potential capability is concerned, to have flexibility and to transform the Navy. When you are looking at the Littoral Combat Ship (LCS) as a potential ship that will be replacing some of the capability for the Navy, do you look at that as part of that nine or ten ship number that you look at annually under construction?

    Ms. BROWN. Yes, sir. The Navy's combat, the battle force, is comprised of every warship and combat logistics force structure, all the ships that run with the fleet to resupply the fleet. That is the number.

    And yes, the chief of naval operations and the secretary of the Navy do count the littoral combat ship in that total force structure.

    Mr. CALVERT. Your industry does that also? Does your industry—some of these smaller, more flexible ships that have the ability to change its mission, supposedly giving more flexibility, I guess, the end result having less ships to do more things.
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    Ms. BROWN. I can only say that the industrial base that the Navy, that the nation depend on today, to build our combat ships will not be—will not be—the same one that builds the littoral combat ship.

    Mr. CALVERT. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you.

    Mr. Langevin. Thank you very much.

    I want to thank you very much for your testimony. Each year, I sign on to Ron Paul's bill to get us out of the U.N., not because I am certain that we need to get out of the U.N., because I am certain that we need a discussion of that subject because America is deeply divided. And I believe that if all the facts were on the table, we would not be so deeply divided on the U.N.

    For pretty much the same reason, I signed on to H.R. 375, not because I necessarily believe that we need a 375-ship Navy, but because I believe we really need a discussion of that subject. Of course, what we really ought to be talking about is capability, rather than number of ships.

    If you want a Navy of 375 LCSs, that is very different than a Navy of 375 carriers, is it not? So I think that when you are talking about numbers, you really need to associate capabilities with those numbers. And I think that we do need a discussion of that.
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    We clearly need a rational way to decide what size industrial base we need for the security interests of our country. I have not witnessed that we have a rational way of deciding that.

    Doing what we are doing here and doing what we did last year and what we probably will do next year, lamenting the fact that we are losing people and we have gaps and so forth, is not getting us to a rational deliberation as to what size industrial base we need. Clearly, today's military is enormously more capable than it was just a decade ago.

    With our intelligence, with our sophisticated guided weapons and so forth, we are very much more effective than we were a decade ago. All this needs to be factored in, in deciding how large an industrial base we need and how many ships we need in our Navy.

    I am not so sure but what we may need more than 375 ships, but not the kind of ships we are building today. I have a big concern that our major assets present major attractive targets for terrorists and an enemy of the future. And I do not know to what extent we can maintain the same capabilities with having smaller platforms, which provide smaller targets and more survivability.

    So I think the number of ships—maybe we need a 3,000-ship Navy, rather than a 300-ship Navy, that costs no more than our present 300-ship Navy. And we have now commissioned a naval architecture study, which I want to ask a question on a little later with the next panel, that will hopefully get us there.

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    I want to thank you very much for your testimony. And I want to ask, as a favor, could you stand by until the second panel has testified, because I am sure there will be more questions that we would like to get answers from you on when that panel is also at the table?

    If you could stand by and join them at the table, after they finish their testimony, for the questioning, we would really appreciate it. Can you do that?

    Ms. BROWN. Absolutely, Mr. Chairman. And thank you.

    Mr. BARTLETT. Thank you so much.

    It is my understanding that we have the three witnesses from the Navy, all of whom will be available to answer questions, that you have a combined statement? And Mr. Young, you will be delivering that statement. And the entire statement, without objection, will be entered into the record.

    And so you are free now to make your oral statement. Thank you very much.


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    Secretary YOUNG. Mr. Chairman, Congressman Taylor, members of the committee, I am pleased to again appear before the committee, returning to discuss the Department of the Navy's ship construction programs and the fiscal year 2005 budget request.

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

    Vice Admiral Nathman, as you noted, and Vice Admiral Dawson are joining me on behalf of the Department of the Navy.

    The Navy and Marine Corps team's outstanding performance in Enduring Freedom and Iraqi Freedom last year underscored the high return on your investment in our combat readiness, our people and our unique maritime warfighting capabilities. The naval mission covers the full spectrum, from protecting sea lanes, to forward presence, to forcible entry. We rely on all of our naval warfare systems operating together to provide sustained combat striking capability when required—all without a permission slip, as the Chief of Naval Operations (CNO) likes to say.

    Central to enhancing our ability to perform these missions against any threat in the future and today are the new systems under development, such as DD(X), the Littoral Combat Ship, LPD–17, CVN–21 and LHA(R). As you know, the fiscal year 2005 request includes funds for nine ships, reflecting the continuous successful efforts by the Department of the Navy to increase the number of ships we are purchasing.

    As we modernize the naval force, it is important to improve how we buy ships. Congress's steady calls for discipline in acquisition and support of new initiatives has enabled the department to take a different approach to contracts. I would like to emphasize some key examples.
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    Through Congress's support, the Department signed a new Virginia Class multiyear procurement contract. The contract includes a realistic target, incentives and share lines which reward under-target performance.

    In an unusual step, the Department recently renegotiated the current Eisenhower carrier refueling contract to include similar incentives and revised share lines. The fiscal year 2005 budget request includes RDT&E funds for construction of the lead DD(X) and LCS.

    This approach mirrors the approach used in every other weapons development program. Indeed, tactical aircraft programs are developed by using R&D funds to establish the production process and build pre-production aircraft. While we cannot afford to build and discard pre-production ships, the Department still needs a chance to establish a production process for the ship class.

    We need the chance to work with industry to create a production process that can reduce the cost, applying advanced design and manufacturing techniques. Further, we need the ability to adjust the lead ship budget in order to avoid the detrimental effects of prior year completion bills.

    Program managers are currently given one block of funds that must be carefully managed over a five-to ten-year period, in order to complete the complex process of designing and building a lead ship. Like you and me, managers will take a cautious approach, seeking to live within their budget and generally not making producibility investments for the class.
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    We need to allow budget adjustments to make sure the development of a successful process for the class is put in place. Steps such as these, endorsed by Congress, were essential to programs like C-17 and virtually every other program and reflect our normal way of doing business.

    With improved buying practices, we also need to focus on developing an efficient design with the right level of capability. The acquisition team, the fleet and the requirements sponsors are collaborating to make affordable choices on new systems.

    For example, DD(X) will provide surface fire support with precision for the forcible entry mission. Further, DD(X) provides greater survivability through signature reduction, reduce manning through automation and electric drive for efficiency and flexibility.

    The DD(X) technology and hull will lead directly to CG(X), the next generation cruiser. We have made significant progress in developing the new technology engineering development models (EDM) needed for this future combatant and are committed to maintaining the schedule.

    The littoral combat ship provides essential support for forcible entry, dealing with mines, submarines and small boat threats. The LCS seaframe will allow us to tailor the ship for the mission and easily upgrade the ship's capabilities in the future, as we have done with aircraft.

    The Joint Requirements Oversight Council, or JROC, is expected to approve the requirements document for LCS in April. And the LCS source selection is expected in May.
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    Lessons from Iraq and Afghanistan suggest we should also maximize the air capability of LHA(R), while leveraging the design investment made in LHD–8. These lessons are consistent with the review, over the past year, of the joint forcible entry operations capabilities and would be part of our future seabasing strategy.

    The resulting design is planned to provide a transformational capability that is interoperable with future amphibious and maritime prepositioning force ships, high-speed vessels and advanced rotorcraft like the MV–22 and the Joint Strike Fighter.

    Mr. Chairman, out of respect for the committee, I will stop, leaving much more to say. I am grateful to the committee for the chance to offer a few examples of how the department is changing its approach to acquisition, requirements and the delivery of seabased capability with shipbuilding programs serving that function.

    Congressional support of our vision is essential. And I thank you for your consideration.

    [The joint prepared statement of Secretary Young, Admiral Nathman, and Admiral Dawson can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much.

    Mr. O'Rourke, it is really nice to see you again. Please proceed with your opening comments.
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    Mr. O'ROURKE. Thank you, Mr. Chairman, distinguished members of the subcommittee. It is an honor to be appearing before you today.

    You asked me to discuss potential oversight issues for the committee and for Congress as a whole on a number of matters relating to Navy force structure and ship programs. At the outset, it is important to note that there is currently no officially approved consensus plan for the future size and structure of the Navy.

    As a consequence, Congress may find it difficult—if not impossible—to close the oversight loop by reconciling desired capabilities with planned force structure and planned force structure with supporting programs and budgets.

    In a situation of planning uncertainty, Navy and DOD officials are free to speak broadly about individual programs, without having to show Congress that they have a credible plan for funding all of these programs in certain total quantities within a certain total amount of available funding.

    Navy and DOD officials have argued that under capabilities-based planning, numbers of ships and aircraft per se are not as important as the total amount of capability represented in the fleet. At any given time, however, it should be possible, given current and projected ship and aircraft designs, to translate total desired capabilities into a force structure plan for a certain number of Navy ships and aircraft.

    Those numbers may change over time as technologies change, but capabilities-based planning arguably does not serve as a reason to set aside permanently the question of the planned size and structure of the fleet.
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    Navy officials say the 2005 budget contains nine ships. It may be more accurate to say that the budget fully funds seven ships, along with 50 percent of a relatively inexpensive LCS and the first eight percent of the lead DD(X).

    The CNO has testified that when he assumed office in mid-2000, the SCN account was $4.7 billion and that this year, it is $11.1 billion, suggesting the account has more than doubled during that time. But the SCN account in mid-2000 was not $4.7 billion. It was about $7 billion if you use the fiscal year 2000 figure or about $12 billion if you use the fiscal year 2001 figure.

    Rather than a pattern of steady growth since mid-2000, the SCN account since 2001 has shown no clear trend of increase or decrease, even while the defense budget as a whole has grown.

    On the DD(X) program, the Navy has said the fifth and sixth ships will cost an average of $1.2 billion to $1.4 billion in fiscal year 2002 dollars. There are reasons to be concerned, however, that follow-on DD(X)s may cost closer to $2 billion each in fiscal year 2002 dollars.

    Navy officials have referred to producibility features in the DD(X) design, but have done little to show in detail why these features will permit the DD(X) to be built at the Navy's estimated cost, rather than a cost closer to $2 billion.

