    [Senate Hearing 107-355]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 107-355, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1416

    AUTHORIZING APPROPRIATIONS FOR FISCAL YEAR 2002 FOR MILITARY ACTIVITIES
       OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND FOR
    DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE PERSONNEL
      STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 2

                                    SEAPOWER

                                   ----------

                       APRIL 4, 26, JUNE 7, JULY 31, 2001

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                             2002--Part 2  SEAPOWER

                                                     S. Hrg. 107-355, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED SEVENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1416

    AUTHORIZING APPROPRIATIONS FOR FISCAL YEAR 2002 FOR MILITARY ACTIVITIES
       OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND FOR
    DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE PERSONNEL
      STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR OTHER
                                    PURPOSES

                                   __________

                                     PART 2

                                    SEAPOWER

                                   __________

                       APRIL 4, 26, JUNE 7, JULY 31, 2001

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                        JOHN WARNER, Virginia, Chairman

    STROM THURMOND, South Carolina       CARL LEVIN, Michigan
    JOHN McCAIN, Arizona                 EDWARD M. KENNEDY, Massachusetts
    BOB SMITH, New Hampshire             ROBERT C. BYRD, West Virginia
    JAMES M. INHOFE, Oklahoma            JOSEPH I. LIEBERMAN, Connecticut
    RICK SANTORUM, Pennsylvania          MAX CLELAND, Georgia
    PAT ROBERTS, Kansas                  MARY L. LANDRIEU, Louisiana
    WAYNE ALLARD, Colorado               JACK REED, Rhode Island
    TIM HUTCHINSON, Arkansas             DANIEL K. AKAKA, Hawaii
    JEFF SESSIONS, Alabama               BILL NELSON, Florida
    SUSAN COLLINS, Maine                 E. BENJAMIN NELSON, Nebraska
    JIM BUNNING, Kentucky                JEAN CARNAHAN, Missouri
                                         MARK DAYTON, Minnesota

                          Les Brownlee, Staff Director

                David S. Lyles, Staff Director for the Minority

                         CARL LEVIN, Michigan, Chairman

    EDWARD M. KENNEDY, Massachusetts     JOHN WARNER, Virginia,
    ROBERT C. BYRD, West Virginia        STROM THURMOND, South Carolina
    JOSEPH I. LIEBERMAN, Connecticut     JOHN McCAIN, Arizona
    MAX CLELAND, Georgia                 BOB SMITH, New Hampshire
    MARY L. LANDRIEU, Louisiana          JAMES M. INHOFE, Oklahoma
    JACK REED, Rhode Island              RICK SANTORUM, Pennsylvania
    DANIEL K. AKAKA, Hawaii              PAT ROBERTS, Kansas
    BILL NELSON, Florida                 WAYNE ALLARD, Colorado
    E. BENJAMIN NELSON, Nebraska         TIM HUTCHINSON, Arkansas
    JEAN CARNAHAN, Missouri              JEFF SESSIONS, Alabama
    MARK DAYTON, Minnesota               SUSAN COLLINS, Maine
    JEFF BINGAMAN, New Mexico            JIM BUNNING, Kentucky

                         David S. Lyles, Staff Director

                    Les Brownlee, Republican Staff Director

                                     ______

                            Subcommittee on Seapower

                        JEFF SESSIONS, Alabama, Chairman

    JOHN McCAIN, Arizona                 EDWARD M. KENNEDY, Massachusetts
    BOB SMITH, New Hampshire             JOSEPH I. LIEBERMAN, Connecticut
    SUSAN COLLINS, Maine                 MARY L. LANDRIEU, Louisiana
    JIM BUNNING, Kentucky                JACK REED, Rhode Island
                                         JEAN CARNAHAN, Missouri

                   EDWARD M. KENNEDY, Massachusetts, Chairman

    JOSEPH I. LIEBERMAN, Connecticut     JEFF SESSIONS, Alabama,
    MAX CLELAND, Georgia                 JOHN McCAIN, Arizona
    MARY L. LANDRIEU, Louisiana          BOB SMITH, New Hampshire
    JACK REED, Rhode Island              SUSAN COLLINS, Maine
    JEAN CARNAHAN, Missouri              JIM BUNNING, Kentucky

                                      (ii)

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
              Shipbuilding Industrial Base Issues and Initiatives
                                 april 4, 2001

                                                                       Page

    Fricks, William P., Chairman and Chief Executive Officer, Newport
      News Shipbuilding..............................................     7
    St. Pe, Gerald, Chief Operating Officer, Northrop Grumman Litton
      Ship Systems...................................................    12
    Welch, John K., Senior Vice President, Marine Systems Group,
      General Dynamics Corporation...................................    20

         Strategic Airlift and Sealift Imperatives for the 21st Century
                                 april 26, 2001

    Robertson, Gen. Charles T., Jr., USAF, Commander in Chief, United
      States Transportation Command..................................    73

         Navy and Marine Corps Equipment for 21st Century Operational
                                  Requirements
                                  june 7, 2001

    McGinn, Vice Adm. Dennis V., USN, Deputy Chief of Naval
      Operations for Warfare Requirements and Programs; Accompanied
      by Maj. Gen. William A. Whitlow, USMC, Director, Expeditionary
      Warfare; Rear Adm. Michael J. McCabe, USN, Director, Air
      Warfare; Rear Adm. Bruce B. Engelhardt, USN, Deputy Director,
      Submarine Warfare; and Rear Adm. John M. Kelly, USN, Deputy
      Director, Surface Warfare......................................   126
    Nyland, Lt. Gen. William L., USMC, Deputy Chief of Staff for
      Programs and Resources.........................................   132

                           Navy Shipbuilding Programs
                                 july 31, 2001

    Fallon, Adm. William J., USN, Vice Chief of Naval Operations.....   210
    Young, Hon. John J., Jr., Assistant Secretary of the Navy for
      Research, Development, and Acquisition.........................   222

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                            WEDNESDAY, APRIL 4, 2001

                                   U.S. Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.

              SHIPBUILDING INDUSTRIAL BASE ISSUES AND INITIATIVES

        The subcommittee met, pursuant to notice, at 9:32 a.m., in
    room SR-222, Russell Senate Office Building, Senator Jeff
    Sessions (chairman of the subcommittee) presiding.
        Committee members present: Senators Sessions, Warner,
    Smith, Collins, Bunning, Lieberman, Landrieu, and Reed.
        Committee staff members present: Anita H. Rouse, deputy
    chief clerk.
        Professional staff members present: John R. Barnes, William
    C. Greenwalt, Gary M. Hall, and Thomas L. MacKenzie.
        Minority staff members present: Creighton Greene,
    professional staff member, and Peter K. Levine, minority
    counsel.
        Staff assistants present: Kristi M. Freddo, Jennifer L.
    Naccari, and Michele A. Traficante.
        Committee members' assistants present: Margaret Hemenway,
    assistant to Senator Smith; Arch Galloway II, assistant to
    Senator Sessions; Kristine Fauser, assistant to Senator
    Collins; Menda S. Fife, assistant to Senator Kennedy; Frederick
    M. Downey, assistant to Senator Lieberman; and Elizabeth King,
    assistant to Senator Reed.

               OPENING STATEMENT OF SENATOR JEFF SESSIONS

        Senator Sessions. Good morning. Today the Seapower
    Subcommittee convenes to explore shipbuilding industrial base
    issues and initiatives. I am very pleased to be able to work
    with the Ranking Member, Senator Kennedy, with whom I have
    talked about this hearing but could not be here today. We are
    delighted that Senator Lieberman will serve as the Ranking
    Member of this subcommittee today, as he has served on the
    subcommittee for a number of years. Also Senators McCain,
    Smith, and Reed will return to this subcommittee. We welcome
    our new subcommittee members: Senators Collins, Bunning,
    Landrieu, and Carnahan.
        We look forward to working in a bipartisan manner as this
    panel has in the past to address the seapower procurement and
    research and development issues. As we all understand, our
    decisions directly impact the equipment our men and women of
    the Armed Forces will have as they carry out the national
    security strategy. Navy ships are vital to our national
    security, and the shipbuilding industrial base is the means of
    providing those Navy ships. Ships are critical to projecting
    American power.
        Today we face many challenges regarding the industry.
    Reduced funding is exacerbated by reports of schedule delays
    and increased costs. This committee has to ask the hard
    questions to determine if these reports are accurate and, if
    so, the cause of these problems and possible solutions to
    prevent reoccurrence.
        Today we hope to explore and clarify the following
    questions regarding the challenges we face together with
    respect to building quality and complex ships. Is there
    adequate research and development in ship construction funding
    for the complex ships that are needed by the Navy? Is there
    enough Navy ship construction work to maintain the industrial
    base? Are there initiatives including funding alternatives
    which could reduce the costs of Navy ships? Is the shipbuilding
    industry controlling the costs of Navy ships and taking
    initiatives to improve efficiency and reduce costs to the
    taxpayer, while also providing capable ships? Are there ways to
    minimize the reported cost increases and schedule delays
    associated with some Navy ship construction programs? How can
    design and construction costs be predicted and controlled?
        To answer these and other questions presented by Members,
    we have a distinguished panel of witnesses today representing
    the six major shipyards which build most of the Navy's ships.
        Mr. William Fricks is the chairman and CEO of Newport News
    Shipbuilding. We were delighted to be there recently with the
    Reagan carrier. That was a great ceremony, Mr. Fricks. Mr.
    Jerry St. Pe is the chief operating officer of Northrop
    Grumman's Litton Ship Systems. Mr. John Welch is the General
    Dynamics senior vice president for the Marine Systems Group.
    Gentlemen, we welcome you and thank each of you for appearing
    today.
        [The prepared statement of Senator Sessions follows:]

                  Prepared Statement by Senator Jeff Sessions

        Today the Seapower Subcommittee convenes to explore shipbuilding
    industrial base issues and initiatives. I am very pleased to be able to
    work with the ranking member, Senator Kennedy, who has led this
    subcommittee in the past and has maintained a bipartisan approach to
    national security issues. I would like to welcome Senators McCain,
    Smith, Lieberman, and Reed back to the subcommittee and welcome our new
    subcommittee members Senators Collins, Bunning, Landrieu, and Carnahan.
    I look forward to working in a bipartisan manner, as we have in the
    past on this panel, to address the Seapower procurement and research
    and development issues. As we all understand, our decisions directly
    impact the equipment our men and women of the Armed Services will have
    as they carry out the national security strategy.
        The shipbuilding industrial base is vital to our national security.
    Why is this the case? Simply put, because Navy ships are vital to our
    national security. Navy ships are forward deployed on a daily basis to
    deter potential adversaries while reassuring friends and allies. The
    Navy and Marine Corps team are often the initial response to crises
    throughout the world. This is the case because Navy ships can move
    rapidly to an area without prior approval of foreign governments. The
    Marine Corps and Navy team create the conditions that ease the entry of
    joint forces when required. The Navy maintains freedom of navigation on
    the high seas which is critical to our economy and our national
    security.
        What are the risks associated with not having the ships to be
    forward deployed and not being able to assure freedom of navigation
    throughout the oceans of the world? To answer that question let's look
    back at the effects of the 1973-1974 oil embargo. The embargo resulted
    in a loss of 14 percent of the world's oil supply which caused a 4
    percent decrease in U.S. employment, a 48 percent devaluation in the S
    & P 500 stock market index, and a 6 percent decline in Gross Domestic
    Product in the U.S. In addition to the transit of oil tankers across
    the oceans, 99 percent of the volume and 84 percent of the value of all
    intercontinental trade travels by sea. This intercontinental trade,
    reflective of what is referred to as a global economy, requires access
    to 16 super ports and transit through nine choke points throughout the
    world.
        In addition to ensuring free transit on the oceans of the world,
    Navy ships are vital to the concept of joint military operations. This
    is because the Navy and Marine Corps team in Navy ships develop an
    understanding of the battlespace while providing a visible show of
    force to deter aggression and, if necessary, an immediate response to a
    crisis. These actions require no prior approval of a foreign government
    and no strategic lift. Navy ships also project defense ashore allowing
    embarked Marines and then joint forces to secure points of debarkation
    for follow-on forces.
        Construction of Navy ships requires unique skills and facilities.
    The complexities of building Navy ships require close coordination
    between designers, constructors, integrators, and operators. The Navy's
    ability to estimate, negotiate, contract, and manage ship construction
    programs is largely dependent on information provided by shipyards.
    Recently, the Navy has put more of the design responsibility in the
    hands of industry. The results, thus far, are mixed. There have been
    successes as well as disappointments. While cost and schedule
    estimation differences have normally been accommodated by the Navy and
    the shipbuilder, the resulting agreements often have negative effects
    on other ship building and non-related programs.
        The reduction in shipbuilding budgets has led to the reduction in
    the number of shipyards that build Navy ships, the consolidation of the
    remaining shipyards, and a reduction of the vendor bases supporting the
    remaining shipyards. Today there are six shipyards owned by three
    corporations that construct most of the Navy's ships. Low Navy ship
    construction rates have limited the government's ability to provide the
    number of ships required to attain price reductions which would result
    from quantity buys and contractor competition. Attempts by shipyards to
    diversify and broaden their customer base by building commercial ships
    as well as Navy ships has met with mixed results for a number of
    reasons. There have been instances of directed procurement to maintain
    the industrial base required for national security.
        In the previous 2 years, this subcommittee has gone to great
    lengths to establish the annual shipbuilding investment required to
    maintain a Navy of about 300 ships. The Navy, Department of Defense,
    and the Congressional Research Service agree that an annual investment
    of $10 to $12 billion to build an average of 8.7 ships per year is
    required for the next 30 years to maintain about 300 ships.
        As far as the total number of Navy ships go, the operational
    commanders have testified that the present ship force structure of
    about 315 ships is not enough to carry out the present national
    security strategy. The administration's strategic review, coupled with
    their national security strategy, will provide fresh data points to
    evaluate the total ship requirement.
        It is not my intention, in this hearing, to debate whether the
    annual investment requirement should be a little more or a little less
    or whether the total ship requirement is adequate. Rather, it is my
    intention to concentrate on how the government, working closely with
    industry, can get the most out of the shipbuilding investment
    regardless of the actual amount appropriated and authorized.
        Today, we face many challenges regarding the shipbuilding industry.
    Reduced shipbuilding funding is exacerbated by reports of schedule
    delays and increased costs. This committee has to ask the hard
    questions to determine if these reports are accurate and if so, the
    cause of these problems and possible solutions to prevent reoccurrence.
        Today, we hope to explore and clarify the following questions
    regarding the challenges we face together regarding building quality
    and complex ships:

              1. Is there adequate research and development and ship
            construction funding for the complex ships that are needed by
            the Navy.
              2. Is there enough Navy ship construction work to maintain
            the industrial base required to produce the Navy ships that are
            required?
              3. Are there initiatives including funding alternatives which
            could reduce the cost of Navy ships?
              4. Is the shipbuilding industry controlling the cost of Navy
            ships and taking initiatives to improve efficiency and reduce
            cost to the taxpayer while providing capable ships?
              5. Are there ways to minimize the reported cost increases and
            schedule delays associated with some Navy ship construction
            programs?
              6. How can design and construction costs be predicted and
            controlled when there is no viable competition?

        To answer these and other questions presented by members, we have a
    distinguished panel of witnesses today representing the six major
    shipyards which build most of the Navy's ships. Mr. William Fricks is
    the Chairman and CEO Newport News Shipbuilding, Mr. Jerry St. Pe is the
    Chief Operating Officer of Northrup Grumman Litton Ship Systems, and
    Mr. John Welch is the General Dynamics Senior Vice President for the
    Marine Systems Group.
        Gentlemen, we welcome you and thank each of you for appearing
    today.
        Before we begin the testimony, I'd like to recognize Senator
    Lieberman for any opening statement on behalf of our ranking member.
        Are there any other Senators wishing to make opening remarks?
        Gentlemen, in the absence of any objection, your complete
    statements will become part of the subcommittee's hearing record. Mr.
    Fricks, please begin.

        Before we begin the testimony, I would like to recognize
    Senator Lieberman for any opening statement he may have.

                STATEMENT OF SENATOR JOSEPH I. LIEBERMAN

        Senator Lieberman. Thank you, Mr. Chairman. Senator Kennedy
    regrets that he cannot be here today. I am honored to have the
    opportunity to sit in for him. I would ask that an opening
    statement of his be submitted for the record at this time.
        Senator Sessions. We would be pleased to make that a part
    of the record.
        [The prepared statement of Senator Kennedy follows:]
                Prepared Statement by Senator Edward M. Kennedy
        Thank you, Mr. Chairman. I want to join you in welcoming our
    witnesses to the hearing this morning. I look forward to hearing your
    testimony.
        This is the first hearing of the Seapower Subcommittee this season.
    I would like to take this opportunity to congratulate you, Mr.
    Chairman, on assuming the duties of the chair this year. I am looking
    forward to continuing the close working relationships that we have
    maintained in this subcommittee through the chairmanships of Senators
    Cohen, Warner, and Snowe.
        I believe that you have identified a good series of hearings for
    the coming year, which should provide the basis for producing a
    comprehensive report from the subcommittee. I very much look forward to
    working with you this year.
        I believe that the fundamental problem that we must deal with in
    this Subcommittee is achieving the proper level of modernization to
    support tomorrow's readiness. We cannot in good conscience ask more of
    our forces when we are not willing to provide them the tools they need
    to protect our vital interests.
        The focus of today's hearing is on the shipbuilding industrial
    base. We are most interested in hearing what suggestions our witnesses
    can offer on the most effective ways in which we can provide the ships
    the Navy needs in its fleet.
        Thank you again, Mr. Chairman, for calling this very important
    hearing.