    When asked about potential DD(X) procurement costs, supporters have sometimes responded by focusing on the DD(X)'s expected low operation and support (O&S) costs. Reduced O&S costs, however, have always been a feature of the DD(X) program.
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    If follow-on DD(X)s are more expensive to build than the Navy estimates, then the DD(X) program, whether or not you include the O&S costs, will be more expensive and therefore potentially less cost-effective than now projected. Naval fire support is a central mission for the DD(X) and one that contributes to its cost. The fleet's requirement for additional fire support has been revalidated periodically in recent years.

    Naval surface fire support, though, has not played an obviously major role in recent U.S. military operations. To the contrary, Afghanistan and Iraq have spotlighted concepts for conducting ground operations using smaller-size ground units, supported by aircraft loitering overhead with expensive all-weather precision guided missiles (PGMs).

    The advent of inexpensive GPS-guided bombs, the concept of air-delivered loitering munitions and evolving notions of land warfare may lead to a renewed debate about the priority of naval surface fire support compared to other investments or about the amount of naval surface fire support capability that will be needed.

    Navy officials have taken steps to mitigate technology risk in the DD(X) program. GAO has reported that the DD(X) is scheduled to enter system development with none of its 12 critical technologies fully mature.

    Navy officials have said that the DD(X) is to form the basis of a spiral development effort, leading to the future CGX cruiser. Skeptics, however, could ask whether spiral development is being invoked here in part to use the more distant and possibly more strongly supported CGX cruiser as a means of leveraging support for the nearer-term DD(X).
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    If the DD(X) is not pursued, skeptics could ask, what would prevent the technologies now being developed for the DD(X) from instead being developed directly for an accelerated CGX? Navy officials have argued their plan to fund the lead DD(X) through the Navy's R&D account offers them advantages in terms of mitigating technical risk and controlling production costs.

    They have also argued that it would make shipbuilding programs more like DOD acquisition programs for aircraft and other items. Whether this approach would make the DD(X) program more like aircraft acquisition programs is open to question.

    More important though, this approach could weaken congressional oversight and cost discipline by obscuring the total cost of the lead DD(X), by permitting the Navy to blend construction funding with R&D funding and by permitting any cost overruns on the lead ship to be funded through the R&D account, rather then the SCN account, where the additional funding would show up in the highly visible ''completion of prior year's shipbuilding'' line.

    With cost overruns on the lead potentially less visible, it may be more difficult for Congress to measure the risk of experiencing cost overruns on the follow-on ships.

    There already may be limited awareness, as a result of this approach, that the total design and construction cost of the lead DD(X) is $2.8 billion and that payments for the lead DD(X) are to stretch through the year 2011. Under the Navy's plan, the Navy could be asking for the final increment of funding for the lead DD(X) in the same year it would be asking to fully fund DD(X) numbers 11 and 12.
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    If follow-on DD(X)s turn out to be substantially more than the Navy projects, DD(X) procurement could be limited to one or one-and-a-half per year, which might not be sufficient to maintain the industrial base in its current form. Options for supporting the industrial base include procuring one or two additional DDGs in 2006, accelerating procurement of big-deck amphibious ships and accelerating and expanding procurement of deep water cutters for the Coast Guard.

    The deep water option is a new and potentially very significant element in the industrial base situation.

    On the LCS program, there appears to be no officially approved force structure plan at present that includes slots for any significant number of LCSs. The last officially approved Navy force structure plan, the 310-ship plan from the QDR, contained no slots for LCSs.

    And while the Navy's proposal for a 375-ship fleet does include slots for LCSs, OSD has not approved that plan. LCS supporters could argue that a force structure plan with slots for LCSs will eventually be approved.

    Critics could argue that, until such a plan is approved, the Navy has no force structure basis for proposing a program to build any significant number of LCSs. Prior to announcing the LCS program in November 2001, the Navy apparently did not conduct a formal analysis of multiple concepts—or AMC—to demonstrate that a ship like the LCS would be not just one way to perform the missions in question, but rather the best or most promising way.
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    The Navy acknowledged this somewhat reluctantly in testimony to this subcommittee a year ago.

    Instead of rigorously comparing a ship like the LCS to potential alternative approaches for performing these missions, there appears to have been an a priori preference for the LCS. Navy officials have said they have conducted a lot of analyses since report of the LCS program.

    This is true enough. But the analysis being referred to appears to be on issues other than the key oversight question of whether a ship like the LCS is better than potential alternative approaches for performing the missions in question.

    The Navy can show that adding LCSs to the fleet would increase its ability to deal with littoral threats. But other potential additions to the fleet could do this as well.

    What the Navy has not shown through formal rigorous analysis is that the increase provided by adding LCSs is greater than the increase that would be realized by investing a similar amount of funding in alternative approaches. That is the question that would have been addressed by a rigorous AMC.

    The Center for Strategic and Budgetary Assessments has proposed building a few LCSs and evaluating them in exercises, while reserving judgment on whether to put the LCS program into serious production. This option could permit the Navy to verify the performance of the LCS and better understand how it might contribute to fleet operations. It would also provide breathing room for a rigorous AMC that is not tainted by a preexisting Navy commitment to build a lot of LCSs.
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    The Navy plans to fund LCS mission modules through the other procurement Navy appropriation account. One question is whether this approach would effectively obscure a significant portion of total LCS program costs and thereby complicate congressional oversight by placing these costs in a part of the Navy's budget where they might be less visible to Congress.

    In fiscal year 2009, for example, more than $1 billion—or about 44 percent of LCS program costs for that year—are in the OPN account. Navy officials say the LCS program's rapid acquisition schedule is consistent with reducing acquisition cycle time and is needed to meet an urgent operational need.

    Skeptics could argue that recent major U.S. combat operations in Kosovo, Afghanistan and Iraq suggest that the Navy faces no immediate crisis in littoral warfare capabilities and that the Navy's argument about operational urgency is undercut by its own notional procurement profile for the LCS program, which would procure the ships over a 15-year period, with the final ships not being delivered until about 2021.

    These skeptics could ask whether the LCS's rapid acquisition schedule is driven less by operational urgency than by other considerations, such as getting the LCS program started before there is a possible change in the administration or before there is a change in the CNO or before DD(X) supporters have a chance to kill the LCS or before people in Congress or elsewhere have a chance to learn more about the program.

    The LCS's rapid acquisition schedule has provided Congress with only a limited amount of time to learn about the program. And for much of that time, the Navy has not been able to provide specific answers to questions about the program.
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    Because the LCS program is a spiral development effort, answers to some of these questions may only be determined over time.

    An important oversight issue for the committee and for Congress is whether the combination of spiral development and a rapid acquisition schedule permits DOD to gain approvals for starting major acquisition programs without having to provide Congress with much specific information about those programs.

    This issue is not necessarily limited to the LCS. If Congress approves the LCS program as proposed, DOD may view it as a precedent for proposing other major acquisition programs in a similar manner.

    On the Virginia Class program, submarine supporters are concerned that the Navy or DOD may be seeking to reduce the attack submarine force level goal, so as to limit Virginia Class procurement and transfer funding to surface programs, such as the DD(X) or LCS.

    They are concerned about an internal Navy study which they understand concluded that the attack submarine force level goal can be reduced from 55 down to 37 if the day-to-day Intelligence, Surveillance, and Reconnaissance (ISR) missions of attack submarines are set aside for force planning purposes and the force level is established solely on the basis of the number of boats needed for warfighting.

    Reducing the force level to something like 37 would permit Virginia Class procurement to remain at one per year or even less for a number of years.
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    The CNO has testified to this committee last month that he would not find a 30-boat submarine force acceptable. He did not, however, comment on whether he would find acceptable a force of more than 30 boats, but less than 55 or less than 40.

    Although congressional action last year may effectively prohibit the Navy from requesting funding for a second Virginia Class boat in 2007 or 2008, it does not necessarily prevent a future Congress from funding a second boat in 2007 or 2008 if a future Congress wants to and sufficient funding is available for the purpose.

    The absence of advance procurement funding to support a second boat in 2007 or 2008 would not be an obstacle. Congress can—and in the past has—fully funded the procurement of nuclear powered ships for which there was no prior year advance procurement funding.

    The interval between the year of procurement and the year the ship enters service is simply two or three years longer than normal.

    Finally, the current DOD study on forcible entry options and the new seabasing concept could reduce projected numbers of amphibious ships, while increasing projected numbers of Maritime Prepositioning Force (MPF)-type ships. Navy officials have said they view the MPF-type ships as complements to—not substitutes for—amphibious ships. They have not, however, indicated what mix of amphibious and MPF-type ships they see emerging.

    Mr. Chairman, distinguished members of the subcommittee, that completes my statement. And I will be happy to respond to any questions.
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    [The prepared statement of Mr. O'Rourke can be viewed in the hard copy.]

    Mr. BARTLETT. Thank you very much for a very complete statement.

    Mr. Taylor.

    Mr. TAYLOR. Secretary Young, while I have you here, going back to my comments to Ms. Brown—and again, I want to give you the opportunity, if I misspoke your words, I certainly want to invite you to correct me. But I am, given the already year-and-a-half gap between apparently the last DDG being built and the first DD(X), and because the industrial base is of great concern to me, as is the shrinking fleet, number one: can we agree on a design for which the supplier can proceed?

    And the second thing is: what alternatives could you propose in order to maintain the industrial base and to keep the workforce there in the gap between the last DDG and the first DD(X)?

    Secretary YOUNG. Congressman, I think I will try to come at this in an orderly way. The backdrop for this discussion, which we worked through in detail last September and continue to work going forward, is we bought three DDGs a year for the—or three are proposed in 2005 and three were purchased in 2004. And four of those are at one shipyard, which is a significantly higher rate than they have seen in the years past.

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    So there is a backlog of work in that yard going forward. That is not as true in the other alternate destroyer yard. We have to pay attention to that issue.

    The engineering development models (EDMs) for DD(X) are in process. We are doing what I think you would expect us to do, and that is making decisions about the design of the ship as prudently and as quickly as we can.

    Several months ago, we made a decision to set the size of the ship. That freed up many decisions.

    Now we have made decisions about how we will experiment with the electric drive motors, decisions about how we will load the gun. All those decisions have been made here in recent months. And they are flowing into the supplier base, as we speak.