        Senator Lieberman. I agree with everything you have said,
    and maybe I will quote from Senator Kennedy's statement, which
    is the fundamental problem that we must deal with in this
    subcommittee is achieving the proper level of modernization to
    support tomorrow's readiness. We cannot in good conscience ask
    more of our forces when we are not willing to provide them the
    tools they need to protect our vital interests. I could not
    agree with that more.
        The forces of technology are affecting shipbuilding as they
    are every other facet of our lives, and they affect those who
    threaten our security. We have an obligation to make sure that
    we provide the absolute best for our forces and for our Nation.
    The reality is that no matter how much we work and occasionally
    succeed in making the Pentagon more efficient, there is no
    cheap way to do this. We are going to have to invest to
    maintain the security that a great Nation like ours requires
    and deserves.
        Gentlemen, you are ideally suited by not only position but
    experience and knowledge to advise us on exactly the terms that
    we ought to meet to fulfill our responsibility to provide for
    the common defense. Ancient terms, but terms that we try to
    apply today in a very modern high tech context.
        So I thank you, Mr. Chairman, for convening this hearing,
    and I thank the three of you for coming. I look forward to your
    testimony.
        Senator Sessions. Thank you, Senator Lieberman.
        Senator Bunning, any comments?
        Senator Bunning. Thank you, Mr. Chairman.

                    STATEMENT OF SENATOR JIM BUNNING

        Senator Bunning. Thank you all for coming before this
    subcommittee today. I am going to keep my remarks brief so that
    we can hear what you have to say.
        Personally, I am very concerned about this country
    maintaining a viable naval construction infrastructure that
    will allow us to maintain our position as the leading naval
    power in the world. Under the current naval construction rate,
    our Navy will soon have fewer--I say fewer--than 300 ships. I
    believe this is insufficient to maintain our commitments around
    the world.
        Finding the resources to adequately fund the necessary ship
    construction rate is going to be a challenge, due to budget
    realities, but it is hard to imagine any more pressing need
    than our national security. In the meantime, I look forward to
    hearing your opinions on what you can do to hold down the costs
    and make sure that the taxpayer gets the biggest bang for their
    shipbuilding buck. Thank you, Mr. Chairman.
        [The prepared statement of Senator Bunning follows:]

                   Prepared Statement by Senator Jim Bunning

        Thank you, Mr. Chairman. Gentlemen, I would like to join my
    colleagues in welcoming you. We all appreciate your lifelong service to
    this country.
        The state of our sea services is something that greatly concerns
    me. The United States has always been a maritime nation and this has
    not changed. It is vital to our national security that we remain
    capable of projecting power to any point on the globe. Our naval forces
    are a vital part of that capability. They provide a flexibility not
    found elsewhere. I am looking forward to working with all of you to
    ensure our naval forces can meet our Nation's national security
    requirements.

        Senator Sessions. Thank you.
        Senator Reed.

                     STATEMENT OF SENATOR JACK REED

        Senator Reed. Thank you very much, Mr. Chairman. Let me
    simply welcome the panel and say how much I look forward to
    their comments this morning and yield back the time.
        Senator Sessions. Thank you. I would just concur with
    Senator Bunning's comments that at the rate we are building, it
    appears that we will be below a 300-ship Navy, and no matter
    how efficient and capable these ships are, it is a big world.
    If one is in the Gulf it cannot be in the Pacific. You simply
    can not be in two places at once. We need to analyze what is
    happening. I do not believe that this Senate or this government
    is in a position to alter fundamentally its ways of doing
    business, but there may be opportunities for us to utilize our
    funding procedures and contracting procedures in a way that
    would allow you to produce more for less, and that will be one
    of the issues that we will be talking about today.
        Senator Collins, we are glad to have you. Would you like to
    make any comments before we begin?

                   STATEMENT OF SENATOR SUSAN COLLINS

        Senator Collins. Thank you very much, Mr. Chairman. I just
    want to say that I am very pleased to be a new member of the
    Seapower Subcommittee and to be joining the subcommittee in its
    important work under your leadership, and I look forward to
    hearing the testimony of our witnesses today. I want to
    associate myself with the comments that you and others have
    made to express my concern about the current low rate of
    shipbuilding, and the concern that we are moving away from the
    goal of a 300-ship Navy at a time when many experts believe
    that that number is inadequate.
        I am also very concerned that at the current low rate of
    production, the costs for ships will go up and the efficiency
    at the various yards may go down because we will not have
    maintained the skilled work force and know-how that we need to
    produce ships productively and efficiently.
        I have a lengthier opening statement that I would ask be
    included in the record, and I appreciate the opportunity to
    comment this morning.
        Thank you.
        [The prepared statement of Senator Collins follows:]

                  Prepared Statement by Senator Susan Collins

        Thank you Mr. Chairman. Today, the committee will hear testimony
    from three distinguished professionals who help to ensure that our
    uniformed men and women have the most advanced and best equipped ships
    in the world. I want to start by thanking each of you for coming here
    today to discuss the very important topic of shipbuilding and the
    issues, challenges, and initiatives that you face in the industry.
        Seapower is among the most essential components of our national
    security posture. However, with that said, the U.S. Navy has shrunk
    from a fleet of 594-ships in 1987 to 315-ships today. While, during the
    same period, deployments have increased more than 300 percent. Regional
    Commanders-in-Chief have repeatedly warned that the fleet is stretched
    perilously thin and needs to be increased to 360-ships to meet their
    present mission requirements.
        The new administration and this Congress will be faced with the
    challenge of rebuilding and re-capitalizing the Nation's naval fleet.
    The numbers are just as clear as can be; at the present rate of
    investment our Navy will grow smaller and by the 2010 time frame the
    numbers are quite alarming.
        Numbers do matter; on a typical day about half the ships in the
    Navy are at sea, with one third deployed in the Mediterranean, the
    Persian Gulf and the Western Pacific, putting wear and tear on our
    ships and sailors. In addition to combat over the last 10 years, naval
    forces have conducted: 19 non-combat evacuation operations, 4 maritime
    intercept operations with more than 5,000 boardings in support of
    United Nations sanctions or U.S. drug policy, 32 humanitarian
    assistance operations, and 20 shows of force to send powerful messages
    to friends and foes alike.
        Even though our deployments are at exceptionally high rates, the
    U.S. shipbuilding industry is at risk of deteriorating if the current
    build rate for the Navy continues. At the current low rate of
    production, the cost for ships will go up and the efficiency at the
    yard may go down.
        In response to the decline in funding for Navy shipbuilding in
    recent years, it has been suggested the Navy make greater use of
    funding mechanisms other than the traditional full-funding method.
    Included in these alternatives are multi-year procurement, incremental
    funding, advanced procurement, and most recently the Navy is evaluating
    a new mechanism which they refer to as advance appropriations. Each of
    these alternatives are intended to help provide stability and
    credibility in the current shipbuilding process. I hope to hear from
    each of you what you think the pros and cons are of each of these
    proposed alternative funding mechanisms and any other alternative
    mechanisms that have, at this time, not yet been considered and should
    be.
        A few other critical areas that have seemed to get little attention
    in a budget constrained environment is research and development, and
    training. I look forward to hearing what research and development
    investments that you have each made at your various yards and the
    approaches that you have taken to attract and retain a highly-skilled
    workforce necessary to build the complex warships required for our U.S.
    Naval ships to operate against the emerging and traditional threats in
    the 21st century.
        Recently, everyone has been consumed with trying to predict what a
    new military strategy might mean. I would advocate that regardless of
    the result of the strategic review, forward deployed combat power will
    not only be required, but will continue to be a key element to our
    strategic posture. There is an enduring and emerging return on the
    investment when our Navy's ships command the seas, provide U.S.
    sovereign power forward, assure access, and project and transform the
    current naval fleet to prepare for the 21st century.
        I again thank you for your presence here today, and I anxiously
    await your candid assessments of the critical issues facing the
    shipbuilding industrial base; the factors contributing to the current
    costs of our Navy ships and the various funding alternatives; the
    research and development investments needed to be made to remain
    competitive and efficient; and any other business considerations that
    you feel need to be brought in the forefront for discussion. Thank you,
    Mr. Chairman.

        Senator Sessions. Thank you. Well said.
        Mr. Fricks, you lead us off. I am glad to hear from you.

     STATEMENT OF WILLIAM P. FRICKS, CHAIRMAN AND CHIEF EXECUTIVE
                   OFFICER, NEWPORT NEWS SHIPBUILDING

        Mr. Fricks. Mr. Chairman and members of the subcommittee,
    we are pleased to appear before you this morning to discuss the
    issues confronting the industrial base. I have submitted a
    formal statement in advance and ask that it be included for the
    record.
        Senator Sessions. We will, and all statements will be made
    a part of the record without objection.
        Mr. Fricks. Thank you.
        First let me point out that I believe that currently the
    shipbuilding industrial base is surviving, but it is
    struggling. The quandary for shipbuilders today is that, as we
    have talked about already, the Navy stated a need for 300 to
    360 ships. That is the equivalent of 10 to 12 ships per year,
    yet we continue to build about half that many. So our
    challenge--the industry's challenge--is whether to invest in a
    program to upgrade facilities for twice that workload, or
    continue to retrench to build the number of ships that are
    actually being authorized each year.
        For us to realistically assess the future of the industrial
    base, we need to know obviously how many ships are going to be
    built, and what kinds of ships are going to be built. I also
    know you are interested in hearing about cost control and the
    predictability of current shipbuilding programs.
        First, let me talk about the touchstones of a successful
    shipbuilding program which can be reduced to about three
    important fundamentals. The first is the stability of
    production which allows for the planning of both facilities and
    work force. The second is the stability of design which firmly
    defines the product being built without having to go back and
    make costly changes. The third and final fundamental is a
    reasonable cost target which allows for the planning of the
    entire program and provides incentives for continued
    performance improvements.
        Now let me say this--in my 35 years in the shipbuilding
    business, I have never seen a program at Newport News, or in
    fact at any of the other yards, lose cost control when these
    three fundamentals were in place.
        Today you will hear me repeat a very critical word, and one
    I am confident you will hear from the other shipbuilders--it is
    the watch word of our industry, and the word is stability. We
    need stability to strengthen and improve both the industrial
    base in general and the individual programs. We need a
    commitment from the government to define and stay the course
    with Navy shipbuilding programs. One of the ways to do this was
    mentioned earlier through alternative funding mechanisms. These
    various alternatives such as multi-year, advanced procurement,
    block buys, and advance appropriations all support the first
    fundamental of a successful shipbuilding program, a commitment
    to stability.
        What these alternatives allow us to do, to varying degrees,
    is to let the shipbuilders plan ahead, invest ahead, and buy
    several ship sets of material at once, all of which help reduce
    the costs of building ships. Advance appropriations are more in
    line with how business finances its capital programs, which is
    on a cash outlay basis. For example, when we build a new dry
    dock, we will approve the entire project but budget the costs
    over the future years when they are expended. By using this
    approach, shipbuilders can build more ships over the next 5 or
    6 years and certainly build them at reduced costs, and
    therefore I fully support it.
        Now I want to touch briefly on some of the Newport News
    programs, starting with the aircraft carriers. We are currently
    building the Ronald Reagan that you mentioned, Mr. Chairman,
    which is about 60 percent complete. This includes a completely
    redesigned island using the most modern tools for 3D product
    modeling. It will be delivered to the Navy in 2003. Now, there
    have been some press reports about Reagan costs, so I would
    like to briefly address that subject. We expect the Reagan will
    be delivered to the Navy within about 3 percent of the contract
    price. Much of this variance comes from the impact of a lengthy
    strike at Newport News, resulting in increased labor costs.
        The next carrier in line, the transition ship to the new
    class of carrier is CVN-77. This ship will have a newly
    designed warfare system. In previous carriers, system
    integration of the warfare system was performed by the Navy.
    For CVN-77, Newport News, in conjunction with Lockheed, is
    performing this role.
        At this juncture I would like to briefly highlight what I
    believe is a very important success for both the Navy and for
    Newport News, and that is the recent contract negotiations for
    CVN-77. Newport News and the Navy, I believe for the first time
    as far as I can remember, have agreed to a fair and reasonable
    target cost. It is important to note, however, that for us to
    meet that goal, Newport News still has to further reduce its
    man hours on CVN-77 by about 10 percent, compared to CVN-76. We
    feel this goal, while challenging, is achievable given the
    investments we have made in new information technology and
    manufacturing systems.
        This contract also has a stable design and a stable
    production plan. In short, all three of the fundamental
    ingredients required to have a successful program are now
    present for CVN-77. It should be a model for the future.
        Newport News is also working on the first new class of
    carrier, CVN-X. This ship will have a newly designed propulsion
    system that will help reduce manpower costs. The second ship in
    that class is slated to have a newly designed hull. Much of the
    work on future carriers will take place in a $60 million
    carrier integration center funded by the state of Virginia.
    This center, located in downtown Newport News, is scheduled for
    opening this summer. It will serve as a nucleus for carrier
    research, design, testing, and integration with emphasis on
    improving performance and reducing costs.
        With regard to the submarine programs, the teaming, as I am
    sure Mr. Welch will tell you, on the Virginia-class, is
    progressing very well. The lead ship in the class, Virginia, is
    50 percent complete, and is scheduled for delivery in 2004. The
    second ship, the Texas, is 40 percent complete and slated for a
    2005 delivery.
        This summer Newport News will deliver a quarter-scale model
    of the Virginia-class submarine, called LSV-2, to the Navy.
    This test vehicle will provide the Navy with the opportunity to
    conduct large-scale testing that will be invaluable to
    technology development and insertion in a very cost-effective
    manner.
        Another very important element in shipbuilding is our
    supplier base for materials. Both submarines and aircraft
    carriers have thousands of different suppliers from all over
    the country. They range from the very large corporations to the
    very small businesses. The down turn in defense spending and
    the lack of follow-through on proposed shipbuilding programs
    has dealt many of these suppliers a critical blow. In many
    cases, the industry is down to single-source suppliers, and we
    remain concerned about our dependence on select suppliers of
    complex equipment and components.
        A month ago Newport News was proud to christen U.S. carrier
    Ronald Reagan. This ship, when it enters the fleet in 2003,
    will be the most modern, flexible and survivable ship capable
    of projecting American power and presence around the world for
    the next 50 years. This ship is a tribute to the skilled
    workers of both Newport News and our suppliers and,
    importantly, this ship is indicative of the quality that the
    U.S. shipbuilding industrial base delivers, in spite of some of
    the handicaps it is under.
        In summary, Mr. Chairman, the Navy shipbuilding industrial
    base faces many challenges, but we are working hard with our
    customer to meet them. We know that we can reduce the cost of
    building Navy ships, but to get there we need to allow for
    early planning and integration of the design and construction
    to minimize the number of changes, increase the production
    rates, and stabilize production schedules and funding. I look
    forward to working with you and the members of the subcommittee
    as we all seek to reach these goals. I thank you and look
    forward to responding to your questions.
        [The prepared statement of Mr. Fricks follows:]