    So I cannot say we are behind schedule. Can you find a supplier who today, in March of 2004, wants to know what he is going to build in 2006? I am sure so. And we are conscious of having them involved in the discussion.

    But we have to make the right design decisions so the ship is affordable, as many of you have talked about. And all that is on track.

    It is up to us to accomplish the EDMs, demonstrate that the systems that build the DD(X) are mature and then come to you and say, ''We are ready to build DD(X).''

    Mr. TAYLOR. What recommendations would you have in the meantime, knowing that we have a year-and-a-half year gap, based on my time here, my hunch is—and I certainly hope that I am wrong—that gap grows? What recommendations can you make to this committee to try to fill that gap with things that the Navy needs?
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    Secretary YOUNG. I think how we got to this point is we live in a budget-constrained environment.

    Mr. TAYLOR. Apparently only the United States Navy shipbuilding account. Everything else seems to have grown dramatically in the past three years.

    Secretary YOUNG. And so within those constraints, we have bought DDGs to our notional requirement. Missions continue to adjust. And as you know, we have expanding mission requirements, if you will, to support national missile defense and others.

    But we believe, with the DDG force we have—and that is continuously under review—we have an adequate force. So within that, and with the ships we have purchased, making that transition to DD(X) is what is critical to us.

    We find that when you want to build a new ship, and especially a lead ship, there is a 12-to 24-month cycle of ordering materials so that you are postured to apply shipyard labor to building that ship. So the issue—that I think it was mentioned earlier, the secretary has discussed and we will continue to work internally—is a proposal that has been discussed in the Department would have been building the second DD(X) in 2006 with R&D dollars and giving both yards a chance to build that production process I have talked about focused on for those two ships.

    In alternate, you could at least buy some of the materials and finalize the drawings in the production process in the second yard in 2006 and have a portion of the funds for the ship, but not the full funds for the ship and then fully fund the ship in 2006, using that advance purchase money and the design money in 2006 for that ship.
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    The other important step we are taking to focus on the health of the two yards is this ship is being built by a national team—DD(X) is. The two companies, both shipbuilders and combat system suppliers, are working together with multiple other partners. And on the lead ship, there is an intention to have certain blocks or modules of the lead DD(X) built at the second yard and shipped to the prime yard, so both yards begin to set up a production process.

    And I highlight that to illustrate how important we view this transition and how important the industry views this transition, that they are working together to accomplish the transition from DDG to DD(X).

    Mr. TAYLOR. Would forward funding of an LHA(R) help keep that manpower base in place as all these other factors start falling into place?

    Secretary YOUNG. I think the follow yard for the destroyers has a fairly stable workload. Again, it is critical to hold the schedule on DD(X).

    The lead yard for destroyers, which is also the yard, as you have noticed, to build amphibious ships, has a more significant problem. And that is what came out of our September study. And that is, they face a potential to drop several—3,000 to 4,000—in manpower and then have to build back up because of the timing of the amphibious ship.

    And frankly, buying even a couple more DDGs, even if we could assign them to that yard, sole source, would barely fix that problem. So we have looked hard at whether there are budget opportunities and procurement mechanisms to pull that ship forward.
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    I think that ship may be the more important piece of the health of that yard and whether the have to go through a drop and a recovery or can work stably going forward.

    Mr. TAYLOR. If this committee sought to do that, what would be your opinion of such a move?

    Secretary YOUNG. Well, the President's budget has that ship in 2008. I support the President's budget. But I recognize that in executing that budget, we have a significant—we are putting before our industry partner a significant challenge.

    And so if the committee chooses to deliberate on that, I think the Marine Corps and the Navy agree there is a requirement for that ship. And we, on our own, will look at opportunities within that constrained budget to pull that ship forward because of the industrial issue. And we will have to balance that against the requirements issue and the many other needs in the Department of the Navy.

    Mr. TAYLOR. Okay. So is that a flat ''no?'' Or is that a maybe? Or is that you would welcome that option?

    Secretary YOUNG. We would execute the will of the committee.

    Mr. TAYLOR. Okay. Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.
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    Mr. O'Rourke, do you have an observation, a comment, on the issues that have just been discussed between Mr. Taylor and Mr. Young?

    Mr. O'ROURKE. Well, I think it is important, in looking at the industrial base, to try to keep in mind that there are two categories of concern: one is for the shipyards; and one is for the suppliers. A solution that might work for the shipyard might not work for the suppliers and vice versa.

    In terms of moving money ahead for an LHA(R) ship, I think that would definitely help to support the business base and the employment levels at the yard. Whether that would support the same suppliers that you might be concerned about in connection with the DD(X), I think would depend on the individual supplier.

    So I think the solution for the suppliers may or may not reside partly within moving the LHA forward or it may or may not reside within adding one or two additional DDGs into the 2006 column or accelerating procurement of the cutters for the Coast Guard deep water program.

    Mr. TAYLOR. Would the chairman yield?

    Mr. O'ROURKE. The solution for the suppliers, I think, would be something you would look at more on a focused, firm by firm basis because their situations will differ from one to the next.

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    Mr. BARTLETT. Mr. Taylor, you have a comment?

    Mr. TAYLOR. Yes, sir, if the chairman would yield. I would be curious to hear Mr. O'Rourke's thoughts, either now or sometime in the near future, as to how he would address that so-called manpower bathtub that we are looking at.

    Mr. O'ROURKE. I can talk about it now, if you would like. If, after examining the situation, for example, at Ingalls, you see a manpower bathtub, as I indicated in my testimony, there are three options which can be pursued in combination for filling that bathtub in.

    You could put 1 or 2 additional DD(X)s in the 2006 column. The Navy does not have an official requirement for those ships. But if they are built, the Navy would make very good use of them. And they would provide additional revenues and employment to the yard.

    Your second option is to accelerate procurement of LHA(R)-type ships into the near term, either through partial funding or just by moving up the whole schedule.

    And the third, and the one which I think is important to begin thinking about in looking at the industrial base situation for the Navy, is the option of accelerating and possibly expanding Coast Guard cutter procurement. The Rand Corporation recently put out a study which says that instead of building 33 larger cutters under the deep water program, the Coast Guard might contemplate building as many as 90. Ninety is the number that Rand says, in their report, would be needed to fully meet the existing and emerging mission demands of the Coast Guard.
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    Those Coast Guard cutters are a lot smaller than the DD(X). But building four or five of them would constitute a collection of ships that would have a displacement roughly equivalent to that of a DD(X).

    And so it may be that part of your solution resides in accelerating and expanding the number of cutters to be procured under the deep water program.

    Mr. TAYLOR. Thank you for yielding, Mr. Chairman. Thank you.

    Mr. BARTLETT. Let me ask now a question I was going to reserve until later, but it seems appropriate now. Clearly, maintaining our industrial base is very important. And the question is: how does DOD and the Coast Guard coordinate their ship construction to do this?

    Your observation, Mr. O'Rourke, about the deep water cutters fits into this. Obviously, they are needed. And obviously, if there was to be a surge in that need, that could then occupy our shipbuilding base, so that we could have more time to make maybe better rational decisions on the DD(X) and so forth.

    Would you comment?

    Mr. O'ROURKE. Yeah, there are a couple of things I could say in connection with that. The first is that there is a Nav-Guard, a Navy-Coast Guard board that meets regularly to coordinate the activities of the two services. And that could include things like coordinating procurement activities.
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    Mr. BARTLETT. Does it?

    Mr. O'ROURKE. It meets regularly. I do not know exactly——

    Mr. BARTLETT. Do they talk about procurement and the industrial base and how they might cooperate to——

    Mr. O'ROURKE. I think that is a good question to ask the Navy and the Coast Guard, whether they have addressed those topics at the Nav-Guard meetings. Second, there is a national fleet concept, which has been signed out twice.

    This is a memorandum of agreement between the Navy and the Coast Guard, in which the two services take on a commitment to more closely coordinate their various activities, including acquisition activities. And so, the national fleet concept, which is quite new compared to the Nav-Guard board that goes back many years, can be considered as a measure for reinforcing the idea that the two services can and should cooperate so as to maximize at the national level the investment that the country makes in maritime defense assets.

    And so under the national fleet concept, which the leaders of the two services have signed, there is actually now an explicit commitment to look directly at, among other things, coordinating procurement.

    But doing the Coast Guard cutter option will require coordination between DOD and a different cabinet level department, DHS (Department of Homeland Security). It will also require the committees on the Hill that look at the Navy to sort of talk to the committees on the Hill that look at the Coast Guard under the DHS appropriations.
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    So the coordination would need to take place on both sides of the river.

    Mr. BARTLETT. We intend to talk to our counterparts here in Congress.

    And Mr. Young, my question to you is: are you talking to homeland security about the deep water cutters and the potential to coordinate our procurements and their procurements so that we do what we clearly must do; and that is, maintain an adequate industrial base?

    Secretary YOUNG. Mr. Chairman, I would be happy on this one, you could always do more. But I have probably met with Admiral Stillman half a dozen times, who is the lead for the Coast Guard deep water program. At the PEO level, my program executive officer for ships has a memorandum of agreement with Admiral Stillman and his deep water team on things, technologies, all the way up to the hulls we could share between LCS and the deep water program.

    So I would tell you, yes, sir, we are working that. My workload discussions, going back to September and looking at the DDG to DD(X) transition, considered the national security cutter work that is in the Ingalls yard. So we are conscious of all of these facts at all times.

    Mr. BARTLETT. When you make decisions about your recommendations for the procurement of your ships and the need to maintain the industrial base, are you factoring into that the needs of the Coast Guard and their deep water cutters?
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    Secretary YOUNG. To a degree, yes, in that we are conscious of the workload charts, based on the Coast Guard's budget projections and what the national security cutter, for example, or others might consume of the industrial resources and then whether or not the plans we are making would fit within the remaining industrial resources.

    And as I said, that analysis says that we still have issues, specifically at Ingalls, in the 2007 to 2008 timeframe, where their production workload will drop and then rise back up. And those are the issues we are looking at in the budget. And that is why at least one option is the LHA(R) discussion.

    Mr. BARTLETT. Is it feasible that if we were to optimally coordinate with Homeland Security, that we might not have that year-and-a-half drop?

    Secretary YOUNG. Sir, in general, the Coast Guard has purchased ships at smaller yards. I guess some, I hesitate to use it, but some would call them second-tier yards, as opposed to first-tier, major surface combatant construction yards.

    So national security cutter is one of the first ships where they are using a so-called ''tier one'' shipyard. And the Navy in alternate, at least the companies, have proposed to us—we did not dictate it, but the companies have proposed to us—building LCS in some of the smaller yards that the Coast Guard uses.

    In both cases, again I would suggest, subject to each department's decisions about their out-year budgets, we are conscious of the workloads between the two yards and that the industry can provide the products that we are budgeting.
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    Mr. BARTLETT. If we are conscious of it, are we actively cooperating and coordinating so that we are going to avoid peaks and valleys in our yards? Or could we be doing better?

    Secretary YOUNG. I would say we are making an effort. It could be done better. I mean, Congress plays a role in this, if I could say so, because I think—I apologize. I do not know the Coast Guard budget perfectly well, but I believe a national security cutter was added last year.

    So there are adjustments that are made by Congress also in this discussion that would have to factor into the planning and the degree of coordination you are talking about.

    Mr. BARTLETT. Thank you very much.

    Mrs. Davis.

    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you, Mr. Chairman. And with all due respect, Secretary Young, when you made the comment that you operate under budget restraints, you may very well do that. But if you do not ask for more, we may not try and get you more.

    Admiral Nathman and anybody else who—Mr. O'Rourke, feel free to chime in to an answer on this question. Earlier this year, Secretary England stated that when it comes to defining the right fleet size and the makeup, that numbers are notional. And he went on to say that what really counts is capability.
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    And what measurement are we here on this subcommittee supposed to use to determine whether the Navy has the assets it needs to perform its duties, as we perform our duty in Congress, under Article 1, Section 8 of the Constitution?

    It seems clear that, supposing we do not have an aircraft carrier available to address a problem in the Pacific, it does not matter how capable the aircraft we have are if we do not have a carrier on which to land them. And if all of our submarines are deployed in trouble spots and a new one pops up, as capable as the technology on those subs may be, it does not allow them to be in two places at one time.

    And what is the measuring stick that we in Congress are supposed to use? Whether the number is 360, whether it is 400, whether it is 375, the fact of the matter is that we do not have a naval force structure policy. And I think Mr. O'Rourke alluded to that.

    And I believe very strongly the Constitution, under Article 1, Section 8, says that it is our job here in Congress to provide and maintain a Navy. So I am just curious as to what is our measuring stick?

    Admiral NATHMAN. Yes, ma'am. If I could take a chance for some stage setting with Mr. O'Rourke's comments and even Ms. Brown's, I think we need to talk about—I believe we have a very logical way of building our shipbuilding plan. I also believe we are trying in our Future Years Defense Plan to predict the future.

    There was some comment made about the fight in Kosovo and we did not use ships in Kosovo a certain way, so why should we buy things like littoral combat ships? Well, the future is about two things. The future is about access and speed.
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    And it is very clear the Department of Defense wants speed in influencing the battlespace. And I want to talk to that in a second. But a real part of it is about access.

    And so the Navy's challenge right now, with the fact that we believe strongly that our mission and our competencies will be more and more in demand from the joint force because of the access trends. The access trends are pretty clear. Look at just a year ago, the access trend we had in Turkey.

    So political access is going to be down in the next couple of decades; certainly this next decade. And access to a battlespace where you have fixed sites is at high risk because of the fact that they are fixed and people can locate them. And typically, they may be in unprepared battlespaces, like we are seeing in Iraq and in other places, where it does not take much of a force to really drive a very high logistics and force protection need on that fixed site.

    So we believe the competencies of the United States Navy, that we bring the joint force, are going to be very much in demand. And we are trying to look at that because we believe, in our future fights, access for us is going to be about: how do we deliver the maritime dominance or the maritime superiority to allow that joint force to close and be sustained, in many cases, from the sea?

    And that is why you are seeing a lot of this discussion of rhetoric and analysis by the Navy around the seabasing concept. That is why you also see us grasping very rapidly around a compelling gap; and that is, how do we develop and sustain this maritime dominance in the littorals?
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    And that is why we have heard this word about a certain bias towards the littoral combat ship. And let me spend a few seconds to talk about that.

    If you believe that it is going to be an access issue and we see the future fights in the Pacific Rim, in Northeast Asia and Southwest Asia, there is a maritime dominance issue there that you need to really pay close attention to in how you support and sustain that maritime dominance.

    At the same time, we are seeing what you would think of as our classic ships—our DDGs and our cruisers—being pulled into different missions. Right now, our DDGs are being pulled into missile defense. And that demand will go up before—it will certainly go up, I believe, in the future.

    We are seeing in the global war on terrorism a very big demand on our surface force to get up next to relatively small ships, to interdict them, to find out if they are pushing drugs to finance the global war on terrorism, to see if they are moving clandestine cargos and to look at particular individuals that have access through the sea.

    So there is a big demand on our force. And if you think about it, these are very sophisticated, expensive ships, that are often called to get relatively close to the ships. So we believe—and the point was made about having a distributed force over Iraq. But that distributed force over Iraq was an Air Force that had relatively cheap weapons on them.

    That is what LCS is about. LCS is about speed in the littoral, with a distributed capability, that is a relatively low cost, to do exactly what Mr. O'Rourke was insisting that the Air Forces did—Navy and Air Force and Army Air Forces and Marine Air Forces—did in Iraq.
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    We want a distributed force that is very high speed, that gets the persistence there of both sensors and capabilities, by using the modules that we can put into that distributed battlespace, so we know what it is.

    Mrs. JO ANN DAVIS OF VIRGINIA. Why do you think the LCSs were not included in the 310 number in the QDR?

    Admiral NATHMAN. Ma'am, I can explain that. This is the rational basis for our shipbuilding. We delivered a 30-year shipbuilding plan. And this committee has a copy of it.

    And inside that plan, the Department basically validates a need for around 310 to 316 ships. In our 30-year shipbuilding plan, what we add in that is our concept of this distributed capability in the littorals—the littoral combat ship was about 56 LCSs—and maritime prepositioning future ship, which we believe is going to be part of our seabasing construct.

    So when you add those numbers in there, you reach around 375 ships. And that is the rational basis for our numbers.

    Mrs. JO ANN DAVIS OF VIRGINIA. So you are still back to 375?

    Admiral NATHMAN. Yes, ma'am.

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    Mrs. JO ANN DAVIS OF VIRGINIA. No matter how you slice it?

    Admiral NATHMAN. Yes, ma'am.

    Mr. O'ROURKE. If I could respond to the first part of your question about numbers being notional versus capability. Balancing total numbers and unit capability is a longstanding naval planning issue. It is not anything new. It goes back decades.

    There is nothing wrong with the Navy saying or DOD saying, ''We are doing capabilities-based planning, so what we want is a force that has a certain total collection or package of capabilities.'' But as I mentioned in my testimony, given the designs you have for your ships and your aircraft and the technologies that go on them, it should be possible, once you understand what that total collection of capabilities is that you want to have, to translate that into a certain number of platforms and get a force structure plan.

    It is OK for periods of uncertainty to emerge from time to time in naval force structure planning or force structure planning for the other services. It has happened in the past. The last time it happened was the first two years during the previous Bush Administration, for example. So these things happen.

    But there are potential consequences if these periods of planning uncertainty persist for a long period of time, for exactly the reason that you mention: because it creates a situation where nobody needs to be held accountable for anything that they say about numbers and costs because there are no numbers and there are no total equations that can be examined to see if they make sense. You cannot close the oversight loop. You cannot reconcile that collection of capabilities with numbers and the numbers with the budgets if you do not have the middle element of that equation.
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    And so it is OK to talk about capabilities-based planning. It is understandable if a period of planning uncertainty emerges from time to time. But if that period of uncertainty persists for a very long time, it could begin to make it very difficult for Congress to carry out its oversight functions.

    Mrs. JO ANN DAVIS OF VIRGINIA. Thank you.

    Thank you, Mr. Chairman.

    Mr. BARTLETT. Thank you very much.

    Mr. Kline.

    Mr. KLINE. Thank you, Mr. Chairman.

    Gentleman and lady, thank you again for being here. I am going to continue to beat this horse for a minute because I do not think we have come to a conclusion. It appears to me, listening to the testimony and discussion, that we have a budget that the Navy has presented which leaves us with a production gap in our shipyards.

    And the question here amongst the members is—and you, Mr. Secretary—is: what are we going to do about it? And there are suggestions to move perhaps the deep water cutter, perhaps an amphib, perhaps continuing production of DDG–51. And I am not sure we got an answer. And maybe it is Ms. Brown who gives it to us.
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    Does that fix the employment gap, the production gap? Is any one of those better in terms of the shipyards themselves or the suppliers, from anybody willing to step in?

    I think, Ms. Brown, you were included in this panel, even though you have stepped back.

    Ms. BROWN. I can state that when you have your existing supplier base depends on DDG–51s. So when the DDG–51 ends, those suppliers are going to be impacted adversely. That is the first point.

    Mr. KLINE. No matter what we do for our follow-on ship?

    Ms. BROWN. If there is a gap for them, they are going to be the most impacted. So they are going to be impacted. In that year-and-a-half, which is really more of a two-to three-year period for many of them because when ship fabrication begins is not when all of the supplies are ordered or all of the components.

    If you are looking for a means to mitigate the risk, there are two shipyards involved here. And they are both hurt terribly in this production gap.

    So it is to, at the same time, hold the DD(X) schedule, but also to add more DDGs helps one yard, would help both yards. The other alternative is accelerating LHDs or accelerating other programs.

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    It does not mean that those other programs, though, will help both yards. There is only one program that could be continued that would help both yards and, at the same time, helping the supplier base that you need when you start building DD(X)s and then CGXs.

    Mr. KLINE. Okay. Thank you. I think we are going to need, in some form gentlemen, some help. Because my sense here is in this subcommittee and perhaps in full committee, we are not going to accept—just my own opinion and guess—we are not going to accept a year-and-a-half gap. It is just unacceptable, on a number of fronts.