                    Prepared Statement by William P. Fricks

        Mr. Chairman, and members of the Subcommittee, I am pleased to
    appear before you this morning to discuss issues confronting the
    shipbuilding industrial base. In addition, your staff has asked that we
    cover a broad range of topics from individual shipbuilding programs to
    more general issues such as the supplier base, the role of commercial
    shipbuilding and alternative budgeting and funding approaches for Navy
    shipbuilding. I will touch briefly on each of these and then be
    prepared to answer your questions.
        The current condition of the shipbuilding industrial base is that
    it is surviving but struggling. The quandary for shipbuilders today is
    that the Navy has stated a need of 300 to 360 ships which is the
    equivalent of 10 to 12 ships per year, yet we continue to build about
    half that many. So the industry's challenge is whether to invest in a
    program to upgrade facilities for twice the workload or continue to
    retrench to build the number of ships that are actually being
    authorized each year. In order to realistically assess the future of
    the industrial base, it is critical to know how many and what kinds of
    ships are going to be built.
        Another area that has a particularly high level of interest for the
    committee is cost control and the predictability of current
    shipbuilding programs.
        The touchstones of a successful shipbuilding program can be reduced
    to three fundamentals. The first is stability of production, which
    allows for the planning of both facilities and workforce. The second is
    stability of design, which firmly defines the product being built
    without having to go back and make significant and costly changes. The
    third and final fundamental is a reasonable cost target, which allows
    for the planning of the entire program and provides incentives for
    continued performance improvements.
        In the 35 years that I have been in the shipbuilding business, I
    have never seen a program at Newport News, or in fact at any of the
    other yards, lose control of costs when these three fundamentals were
    in place.
        Throughout this testimony, you will hear me repeat a very critical
    word and one I'm confident you will hear from the other shipbuilders.
    It is the watchword of the industry. The word is stability. We need
    stability to strengthen and improve both the industrial base in general
    and the individual programs. We need a commitment from the government
    to define and stay the course with Navy shipbuilding programs.
        With those three fundamentals outlined, let me discuss some of the
    other areas of interest.
        First, let me address the subject of productivity improvements.
    Many of you have heard about the low cost shipbuilding in Japan and
    Korea. I have been there many times. We have worked with their
    companies and we have walked their factory floors and their dry docks.
    There is no mystery to their low cost model. They have stability in
    production. They have stability in design. Because of that, they can
    invest heavily in their plants and in their up front planning. These
    investments pay large dividends in reducing costs. Although the ships
    they build are almost exclusively commercial, and not as complicated as
    military warships, the model works for both.
        The U.S. shipbuilding industry stands ready to make those same kind
    of investments once it becomes clear we have a dependable future
    market. That is not to say that this industry has not invested in
    itself. Newport News has invested more than a billion dollars in the
    last 12 years. These investments, in computer-aided design, robotic
    manufacturing and new facilities, have enabled us to substantially
    reduce the man-hours required to build carriers and submarines.
        You asked about the impact of ship funding alternatives. These
    various alternatives, such as multi-year funding, advance procurement,
    block buys, and advance appropriations, all support the first
    fundamental of a successful shipbuilding program--a commitment to
    stability. Therefore I enthusiastically support them.
        What these alternatives do to varying degrees is allow the
    shipbuilder to plan ahead, invest ahead and buy several ship-sets of
    material at once--all which help to reduce the costs of the ships.
        Advance appropriations are more in line with how business finances
    its capital programs, which is on a cash outlay basis. For example, if
    we build a new dry dock, we will approve the entire project but budget
    the cost over the future years when it is expended. It is certainly
    worthy of careful consideration. Therefore I hope the Senate will not
    agree with the House Budget Resolution provision that would deny
    Congress the flexibility to consider the use of advance appropriations
    for Navy shipbuilding. Using advance appropriations, shipbuilders can
    build more ships over the next 5 or 6 years and certainly build them at
    reduced costs.
        Some of these ship funding alternatives can be used in combination
    with each other and there are various levels of savings that can be
    realized, and because there are pros and cons to each of them, I won't
    get into any more detail at this point. We can save that for questions
    and answers if you desire.
        In addition to the more general issues I have discussed thus far
    the subcommittee staff has also asked that we address some specific
    questions.
        First, can commercial shipbuilding serve as a reliable means to
    preserve the industrial base? My general answer is no. Because of the
    subsidies overseas, the world commercial market is not available to
    U.S. shipbuilders and the domestic market is not that large. It can,
    however, be an important supplemental and therefore be of some help to
    maintaining the industrial base, albeit a small one. Additionally, the
    most logical place for that work to take place is in the two yards that
    build military ships that are closer to the design of a commercial
    ship, products such as the auxiliary ships built for the Navy.
        You also inquired about the teaming on the Virginia-class submarine
    program and whether there were lessons-learned that could be applicable
    to other programs. With respect to the Virginia-class submarine
    program, it is our view that the Electric Boat/Newport News
    Shipbuilding teaming agreement is an unqualified success.
        Despite skepticism by some in the beginning, the Electric Boat/
    Newport News teaming has resulted in the Navy getting the best both
    companies have to offer. We have demonstrated that the two companies
    can seamlessly share and utilize electronic design and construction
    data, while incorporating the best practices of both companies into the
    construction process.
        The Subcommittee staff has specifically asked if lessons learned
    from the teaming agreement can be incorporated into other programs, and
    I think there may be that opportunity. For example, this teaming
    between two fierce competitors has matured the Virginia-class program
    to the extent that it will be ready for multiyear contracting soon. The
    teaming agreement provides for a discrete work split between the
    companies so that each performs separate yet identical work on every
    boat. This means that each company has essentially one learning curve
    on its half of the work, rather than both companies having a separate
    learning curve on the entire boat.
        The EB/NNS teaming agreement is also a true partnership with
    financial incentives in which both partners stand to gain equally if
    both perform well, and in which both partners stand to lose equally if
    either performs poorly. It remains to be seen whether the benefits to
    the Navy from the EB/NNS teaming agreement can be captured in other
    shipbuilding programs that do not have such a partnership structure.
        I will now address the specific shipbuilding programs, starting
    with aircraft carriers.
        We are currently building the Ronald Reagan (CVN-76) which is about
    60 percent complete. This ship includes a completely redesigned island
    using the most modern tools for 3-D product modeling, and other changes
    that resulted in reconfiguring almost two-thirds of non-electronic
    design drawings of the Nimitz class carrier. It will be delivered to
    the Navy in 2003. The company is also designing and accelerating
    construction on the transition ship to the new class of carriers. The
    as yet unnamed CVN-77 will have a newly designed warfare system and
    unlike previous carriers where this integration was preformed by the
    Navy, Newport News is managing the technology insertion with Lockheed
    Martin in a subcontractor role.
        Here I would like to briefly highlight what I believe is an
    important success for both the Navy and for Newport News. That is the
    recent negotiation for the CVN-77 contract. Newport News and the Navy,
    for the first time probably in 30 years, agreed to a fair and
    reasonable target cost. It is important to note however, that to meet
    this goal Newport News has to further reduce its man-hours on CVN-77 by
    nearly 10 percent compared to CVN-76. This goal, while challenging, is
    achievable. We also have a reasonably stable design and a stable
    production plan. In short, all three of the fundamental ingredients
    required to have a successful program are present for CVN-77. It should
    be a model for the future.
        Newport News is also working on the first of the new class of
    carriers, CVNX1. This ship will have a newly designed propulsion system
    that will, in effect, reduce manpower requirements, thereby saving
    money. It is also scheduled to have an electromagnetic launch system
    for aircraft. The second ship of the new class, CVNX2, is anticipated
    to have a newly designed hull as well as an electromagnetic aircraft
    recovery system.
        Much of the work on future carriers will take place in the new $60
    million Virginia Advanced Shipbuilding and Carrier Integration Center
    located in downtown Newport News, Va. Scheduled for opening this
    summer, this Center will serve as the nucleus for all carrier research,
    design, test and integration. Eleven Virginia colleges and
    universities, as well as industry partners and the Navy, will
    participate in this Center.
        With regard to the submarine program, I have already mentioned how
    well the teaming on the Virginia-class is progressing. Newport News and
    Electric Boat have exchanged two modules thus far and will exchange the
    third later this month. The lead ship of the class, Virginia, is 50
    percent complete and scheduled for delivery in 2004. The second ship
    Texas, is 40 percent complete and slated for a 2005 delivery. This
    summer, Newport News will deliver a quarter-scale model of the
    Virginia-class submarine, called LSV-2, to the Navy. This autonomous
    test vehicle will provide the Navy with the opportunity to conduct
    large-scale testing that will be invaluable to technology development
    and insertion in a very cost-effective manner.
        A very important element in the shipbuilding industrial base is the
    supplier base for materials. Both submarines and aircraft carriers
    literally have thousands of different suppliers from all over the
    country. They range from very large corporations to very small
    businesses. The downturn in defense spending and the lack of follow-
    through on proposed shipbuilding programs has dealt many of these
    suppliers a critical blow. In many cases, the industry is down to
    single source suppliers. We remain concerned about our dependence on
    select suppliers of complex equipment and components.
        Like the prime shipbuilders, these suppliers have based their
    business models and manufacturing capabilities primarily upon Navy
    shipbuilding programs. In a U.S. economy driven by growth in technology
    and services sectors, it is doubtful that new manufacturing companies
    will emerge as alternative suppliers, given the shrinking military
    opportunities. In addition, it is unlikely that even the more
    established companies can, over time, make the plant investments
    necessary to keep up with improvements in manufacturing technology and
    practices unless they see stability in the shipbuilding programs. As
    with the shipbuilders, the remaining sole source suppliers struggle to
    maintain skilled employees and capabilities given the gaps in contract
    awards and low order quantities.
        A month ago, Newport News was proud to christen the newest carrier,
    Ronald Reagan (CVN-76). This ship, when it enters the fleet in 2003,
    will be the most modern, flexible, and survivable surface ship capable
    of projecting American power and presence around the world. This ship
    is a true tribute to the skilled workers of both Newport News and our
    suppliers. Importantly, this ship is indicative of the quality that the
    U.S. shipbuilding industrial base delivers, in spite of some of the
    handicaps it is under.
        The industry can continue to reduce its costs and cycle times but
    there must be stability in shipbuilding and a commitment from the
    government for these programs to effectively make these kinds of
    improvements.
        In summary, Mr. Chairman, the Navy shipbuilding industrial base
    faces many challenges, but we are working hard with our customer to
    meet them. We know that we can restrain the costs of constructing Navy
    ships by allocating sufficient time and resources to the early planning
    and integration of the design and construction processes, by reducing
    the number of changes in ship designs, by increasing production rates,
    and by attaining stable production schedules and funding.
        I look forward to working with you and Members of the Subcommittee
    as we all seek to reach these goals.

        Senator Sessions. Thank you, Mr. Fricks. We are glad to be
    joined by Senator Smith and Jerry St. Pe of Northrop Grumman,
    Litton Ship Systems. We are glad to hear from you, Mr. St. Pe,
    at this time.

     STATEMENT OF GERALD ST. PE, CHIEF OPERATING OFFICER, NORTHROP
                      GRUMMAN LITTON SHIP SYSTEMS

        Mr. St. Pe. Thank you very much, Mr. Chairman. I am new to
    Northrop Grumman. Just yesterday Northrop Grumman acquired our
    company, so I am struggling myself with trying to figure out
    who I am and how I should say who I am.
        Thank you Mr. Chairman and the members of the committee for
    providing us this opportunity this morning. Clearly what you
    have on the agenda are critical issues facing this industry. I
    know that those of us who are on the industry side of the
    partnership to build and maintain ships recognize that
    Congress, as representatives of the taxpayers, also have a
    responsibility to balance the needs for defense against the
    costs of producing the assets. I commend you for the role that
    you have in that partnership.
        I, too, like my associates here have submitted a detailed
    testimony for the record. This morning what I would like to do
    is focus the few minutes that I have on the issue of stability,
    recognizing that the other points that are of interest to this
    committee are contained in my formal statement. I will do that
    in the interest of time.
        Building Navy combatant ships is a very expensive process.
    As Bill Fricks has just articulated, and I'm sure John Welch
    will as well, I think we all agree that there are three key
    factors that contribute to stability in this industry: a stable
    long-term shipbuilding program, adequate numbers of ships in
    the plan to fully utilize America's shipbuilding capacity, and
    a commitment on the part of shipbuilders to improve efficiency
    and productivity through investments in shipbuilding processes
    and technology.
        Recent history paints a clear picture that the most
    affordable way to achieve the fleet size the Navy needs at the
    lowest possible total program cost is to allow mature
    shipbuilding programs to continue at a stable pace without
    interruption. The Navy and its industry partners in the Aegis
    shipbuilding program, with the support of Congress, clearly
    demonstrated the value of program stability in the production
    of 27 CG-47 Aegis class cruisers, and that performance is
    continuing today in the DDG-51 class destroyers which Ingalls
    Shipbuilding and Bath Iron Works are building today for the
    United States Navy.
        Just using my own company's work in the Aegis program since
    1982 as an example, Ingalls has sent 33 Aegis ships into the
    fleet, 19 cruisers and 14 destroyers. Those 33 ships were
    completed at a combined 170 weeks ahead of the original
    contract schedule with a savings to the taxpayers of more than
    $600 million. As impressive as these results are, I can tell
    you firsthand, as I know Bath Iron Works can, they were not
    achieved without early challenges in both the cruiser and
    destroyer programs. At the bottom line, these two programs
    became industry standards for acquisition and program
    management because we--the Navy and industry team--are allowed
    to work and address those challenges in a sustained production
    run.
        Additionally, a major portion of the credit for the Aegis
    program's success goes to the program stability provided by the
    Navy and the fiscal responsibility and stability provided by
    DOD and Congress.
        Let me take a few moments to explain what I mean by program
    stability and fiscal responsibility. If you look back at every
    first-of-a-class, non-nuclear surface combatant ship produced
    over the past 30 years in this country, not a single one of
    them was built to the original contract schedule, or to the
    original cost estimate. I do not cite that statistic as an
    excuse for any performance today. Cost growth has ranged from
    14 percent to 200 percent, and schedule growth has ranged from
    one-third to three-fourths higher than the original estimate.
    While these are indeed sobering statistics when viewed in the
    context of how ships are procured, they depict a reality that
    must be faced as we move forward.
        More than in any other industry, the cost and schedule
    estimates we provide in a competition for a lead ship contract
    are just that--they are our best estimates based on what we
    know at the time. Over-optimism by the Navy, Congress, and
    industry often produces unrealistic cost and schedule estimates
    for a first-of-a-class vessel. Estimates done in cases many
    years before the first ship in the class, starts production in
    our shipyards. Why are these estimates so fragile and so often
    understated? Very simply because there are no prototypes in
    shipbuilding, not even when you consider some of the critical
    important computer simulations and modeling work which we are
    doing today, some of which Bill Fricks just shared with you
    with regard to the carrier work.
        There are no competing concept fly-offs in shipbuilding.
    The first ship built to every new design, the lead ship of
    every new class of Navy warships, would be considered in every
    other industry a test bed or prototype, a research and
    development platform. That is not the case in shipbuilding.
    Instead, in shipbuilding the first ship built, the prototype,
    is as much a part of the fleet as the last ship in that class,
    and it has to be built to take our sons and daughters in harm's
    way. That is a cold, simple fact of life in shipbuilding, as is
    the length of time it takes to design and build these ships--4,
    5, 6 years after the estimate is originally established. This
    working prototype factor must be taken into account in
    discussing ways to improve the acquisition process for ships.
    We must take a long-term approach such as the approach that was
    successfully applied in the building of Aegis cruisers and
    Aegis destroyers at Ingalls Shipbuilding and Bath Iron Works
    over the past 15 years. We absolutely must recognize that
    large, front-end investments can only be recaptured and
    maximized by allowing programs to run uninterrupted with
    sustained levels of program and financial support.
        Let me now apply these points to a lead ship under
    construction in our Avondale shipyard today--the only non-
    nuclear surface combatant lead ship in process today in this
    country. Ingalls Shipbuilding, in partnership with Bath Iron
    Works and Avondale, have an alliance that is at work today
    designing and building LPD-17. U.S.S. San Antonio is currently
    the only first-of-a-class non-nuclear surface combatant being
    designed and built today. Are there cost and schedule problems?
    Absolutely. Are there concerns? Yes, indeed, there are. Are
    these concerns being addressed? Absolutely and without
    exception.
        I will submit to you the two programs that industry and the
    Navy now describe as models of efficiency. The Aegis programs I
    discussed earlier, underwent many of the same challenges that
    are being experienced at Avondale and at Bath today as we work
    hard to get the first-of-a-class ship underway. As this was the
    case with CG-47 and DDG-51 at Ingalls and Bath, and DDG in
    which these programs relate directly to the challenges of
    building a first-of-a-class.
        However, on LPD-17, the Navy, industry and Congress,
    collectively took on additional challenges in the way we
    decided to design this ship, the way we decided to build it,
    invest up front and reduce life cycle costs. Some critics might
    suggest that the program today represents a glass half empty. I
    suggest to you, based on facts and progress, that that glass
    today is half full and it is getting fuller by the day as this
    alliance works to bring this program in.
        I know that we are making progress, and I will tell you
    that we may have taken longer to get where we are, we may have
    taken longer to get where we want to be, and we are clearly not
    where we wanted to be in the mid-1990s when this ship was first
    proposed. However, the LPD-17 program is well underway, and I
    can tell you directly that we are now seeing the benefits of
    those efforts and the benefits of those investments.
        By early fall the ship's design will be complete, far
    earlier in the construction process than previous first-of-a-
    class ships in terms of the completion of designs. I say that
    from a position of experience. No shipbuilding company--no
    alliance as is represented today by Litton Industries and
    General Dynamics--has designed or built more lead ships in the
    history of America, and we have the experience to bring this
    one through as well.
        The quality and completion of design is proving to be
    superior and is resulting in far less rework than otherwise
    would be the case. Concurrent with the design process, the
    Avondale Alliance has reduced total program life cycle costs by
    more than $4.5 billion, and that is a Navy estimate, one with
    which we in industry concur.
        Today the construction of LPD-17 is ongoing. A keel was
    laid in December, and Bath Iron Works will begin the
    construction of LPD-19 in July. By the end of this year, nearly
    1,500 shipbuilders in Maine and Louisiana, as well as people
    working with subcontractors across this Nation, will be engaged
    in building LPD-17. We have much work left to be done, but I
    can tell you that it has the full commitment of my company, and
    I know it has the full commitment of the Navy as well as the
    full commitment of my partners, Bath Iron Works and General
    Dynamics.
        I submit to you that the LPD-17 program is facing similar
    challenges to those programs of the past, and that today
    represent the very, very best that this industry knows how to
    do.
        Mr. Chairman, I think my time has run out. I look forward
    to your questions on this subject and any others that the
    committee may have on its mind today. Thank you very much.
        [The prepared statement of Mr. St. Pe follows:]

                       Prepared Statement by Jerry St. Pe

                                  INTRODUCTION

        Thank you, Chairman Sessions, Senator Kennedy, and distinguished
    members of the subcommittee for giving me this opportunity to testify
    on behalf of two of the six major shipbuilding facilities remaining in
    this country, and, more importantly, to do so on behalf of the 17,000
    men and women of Litton Ship Systems, the newest operating sector
    within the Northrop Grumman Corporation. Litton Ship Systems includes
    Ingalls Shipbuilding in Pascagoula, Mississippi, and Avondale
    Industries, in metro New Orleans, Louisiana, and other locations.
        This morning, I will discuss with you key programs and issues
    important to Ingalls and Avondale, as well as give you our Company's
    thoughts on a number of issues relating to this Nation's shipbuilding
    industrial base, and the way the U.S. Navy buys and maintains its
    surface combatant fleets.
        Litton Ship Systems was initially formed in August 1999, following
    the acquisition of Avondale by Litton Industries. By joining Avondale
    with Ingalls, Litton combined two of the strongest, most diverse
    shipbuilders in the country. In addition to having similar histories
    and capabilities, the two shipyard facilities are in close proximity
    (approximately 100 miles) and both are strategically located on the
    Gulf of Mexico, providing opportunities for optimizing shared and
    specialized services to a much greater extent than other major
    shipbuilding companies.
        In March 2000, Litton further strengthened the team by creating the
    Litton Ship Systems (LSS) Full Service Center as a focal point for full
    service contracting, in response to the U.S. Navy's Full Service
    Contracting initiatives. The LSS FSC is now a one-stop source for
    support to naval and commercial shipbuilding programs throughout all
    phases of a program and a product's operational lifetime. All of the
    individual efforts previously underway at Ingalls and Avondale in
    research and development, integrated logistics and fleet support were
    moved into the single FSC organization.
        Already, the three Litton Ship Systems companies have identified
    hundreds of millions of dollars in merger synergy savings and expect to
    identify much more as we continue to enhance our shared services
    concepts within Northrop Grumman. These savings will be passed along to
    the government in the form of savings on existing programs and lower
    bids on new programs. These savings will come from a broad range of
    opportunities, including combined material procurement, combined
    marketing, common financial and engineering tools, shared work and a
    stable work force, optimal use of geographically-close facilities,
    sharing of best practices, a combined approach to capital improvements
    and sharing of lessons learned.
        Two examples of this synergy are that within a few months of the
    Ingalls-Avondale merger, Ingalls began filling production requirements
    for Avondale by fabricating certain steel modules for Avondale's
    Sealift Ship Program; and when Ingalls' Project America cruise ship
    construction got underway last summer, Avondale stepped up to the
    partnership by producing a significant amount of the hull stiffeners
    and t-beams required for this project.
        The total employment of Litton Ship Systems is approximately 17,000
    with current revenues of $2.2 billion and backlog of more than $6.5
    billion.
        The acquisition of Litton Industries by Northrop Grumman, finalized
    on Monday, is the most recent step in an ongoing consolidation of the
    defense industry, will significantly strengthen our ability to compete
    in an environment where the way in which the Navy procures ships is
    changing significantly. This acquisition will result in a much stronger
    competitor for all non-nuclear, surface ship programs and services and
    will generate significant savings for the American taxpayer.