    And the budget does not allow for that. So in some way, we are going to need to get some guidance from you. Or again my guess is—and I am just a new guy here—we may provide a fix that you do not want.

    So in some form, we are going to need a little bit of guidance from you, even if it does not exactly match the President's budget. And my guess is also you are not prepared to address that right here, right now.

    But I am hoping that we are going to get some information from you. Or perhaps you are?

    Secretary YOUNG. Can I just add one comment?

    Mr. KLINE. Please.

    Secretary YOUNG. There is some correlation between the prime for the ship and the supplier base. I mean, they have to be correlated in some way. It is not like suppliers bill it out and primes do not.
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    So we are addressing and could address in greater detail the supplier—the sub-tier suppliers to the primes. But the budget proposed, as long as we hold schedule on DD(X), provides a reasonable transition for the destroyer industrial base, a smooth transition. It is not totally risk free. But it provides a stable transition.

    Within that, when we have this bigger discussion, we have to bring other things to the table we have not talked about. There is a cruiser modernization program that provides substantial work and workload, particularly for suppliers and, in some ways, maybe less or limited work for prime vendors, but substantial work for suppliers.

    An SSGN program that is going on robustly and aggressively and on schedule has consumed significant supply, steel and other resources and providing work for both industry and public yards because it is being worked in a public-private partnership. And then the national security cutter and what has been done in deep water.

    So at the sub-tier vendor level, below the primes, we have to look at the full spectrum of programs and modernization and overhaul, as well as even maintenance work. And we do not have substantial examples that there is a serious problem there.

    Mr. KLINE. Okay. So that is your testimony? Your position is there is not an impact on either the yards or the suppliers? Not an appreciable impact?

    Secretary YOUNG. I think we have a stable, but thin base of both primes and suppliers.
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    Mr. KLINE. Any comments from either Mr. O'Rourke or Ms. Brown?

    Mr. O'ROURKE. I think in terms of the suppliers, what you need to do is examine those suppliers on a case-to-case basis because their situations may differ from one company to the next. One firm can navigate a year-and-a-half gap, while another one may not be able to.

    And a fix for one supplier firm may not be the right fix for the next. You simply need to do a survey of those firms and try and be as meticulous as you can and make sure that your solutions are focused, so that you do not wind up spending money addressing things that are not problems while you are trying to find money for things that really are problems.

    Mr. KLINE. Okay.

    Ms. Brown.

    Ms. BROWN. Could I?

    Mr. KLINE. Please.

    Ms. BROWN. I have the greatest amount of respect for John Young, sitting to my left here. Good friend. However, I have to say that the Navy has not ever studied the supplier base—the first tier or the second tier suppliers—of the shipbuilding industry.
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    The organization that probably knows more about the supplier base is the American Shipbuilding Association, above any and all organizations in this town. And I am in the process of doing that survey to find out exactly how each and every one of them will be impacted.

    The shipyards oftentimes, they know who their suppliers are—absolutely. But they do not necessarily understand what the impact will be on them from a gap in production.

    I know of no study that has been done by the Navy of the supplier base, either first tier or second. But we are working on it.

    I would also like to make one other comment, that on trying to fill the gap, it is about risk mitigation. How do we mitigate the risk in the shipbuilding plan and that gap for the surface combatant community? And there are multiple answers.

    But the one way to mitigate the risk is by accelerating ships in the plan and keeping DDGs going during that transition. I can also say that with—the admiral has talked about missile defense and the need for 15 to 18 destroyers and cruisers for missile defense. That means that DDGs and CG-47s would be pulled out of the inventory, where already are below the 116 required in the QDR, to serve a ballistic missile defense role.

    It seems as though there is a requirement for more surface combatants.

    Mr. KLINE. Okay. Thank you, Mr. Chairman. I see the red light. My apologies.
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    Mr. BARTLETT. Okay. Thank you very much.

    Mr. Schrock.

    Mr. SCHROCK. Thank you, Mr. Chairman. I had a couple of questions. But I am so confused now, I probably have a lot more.

    I agree that studies ought to be done. But I am wondering if we have really studied the global maritime threats to the United States, which would dictate a lot of what we build. And we talk about filling the bathtub, as Mr. O'Rourke said. And the answer was to maybe just build more DDGs.

    Well at some point, we just cannot keep building more DDGs. So I am puzzled. I am puzzled.

    I want to make a comment to the secretary and to Admiral Dawson and then ask a question. The Navy has requested a multiyear procurement arrangement for the Virginia Class submarine in which we procure two ships a year for the next years. Congress authorized—we authorized—the multiyear appropriations, but only at a build rate of one a year.

    House appropriations have also cut advance procurement funds for the Virginia Class and other shipbuilding programs. Could you speak to how these restrictions and changes in the multiyear procurement authority will lead to overall increased costs to the programs?
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    Secretary YOUNG. I guess I could start with that. And the straightforward answer would be we negotiated a multiyear contract and Congress thankfully gave us the authority to sign that contract. It offered the potential to save $155 million, on average, per submarine if we bought 7 subs, which is over $1 billion; $126 million per sub for 6; and $80 million per sub for 5.

    Congress directed us that five was the appropriate amount and gave us advance procurement for that. So we have the opportunity to save $400 million on those submarines.

    We will forego the chance for greater savings per submarine. We will also forego an aspect of what we are discussing here. And there has been a reasonable study of the industrial base supporting Virginia.

    We know that in some of the nuclear elements of this submarine, we are down to single tier suppliers. And they are being consciously monitored and worked with as we go forward.

    And this multiyear is very critical to them. It allows people to at least plan—albeit one a year-five years of stable production so that hopefully they stay in this business and support Virginia going forward in the class.

    Mr. SCHROCK. Sounds to me like we need to get the appropriators to change the way they do business. I guess it is a pretty cruel thing, but as far as I am concerned, they seem to be the root of all evil around here. They really do.
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    And I say that seriously. And I know you cannot comment on that, but I certainly can.

    And I think we need to get to those people. And we need to make sure the staffers understand that and that the staffers make members understand that so the inmates are not running the asylum. And that is why we are having a lot of these problems.

    We just better say it and say it right upfront. My staff is dying back there; I can assure you. But I mean, that is where we have to get some of these things changed.

    Admiral Dawson, do you want to——

    Admiral DAWSON. I have nothing to add to that. [Laughter.]

    Mr. SCHROCK. Oh, you are smarter than I am, that is for sure.

    Secretary YOUNG. Can I offer one comment?

    Mr. SCHROCK. Yes, please.

    Secretary YOUNG. Probably at my peril. But there is a legitimate debate there. And I think it plays out in all the discussions we are having here today; and that is, the first Virginia hopefully will deliver this June. And we are working that very hard and with a great deal of success.
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    The marker that some in Congress laid out is were they prepared to commit to two a year on a multiyear, essentially irrevocably committing Congress to fund those submarines, without having seen the first submarine go through testing. That is a struggle for us. I do not say that to illustrate the debates that you all should work out here in Congress, but to illustrate the aspects of shipbuilding that are a challenge for us.

    Even as we make this transition from DDGs to DD(X), there will be people that will want to say, ''Why should I fund this DD(X) because you have not proven this and this and this and the other thing?''

    At some point, if you believe in a stable industrial base and we make a good argument for the capability, which definitely can be made, we have to then agree to fund that program and go forward, albeit it thin or less robust. I think that it is difficult to get every member of Congress to agree to a significantly more robust program until you can prove results along the way.

    Mr. SCHROCK. I know my time is about up, but I wanted to just ask Secretary Young, there has been a fair amount of discussion over the Navy's decision to fund the lead DD(X) and the LCS ships from the RDT&E funds. And I agree that the practice of forcing the Navy to frontload all the costs of ship procurement in your budget can be crippling and that the Navy is the only service, quite frankly, that has been challenged to do so.

    Could you elaborate on the advantages of using RDT&E funding to procure the lead ship, especially when it comes to cooperation with the industry partners?
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    Secretary YOUNG. I believe this is a critical step for the industrial base. We have—to illustrate, many of you spent some time on F–22. We spent about $26 billion to develop that airplane.

    We are proposing to spend $40 billion to develop the Joint Strike Fighter (JSF). In the DD(X) program, we have about $5.9 billion for design and—for development and detailed design. CVN–21 is similar, about $5 billion for development and detailed design.

    There is a need to spend additional funds in RDT&E to develop systems and allow our shipbuilders, just as our aircraft providers, to develop modernized manufacturing processes, advanced assembly procedures and mechanisms that reduce labor or touch labor and deliver a product at lower cost. We have not done, I think, well in shipbuilding on that account.

    This step does not necessarily raise the cost because we are working within a budget. But it does allow a program manager who is given money on Year 1 that has to last for 5 to 7 years to make a decision to invest in a machine tool or invest in a manufacturing or assembly process that will pay off over the class of DD(X) as currently projected at 24 ships.

    Rather than decide, ''I am not prepared to invest in that machine tool or that process because I am afraid that I will run out of money and have to go to the CNO for prior year completion funds to complete that ship,'' which the CNO and the Secretary are very troubled about that. That is a lost opportunity cost in the future.

    It is also detrimental because you do not recognize those problems until you get there. And then you go through: do we come and ask Congress on a reprogramming? Or do we come in a budget?
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    You are six months to a year from getting funds to fix your problems; whereas, if we can go through and have RDT&E and annually take a look at whether the program is budgeted right. And I would strongly advocate, we are prepared to give Congress total visibility in this program.

    I do not agree with the critics that suggest this is an effort to hide the costs. There is nothing precluding Congress from asking us. And we are prepared to display, along the way, every dollar cost to design that ship and to build that ship.

    But we do want to be able to come to you next year and say we can invest in a machine tool and an assembly process if we have $10 million more. And we are going to ask you this year for that $10 million.

    And we are going to apply it to the class of the ship, using RDT&E funds, instead of having to wait and use some SCN process—ship construction Navy funds and procurement funds in a reprogramming to get there.

    Mr. SCHROCK. Mr. Chairman, I agree with that because every time they come back, we keep asking these questions, because the system they are forced to live under creates doubts in the minds of the members and that causes questions. We have to get that resolved.

    Thank you, Mr. Chairman.

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    Mr. BARTLETT. Thank you.

    Mr. O'Rourke, is there a potential downside to this approach?

    Mr. O'ROURKE. The downside are the things that I mentioned in my opening statement, that funding these ships through the R&D account would allow the Navy to pay for this ship through a steam of payments, which is a process that does have the potential for reducing the total visibility of the cost of that ship to Congress.

    It allows any cost overruns that might occur to be funded through the R&D account, where they, if they are financed, would not be as visible as they would be in the SCN account. And it would allow the Navy to blend both construction and R&D funding for this ship in its budget documents.

    I welcome the statement of Secretary Young, the commitment he just made, to make the cost of this program more visible, even though the Navy's intention is to fund it through the R&D account. This is the Navy's budget highlights book. It has 100 pages of detailed information on the Navy's budget in it.

    But if you were to look in this book for the total cost of the first DD(X), or even for the portion of that cost that appears in this year's budget, you will not find it. It is not there. And it is a consequence of the fact that the Navy is trying to fund this through the R&D account, rather than through the SCN account.

    The same thing holds true for the LCS. If you look for the amount of funding for the LCS that is in this year's budget for that lead ship, you will not find it here either.
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    So I welcome what Secretary Young said, that if these ships are to be funded through R&D, the Navy will do what is necessary to make these costs fully visible to Congress so that Congress can understand and track them and carry out their oversight responsibilities in connection with them.

    But the budget documents, in some cases such as this one, which a lot of people do rely on as a handy source of information, in some cases do not have those numbers in them and you have to look harder. That is what I mean by ''less visible.''

    Secretary YOUNG. Mr. Chairman.

    Mr. BARTLETT. Yes?

    Secretary YOUNG. If I could? I would appreciate the chance to comment. I believe, as a former staffer here, our contract with Congress is documents called R–1s and P–1s, which break down in great detail exactly how we spend virtually every tax dollar you give us.

    An R–1 for this account is well over 1,000 pages. And we are happy to drop one on Mr. O'Rourke's desk.

    For the record, LCS in the 2007 budget is $107.7 million to build the lead ship, against a projected cost—and we have not made a contract award—of $220 million. For the lead DD(X), it is $221 million of the budget request in 2005. We have a projected cost for the lead DD(X) of about $1.8 billion, along with $900 million for detailed production design; $2.7 billion for that lead ship.
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    And we are prepared to provide any document and honor the contract we make with Congress through R–1s and P–1s.

    Mr. O'ROURKE. The R–1s and the P–1s do not show funding beyond a certain number of years. And a portion of the total cost of the lead DD(X) falls in years 2010 and 2011, which are beyond the FYDP. Somebody looking at documents that show funding out through the end of the FYDP will not have an understanding of the total cost of the DD(X) because the funding in those 2 years is not shown.

    Secretary YOUNG. R–1 and P–1 documents have ''cost to complete'' columns in every category of my experience. And if not, we are happy, at the request of Congress, to answer those questions.

    Mr. BARTLETT. Mr. O'Rourke, of course, is one out of roughly 280 million people. I think his concern is the rest of those people. I am sure that with his knowledge and insights, that he can find out what it costs. His concern, I think, is that the general public and we in Congress need to know what it is costing.

    Thank you for your commitment to make these costs more visible.

    Mr. Langevin.

    Mr. LANGEVIN. Thank you, Mr. Chairman.

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    Thank you to the panel.

    Obviously, we are touching on a very important topic here. And I had—something that Mr. O'Rourke mentioned actually caught my attention.

    Secretary Young, your fiscal year 2004 budget request proposed a long-term program for the Virginia Class procurement that would increase the procurement with the submarines to 2 ships per year, starting in fiscal year 2007, which was intended to support the objective of 55 attack submarines, consistent with the 2001 Quadrennial Defense Review. Yet this year's budget request again delays the increased procurement rate until fiscal year 2009.

    As you know, it takes six to eight years to add a submarine to the fleet, once approved for advance procurement. And obviously, we are at a critical point. New submarines are needed to replace the older ones.

    What is your position on increasing the procurement rate of Virginia Class submarines to two per year? And will your fiscal year 2009 target slip again this year, taking us to fiscal year 2010?

    And with respect to the comment that caught my attention, Mr. O'Rourke made the statement that Secretary Clark said that a submarine force slipping to 30 would be unacceptable, but did not specify if a submarine force below 55 would be acceptable, even something as low as to 35. Can you clarify what exactly is Admiral Clark's position on the size of the submarine fleet?

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    Secretary YOUNG. I will offer a couple of comments. I think Admiral Nathman in particular is better suited to answer the requirements question.

    The Department's stated goal is to attempt to get to two a year Virginia Class. And that is clearly what supports an inventory of roughly 55 submarines.

    Congress did, however, last year, do two things: one, added two EROs (engineering repair overhauls), which helped stabilize the number of submarines in the force; and alternately, directed that we only contract for one a year Virginia Class. So that prescribes our courses of action from that.

    The CNO has undertaken a study—and maybe at that point I will stop—but I think that study is an important effort to look at, within the changing requirements base—and I know that is a challenge for the members—and the changing way of operations, things we are doing, not necessarily in submarines, but in surface ships, such as Sea Swap, change the mission requirements. What is exactly the right number in the submarine force? And that effort will look at it across the fleet, I am sure.

    Admiral Nathman is doing much of that study work. And I will defer to him for further comment about what the studies might say about our requirements.

    Admiral NATHMAN. Yes, sir. I think everyone should appreciate—and I come back to what the chairman has asked before about unmanned, underwater vehicles. But there are a lot of dynamics in how you build force structure requirements for the submarine force.
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    Right now currently it is built on warfighting and this compelling need by the intelligence community for a distributed Intelligence Surveillance and Reconnaissance (ISR) surveillance capability that our submarines bring because of their ability to get into those access areas.

    The other debates that I see inside of this is there is a tremendous requirement for intelligence preparation of the battlespace, again because of the submarine's covertness to get into those parts of the battlespace, as they build that battlespace preparation before a conflict. And at the same time, there is this dynamic of adding SSGNs to our budget over the last several years, buying four of those. And then how do you leverage the volume of SSGN and trying to understand what your total submarine force structure ought to be?

    And I will make this point about ISR right now. Submarines do that very well. And they do it for national needs primarily.

    But it seems to make sense to me that if you are going to be asked to take a very high value, very expensive, very complex device and—like a submarine—and keep it in a constrained battlespace so that it can detect certain communications and signals intelligence in a very confined area, that we might be better off in the near term looking at investments in leveraging the volume of SSGN to putting unmanned, underwater vehicles in those very same places.

    A submarine would probably be the delivery vehicle. But it could be an SSGN or it could be an SSBN.

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    So why could you not leverage the force structure that you need by taking more of this requirement and going offboard into unmanned, underwater vehicles and that potentially leveraging the investment in SSGNs the same way.

    So this is part of the debate we are having. We are having that debate now in an underwater sea superiority study with the joint staff and our own significant study, as you would expect, another study that says let's look at our total force structure requirements around the capabilities that we will need in these very specific fights that we have been looking at, that we see in the future.

    So this is the kind of rigor that we are trying to get to, sir, to understand what that force structure requirement should be so we do not under-or overinvest in the total size of our submarine force.

    Admiral DAWSON. I might just add, sir, that those are ongoing right now. And we expect them to inform us—although not for the budget that you have before you this year, but what we submit in 2006.

    Mr. LANGEVIN. If I am hearing this correctly, it again is possible that you may back off the two per year submarines and you are willing to, depending on what this review produces, that we could significantly drop below the 55 submarines force?

    Admiral DAWSON. Well, what I am saying, sir, is you have a congressionally mandated action on certainly the force structure we are buying now, through 2009. And what we are looking at here is these two specific studies, one by the joint staff, this undersea superiority study, which we expect to have delivery here this summer, and our own work on—this goes back to how do you leverage the capabilities of your submarine force because of its covertness and its access? And how do you leverage the investment we are making in SSGN?
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    So I do not know the answer. But I am telling you, I am suggesting these are areas that we are looking at very strongly to make sure we make the proper investment in our total submarine force.

    Mr. LANGEVIN. I see my time has expired. Obviously, I will look forward to seeing the results of that study this summer and following up on this issue. Thank you.

    Mr. BARTLETT. Thank you.

    Mr. Young, was there a plus-up in the R&D accounts anticipating their use for DD(X) and LCS?

    Secretary YOUNG. I cannot say there was a plus-up to the accounts.

    Mr. BARTLETT. Let me go back to my concern that I expressed in my opening statement. And what we see here is another example of the tyranny urgent, which always takes precedence over the important.

    We have been systematically starving basic research and R&D because of our need for procurement. Are we not making that problem worse by taking R&D funds for the first ships of DD(X) and LCS?

    This seems pretty much the equivalent of the farmer eating his seed corn. Few farmers are dumb enough to do that. But we seem to be doing it.
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    And the next question is, there are very likely to be cost overruns here. There usually are in these first developments. How are we going to keep from making a bad matter worse?

    We had too few R&D funds to start with. We are now using them for something they have not traditionally been used for, so we are further decimating these accounts. And now there is likely to be overruns, which will further devour the R&D budget, squeezing out those essential research and R&D projects which are necessary, essential, if we are going to have the best platforms after this.

    Secretary YOUNG. Again, my colleagues can almost certainly expand on this, but I will offer a starting discussion. In fiscal year 2004, the Navy RDT&E account was $14.1 billion. In fiscal year 2005, I believe it is $15.4 billion.

    So there is an increase in that account that more than covers the amount of funds I indicated earlier are the payments on LCS and DD(X) lead ship construction. But I think, to the secretary's goal and led by Admiral Nathman and then followed by Admiral Dawson, we seek to build a budget each year that delivers capability and addresses what the needs and requirements of the sailors and marines are and within that, allocate funds accordingly.

    I think there are not generally viewed to be fences between accounts. And at the end of the day, when we live through what we have lived through, of having $3 billion of prior year completion bills, something in the Navy, some $3 billion of something did not get done as long as our top line stayed the same.
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    And that effort to pay those bills reaches into personnel, O&M and it inevitably reaches into RDT&E procurement. So when we misestimate the cost today, we pay for it in an adverse way where we have to go back and take programs out and come to you and ask for prior year completion monies.