                                CURRENT PROGRAMS

        The DDG-51 Aegis Destroyer program underway at Ingalls is a mature
    program, running very smoothly, resulting in a highly capable and
    affordable warship being delivered by Litton Ship Systems at a rate of
    about 1.5 ships per year. To date, 24 DDG-51s have been awarded to
    Ingalls, many of these through multi-year procurement authority granted
    by Congress. We recently completed our 14th of these ships. The program
    has been made even more affordable with the use of multi-year
    procurement, shared processes and material purchasing between Ingalls
    and Bath Iron Works, close government-industry teaming and a stable
    production rate of at least three ships per year divided between
    Ingalls and Bath Iron Works. The proposed reduction in the DDG-51
    procurement rate to two ships per year in fiscal year 2002-2004, and
    the end of this highly successful program in fiscal year 2004--well
    before the Navy plans to begin building DD 21s--gives us great cause
    for concern in the areas of affordability, skill retention and optimal
    facility utilization.
        We believe that a minimum procurement rate of at least three ships
    per year until DD 21 construction begins is essential to the successful
    introduction of the DD 21 Program at both Ingalls and Bath Iron Works
    at the least cost to the taxpayers.
        Since 1998, Litton Ship Systems has been funded and actively
    participating in the follow-on destroyer program to the DDG-51, the DD
    21 program. The unique acquisition approach has Ingalls as leader of
    the DD 21 Gold Team--with Raytheon Corporation as systems integrator--
    and as co-leader of the DD 21 Alliance, with Bath Iron Works. The
    competition has been intense, and the investment of time and people has
    been significant. The result will be a revolutionary ship design
    produced in an affordable and stable manner by this country's two
    premier surface combatant shipyards.
        The DD 21 Program is essential to bringing to the Surface Navy the
    latest and best technology, warfighting improvements and quality of
    life for our sailors that industry and government can provide. We urge
    your continued strong support for this program.
        Ingalls is now completing the 7th LHD, U.S.S. Iwo Jima, which will
    join the fleet this summer. Over the past 3 fiscal years, Congress has
    provided a total of $856 million for advance procurement, detail design
    and advance construction of LHD-8. Included in the LHD-8 design will be
    new gas turbine propulsion, electric auxiliaries, and a number of other
    improvements to reduce manning and life-cycle costs, and to improve war
    fighting capability.
        The gas turbine modification alone will enable the Navy to reduce
    LHD-8's crew size by about 90 personnel, and will result in the
    elimination of more than 3,000 valves in the ship's propulsion system.
    These reductions, along with the more efficient combination of gas
    turbine and electric propulsion will result in over $300 million in
    life cycle cost reductions.
        We look forward to obtaining the remaining funding for this ship,
    and to starting construction soon. We appreciate the support of this
    committee for the approach we suggested 3 years ago for building this
    ship in a timely manner, saving the Navy and the taxpayers hundreds of
    millions of dollars and providing timely replacement for our aging LHA
    fleet.
        Because both the industry and the Navy see LHD-8 as an excellent
    transition toward future amphibious assault ships, we are concerned
    about budget-driven plans to move the next ``big deck'' amphib out
    beyond fiscal year 2006. Indeed we believe the Navy/Marine Corps team
    would be better served by procuring the next ship in fiscal year 2005,
    while it can take full advantage of the ``hot'' production line at
    Ingalls working on LHD-8, which will also save the taxpayers hundreds
    of millions of dollars.
        The Avondale Alliance of Avondale Industries and Bath Iron Works is
    also involved in a major Amphibious Ship effort with the 12-ship LPD-17
    program. These highly capable ships replace 41 older ships and will
    introduce significant reductions in life cycle costs. The Navy's
    acquisition strategy for these ships specifically called for an
    unprecedented level of engineering completion prior to construction
    start--using a unique three-dimensional design tool and Integrated
    Product Model--as a way to reduce the cost of design changes and
    rework. Indeed, over $4 billion in reductions to total ownership costs
    have already been identified and designed into the ship. However,
    delays in developing this new and unique ``design/build'' process led
    to removal of funding for the fifth and sixth ships in the program
    during fiscal year 2001.
        I am here to tell you today that most of the obstacles have been
    overcome--both to our satisfaction and to that of our customer. The
    design is about 80 percent complete, and we laid keel for the first
    ship in February, so this program is now well underway, with sustaining
    levels of production.
        Full funding, therefore, of the two fiscal year 2002 ships is
    essential to keeping this program on track, to avoiding a costly break
    in production, and increased acquisition costs. The aforementioned
    military shipbuilding programs, and other critical future programs such
    as T-AKE and JCC(X), form the core of ship programs at Litton Ship
    Systems, but are not sufficient to operate our facilities at optimal
    levels. We have pursued successfully additional core commercial
    programs that capitalize on the expertise at Ingalls and Avondale and
    that contribute to stabilizing the business base, retaining skills and
    generating significant commercial expertise at both facilities. We are
    building cruise ships at Ingalls and tankers for the Alaska oil trade
    at Avondale--the first of which has completed sea trials and will soon
    begin operations on the west coast.
        Let me point out that our cruise ship programs would not be
    possible without DOD's former MARITECH Program, now known as the
    National Shipbuilding Research Program, or NSRP. which enabled Ingalls
    to learn about and observe cruise ship building practices around the
    world, as well as develop teaming relationships with those companies
    who truly know how to design and build large cruise ships. We strongly
    support NSRP, and encourage its consistent and full funding.
        These and future commercial programs being pursued aggressively by
    Litton Ship Systems are critical elements of our overall strategy to
    maintain stability in production, retain skills and apply commercial
    lessons to improve our overall efficiency. They also reduce overhead
    expenses for our Navy customers. For this reason, it is critical that
    MARAD and the Title XI ship loan guarantee program remain in place.
        Finally, Litton Ship Systems continues to pursue aggressively
    foreign military programs throughout the world. The Defense Export Loan
    Guarantee remains a powerful potential tool to aid in successfully
    winning international programs to produce and modernize surface
    combatants.

                        MAINTAINING THE INDUSTRIAL BASE

        In addressing some of the specific issues before this subcommittee,
    let me start by saying that we all know that building Navy ships is,
    and will always be, an expensive business. Clearly, though there are
    ways that we in industry can partner with our customers--which in my
    mind includes not only the U.S. Navy, but Congress as well--to remove
    some of the current obstacles to improving productivity and cost
    efficiency.
        It should be said up front that the maintenance of a healthy
    shipbuilding industrial base that can produce ships at the lowest cost
    to the taxpayer depends on three key factors: A stable, long-term
    shipbuilding plan; adequate numbers of ships to utilize efficiently the
    shipbuilding capacity we have; and a commitment on the part of
    shipbuilder to invest in shipbuilding facilities, processes and
    technology.
        While program instability--particularly in the areas of funding and
    scheduling--are unhealthy for Ingalls, Avondale and all other
    shipbuilders, the management of Litton Ship Systems and Northrop
    Grumman would be derelict in our responsibilities to the Nation--and
    our shareholders--if we allowed ourselves to get into a ``do or die''
    situation with one program. The recent industrial base study Congress
    required of DOD last year painted a somewhat bleak picture of the
    situation at Ingalls. The study focused only on surface combatants, and
    while we are very concerned about the DDG-51 building rate and
    transition to DD 21 production, we have been aggressive in bringing
    other kinds of work to Ingalls to help stabilize overall employment
    levels.
        We do, however, remain concerned about the erosive impact on
    specific critical skills in our yard associated largely with
    construction of surface combatants. One lesson we have all learned in
    the past is that once highly skilled technicians, such as combat system
    test engineers, leave our workforce, they do not come back. Commercial
    products just don't require many of the highly technical skills
    required in building surface combatants.
        That said, recent history paints a clear picture that the most
    affordable way to achieve the Fleet size the Navy needs, at the lowest
    possible total program cost, is to allow mature shipbuilding programs
    to continue without disruption.
        The Navy and its industry partners in the Aegis Shipbuilding
    Program, with the support of Congress, clearly demonstrated this in the
    production of 27 CG-47 Class cruisers, and continue to prove this
    theory in the production of DDG-51 Class destroyers. Just using our own
    company's work as an example, since 1982, when we delivered CG-47,
    Ingalls has sent 33 Aegis ships into the Fleet--19 cruisers, 14
    destroyers. Those 33 ships were completed a combined 170 weeks ahead of
    schedule, with savings to the taxpayers of more than $600 million. Much
    of the credit goes to the program stability provided by the Navy, and
    the funding stability provided by DOD and Congress.
        I can tell you today that we have the same opportunities for
    success in the LPD-17 Program, in future DDGs as a bridge to the DD 21
    Program, and in big deck amphibs, if we exercise the program and fiscal
    responsibility required to start these programs on time, and to
    continue them uninterrupted to completion.
        Let me take a moment to explain what I mean by program and fiscal
    responsibility. If you look back at every first-of-a-class ship
    procured over the past 30 years, I can assure you that you won't find a
    single one of them that was built to the original contract schedule, or
    to the original cost estimate. Cost growth has ranged from 14 percent
    to above 200 percent; and schedule growth has ranged from one-third to
    three-fourths.
        Taken out of context, these would be very sobering numbers. But a
    number of factors influence this reality, some of which the government
    is addressing in acquisition reform efforts.
        First of all, procurement environments historically encourage
    unrealistic cost estimates. Sticker shock is bad . . . competition is
    good . . . realistic competition is better.
        Further, over-optimism by the Navy, by Congress, and by industry,
    often produces unrealistic schedules for first-of-a-class vessels.
    Remember, ladies and gentlemen, we're not building cars, airplanes or
    furniture. There are no prototypes, other than some of the amazing
    computer simulation and modeling work we're doing these days . . .
    there are no competing concept ``fly offs''. The prototype of a ship
    class--the first one built--gets sailed into harm's way by America's
    sons and daughters.
        That is a simple fact of life in shipbuilding. So is the length of
    time it takes to build these ship--4 years for an LHD or LPD, 3 years
    for a DDG.
        We all simply must take these factors into account in discussing
    ways to improve the acquisition process for ships. We must take a long-
    term approach, such as was successful in CGs and DDGs, and we
    absolutely must recognize that large, front-end investments can only be
    recaptured and maximized by allowing programs to run uninterrupted,
    with sustained levels of program and financial support.
        Now, I would be doing a disservice to thousands of small businesses
    around the Nation if I didn't also express my concern about the impact
    that budget and program instability have on the hundreds of suppliers
    and subcontractors around the Nation . . . companies that build our
    pumps, motors, elevators and other components. These are the people who
    can't just change product lines and diversify at a moment's notice when
    Congress or the Navy decides to delay a program or change a funding
    profile.
        Certainly the shipbuilding industry is doing its part by
    maintaining world leadership in implementing shipbuilding technology to
    improve productivity and reduce costs. We have spent more than $450
    million in our two shipyards over the last decade--including a nearly
    complete $130 million one-time investment at Ingalls over the past 18
    months--to ensure that we have the most modern, most diversified
    facilities in the industry. We have a surge capacity unmatched in the
    world, and an experienced craft base that has proven its ability to
    adapt to everything from hopper barges and drilling rigs to amphibs and
    destroyers.

                               COST OF NAVY SHIPS

        As to the issue of how much ships cost, we share the concern of
    Congress and our customer on this important issue. I believe, though,
    that the issues we have all discussed regarding stability of programs
    and consistent funding levels are major factors that we can all work on
    together to reduce per-ship costs.
        The more of any product that goes into an order book in one block,
    the greater the efficiency and productivity of the design and
    construction process, the less it costs to make changes in the
    production line, and the less it costs to buy all of the components
    from the suppliers I noted earlier. A well thought out, disciplined
    approach to changes also helps to stabilize costs. This is true for
    cars, or airplanes, or widgets . . . and it is true for ships.
        We understand that you are examining a number of different ship
    funding options. Advance material procurement . . . block buys . . .
    multi-year procurement . . . advance appropriations . . . are all
    potentially useful tools you can employ to stabilize shipbuilding
    programs and reduce their cost. We have direct experience with only one
    of these approaches--multi-year procurement on the DDG-51 Program.
    Multi-year has saved the taxpayers more than $1 billion in the
    procurement of these ships at Ingalls and Bath Iron Works.
        We fully support funding approaches that lead to more ships being
    constructed, under stable procurement and production profiles.
        So as a team, we are all moving in the right direction. We simply
    must not let short-term challenges create long-term problems in major,
    important shipbuilding programs.

                              TECHNOLOGY INSERTION

        Some of you have raised the issue of improving the level of
    technology in the shipbuilding process, and in the ships we build.
        Certainly, block upgrades work in airplane construction--the F/A 18
    Hornet program, which involves our new parent corporation, Northrop
    Grumman, is a good example.
        But we have also proven that the process will work in ships as
    well. If you go back to the original 30-ship DD-963 program, this was
    really the first ship class built for modular block upgrades. It was
    designed to accommodate weapons and other systems that, in the late
    60s--early 70s were still on the drawing board . . . things like
    vertical launch missile systems . . . next-generation radar, and
    others.
        The CG-47 Class is another example of block upgrades working. The
    first five ships of the class had dual rail launchers . . . the final
    22 got VLS when that system was ready. The same can be said for sonar
    upgrades and Aegis improvements. For that matter, some of the upgrades
    being proposed in the Cruiser Conversion Program that you are funding
    today, are the types of block upgrades that extend the life of ships
    and make them more mission capable.
        If you compare DD-963 as delivered to DD-997 at delivery, or CG-47
    at delivery to CG-73, I think you will see that while the exterior
    hulls may look the same from first-of-a-class to last-of-a-class, they
    are certainly vastly improved ships.
        Here again, the keys to the success of block upgrades, or
    modernizations of any type, are advance planning, and stable funding--
    both in R&D work to develop new systems and in ship production--to
    provide the platforms to demonstrate the new systems.

                                   CONCLUSION

        We in Litton Ship Systems are doing our part in aggressively
    responding to concerns about the way Navy ships are conceived,
    procured, designed, built and supported. We will continue to exploit
    synergies among our companies and our new corporate partners to find
    ways to reduce the cost of the ships, and to ensure that the very best
    technology available in our industry is made available to the men and
    women who will sail our products into harm's way.
        We appreciate efforts by Congress to bring new approaches to ship
    acquisition into the mainstream, building on the success of multi-year
    procurement. We urge Congress to help maintain stability in ship
    production rates at levels sufficient to sustain the Nation's
    shipbuilding industrial base, and to maintain a Navy of more than 300
    ships.
        We look forward to playing our part in helping to sustain a highly
    capable, affordable United States Navy. I look forward to your
    questions. Thank you.

        Senator Sessions. Thank you very much, Mr. St. Pe.
        Next we will recognize Mr. John Welch. He is the senior
    vice president for the Marine Systems Group of General
    Dynamics.
        Mr. Welch.