    We are asking to have a chance to make more managed adjustments to the budget and manage our way through a problem, instead of buy our way out of a problem, which is frequently a more costly solution.

    Mr. BARTLETT. In another life, I had the opportunity, the privilege, of working for the Navy and observed there this tension between R&D and fleet maintenance. And the same organization had responsibility for both.

    Guess which one always took precedence? It was fleet maintenance and putting out the fires in the fleet; where if they had been able to spend their time and energy in developing new components, they would not have had so many fires to put out.

    So I kind of think there needs to be a firewall between these because it is just so easy to decimate R&D and basic research accounts because you are not going to pay a penalty for that tomorrow. It will be the day after tomorrow. And that may be on somebody else's watch.

    And so our goal here is to get reelected. And the President's goal is to get reelected. And industry's goal is to have a nice quarterly report at the next meeting or the stockholders may be very unhappy and their stocks may drop.
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    Admiral NATHMAN. Mr. Chairman.

    Mr. BARTLETT. But somehow, we have to protect these accounts because they are so easy to plunder when the consequences are not going to be tomorrow, but rather the day after tomorrow.

    I understand that we are retiring ships that have a meaningful amount of their hull life remaining; that we are doing this because they are inefficient to use, it takes too many people to man them. They do not have the latest technology on board.

    We do have a modernization program. And you mentioned, Mr. Secretary, the modernization of the CG–47. If that is appropriate, why would modernization of the DDG–51s not also be appropriate?

    And could we not spend money doing that to fill this trough or this bathtub and thus to push off our need to immediately embark on the DD(X), for which I understand GAO indicated there were 12 different technologies which need to be mature to successfully build that ship and that for only 2 of them was there a meaningful off ramp now. Why isn't looking more intensely at modernization of the ships that are out there with a whole lot more hull life, whether that makes sense and thus we do not need to embark on a development which may be fraught with difficulties? Because if GAO is correct, there are only 2 of the 12 essential technologies for which there is a meaningful off ramp, if we cannot mature those in the timescale we anticipate?

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    Admiral NATHMAN. Sir, a couple of comments. The cruisers that we are decommissioning have reached a stage of warfighting obsolescence that it would take a tremendous amount of money.

    Mr. BARTLETT. But they do have a lot of hull life remaining?

    Admiral NATHMAN. They have some hull life remaining. That is correct, sir.

    Mr. BARTLETT. And we are modernizing some of them.

    Admiral NATHMAN. We are, sir, because those are the ones——

    Mr. BARTLETT. My question is: why do we not modernize more of them and fill this bathtub and push off the need to build a ship for which the technology admittedly are not now mature?

    Admiral NATHMAN. Well, sir, you asked a series of questions here. And maybe I can take them one at a time and try to answer them.

    But the cruisers that we are modernizing are the ones that we feel like we have the most leverage on, in terms of bringing up to modern warfighting standards. And we made a very deliberate choice on what cruisers we would modernize, based on that cost trade, as well as the ability to modernize to a high warfighting standard. And you can see us making that investment.
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    It is interesting to me, that does not count as a shipbuilding account because it is in OPN primarily, so we do not even get credit for that in terms of the numbers. But we do have a significant investment right now in cruiser modernization to bring them up to very high standards.

    The CNO has directed us to look at a DDG modernization account for 2006 primarily because we are studying now how to do that. But to start the modernization effort around our DDGs.

    But the question you ask about, you are asking a warfighting trade here between modernizing older cruisers or building DD(X). And see, DD(X) is about delivering fires for the Marine Corps. It is a mission change for us, based on the Marine Corps needs in fires.

    So we are doing two things. In CG modernization—excuse me, in DDGs, we are investing in a weapons system called the 5-inch/62 and a round to deliver that. We are also investing in trying to close the fires gap by building DD(X).

    So what we are trying to do there is go to a warfighting gap that you cannot get on your current cruisers. So it is really a warfighting issue about how you go buy that leverage for surface fires for closing the gap on total fires for the Marine maneuver scheme.

    So that is why we are headed that way. I think Secretary Young may want to discuss about the issues of risk in the EDMs for DD(X).

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    Secretary YOUNG. Mr. Chairman, actually I just wanted to not leave the committee with a wrong impression. When we proceed—and as Admiral Nathman noted, the CNO is asking for an evaluation of a DDG upgrade or modernization program. That program is likely, under the rules and restrictions I live in from Congress, to be a competitive program that can be done by small yards or in any number of places.

    There is no guarantee that that will be put at a yard that is a new construction yard that has an industrial base gap. And I do not have necessarily valid tools to steer it in one place.

    Mr. BARTLETT. But if that were not there, could the deep water cutters not potentially be there? There are just a lot of things that we need to be looking at. And I am not certain that because it crosses cabinet lines and so forth that we are really looking at all of these options.

    Mr. O'Rourke, do you have an observation?

    Mr. O'ROURKE. In terms of DDG modernization, beyond those things, in terms of updating like the C4I equipment on board this ship, I am aware of another option to back fit automated equipment onto the DDG so as to significantly reduce the size of their crews, taking the crew from something on the order of 300 people to potentially something on the order of 200 people. That is a forward-fit option for DDGs under construction—or could be—but it is also a back-fit option for existing DDGs.

    And that could become a part of the DDG modernization effort that Secretary Young says the CNO wants to have considered. I am not sure where on the menu it is, but it could become part of that.
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    In terms of the five oldest CG–47s, which are the ones scheduled to be deactivated and retired, they would need a lot more work than the later CG–47s, the later baselines. If there is an argument for doing those ships, it is to say that well, the Navy, among other things, does not have a plan right now for its future size and structure, so it cannot be certain at this point technically that it will not need those ships in the future, should the plan, when we arrive at it, call for a certain number of surface combatants.

    Furthermore, the Navy has an emerging role in missile defense. And if that role requires a fairly significant number of Navy surface combatants, then there may be a utility for modernizing those five earliest CG–47s, in part to provide missile defense platforms that contribute to that role.

    In terms of the change in mission, that is absolutely right. Keeping old DD–963s or old CG–47s around or modernizing the DDG–51s will not do anything to close the naval surface fire support gap. That is more of an issue of analyzing what our needs for naval surface fire support capability in the future are going to be.

    And if you do believe that you need it, then you need to put into service ships that can bring those guns to bear. And then it becomes a question of whether the DD(X) program is the right way to do that or not.

    And if you do not think that the mission requirement is there because we are in era of changing warfare requirements and changing ways of conducting land warfare, then perhaps that is not a requirement that needs to be chased.
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    Mr. BARTLETT. Well, thank you. I would like to yield for a moment to Mr. Taylor for any comments or follow-on questions he would like.

    Mr. TAYLOR. Thank you, Mr. Chairman. I think you have asked—and the whole group has asked—some great questions.

    Mr. O'Rourke, has there ever been a precedent for the Navy including as many new concepts on a ship as they will be with the DD(X)? You know, you often hear that this vessel was used as a test platform for a gun or for a radar or for a drive mechanism.

    And the chairman has me thinking about the first block of the CGs. It just strikes me, with this shrinking fleet, that we are getting ready to retire 5 ships that are, off the top of my head, somewhere between 17 and 20 years old.

    It just strikes me as a terrible waste of taxpayers' resources. And could not those platforms be used as test platforms for some of the things that are going to the DD(X), rather than, in effect, rolling the dice on an ''all or nothing'' outcome with the DD(X), with so many new technologies?

    Mr. O'ROURKE. I guess I heard two parts to that question. The first was: is there a precedent for having this many number of new technologies in a new class of Navy ships?

    Mr. TAYLOR. And I really want to open that up to the panel. I do not want the admirals to sit there and bite their tongues off if they have a substantially different answer.
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    Mr. O'ROURKE. My own answer would be that I think if you went far back enough in history, you would find ships, even the Iron-Clad Monitors, that represented a complete change from what had gone before.

    When I addressed that issue in my own writing on the DD(X) program, what I said is that this is the largest number of new technologies to be in a new class of surface combatants in several decades. That was my answer to it.

    And in terms of the utility of the CG–47s, if we are in a situation where we do not know what our future requirements are, then that might argue in favor of, at a minimum, making sure we do not take any irreversible steps in retiring those ships if we decide later that, in fact, we might want to bring them back into service in some form, with modernization and maybe a mission reorientation where they might be useful.

    And so if you are going to retire the ships, then one question would be: what form of preservation will they be kept under if it turns out that there is a requirement and a usefulness in having those ships put back into the fleet?

    Admiral NATHMAN. The short answer is: if you want to restore the old ones, you might as well build new, sir. I mean, it is really an affordability issue in terms of the amount of modernization you need in both combat system, the missile system, from a launcher system to VLS (vertical launch system), to the amount of room that you have on them. And then you face the aging issues of the hull.

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    So the question is: if you have a 1984 Suburban, do you want to buy new motor, new seats, new power steering gear, new four-wheel drive on it? Because that is kind of where we are. So it still looks like a 1984 Suburban. But it is not going to deliver what we are going to need.

    We are not trying to buy a Suburban anymore. We are trying to buy—in this case, the analogy is we are trying to buy something that delivers the naval fire.

    So we need to go to a new mission area. We do not need to preserve old.

    And part of our issue here is an affordability issue about if you are going to generate some liquidity in your budget and you want to buy the new mission that you need to buy, you need to look for those opportunities to walk away from old where it makes sense. And we have a very strong warfighting case and a very strong business case about why we need to walk away from those older ships.

    So it does, in the near term, marginalize our ship count. But in the far term, it creates the opportunity to go to the mission area we need to go to and devise ships that are going to be effective.

    Now the CNO recognized, to the panel's point, that we should be looking at modernization accounts from the very beginning with any class of ship. And so the CNO has directed us to go and provide him alternatives and studies and in what we can leverage in our new classes of ships—our DDG–51s and our cruisers.

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    So we have our cruiser modernization plan. And I believe we will soon look at an affordable DDG–51 plan.

    Mr. Chairman, you talked a lot about R&D and leveraging R&D and eating our seed corn. I think, so I will not have to bite my tongue anymore, to Mr. Taylor's point, one of the things I think the panel needs to understand is the Navy is trying to protect R&D in several critical areas.