       STATEMENT OF JOHN K. WELCH, SENIOR VICE PRESIDENT, MARINE
              SYSTEMS GROUP, GENERAL DYNAMICS CORPORATION

        Mr. Welch. Thank you very much, Mr. Chairman, for the
    opportunity to testify before the committee on behalf of
    General Dynamics Marine Systems. I have submitted a statement
    for the record, and I will summarize key points for the
    committee.
        Industry has adjusted reasonably well to the current low
    rate of ship production. However, we need to understand the
    future. Are we recapitalizing for a 300-ship Navy, or a 220-
    ship Navy? What kind of platforms will be required for the new
    threat environment? In developing the plans that will answer
    these questions, most importantly we need to ensure the key
    characteristics of successful weapons systems programs are in
    place: stability, predictability, and cost efficient production
    rates. My testimony today will focus on the status and needs of
    the industrial base supporting three major Navy platforms:
    surface combatants, auxiliaries, and submarines.
        First, surface combatants. General Dynamics supports the
    surface combatant industrial base principally through our Bath
    Iron Works shipyard located in Maine. Ten years ago, Bath had
    almost 12,000 employees. Today the company is Maine's largest
    private employer with an employment level of 7,000 building
    DDG-51s. A matter of major concern is stabile production of
    DDG-51 class ships to cost effectively transition to the next
    generation destroyer, DD 21.
        At the projected low levels of procurement, ship unit costs
    will increase and cause significant erosion of surface
    combatant skills at both shipyards, Ingalls and Bath. In order
    to prevent this, procurement of at least three ships per year
    under a follow-on multi-year contract beginning in 2002 is
    needed. This strategy supports stated force level requirements
    and is cost effective.
        Multi-year contracting for surface combatants has proven
    results. The current multi-year contract saved the Navy $1.4
    billion and allowed them to buy 12 ships for the price of 11
    over fiscal years 1998 to 2001.
        Next, naval auxiliaries. National Steel and Shipbuilding
    Company, NASSCO, a GD subsidiary based in San Diego,
    California, builds commercial and Navy auxiliary ships. At its
    peak in the early 1980s, NASSCO employed 7,800 people. Today it
    is sized to employ about 3,500 people completing the Sealift
    program, building double-hull tankers for the Alaska trade, and
    with a goal of transitioning to the T-AKE program, the next
    generation dry cargo ship this summer. The optimum approach to
    realized cost savings on the T-AKE program is to enter into a
    block buy or multi-year contract and stable, series production
    after the design has been validated by lead ship construction.
        Finally submarines--at its peak in the 1980s, Electric Boat
    employed close to 27,000 people in our facilities in
    Connecticut and Rhode Island. Current employment is about
    9,000. The unique Virginia-class design and construction
    teaming approach was developed to create an affordable and
    capable attack submarine fleet for the future. Electric Boat
    and Newport News Shipbuilding entered into a revolutionary
    teaming arrangement that provided the most affordable
    acquisition approach for the Virginia-class program while
    maintaining two nuclear-capable yards. Cost savings by this
    arrangement and the design build approach are in excess of $700
    million over the first four ships. This program has provided us
    valuable lessons learned, which are being applied to future
    programs.
        It is essential to increase submarine procurement rates to
    two ships per year as soon as possible to meet the Navy's force
    level objectives and achieve production efficiencies.
    Additionally, contract flexibility and commitment in the form
    of a follow-on multi-year procurement with economic order
    quantity authorization, will provide the industrial base, the
    shipbuilder and the suppliers with the stability and
    flexibility needed to deliver submarines at the most affordable
    price possible.
        In conclusion, again I believe the question is are we
    building for a 300-ship or a 220-ship Navy? The key factors to
    provide a cost-efficient and reliable ship construction base
    are predictability and stability, both in Navy program plans
    and in the funding stream available. This is especially true
    today because the shipyard workloads are stretched thin with
    current low rates of production. Stability allows us to exploit
    the advantages and cost savings that can be achieved with
    innovative contracting techniques such as multi-year block buy
    and advanced appropriations as described by Mr. Fricks.
        If the requirements are for a 300 plus ship Navy, I
    recommend that Congress and the administration, budget and
    build three DDG-51s per year under a follow-on multi-year
    contract as a cost-effective transition to DD 21.
        I also recommend that we accelerate the Virginia-class
    program to two ships a year under a multi-year contract as soon
    as reasonably feasible. Finally, I suggest adopting a
    reasonable delivery schedule for the T-AKE with the contract
    option of awarding a multi-year contract once the design is
    proven. This ensures a healthy and efficient industrial base
    for the future.
        Thank you, Mr. Chairman, and members of the committee for
    providing all three of us this forum to discuss the critical
    issues facing the shipbuilding industry, and I welcome the
    opportunity to answer your questions or take any comments.
        [The prepared statement of Mr. Welch follows:]

                      Prepared Statement by John K. Welch

        Thank you, Mr. Chairman for the opportunity to testify before the
    committee on behalf of General Dynamics Marine Systems. Your invitation
    requested that I address several issues regarding the status of the
    shipbuilding industrial base and initiatives to improve cost control,
    predictability and alternative funding approaches. I will speak to many
    of those topics in this written submittal. I would also be happy to
    discuss any of these issues in more detail during your Question and
    Answer period.
        I appreciate the committee's recognition that there are critical
    issues facing the shipbuilding industrial base. Although we have sized
    ourselves to low rate production and had many success stories, major
    challenges still face the shipbuilding industry as well as our
    customer, the U.S. Navy, to provide the quantity of ships and
    submarines and the warfighting capability needed to recapitalize our
    naval forces.
        These challenges are further exacerbated by the significantly lower
    production volumes in our shipyards compared to a decade ago. This low
    production volume, and attendant peaks and valleys in workload, result
    in increased production costs driven by less than efficient utilization
    of our resources. The uncertainty of future workload compounds these
    challenges as it serves to limit our ability to plan for and invest in
    our businesses, absent the assurance of a reasonable return on our
    investment. Further, while we strive to introduce new technology and
    capability into new ship designs, the budget constraints imposed on the
    Navy's shipbuilding programs seriously limit these efforts. Lastly, we
    cannot overlook the fact that, despite the best efforts of industry and
    the Navy, the risks of construction cost growth and schedule delays are
    an inherent part of building complex warships in a constrained budget
    environment. Repercussions from one mis-step are felt by all. If a
    problem evolves with any one program, all members on this panel share
    the burden of recovery.
        The staunch ``stand alone'' mentality that had driven the industry
    since World War II has evolved to a business environment of shared
    resources and innovation. Further, the ``winner take all'' approach has
    given way to teaming and alliances which integrate the strengths of all
    of us at the table. One success story on this front is the National
    Shipbuilding Research Program, NSRP, formerly know as Maritech. NSRP
    provides a key forum for members of our community, both public and
    private, to share manufacturing and technology advances. Improvements
    have a direct impact on the capability, affordability and producibility
    of naval platforms. Benefits from this program are already being
    realized by several member shipyards. For example, Electric Boat is
    already using early results of a joint industry eBusiness project to
    procure parts for the Virginia-class program. The Nation's smaller ship
    building and repair yards have received significant benefits from the
    technology and innovations of the Maritech Program. Lack of funding
    will slow the progress and support needed to continue these
    collaborative efforts. A total fiscal year 2002 request for $30M, $10M
    more than in the anticipated budget request, is recommended to continue
    this important effort.
        While industry has adjusted well to the current low rate production
    environment--we now need to understand the future. We welcome the
    administration's on-going strategic review. I urge all involved to
    bring these reviews to an expedient closure and provide industry with
    the definitive direction to develop our strategic long-range plans in a
    more stable and predictable environment. The confidence this direction
    brings will allow us to continue the major capital investments being
    made by our shipyards to improve productivity and advance the
    manufacturing process. Significant investments have been made at Bath
    Iron Works with a $250M Land Level Transfer Facility; Electric Boat
    with a state of the art combat and control test and integration site
    and new steel processing center; and NASSCO with upgrades to shipyard
    plant and equipment.
        My testimony today will focus on the status, successes and needs of
    the industrial bases supporting three major Navy platforms: surface
    combatants, auxiliaries, and nuclear submarines.

                               SURFACE COMBATANTS

        GD Marine serves the surface combatant industrial base principally
    through our Bath Iron Works shipyard located in Bath, Maine. Ten years
    ago, BIW had almost 12,000 employees and was actively engaged
    constructing ships in two overlapping U.S. Navy surface combatant
    programs--CG-47 Aegis cruisers and DDG-51 Aegis destroyers. Additional
    work involved Coast Guard cutter modernization and Navy ship repair
    work including the battle damage repair of U.S.S. Samuel B. Roberts.
    Today, the company remains Maine's largest private employer at an
    employment level of 7,000.
        Since General Dynamics acquired BIW in 1995, substantial
    reengineering of all aspects of the business has been underway.
    Reengineering and process improvement remain a continuous focus at BIW.
    Major overhead reductions have been made which will save the Navy and
    taxpayers hundreds of millions of dollars on current and future
    contracts. General Dynamics has invested over $250M at Bath to
    construct a state of the art world-class shipbuilding Land Level
    Transfer Facility. This facility will be officially dedicated on May
    5th, the same day the keel of DDG-90, named for your respected
    colleague the late Senator John Chafee, will be laid down on it.
        The facility modernization at BIW will provide the yard's skilled
    production workforce a better, more efficient work environment. It will
    permit them to erect and outfit larger sized modular ship units earlier
    in the construction process and reduce cycle time. BIW will be able to
    launch ships at a higher level of completion, compress schedule
    duration at key stages and reduce or eliminate a number of related
    costs. The U.S. Navy and taxpayer stand to share the benefits of this
    major investment as a result of reduced costs for U.S. Navy ships.
        Significant success has been achieved in the current DDG-51 program
    with the design and construction of the first two Flight 2A upgrade
    Arleigh Burke Destroyers. Both shipbuilders, BIW and Litton Ingalls,
    and the Navy have worked in a 3-D CAD environment to accommodate system
    and design changes affecting 60 percent of the ship's overall design
    and 80 percent of its drawings. This major effort was accomplished on
    schedule and on budget. The first two ships, DDG-79 (Oscar Austin) and
    DDG-80 (Roosevelt), one from each builder, have performed very well on
    sea trials.
        The shipbuilding industry is excited by the Navy's forward leaning
    acquisition strategy on the DD 21 program. It represents the next
    important step forward in Acquisition Reform. Its innovative
    acquisition approach and aggressive performance and cost goals are
    leveraging the very best competitive resources available. This
    competitiveness is evident in the Blue and Gold Teams ship designs and
    total systems solutions. By providing the industry demanding
    performance requirements and challenging cost goals, and allowing us to
    make the cost-performance tradeoffs, we are confident that DD 21 will
    deliver to the Surface Navy next-generation technology and warfighting
    capability, at significantly reduced Total Ownership Costs.
        The DD 21 design is more mature at its current stage than any
    previous surface ship program at similar milestones. DD 21 is being
    developed in a fully integrated environment encompassing the total
    ship's systems. This will not only reduce potential errors in design
    products when ship construction begins, but also provide a superbly
    capable, operationally ready warship from Day One.
        The DD 21 design and construction approach builds on the successes
    of the Virginia-class submarine program. Detailed design products will
    be mature for production and issued months before construction will
    begin. One particular early focus in the DD 21 program is to ensure
    that whichever design solution is chosen by the Navy at downselect, the
    total ship system design can and will be efficiently producible at both
    DD 21 shipbuilders. Unprecedented initiatives have been made to ensure
    this result, and will pay significant dividends in terms of production
    efficiency and reduced cost. DD 21, like Virginia, will be constructed
    in two shipyards based on a common design and a shared data
    environment.

       CRITICAL NEED FOR MORE EFFECTIVE BRIDGE BETWEEN DDG-51 AND DD 21
                                    PROGRAMS

        A matter of major concern has been the procurement rate of DDG-51
    class ships as the Navy transitions to DD 21. DDG-51 production rate
    has declined from five ships a year to four ships a year to three ships
    a year. It is our greatest concern that the fiscal year 2001 budget
    projects a procurement rate of only two DDGs per year for the next 3
    fiscal years. At such a low level of procurement, ship unit costs will
    increase and cause significant erosion of surface combatant skills at
    both shipyards. This is a specialized industrial base facing a period
    of great uncertainty and declining surface combatant workload as it
    transitions to the next generation surface combatant program, DD 21. An
    industrial base erosion and subsequent reconstitution will increase the
    costs of remaining DDG-51 ships and add to the costs and risks to the
    start up of the DD 21 construction program.
        Based on the fiscal year 2001 SCN budget and projected fiscal year
    2002 plan, only 7 destroyers are planned to be procured from fiscal
    year 2002 through fiscal year 2006--6 DDGs and a single DD 21. That
    equates to a procurement rate of less than 1.5 ships per year for the
    next 5 years compared to today's procurement rate of 3 ships per year
    of which each DDG builder receives the equivalent of 1.5 ships per
    year. This two ship per year level does not support surface combatant
    force level requirements or sustain the industrial base. The Navy's
    shipbuilding funding challenge during the fiscal years 2002-2006 time
    frame has been exacerbated by the funding spikes of nuclear aircraft
    carrier refueling and construction in fiscal year 2002, fiscal year
    2005 and fiscal year 2006, leaving little room for required surface
    combatant funding.
        The procurement rate for surface combatants is not expected to
    return to 3 ships per year until fiscal year 2007--after a 5-year
    period of procuring less than a one-and-a-half ships per year. The
    operational and management challenge of ramping up production should
    not be underestimated. DD 21's ultimate success will depend heavily on
    whether actions are taken now to sustain this industrial base sector at
    a reasonable rate of procurement to support affordable unit costs and
    deliver the ships the Navy needs.
        The need to establish a more effective shipbuilding transition
    between DDG-51 and DD 21 programs must be addressed this year. This
    means sustaining current surface combatant procurement at 3 ships per
    year under a follow-on multi-year contract beginning in fiscal year
    2002. Multi-year contracting for surface combatants has seen proven
    results. The current DDG-51 multi-year contract saved the Navy $1.4B
    and allowed them to buy 12 ships for the price of 11.
        Non-DDG-51 shipbuilding work, such as the LPD-17 program, can help
    from an overall shipyard volume and employment perspective, but
    sustained surface combatant construction and related engineering work
    is the only way to ensure that the surface combatant industrial base is
    adequately maintained and future combatants are affordable.

                                  AUXILIARIES

        National Steel and Shipbuilding Company, NASSCO, a subsidiary of
    General Dynamics based in San Diego, California, builds commercial and
    Navy auxiliary ships.
        NASSCO is also a major provider of ship repair services to the
    Navy's Pacific fleet in San Diego. NASSCO is the only major full
    service shipyard remaining on the West Coast. General Dynamics has
    approved an $80 million investment in facilities at NASSCO which will
    further improve cost efficiency and expand capacity in the wide beam
    (post-Panamax) shipbuilding market, such as Alaskan oil tankers. These
    new facilities will include increasing crane lift capacity to make
    heavier lifts and reduce ship erection cycle times on future programs.
    The investments in wide beam capacity include improvements in steel
    processing, assembly, and outfitting.
        At its peak in the early 1980's, NASSCO employed 7800 people. Today
    it employs about 3500. Currently, NASSCO is completing a program to
    build a series of 8 Large Medium Speed RO/ROs (LMSRs) for the Navy
    which will serve the Army's sealift needs, both for prepositioning and
    CONUS based fast sealift missions. NASSCO builds commercial ships for
    the U.S. coastal market (Jones Act). Currently, NASSCO has commercial
    contracts to build two RO/ROs and three crude oil tankers. The 7th
    LMSR, USNS Pomeroy, was recently launched and will be completed ahead
    of schedule and under budget just like the other 6 LMSRs already
    completed by NASSCO. The 8th and last ship of this series is
    progressing in a similar manner.
        NASSCO has made tremendous strides during the last 10 years through
    process improvements in their shipyard, and is setting new standards in
    the U.S. for quality, cost, and schedule performance. This standard has
    been recognized by the commercial customer.
        Key factors that will contribute to NASSCO's continued success are:
    the stability of the design and funding for the T-AKE program, a
    commercial product orientation, and ship maintenance opportunities.
        Most Navy auxiliary ships, like commercial vessels, are being built
    today to commercial standards governed by the American Bureau of
    Shipping (ABS). NASSCO's commercial product orientation has allowed the
    yard to benchmark itself against international shipbuilders that build
    the majority of the world's commercial ships.
        The U.S. Navy and U.S. taxpayers benefit from the commercial work
    at NASSCO and other U.S. shipyards. Commercial work helps lower costs
    on Navy contracts through overhead absorption. More importantly,
    however, commercial work allows U.S. shipyards to keep focused on
    implementing the shipbuilding processes used by the best commercial
    shipbuilders in the world.

                        STABILITY IS CRITICAL TO NASSCO

        NASSCO is dependent on both military and commercial work to
    maintain the critical skills necessary to continue design and
    construction of U.S. naval auxiliaries. With the strategic Sealift
    program almost complete, the 12-ship T-AKE program, the Navy's new
    class of auxiliary dry cargo ships, is an important element to the
    future stability and maintenance of critical skills at NASSCO.
        The LMSR program was a high military priority after the Gulf War.
    Funding to increase our sealift capability enjoyed strong Congressional
    support and resulted in a predictable funding stream for the LMSRs.
    NASSCO, however, was awarded a contract to build a lead ship with a
    series of options, subject to future funding. While NASSCO and their
    suppliers focused on designing a ship for maximum producibility, the
    uncertainty of future funding limited the ability to order materials
    economically or to make facility investments that would help lower
    costs. Fortunately, the LMSR program was funded as planned and NASSCO
    has successfully delivered six ships ahead of schedule and under
    budget. The final two ships are following the same trend. However, if
    the Navy could have awarded NASSCO an initial contract for all 8 ships
    and allowed them to be built to the yard's most efficient schedule, the
    savings in schedule and cost could have been further optimized.
        The T-AKE program is the only near term opportunity for Navy
    auxiliary ship design and construction. The program is being bid based
    on shipyard-developed designs and the Navy plans on minimum changes.
    These factors should help to ensure a stabile design and allow for
    series production. It is noted, however, that program funding
    stability, like on the LMSR program, is, once again, a major concern.
    NASSCO hopes to continue their LMSR success story on the T-AKE program.
    If funding stability could be eliminated as a risk for the T-AKE
    program, NASSCO could truly focus on producing this series of ships at
    the lowest cost. The optimum approach to realize cost savings on this
    program would be to quickly make the award of the first two ships that
    are already funded and then to find a funding approach which reduces or
    eliminates the risk of future funding after the design has been
    validated.
        NASSCO success in winning new commercial shipbuilding contracts
    requires continued Congressional support for the Jones Act. NASSCO will
    need a combination of Navy and commercial work to maintain its
    shipbuilding capabilities.
        Finally, the Navy needs stable funding for ship repair. Ship repair
    facilities such as NASSCO cannot plan to perform repair availabilities
    efficiently when the lack of funding either forces a reduction in the
    scope of work on a given availability or results in the total
    cancellation of an availability on short notice.