    In aircraft, we are protecting—our R&D investment is in JSF. And it is all about protecting the ability to move ahead in tactical air.

    In submarines, it is all in subtech in Virginia Class R&D because that is the hull that we are going to leverage for many years to come. And we need to keep a steady stream of R&D into that class of ship.

    And in shipbuilding, primarily our R&D investment of our future is in DD(X) because it does not just leverage DD(X). The R&D investment in the EDMs for DD(X) leverage CG(X), which is going to be our truly our missile defense ship of the future, as well as our air defense ship of the future, is going to leverage CVN–21 and those technologies, not only in terms of reducing people, combat systems, open architecture and a total computing ship environment.

    And so we are protecting, in one ship line called DD(X) in the R&D, we are protecting the shipbuilding R&D for the U.S. Navy in that particular line. That is why that ship is so critical to us.
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    But I think you should appreciate the fact that we see it the same way, that you need to have a significant R&D investment out there to keep your seed corn and your new ideas alive and deliver. And with any R&D, there is always risk.

    And that is why we looked at the risk in the EDMs and we said: how can you answer that? And what are the off ramps in those EDMs to provide for some characterization that, if you are having real trouble and you cannot deliver, do you have an off ramp? And I think we are protecting that inside the EDM analysis and certainly inside the EDM structure that we created for DD(X).

    Mr. TAYLOR. Admiral, my next question would be going back to a point that Mr. O'Rourke made, playing devil's advocate. What if, for some reason, DD(X) is slipped or, God forbid, we get delivery and the electric drive does not turn out to be as good as we thought? Or the gun system does not work? Or some major foul-up along the line?

    I happen to have been here for the C–17 procurement, which seems to have taken a lifetime and a half. I have seen the A–12 cancelled, the Comanche cancelled.

    So there is certainly precedent for things going wrong. Going back to Mr. O'Rourke's question, what level of confidence do I have that those Block 1 of the CGs will be in a position to be brought back? Or is all of this some sort of a larger plan to almost immediately transfer the still—in my opinion—capable ships to an ally?

    What becomes of the CGs? Are we budgeting in the future to maintain them? Or are we anticipating that they will be transferred to the Taiwanese or the Egyptians or someone like that?
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    What becomes of them? Are they there to grab bag, so to speak? Or are they, once they are tied up, are they gone forever?

    Admiral DAWSON. I would like to——

    Mr. TAYLOR. Someone has to be talking about it. Someone has to be budgeting it because you are getting ready to tie these ships up in relatively short order.

    Admiral DAWSON. Sir, I do not think as of yet we have made any decisions on the disposition of those ships.

    Mr. TAYLOR. At what point would you start budgeting to maintain them in some sort of a high degree of mothball status, if you were going to do that? What is the normal procedure for that?

    Admiral DAWSON. Sir, I do not have the exact date and answer to that. I would like to take that for the record and provide you that answer.

    Mr. TAYLOR. Would you please?

    Secretary Young, can you help me with that?

    Secretary YOUNG. I certainly can get you the answer for the record. I do not know the CNO's retirement plans for the fleet. But you are exactly right. We would have to either have mothballing, decommissioning or transfer—hopefully hot transfer costs—in the budget.
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    We will get it for the record, sir. I do not know it right off the top of my head.

    [The information referred to can be viewed in the hard copy.]

    Mr. TAYLOR. Because the Yorktown, I think, is either getting ready to or has actually begun its last deployment. They are talking about tying it up this fall, if I am not mistaken, which would mean for the 2005 budget, we would have to have something in there if you are going to maintain it or otherwise.

    Admiral NATHMAN. I think we are taking this for the record, sir, because we do not know the disposition. There are several levels of disposition, as you are aware, in terms of if you lay the ship up, in terms of getting it—it could be near-term ready or you are going to make a final disposition decision.

    That determines the certain status of the ship in terms of its inactivation. We just do not know.

    [The information referred to can be viewed in the hard copy.]

    Mr. TAYLOR. That is one for the record. And I do very much appreciate all of you staying here so long.

    A few years back, I had the opportunity to visit David Taylor on the edge of town and was very much impressed with a modular concept they had for double-hull tankers. It just seemed to do a lot of very smart things and it showed a lot of engineering prowess went into it.
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    To the best of my knowledge, no one in the American commercial industry ever used any of that. How often are the designs that come out of David Taylor actually put into use for our Navy or private sector shipyards? I realize that it is great to have that capability, but I would feel even better about it if that capability was actually put into use and we could show the taxpayers where something good comes of that.

    Secretary YOUNG. I do not know if I can give you a specific answer. I will give you an overview answer; and that is, because of Congress, I have the authority to sign, I guess, a grant that public entities like David Taylor can be made part of an industry team up to a certain dollar threshold. And I have signed those in several instances, where we have unique capabilities.

    I believe, for example, Dahlgren, which has special skills and combat systems, is essentially a paid member of the DD(X) national team for the combat system. I do not recall for sure whether David Taylor is.

    There is no question in my mind David Taylor is party to—they have been conducting the hull trials on the scale model, w here DD(X) has successfully traveled through Sea State 8 in hurricane conditions. And so they are partners, at least from the public side, on refining that DD(X) hull design for its performance in various sea states. And they may even be a contracted part of the national team, through the authorities Congress has given me.

    Industry has to make a choice that they want to use those skills. And so in that regard, I would say it is a little bit like the commercial marketplace you would expect in America.
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    They have the skills. They become part of the team. We make them available.

    Mr. TAYLOR. For the record, could I ask folks at David Taylor to supply me the five most recent things that they have done that have actually been transferred, either to a naval vessel or a commercial vessel? In technologies?

    Secretary YOUNG. Sure. Absolutely.

    [The information referred to can be viewed in the hard copy.]

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

    Mr. BARTLETT. Thank you very much.

    I wanted to ask a question that I asked on March 11. Admiral Nathman, section 216 of the 2004 National Defense Authorization Act directed the Secretary of Defense to provide for the performance of two independent studies that would recommend future fleet architecture to the Navy; one study to be performed by the Office of Force Transformation and the other by a federally funded research and development center—FFRDC—such as the Institute for Defense Analysis.

    Studies are to be reported to the congressional defense committees not later than January 15, 2005. The Office of Force Transformation has briefed me on the status and approach to their study.
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    I understand that the Secretary of Defense has delegated the other study that is to be conducted to the Navy for selection of the FFRDC. What is the status of the Navy study? And when can I receive a briefing on the approach that is to be taken?

    Admiral NATHMAN. Yes, sir. If I could take that one for the record and give you a very specific answer on the details?

    Mr. BARTLETT. Okay. Well, we took that for the record on the 11th.

    Admiral NATHMAN. Yes, sir.

    [The information referred to can be viewed in the hard copy.]

    Mr. BARTLETT. Okay. We will ask it again at our next subcommittee hearing if you do not get back to us with answer before that.

    Admiral NATHMAN. I will find some staff and wring their necks, sir. You should have that. We have that answer, but it is a very detailed answer about the assumptions. And I want to make sure I am very accurate on that.

    Mr. BARTLETT. Okay. Looking forward to it. Thank you very much.

    Gasoline is now approaching $2 a gallon. Very soon, it will cost a little more than water in the grocery store, which may get our attention.
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    As gasoline goes up, fuel for our Navy goes up. At some point, we need to ask the question: how much more of our surface fleet ought to be nuclear powered? And it is not just about cost because some of that is, as the television ad said, some things are priceless.

    Freeing us from a long supply chain and refueling once every 30 years just has to have some big advantages. Is there a study as to what point in time, relative to the increasing cost of fuels, that it is appropriate to consider more of our surface fleet being nuclear?

    Admiral NATHMAN. I am not aware of a study that looks at that now. But I will go find out for you, sir, if there is one.

    Mr. BARTLETT. As I say, it just is not the cost of fuel. And I am not sure that we really have a good fix on total lifecycle costs.

    I do not know what kind of a dollar value to attribute to being totally free of crude oil produced in the Arab world; I do not know what kind of a dollar value to attach to being totally freed from a long supply chain, which may or may not be there.

    I would submit that if the Cole had been nuclear powered, it would not have been in that port, would it?

    Admiral NATHMAN. Well, sir, I will tell you, we are not na´ve about this. We have had a history of having nuclear powered surface ships-Truxtun, Texas, California, more than that.
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    But part of this is, you know, a lot of the reasons for us making this original investment were some assumptions about disposition of these ships. And I think we all found out that the disposition of these ships was a lot more expensive than we ever expected them to be.

    So we have made investments in nuclear power and wanted to drive up the operational availability of ships that need really high speed, really high dash requirements, like aircraft carriers, or unique requirements to be underwater for a long time, like submarines. So I personally believe that our investment in nuclear powered warships is about right.

    I think what you will find is when we find the tradeoffs for near-term operational costs—but we should go look into this because of the chairman's question. But when you go look at those trades between near-term operation and sustainability (O and S) costs, but then you look at the far-term trade about disposition of nuclear components and the cleaning and requirements—the ''green side,'' as it were—for the disposition of those ships, I think we all have found that the cost associated with that has been quite expensive. And we need to make that as part of our total calculi on this investment.

    So I believe right now we have made very good investments in nuclear-powered warships.

    Mr. BARTLETT. That is true, that in the past, the spent fuel has been a liability.

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    Admiral NATHMAN. Yes, sir.

    Mr. BARTLETT. New technologies might actually make it an asset. There are now new technologies which could make this something of value, rather than something which is very costly to handle and dispose of.

    But with the cost of fuel going up and with the prospect that it may not be coming down much, I think we need to take a new look at that.

    Before we close—and the votes are imminent. They told us they would be starting ten minutes ago and so they are going to start shortly.

    I would like to ask if my other panel members have any questions? Well, I want to thank you all very much. Oh, this is an oversight committee. There are questions we have to have answers to.

    We did not have time to ask them all. With your permission, rather than keep you here for the next two or three hours, could we submit them to you for the record?

    Okay, you are all nodding your heads.

    Admiral NATHMAN. We promise to answer them too, sir. [Laughter.]

    Mr. BARTLETT. Thank you very much. We are in adjournment.
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    [Whereupon, at 3:38 p.m., the subcommittee was adjourned.]