                                   SUBMARINES

        The nuclear submarine program was a first major defense program
    impacted by the end of the Cold War. Thirty-six submarines were
    procured in the 1980's, only 7 were procured in the 1990's. The Seawolf
    submarine program, forecasted initially to be 30 ships, was cut to
    three.
        Based on the corporate vision to be affordable at low rate
    production, Electric Boat in 1993 undertook a complete reengineering of
    its business. This required us to redefine and resize our facilities,
    business processes, and organization. Key objectives were to be
    properly sized to demand, utilizing ``best practices'' for all
    processes and procedures, and incorporating a culture of world class
    performance. As a result, Electric Boat has led the industry in
    shedding excess production capacity, reducing overhead and
    infrastructure costs, and developing tools and methods to preserve
    critical skills and capabilities during the current period of low rate
    production. These actions have resulted in cost savings of over $1.3
    billion with over 90 percent of those savings accruing to the
    government.
        We also recognized that in order for the submarine industry to
    successfully meet the challenge presented by this major market change,
    the supplier base must be actively engaged in the reengineering
    process. Consequently, through an ``Extended Enterprise'' approach, we
    challenged our supplier base to reengineer their facilities for
    ``Affordable Low Rate Production.''
        Prior to designing Virginia, Electric Boat initiated a
    comprehensive review of submarine design and construction process with
    the goal of reducing nuclear submarine acquisition and life-cycle
    costs. Design and construction methods in use by a broad spectrum of
    U.S. and international industries--aircraft, automotive, power-plant
    equipment, nuclear reactor plant equipment, and shipbuilding--were
    evaluated to improve the overall understanding of the design and build
    process, and eliminate inefficient work practices. The Virginia-class
    design/build process has produced ship construction drawings that are
    significantly more accurate, and more producible, than any previous
    submarine program. The fidelity of the design product has contributed
    to 92 percent fewer changes (as identified by the trades during
    construction) on the lead Virginia -class ship compared to the lead
    Seawolf ship.
        In order to meet the additional affordability challenges presented
    by a constrained SCN budget, the Virginia-class teaming approach was
    developed to permit the creation of an affordable and capable attack
    submarine fleet. Electric Boat and Newport News Shipbuilding,
    traditionally strong competitors, entered into a revolutionary
    arrangement that provides the most affordable acquisition approach for
    the Virginia-class program and maintains two nuclear capable shipyards.
    Enabled by a new design/build process, and advanced modular
    construction techniques, each shipyard is constructing pre-assigned
    modules for each ship, and alternating final outfitting, assembly, test
    and delivery. This teaming arrangement is designed to produce an
    improved learning curve and substantially reduce construction costs for
    the entire production run. Cost savings by this team arrangement and
    the design/build approach have amounted to $700 million.
        Electric Boat is also pursuing additional means to provide savings
    to the Navy and utilize the Groton shipyard workforce. Further
    affordability and resource utilization initiatives are being realized
    with the submarine Regional Maintenance partnership with Electric Boat
    and the Navy at the New London Submarine Base and Portsmouth Naval
    Shipyard.

        MULTI-YEAR CONTRACTING AND ACCELERATION OF 2 SUBMARINES PER YEAR

        Increasing ship procurement rates to two ships per year is
    absolutely essential to achieving the Navy's force level objectives and
    achieving the efficient production rate so essential to a healthy
    industrial base. This plan will lead to increased efficiency and enable
    the industry to provide more ships for a given unit cost.
        In the Virginia-class submarine program, the Navy utilized a
    ``Block Buy'' construction contract for the first four ships. This
    acquisition strategy, coupled with the innovative teaming approach to
    construction developed by Electric Boat and Newport News, was key to
    enabling the Navy to afford these four ships, and it provided stability
    to the industrial base during an extended period of low rate submarine
    production. To date, the benefits of this Block Buy contract have been
    validated with both manhour and schedule performance tracking to plan.
        Contract flexibility and commitment, in the form of a follow-on
    Multi-Year procurement, with economic order quantity authorization,
    will help support attack submarine force levels and ensure industrial
    base stability for both shipbuilders and key suppliers--stability that
    is key to affordability.
        All major facilities at both Newport News and Electric Boat are in
    place to support higher submarine production rates of at least 2 per
    year at each yard--construction of the additional submarines could
    begin as early as fiscal year 2004. To support this construction level,
    however, requires authorization of Advance Procurement for long lead
    material in the fiscal year 2002 budget.

                                   CONCLUSION

        In summary, the key attributes needed by industry to give the Navy
    and the country a cost efficient and reliable ship construction base is
    predictability and stability--both in Navy program plans and in the
    funding stream available. Additionally, higher production rates will
    bring industry to a more efficient level of production.
        It is as simple, and as complex, as knowing whether we are
    recapitalizing for a 300-ship Navy or a 220-ship Navy--this is the
    crucial metric for our future. We have done well adjusting to low rate
    production; we now must know what the future holds. We are currently
    building to a 220-ship Navy. If this trend continues, additional
    downsizing will be required.
        If the Navy is to return to build rates required to maintain 300
    ships, multi-year and block-buy acquisitions strategies are critical.
    These smart acquisition strategies must be coupled with innovative
    funding approaches that will stabilize the SCN account and avoid the
    current disruptive funding spikes. Toward that end, I would recommend
    that Congress and the administration budget and build 3 DDG-51's per
    year under a follow-on multi-year contract for fiscal year 2002 and
    subsequent years; accelerate the Virginia-class submarine to two ships
    a year under a multi-year or block-buy program as soon as reasonably
    feasible; and adopt a reasonable delivery schedule for the T-AKE with
    the contract option of awarding a multi-year contract within that
    program at the appropriate time.
        Procurement predictability and production rate stability for these
    programs, along with steady funding for carrier construction and
    appropriate nuclear refueling can help mitigate the impact of funding
    uncertainty in the SCN account. This maximizes our current investment
    in today's programs by building at more economic rates while applying
    engineering best practices and lessons learned as we evolve to the next
    generation class of ship.
        We need to continue to build on the successes from our recent
    history. New programs, such as DD 21 have built on the lessons learned
    from Virginia:
        Invest R&D funding up-front to buy down technical risk; implement a
    seamless design/build approach with early design funding; ensure design
    product fidelity and maturity to maximize construction efficiency with
    early design funding; and push the envelope further by invoking
    aggressive cost and manning goals.
        Thank you Mr. Chairman and members of the committee for providing
    us this forum to discuss the critical issues facing us in the
    shipbuilding industry. I look forward to your questions and comments.

        Senator Sessions. Thank you very much, Mr. Welch. First I
    will ask Mr. St. Pe and then anyone else who would like to
    comment--how do you see the consolidation that you have just
    gone through, and what does this mean for Navy shipbuilding in
    general?
        Mr. St. Pe. Well, the one experience I have is from both
    our Avondale and Ingalls Shipyards. Back in August of 1999,
    Avondale and Ingalls Shipbuilding joined in a merger. We took
    two companies that had rich histories and success in building
    both Navy and commercial vessels and we brought them together.
        I would tell you today that that was an important strategic
    move for our company, an important strategic move for the
    shipbuilding industrial base of this country, and today is
    serving our communities and serving our employees well. We have
    captured hundreds of millions of dollars in synergies as a
    result of that merger 2 years ago in forms of shared work and
    maximizing facilities. Yesterday's announced acquisition of
    Litton by Northrop Grumman clearly brings to the Avondale/
    Ingalls family a much, much larger dimension of opportunities
    as we move forward. I give it high marks. As we talked a little
    earlier, we talk about six shipyards remaining in this country
    today with the experience and the capital investment to produce
    large, complex Navy vessels. It is six shipyards, but it is
    three companies.
        Senator Sessions. The three represented here?
        Mr. St. Pe. Yes, sir, the three represented here. I think
    that it is important that when one addresses the issue of
    further consolidation in shipbuilding, at some point we very
    well may have already reached that point in this country in
    terms of making sure that we protect the industrial base and
    also do it in a way that maintains a level of competition that
    is important, certainly to you and certainly to the taxpayers
    of the country.
        Senator Sessions. Thank you.
        I just wanted to have you make that comment. I would like
    to raise one point--however, I notice we have a 10:30 vote,
    which will interrupt us some, so if we can keep our first round
    a little shorter than normal, maybe 4 minutes or so, that would
    be helpful. Then we will come back after the vote.
        Each of you have made statements--you have mentioned
    stability as a key to your ability to plan your work and reduce
    costs of ships for the Navy. I had our staff prepare two charts
    which take a 20-year snapshot--1983 through 2003--of ship
    construction and Navy funding.

        The first chart shows the total ship construction funding,
    and the second chart shows the ship construction funding
    without aircraft carriers because they tend to skew the
    numbers. Both charts are in constant fiscal year 1999 dollars.
        It is a rather remarkable chart, I think, if you look at
    the shipbuilding in constant dollars. In 1983, we spent about
    $23 billion in shipbuilding, in 1993, we were down to under $5
    billion in shipbuilding. In 2001, this year, it looks like we
    were a little over $10 billion, maybe $11 billion, dropping
    down next year to $7 billion, 2002.
        Mr. Fricks, you spoke first. In looking at the chart
    without aircraft carriers you see a similar rise and fall, but
    not quite as dramatic at least in recent years. How do you
    interpret that? Is that part of what your concern is regarding
    stability in your business?
        Mr. Fricks. Well, as I said in the testimony, when we have
    this kind of instability, we go through lay-offs. We pay for
    the lay-offs, then we hire people back, retrain them. They have
    to learn shipbuilding all over again. Our suppliers go through
    the same thing. With respect to small business suppliers, a lot
    of them have gone out of business today. All of that
    volatility, as you can well imagine, is costing the government
    and costing the shipbuilders a lot more money, and the
    government is having to pay for it. We are basically pleading
    for some type of level-loaded stability so that we can plan, so
    that we can invest, and so that we can prevent the workload
    changes and maintain the supplier base that we have out there.
    That is critical to building these complex ships.
        Senator Sessions. I think if you look at the numbers you
    can see we could be more efficient and some of that would be
    the government's fault, you would say. Correct?
        Mr. Fricks. We just build them.
        Senator Sessions. I understand, but you lose efficiency,
    which I think is pretty obvious.
        Mr. Fricks. We lose efficiency. There is no question about
    that. It costs the government more money for us to build ships
    in this manner.
        Senator Sessions. We will be looking at that issue further.
    We will also be having Navy officials come in at another time
    for an additional hearing.
        Senator Lieberman.
        Senator Lieberman. Mr. Chairman, thank you. Senator
    Landrieu has to go to another meeting, therefore I am going to
    yield to her and then ask if I might go next after someone on
    the other side.
        Senator Sessions. All right.
        Senator Landrieu. Thank you, Senator, for yielding, I
    appreciate it. I will be brief.
        Let me just make a couple of brief points. One, Mr. St. Pe,
    I want to congratulate you for the excellent work you have done
    in executing this consolidation, at least as it affects
    Avondale. It really works for the company, for the general
    metropolitan area of New Orleans, and benefits thousands of
    workers. Senator Sessions has provided the leadership to merge
    the work of both the Ingalls yard and the Avondale yard. There
    were some pretty tough management/labor problems and disputes
    there, which he has brought tremendous leadership to work them
    out. For the benefit of this committee, I just wanted to thank
    you personally for your good work.
        Second, let me say that I could not agree more with the
    comments that all of you all have made about the need for
    stability and the opportunity that is presented before this
    subcommittee to work out a new way of financing for our fleet
    and for the Navy. I think that is part of what President Bush
    is going to hopefully call for. I am not certain, but hope it
    will be part of the overall strategic review on strengthening
    our military and national defense. This would be a new
    approach--a major change that would not only strengthen and
    enhance our fleet, but save taxpayers money and present them
    with the kind of efficiency and performance that I think they
    frankly deserve, as opposed to the chart that our good chairman
    has just given us, which does not make sense to taxpayers, to
    the industry, or to the men and women that are carried by these
    ships.
        I want to work with you and with our Ranking Member, and
    have talked a variety of times over the last couple of years
    about a new financing mechanism that would work better than the
    one that we have in place.
        Let me just ask one question, because of time. Mr. St. Pe,
    you spoke about the LPD-17 and some of the barriers, and
    challenges that have caused this particular program to be
    delayed. What are one or two specific things that this
    committee could do to get that program moving again, and why is
    it so important that we do so?
        Mr. St. Pe. Senator, thank you. Thank you for your personal
    comments earlier.
        I believe today the way I would describe it is, as I said
    earlier, we approached LPD-17 in a highly competitive
    environment. Too often we find ourselves engaged in predatory
    pricing, when winning at all costs prevails. There is not much
    we can do about that in terms of what our behavior has been in
    the past, but we can certainly modify it as we move forward.
        This country, the Navy, and we in the industry have paid a
    larger than anticipated price to both design and start
    production on a lead ship in a very, very important class of
    vessels. My recommendation--my desire--is that we not waste
    that investment; we recognize that as it has been in every lead
    ship, it is the price you pay to find out how to do it more
    efficiently. The only way we are going to reap the benefits of
    that is to press on. So my advice would be to continue to fund
    this program at a sufficient level so it does not become
    another example of inefficiency because of instability.
        Senator Landrieu. Thank you very much.
        Senator Sessions. Senator Bunning.
        Senator Bunning. Yes. Mr. Fricks, you said that the Ronald
    Reagan cost is going to be 3 percent less than originally
    planned?
        Mr. Fricks. Higher.
        Senator Bunning. Higher? What was the original?
        Mr. Fricks. Well, the contract target price is about $3
    billion.
        Senator Bunning. Three billion, so you are looking at----
        Mr. Fricks. You are looking at about $90 million.
        Senator Bunning. Ninety million dollars you are talking
    about over that. Do you think that is good?
        Mr. Fricks. It is a good number today. We launched the ship
    so we pretty much have a good control over the remaining
    testing programs. I do think you are probably going to see
    additional requests from the Navy to upgrade the technology on
    that ship.
        Senator Bunning. I do not doubt that at all. You testified
    that due to the downturn in defense spending and the lack of
    follow-through on proposed shipbuilding programs in many cases,
    you are down to a single supplier for some materials. Which of
    these areas are you most concerned about, and why?
        I have a specific question I want to ask to follow up on
    this, and then I will be finished.
        Mr. Fricks. Well, we have thousands of sophisticated pumps,
    valves, main engines, turbines, an aircraft carrier is a whole
    multitude of complex equipment that comes from all across the
    country. I would say that about 40 percent of the dollars of
    the material costs are sole-sourced today, so we compete about
    60 percent.
        Senator Bunning. So 40 percent are single-source places.
        Mr. Fricks. About 40 percent.
        Senator Bunning. OK, then this is my follow-up question,
    because I think this is something that highlights what all
    three of you have said about the instability.
        Erie Forge and Steel, Incorporated in Erie, Pennsylvania,
    apparently supplies steel to 90 to 95 percent of the Navy's
    new-built and rebuilt contracts, including shafts, steel mill
    products, and tool steel. The company is currently in Chapter
    11 bankruptcy. If the company goes under, what ramifications
    will that have for your ability to deliver ships on time and
    within budget?
        Mr. Fricks. Well, I would be glad to give you a more
    specific answer to that. I do not have it today, but we have
    this occur quite often. We have various suppliers who go out of
    business. Certainly I would say literally hundreds have gone
    out of business over the last 7 or 8 years.
        [The information follows:]

        In response to your specific question regarding Erie Forge and
    Steel, Inc., Newport News Shipbuilding presently has two orders in
    place with Erie. The first, priced in excess of $2.5 million, is for
    intermediate and inboard propulsion shafts for CVN-77. The second,
    priced at approximately $20,000 is for a CVNX shafting design study. If
    Erie Forge were to go out of business or otherwise could not fulfill
    these orders, we would turn to the one other company that is a
    qualified shafting provider. However, that one other qualified provider
    has limited experience and potential capacity constraints with the
    production of carrier intermediate and inboard propulsion shafts.
        We are presently conducting a quality audit of one other possible
    source for this material.

        Senator Sessions. This is currently one of your major
    suppliers?
        Mr. Fricks. Well, any major supply that goes out of
    business generally hurts us. We have to find an alternate
    supplier. Sometimes we have had to come back and ask for
    waivers to go overseas for certain things. We do not like to do
    that.
        Senator Sessions. On basic steel?
        Mr. Fricks. No, on basic components--such as piping and
    tubing that we are not building here today. I do not know if
    there is an alternate supplier for steel or not. We buy many
    different types of steel, so I do not know to what extent we
    have the flexibility to go to another supplier in this
    particular case.
        Senator Sessions. Would either of the two other gentlemen
    like to comment on that?
        Mr. St. Pe. Senator, it turns out--and I agree with Bill
    Fricks--50 percent of the construction of the ship depending on
    the ship class, goes to the acquisition of materials and
    supplies that are furnished by thousands and thousands of
    subcontractors. Without being able to cite specific examples
    with regard to your question, I can tell you that there are
    many subcontractors who support this industry who are
    teetering, as is Erie Steel. In the case of our own company, we
    just recently placed an order with that company for the shafts
    that will go into the U.S.S. Cole which we are currently
    repairing in the shipyard, and I will tell you that if that
    contract is not fulfilled for whatever set of circumstances, it
    is a critical contribution to the very thing we are trying to
    avoid here.
        Senator Bunning. My time is expired. Thank you.
        Senator Sessions. Thank you, Senator Bunning.
        Senator Lieberman.
        Senator Lieberman. Thanks, Mr. Chairman. In your testimony,
    Mr. Fricks, you said correctly that to maintain a 300-ship Navy
    we ought to be building 10 to 12 ships a year, and we are at
    about half of that now. Mr. Welch said that the big question--I
    believe I am quoting correctly--the more important question is,
    do we want a 300-ship Navy, or do we want a 220-ship Navy? I
    agree with you.
        We are debating a budget resolution on the floor of the
    Senate now. I do not want to get into it in detail, but the
    fact is that you look at it and you look at the next 10 years,
    the money is just not there to have the shipbuilding we need to
    maintain a 300-ship Navy.
        In the normal course of our exchanges--yours and ours--we
    on this side of the table develop policy and authorize and
    appropriate, and then we give it to you to build the ships. For
    a moment because the three of you are experienced at this, I am
    going to ask you to reverse roles and answer the question for
    me, if you can or are willing to, whether the standard of a
    300-ship Navy is the appropriate standard. You have a lot of
    experience here. Forget for a moment that you are shipbuilders
    and know about this field. Are we right to have a national goal
    of a 300-ship Navy, Mr. Welch? Only because I know you so well
    do I call on you first.
        Mr. Welch. Well, clearly the Navy's position on the number
    of ships that it needs is based on what they judge as their
    requirements to carry out their mission. So I am familiar with
    a surface combatant study which, at a minimum, had a 116 ships
    up to a maximum of 135 needed to carry out their missions, and
    I am more familiar with the JCS study that was done on
    submarines which talked about an absolute minimum of 55, below
    that they would not be able to carry out at a minimal basis and
    a peace-time requirement of 68. Therefore, I believe that the
    300 plus ship goal is very strongly validated by national
    security requirements.
        Our position is that we will build to whatever level is
    there--we just would like to have some stability in the program
    so we can deliver them at the most cost-effective level. When I
    look at our commitments, particularly in the submarine force
    and what we are using the submarines for, because I know that
    area probably in greater detail, I think that requirement seems
    to be very firm and nothing that I see in the discussions in
    the Pentagon are backing off of that.
        Senator Lieberman. Mr. St. Pe or Mr. Fricks, do you want to
    add anything to that?
        Mr. St. Pe. Senator, I sort of view it this way. Just a few
    years ago, this country, based on the assessment of those that
    we rely on to determine what we need to defend ourselves and
    defend our allies, maintained we needed a 600-ship Navy. That
    has just been a few years ago, and I will acknowledge that
    world events have changed and threats have altered, but I do
    not believe that the threat today is half of what it was a few
    years ago, and certainly the mission of the United States Navy
    in that changing threat has not been reduced by 50 percent.
    That piece of philosophy, I think, bodes well for the fact that
    300 ships has to be the minimum, and it is probably even more.
        Senator Lieberman. Thank you. Mr. Fricks.
        Mr. Fricks. I certainly agree with my colleagues. If we
    have looked at certain analyses the Navy has done, the number
    is between 300 and 360 ships, and 300 looks like the minimum.
    Yet from a more practical standpoint, we live in the Norfolk
    area where all the Navy bases are located. We see the impact on
    the Navy, on the sailors going out to sea, staying 6 months or
    longer. We see the impact on their families and what they are
    being asked to do. They are required to exercise the fleet
    beyond what it is capable of doing. If this country is going to
    carry out the foreign policy that it has demonstrated it wants
    to over the last 20 years, it is going to have to have a fleet
    of at least 300 ships because it cannot do it on what it has
    today.
        Senator Lieberman. Well, I thank all three of you. My time
    is up. From all that I know, I agree with you and it focuses on
    the question--although obviously everything we are talking
    about today in terms of predictability and stability of the
    program is critical to maintaining the shipbuilding industrial
    base. In terms of national security if, in fact, we are serious
    about a 300-ship Navy, and unless we can figure out some
    reconfiguration of those 300 ships to do them less expensively,
    we have to deal with the reality that we are underfunding our
    shipbuilding program with serious consequences.
        In all the discussions--strategic review and everything
    else--maybe I will be surprised when things come out. I have
    not heard anybody argue that we need fewer than 300 ships, and
    we are not on a course to deliver that to our country. Thanks,
    Mr. Chairman.
        Senator Sessions. Senator Collins.
        Senator Collins. Thank you, Mr. Chairman. I just want to
    follow up on Senator Lieberman's and your questions about what
    the proper size should be. It is my understanding that a June
    2000 Department of Defense report to Congress on Navy force
    structure requirements actually suggested that we needed a 360
    ship Navy, and obviously the Clinton administration's budgets
    did not in any way provide for that. I was startled when I
    received my first briefing from the Liaison Office. The Navy
    Liaison Office gave me a little fact sheet which shows that 10
    years ago, we had 110 ships under construction. We have only 37
    today, for a decline of 66 percent. This fact sheet also
    reflects that 15 ships were authorized to be built in fiscal
    year 1991, while 2001, the number is six, which is a decline of
    60 percent. It is clear to me that we have been going in the
    wrong direction, given what our force requirements are.
        Mr. Welch, you mentioned in your written testimony the
    critical need for a more effective bridge between the DDG-51
    program and the DD 21 program. Now, the LPD-17 will help a
    little bit, but as I understand it, there is still a gap
    because the current shipbuilding rates would equate to only
    about 1.5 ships per year. I recall your testimony pointed out
    that you believe a procurement rate of three ships per year
    would be necessary to support surface combatant force level
    requirements and also to sustain the industrial base. Is that
    an accurate assessment of where you think we need to be?
        Mr. Welch. That is exactly where I believe we need to be. I
    think when you are looking for stability, especially as you are
    transitioning to a new start-up program, I think that is a very
    critical time. We are in an environment when we build a lead
    ship of a unit that we want to take the time to take the risk
    out of the design. DD 21 has a lot of development to go into
    it. You want to get to the DD 21 program as fast as you can,
    but you are going to want to transition into that program cost-
    effectively so that you can avoid a lot of the lead ship cost
    issues that Jerry is struggling with.
        I am worried on two fronts. I am worried that you have an
    inadequate transition out of the DDG-51 program, one that ramps
    down to the equivalent 1.5 ships a year, which you divide that
    between two shipbuilders, you are going to feel the pressure.
    That puts added pressure on starting up the new lead ship of a
    class, maybe prematurely. To me, that just does not make any
    sense. We ought to maintain a stable rate of production and
    keep the combatant. The skills associated with building and
    testing a combatant are more complex than what is done in an
    auxiliary ship or an LPD, and so that work force is very
    important. The goal is to try to keep it stable, keep it
    viable, and then transition in the DD 21 in an orderly manner
    so that costs can be controlled.
        Addressing that issue is one point why I think we need to
    take a look at what the effect is on what happened in the 1990s
    in our industrial sectors. That is one of the reasons I
    specifically talked about how many people were employed in 1990
    versus today. We have gone through significant downturn in the
    industry to adjust to these much lower rates of production.
    Industry acted promptly on that, and I think all three of the
    businesses are operating very well in low-rate production
    environments. The impact of that is, we have sent a lot of
    people home early, and in the cases of our represented work
    force, it was by seniority.
        Therefore we have a very experienced work force that we
    will need to rely on all those talents as we go forward, but
    instability makes that harder. I think I have dubbed it the
    soft underbelly of the industry; the renewal of the work force
    that is going to have to occur over the next decade. We will
    need young people that are interested in doing this business to
    see the stability. We need to get them trained with the
    experienced folks that we have in transition to the next
    generation. I look at that inadequate transition of DDG to DD
    21 both as just not a cost-effective way to do it, and it puts
    all that additional pressure on the people that have to build
    the ships and maintain that critical skill base through that
    period. That is just not for the shipbuilders, it goes right
    through the supplier base as well.
        Senator Collins. Mr. St. Pe, I had hoped to have you
    comment on that as well, but I see my time has already expired,
    so perhaps after the vote in the second round I can ask you
    then.
        Senator Sessions. Well, we just got a note that looks like
    10:55 will be the vote, so we will have a little more time.
    Senator Reed.
        Senator Reed. Thank you very much, Mr. Chairman. Gentlemen,
    the Joint Chiefs of Staff has a goal of having 18 Virginia-
    class submarines by the year 2015. Mr. Fricks and Mr. Welch,
    when is the last year we can begin construction of two
    submarines a year to accomplish that goal? How much time do we
    have until we have to get to 2 years?
        Mr. Welch. I believe that date is 2006. Now, one of the
    difficult issues is that it also assumes you are going to come
    up with three ships a year a few years after that. Again, I
    would think we would be better served in ramping the work
    forces up at both EB and Newport News to deal with that to get
    to the two-a-year ship level earlier. That will allow you to
    delay having to go to three ships a year. My view is let us get
    to two a year, which will really drive the costs down. This is
    actually upon us a lot sooner than we would like to think,
    especially given the advanced procurement required on some of
    the long-lead components.
        Senator Reed. Mr. Fricks.
        Mr. Fricks. I think that statement is about right--2006. As
    John pointed out, it would be easier and more cost effective if
    we start two a year in 2004. We look back at what we built--the
    688 program which was a very stable program both in Newport
    News and Electric Boat, and I can tell you we reduced the
    manpower costs for those ships by about 40 percent. We can do
    the same in the Virginia-class if we are given a stable
    workload. The sooner we start that, the more we are going to
    save.
        Senator Reed. All of you gentlemen have talked about the
    production of new ships, but there is another area, and that is
    the maintenance, particularly submarine maintenance. I wonder,
    Mr. Welch, could you comment on the submarine maintenance
    market and your views?
        Mr. Welch. I think for the industry, the naval shipyards
    plus private shipyards--the maintenance workload, much of it
    has been deferred over recent years. Over the next 5 to 7
    years, there is going to be a significant challenge for what I
    would call the nuclear industrial base, both public and
    private. I think that we are going to need the best resources
    that we have, and the private yards I think can play a very
    significant role in all of that, and we just need to plan for
    that ahead of time. Just like everything else in the
    shipbuilding and ship repair business, you need to plan for
    that ahead of time, lay the targets out for when the work needs
    to be done, plan for it effectively, get the material and
    execute. That is going to be a significant challenge for the
    industry to come to that large load of both refueling and
    overhaul work targeted for the submarine fleet in the next 5 to
    7 years.
        Again, I think that it is one of those that the entire
    industrial base can properly respond to and figure out the most
    cost-effective way to do it, and I think both of the private
    yards can play a significant role in that.
        Senator Reed. So as we go forth, particularly this year, we
    should be urging that that planning and those accommodations be
    made this year.
        Mr. Welch. Absolutely.
        Senator Reed. Let me ask another question, then. We all
    understand that there is an intense review of the military
    strategy policy procurement by the new administration. There
    has been some discussions of leaping over existing
    technologies, going to more unmanned vehicles both in the air
    and on the sea, using long-range precision strike weapons that
    might, in fact, displace plans to construct surface ships that
    we are contemplating now. I just wonder--have you been at all
    contacted since you are the three remaining shipyards in the
    country, with respect to any of these reviews by the
    administration? Have you had a chance to offer your input, Mr.
    Fricks?
        Mr. Fricks. We have had no direct input, nor have we been
    asked about that.
        Senator Reed. Mr. St. Pe?
        Mr. St. Pe. Same here, Senator.
        Senator Reed. Mr. Welch.
        Mr. Welch. I had the good fortune to be on the Center for
    Strategic and Budgetary Assessments Panel in early January, I
    think before Andy Marshall had been designated as part of the
    review team with Secretary Rumsfeld. Also I had the opportunity
    to specifically address the idea of leap-ahead technologies and
    how it was possible to introduce technologies in a cost-
    effective quick manner in the shipbuilding business.
        The thing I would stress out of it, and the same thing I
    did at that meeting, is we have a pretty speckled history on
    R&D investments for the future--steady R&D to field prototype,
    test new technology and get it to sea. The submarine community
    probably does that better than any of the major combatant
    communities. We need that steady level of research and
    development prototyping activities so that we can test those
    things out and then introduce them into a production line and a
    block-type of approach so you can cost-effectively introduce
    those into the ships. If it is focused in the command and
    control system area of the ship, keep the rest of the ship on
    its learning curve, driving costs out of the program and then
    focus that change and that additional cost into fielding a
    specific capability.
        I feel I have had the opportunity to get some of those
    issues on the table, but if you look at the whole issue of
    stability, a subset of that is in a very well-planned and
    constructive manner, introducing this new capability into a
    production line so you do not drive the costs way out of whack.
        Senator Reed. Thank you very much. My time is expired.
        Senator Sessions. Well, I think this panel seems to agree
    that we would like to get our ship construction numbers up and
    at the same time do that in a way that utilizes your yards most
    efficiently. We would also like for the Navy and the government
    to reap the benefits of that. We are now consolidating yards,
    and we have in some ways less competition. How can we manage a
    yard to try to do things that may not be in the government's
    immediate interest but in the long-term interest to try to have
    a steady flow of shipbuilding, and then reap the benefits for
    the Navy? How can we be sure that will happen? Mr. St. Pe, we
    will begin with you.
        Mr. St. Pe. Well, Senator, let me reflect back a little bit
    on my oral testimony. There is sufficient empirical data that
    says if we continue to support programs that are needed,
    support them in terms of numbers of ships each year, and in
    terms of adequate funding, not necessarily full funding, there
    are a lot of approaches I know that are being considered as we
    speak with regard to how we fund an adequate fleet and at the
    same time understand the restrictions and the constraints on
    the budget. History tells us that the best contribution we can
    make is to let programs move along and not have a disruption.
    It gets back to the issue of stability.
        I would say that this industry has demonstrated more times
    than not--many more times than not--that it knows how to work
    its way out of challenges and difficulties. Have faith in us.
    History is on our side. History is on the side of Congress.
    What I believe has to happen here is that some of the
    alternatives that are being discussed, with regard to multi-
    year funding and advanced procurement, must get serious
    consideration. In the absence of a new approach to procuring
    ships, I suggest to you that we will be here next year at this
    hearing, and the charts that you are sharing to us will be
    worse than we are seeing today, Senator.
        Senator Sessions. Well, the charts certainly show that it
    is not a good history, and I cannot dispute that that is a
    prescription for inefficiency and higher costs than would be
    otherwise.
        Let's talk about these proposals--some are new and some are
    old--about how to fund shipbuilding, which is a big deal, a
    long term act, and we in Congress do not like to think in terms
    of long-term commitments. The House of Representatives just has
    a 2-year term. They do not complete a new Congress every 2
    years.
        So let me ask you about these proposals. There are advanced
    appropriations which the CNO is talking about; full funding,
    which is one of the traditional ways; a multi-year procurement,
    which from what I understand is you have a mature design that
    seems to be an effective step; economic order quantity, that is
    a quantity of economic proportions that would give efficiency;
    and finally advanced procurement in even amounts over 3 to 5
    years, and perhaps a 3- to 4-year cycle that would include
    buying one type of ship each year with a total amount of
    funding available. You have heard all of these. You know them,
    I am sure, in some ways better than we do because it is
    important to you about how you do your business. Mr. Fricks,
    would you like to start off and comment on where we are and the
    way we fund ships and how it could be improved?
        Mr. Fricks. Well, today we basically full fund the ships.
    That results in this type of movement around because we cannot
    afford in the budget process to fully fund all the needed
    ships. The advance appropriations gives us the opportunity to
    take advantage of the fact that when you fully fund a ship for
    $2 billion, you only spend a very small portion of that in the
    first couple of years. As I gave the example of us when we
    would build a dry dock, we would approve the dry dock but
    approve the funds over a period of time. That would allow us to
    use that differential to build more ships.
        As far as the block buy and the multi-year buy, they all
    have different twists with regard to how you implement and
    restrict them, but they are all geared to the same principle,
    which is to allow you to begin several ships up-front and take
    advantage of the economic quantities of material to save the
    money. They all point towards stability.
        We would wholeheartedly endorse all of those items in
    different utilizations for different programs and, certainly,
    looking at advance appropriations so that we can actually build
    more ships.
        Senator Sessions. I was just saying that in the long run
    you carried your money over, though, and it is not going to
    make any more ships year four, five, and six, is it?
        Mr. Fricks. Advance appropriations--is basically a one-time
    opportunity to build more ships. Multi-year procurement
    provides the opportunity to save money so that you can build
    more ships.
        Senator Sessions. We are delighted to have our committee
    Chairman, Senator Warner, join us, and former chairman of this
    subcommittee.
        Senator Warner. Invariably carrying on in my stead, but I
    have some modest interest.
        Senator Sessions. I know you do. Mr. Chairman, do you have
    any questions at this point?
        Senator Warner. You have here in these three distinguished
    witnesses a corporate memory of all types of funding. They do
    not go quite way back into the grandfather era when I had some
    responsibility in the department, but there has been a
    multiplicity of approaches to try in the budget process with
    the OMB, whether the President is Republican or Democrat. There
    has always been a push-pull as how to change some of the
    terminology to generate up-front more cash to enable a greater
    number of ships. We have the basic problem. It is interesting.
        Just a little historical concept--I went down to give a
    eulogy at Mr. Sisisky's funeral, and we should note in today's
    record that he, on the House side, was the Chairman and Ranking
    through the years on the Subcommittee on Seapower and
    shipbuilding and spent his life in Congress on this subject. He
    used to always joke with me about when we were in the Navy in
    the war in 1945. There were 6,721 ships of the line in the
    United States Navy. Today the CNO was right next to me going
    down on the plane--313. We are looking for ways to try and
    build our Navy, given that there are world-wide problems, and
    certainly we are seeing one in Asia today which requires the
    Navy to cover an awful lot of ocean. We have to find a solution
    to this situation. It is just imperative that we do it.
        I think it would be important to the record to show all of
    the innovations that we have tried through the various years as
    best we can--perhaps we can put this in the record. We used to
    use advanced funding as a euphemism to sneak in under the tent
    of the OMB. Then we would do partial. It all goes back to the
    struggle between Congress and the Executive Branch to try and
    use various mechanisms to get more money up-front to increase
    the number of keels that we can put down at any one time and
    start a program. I commend the Chairman and the Ranking Members
    of this committee to explore this important subject, because we
    are at a critical threshold today at 313, and if we are going
    to go at the building rate--maybe it is in the record already--
    we are going to sink below 300 in the not-to-distant future. Am
    I not correct on that, gentlemen?
        Thank you for the opportunity to have a small remark.
        Senator Sessions. Thank you, Mr. Chairman, and there have
    been some modest improvements over the years in ways to
    eliminate some of these problems, and I think we need to keep
    working at it.
        Senator Lieberman.
        Senator Lieberman. Thanks, Mr. Chairman. Thanks to Senator
    Warner. I could not agree with him more. Mr. Welch, with
    respect to funding--there have been some recent news reports
    about cost-growth on the Virginia-class program. I wonder if
    you could, for the subcommittee, comment on that from the
    shipbuilder's part of the record?
        Mr. Welch. I will talk to the shipbuilder's piece of it.
    There are, in the total program, several portions of
    government-furnished equipment which the government is
    responsible for those.
        Senator Lieberman. Sure.
        Mr. Welch. There were two aspects that were identified in
    that recent article, and I talk to both design contract and to
    the construction contract which is for the first four ships,
    and the fourth one will be in this year's budget.
        On the design contract, the innovative and design build
    approach is much more aggressively sought at on the Virginia-
    class than we have in previous classes, and we were fortunate
    to have the funding up-front to get that design going early
    before we had to go to construction. It has been a very
    successful design program. Our current estimate at complete for
    the design is a 3 percent growth over the basic design
    contract. Our estimate at complete is a $1.5 billion design
    contract.
        The real measure of the success of that design effort is
    what we are seeing in the production of the first three
    Virginia-class submarines today. We have a very disciplined
    process for how we complete the design. We take a minimum of 26
    weeks to get the paperwork ready and then take that design out
    into the production environment, much of it taken
    electronically and either sent to Newport News or directly to
    our machinery up in Quonset Point.
        The labor performance on those first three ships has been
    outstanding. Any minor growth that was experienced in
    additional manhours to build the ship has been more than made
    up for by overhead reductions, so there is no labor issue
    associated with building those four ships under the estimate
    that was put together in 1998.
        Where we have experienced cost growths were in areas that
    were in some ways beyond our control. One of them is in
    escalation--which is the wage escalation that has developed
    through a Bureau of Labor Standards indices across all of the
    shipbuilding. The assumption is when that program was put
    together, in which we were put under contract, there was a 1.5
    to 2 percent escalation, and we were experiencing across the
    shipbuilding industry 4 to 4.5 percent.
        There has been some material cost growth in there which is
    beyond what we estimated, when we bid the contract. We believe
    we have that under control. I think that is indicative of what
    has gone on in the supplier base as we have come out of the
    drastic reductions in the 1990s coming into the 2000s to
    provide a lot of that material.
        Mr. Chairman, to one of your comments earlier, we have 31
    single or sole-source suppliers in that Virginia-class program.
    They are the only people that do it. We have worked with them
    in an extended enterprise effort since the early 1990s to allow
    them to get through that very low rate of production and hold
    them together as viable suppliers as we come up to the one-
    ship-per-year essential rate that we are at today.
        Most of the growth is in those two areas, escalation and
    material. We think we have that under control. We are going to
    have to continue to watch it. My biggest measure of how
    successful that construction program is going, and again I go
    back to the early design activities and the use of the 3-D
    product model design built process taken into production, is
    that today we are experiencing 93 percent fewer changes in the
    construction of that lead ship than any other submarine. The
    relative percentage of changes in surface ships is not that
    much different than submarines, but 93 percent fewer changes on
    that lead ship, and that ship is on schedule. It will deliver
    on time. There are some people who think it might even be
    better than that. So it is a very successful program. I think
    that the cost growth that is there, we have under control, and
    looking at the total context of the design and construction of
    the project, I am very pleased where we are now.
        Senator Lieberman. Thanks so much for that good answer. We
    will be following that closely.
        I have several other questions which I am going to submit
    for the record. The one, I would like to raise and ask you if
    you would answer it in writing. I know the Navy conducted a
    study of the industrial base for the surface combatant several
    years ago and determined that to keep two viable shipyards in
    the business of building destroyers and cruisers, we needed to
    be building a minimum of three DDG-51s a year, with some
    additional work at Ingalls. The study concluded definitively,
    even with the additional work, if we kept the two DDG-51s per
    year, one of those yards would most likely be forced out of
    business. We have asked the Navy to update that analysis, which
    is now being reviewed by GAO and should be given to us later
    this spring. I would welcome your comments on how that report
    is coming for our benefit. We do not have time now, but I would
    invite that in writing if you would. Thanks, Mr. Chairman.
        Senator Sessions. Thank you.
        Senator Bunning.
        Senator Bunning. Yes, I would like to know if any of you
    three gentlemen have testified before the subcommittee, since
    this is my first appearance here, in the last 9 years.
        Mr. Fricks. John and I testified regarding submarine
    building here 4 or 5 years ago.
        Senator Bunning. Just please answer my question.
        Mr. Fricks. Yes.
        Senator Bunning. Yes? Did you make any comments or concerns
    about the reduction in force from a 600-ship Navy to a 300-ship
    Navy?
        Mr. Fricks. Yes.
        Senator Bunning. You showed some concern that we were
    reducing?
        Mr. Fricks. Yes, sir.
        Senator Bunning. How did the testimony go on the
    expenditure of monies for keeping the force at a level that you
    thought was essential for the national defense? In other words,
    if 600 ships in 1991, or 538, was the number that we had then,
    and now we have 313, somebody has to express concern that we
    were not funding the Navy shipbuilding program properly.
        Mr. Fricks. Yes, sir. I think that we have all talked about
    that. I think from the 1996 time frame on when it was clear
    that we were building at half the number of ships that were
    required to support a 320-ship Navy.
        Senator Bunning. Then you did say something about the
    current budgets that were being projected for shipbuilding?
        Mr. Fricks. Yes, sir.
        Senator Bunning. What kind of reaction did you get from
    this subcommittee?
        Mr. Welch. We heard the same kind of concern that we heard
    today.
        Senator Bunning. That is a great answer, but what did they
    do about it?
        Mr. Fricks. Well, I think the numbers are slightly obvious.
    We continued to go down. We testified here----
        Senator Bunning. Yes, that is what I want to get to.
        Mr. Fricks. We have testified here, we have testified in
    the House, and we have acknowledged each year we continue to
    decline, and nothing has changed that slope each time we
    testify.
        Senator Bunning. You are saying that the budget that came
    up from the White House did not sufficiently cover the amount
    of ships that we needed to maintain a national defense safety
    level as far as the Navy is concerned.
        Mr. Fricks. That is correct.
        Senator Bunning. That is correct.
        Mr. Fricks. Yes, sir.
        Senator Bunning. I will submit some further questions on
    this subject. I am deeply concerned that now both sides are
    worried about the level of shipbuilding, and for the last 8 to
    10 years we have been reducing to the point of 200 and some
    plus ships that are not in service, and we are not building to
    the level that we can even maintain 300 ships. In fact,
    somebody said 200 in their testimony. I believe it was you, Mr.
    Welch.
        Mr. Welch. Yes, sir. If we keep building at the production
    rate we have for the last 4 or 5 years, we are on a glide slope
    to 220 ships.
        Senator Bunning. OK. I am going to submit some questions to
    you three gentlemen to find out where you were in the last 10
    years, and why our budgets did not reflect any of your concerns
    over those 10 years so that we can get up to the level of
    safety. Thank you very much. My time is expired.
        Senator Sessions. Thank you, Senator Bunning.
        Senator Collins.
        Senator Collins. Thank you very much, Mr. Chairman.
        Gentlemen, as you know, the administration is close to
    making a decision on arms sales to Taiwan, which includes a
    request from the Taiwanese government for four DDGs. Now, there
    are obviously many important policy issues related to the
    potential arms sale, including our obligations toward Taiwan
    and our relationship with China, but another important
    consideration, which is of concern and interest to me is the
    impact of the sale on maintaining the industrial base. In your
    testimony each of you highlight difficulties you are facing
    with the declines in shipbuilding procurement rates.
        Mr. Welch, I want to start with you, and then Mr. St. Pe.
    Do you have any comments on what the impact of such a sale to
    Taiwan would have on maintaining the skilled work force that
    you need in each of your shipyards?
        Mr. Welch. It would definitely have a positive impact if,
    indeed, that sale were to go through for four ships. That would
    be one heck of a good way to get up to that three-ship-per-year
    level, then we wrap that up in a multi-year type of
    procurement. I think we could save a heck of a lot for the
    Navy, both in delivery of ships to the United States Navy and
    those that would go to Taiwan. It would have a very positive
    impact and, again, it is very critical to maintain that bridge.
    It could be one of the ways to maintain that bridge to get the
    DD 21.
        Senator Collins. I agree. As we go to the DD 21 program,
    what thoughts do you have, Mr. St. Pe?
        Mr. St. Pe. Yes, as Mr. Welch pointed out, Ingalls
    Shipbuilding and Bath have been in alliance for the last 3 or 4
    years in pursuit of that opportunity. I would answer by saying
    that while clearly the Taiwanese opportunity to build Aegis
    ships would make a significant contribution to bridging the
    gap, I do not view it as a replacement for the requirement to
    build three Aegis ships for the United States Navy. These are
    two separate issues--one has to do with stability of our
    shipyards and maintaining the work force and ita efficiency;
    the other has to do with how many surface combatants we need in
    the United States Navy. So it is important to our business, but
    it does not solve the problem the Navy is facing with a ship
    shortfall.
        Senator Collins. Absolutely, and I was not implying that it
    does. Obviously our first priority should be meeting the
    requirements for surface combatants that we already have for
    our national security purposes, but as I listen to the concern
    about what the bridge is going to be as we move to the DD 21
    program, it seems to me that this might be a way to assist in
    maintaining the industrial base that is so critical to meeting
    our future security needs.
        Mr. Welch. I just think one point I would emphasize that
    what you are talking about is the sale of DDG-51s.
        Senator Collins. Right.
        Mr. Welch. They will make a big difference. Some of the
    other alternatives would have little or no impact for either of
    the shipbuilders.
        Senator Collins. Mr. St. Pe, I am a strong advocate of
    pursuing a 12-ship LPD-17 program. As you alluded in your
    statement, the program has encountered a number of cost and
    schedule difficulties since its inception. Could you comment
    further on what the root causes of these difficulties have been
    and whether, in fact, you believe that Avondale is now on
    track. This is of great interest to Bath Iron Works and my home
    state.
        Mr. St. Pe. Absolutely. Senator, as you may or may not
    recall, prior to the award of the LPD-17 program to the
    alliance of Avondale and Bath Iron Works, Ingalls Shipbuilding
    was a separate company and we were in competition for that
    program and did not prevail.
        I said earlier--not in a way of boasting but only in a
    manner of trying to bring some credibility to our assessment--
    we have had a lot of experience in designing and building
    first-of-the-class ships at our Ingalls shipyard: DD-963s, CG-
    47s, participating in the design of DDG-51, LHAs, and LHDs. I
    will say to you that being as objective as I can, had that
    award decision been different and the LPD-17 been awarded to
    the other offeror, we today would be facing some of those same
    challenges associated with a first-of-a-class ship.
        The combination of Avondale and Bath Iron Works, including
    General Dynamics, brought to the LPD winning proposal the best
    this industry had in terms of understanding of the challenge
    and understanding the estimated costs. That was 4 years ago. As
    I look back on it and say what could we have done differently,
    the first thing comes to mind is that the environment in which
    we were competing perhaps caused us to be more optimistic than
    we needed to be. I do not know that it was a ``win at any
    cost,'' but surely it was a win at an unrealistic cost, and
    that is where we started.
        Having said that, there were clearly some challenges
    associated with a new design tool, which today I can tell you
    is well on the way. The design in this program is 80 to 85
    percent complete. I have a belief that ships are never
    finished. When they leave my shipyard or Bill Fricks' shipyard,
    or John Welch's shipyard, they are never complete. Thirty five
    years after they retire, they are never complete.
        The design of ships is the same way. Designs evolve, and as
    they evolve we get better at it. We are over the hurdle here.
    We believe that. I believe the Navy believes that. I use the
    analogy that the best hot dog is the one that you are eating at
    the time. The most challenging shipbuilding program is the one
    that is before us at the time, and that is where we are with
    LPD-17. We are on our way to making this a successful program,
    and the best contribution we can make is to not let it get
    slowed down.
        Senator Collins. Thank you, Mr. Chairman. My time has
    expired.
        Senator Sessions. Thank you. Senator Warner.
        Senator Warner. Mr. Chairman, thank you. I am just going to
    quickly wrap up on that subject that I raised that our
    committee working with the Appropriations Committee should do
    our very best to see whether or not we can lay down a concept
    by which we can add additional funds.
        I mentioned the advanced appropriation. I ask you now to
    put in the definition that I have been using for that.
        Mr. St. Pe. That is excellent. We need that.
        Senator Warner. Thank you. I draw the attention of the
    Chairman the fact that the House Budget Resolution contains a
    provision that would effectively prevent implementation of a
    recommendation that I have.
        I would suggest that the Chair and members of the committee
    work together. I understand your senior colleague, Senator
    Snowe, might be addressing this issue to see whether or not we
    can put an amendment on the current Budget Resolution before
    the Senate which would at least bring this into a conference
    item status so that we could hopefully resolve between the
    House and the Senate such differences as we may have. I think
    this concept is a good one, let us see what we can do to
    implement it.
        I thank our distinguished colleague from Maine for her
    questions about the use of funds to augment the shipbuilding
    DDG-51 class in relation to the Taiwan package. I have been
    looking--and this committee has looked into--the advisability
    of what the naval part of that package should be, and the two
    classes of ships. There is a question between the Kidd-class,
    which are ships that were once manufactured in the Reserve
    status today which could be brought out.
        I presume your yards have made some estimate of what time
    those ships could be brought out. Do you have an estimate on
    that, gentlemen?
        Mr. St. Pe. I do not have it before me, Senator, but indeed
    that has been in the study we are working on with the Navy.
        Senator Warner. But it is a relatively short period of
    time.
        Mr. St. Pe. Yes, sir.
        Senator Warner. In other words, I would think 18 months. Is
    that a ballpark?
        Mr. St. Pe. I do not know. I cannot quantify that. I would
    say about 18 months.
        Senator Warner. Yes. That would enable the Taiwanese Navy
    to get a class of ships into the heavy destroyer class. Then
    begin to learn to operate that type of ship now, and
    preparation for the Kidd-class if it is the decision of the
    President at a later date, and not in this package, to give
    authority to begin the acquisition of the Kidd-class.
        My approach to this given the tensions now in that whole
    area of the world and particularly in China, is that we ought
    to do it step by step--maybe the Kidd-class--because the
    delivery of the DDG-51 Burke-class has to be what, 6 or 7 years
    from now. What is your estimate on that?
        Mr. Welch. Typically 4\1/2\ years to build, so the first
    one, if authorized this year, they would not have it for 5 or
    5\1/2\ years.
        Senator Warner. Five, 5\1/2\ to 6 years whereas their Navy
    could utilize, in all probability, that type of hull and the
    capability of those systems on the Kidd-class and have that
    experience under their belt should at a later date that we get
    into acquiring the more advanced Burke-class.
        Those are options before the President. The President and
    his team have been in consultation with Congress. This
    committee has had several briefings on this subject. I intend
    to speak on it and give my own views very shortly. I thank the
    Chair and I thank the members of the committee for the
    opportunity to be with you today.
        Senator Sessions. Thank you, Mr. Chairman. You have given
    us some good ideas. I think that with the Chief of Naval
    Operations interested in some sort of advanced appropriations
    improvement along with the Chairman's suggestions, we may be
    able to do something that would help improve the system and
    perhaps get it to a conference committee which would leave us
    in the best opportunity this year. I doubt it will be a
    dramatic achievement this year or a dramatic change in what we
    are doing, but good progress I believe is achievable.
        We do have a vote now. I think most of the members have
    been able to ask their questions. If you would be available for
    submission of additional questions in writing, which I intend
    to do and several others as well, I think at this point we
    would be prepared to adjourn.
        I would note that with regard to the Taiwanese situation,
    while we do not desire to be provocative at this time, I do not
    believe that the United States needs to be timid about our
    partnership with Taiwan. I think we need to make decisions soon
    that would give them a realistic chance to provide for the
    defense that they feel they may need.
        Is there anything else? We would stand adjourned.
        [Questions for the record with answers supplied follow:]

                  Questions Submitted by Senator Jeff Sessions

        1. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    business case can be made for productivity improvements which require
    large capital expenditures when the annual procurement rate of ships is
    small?
        Mr. Welch. Business will make capital expenditures to support
    productivity improvements if and only if the risk-adjusted rate of
    return from such an investment is acceptable. Given the lack of
    stability in current ship acquisition forecasts, and the low rate of
    production, it becomes very difficult to construct a business case
    which results in reasonable payback probabilities. Moreover, the nature
    of ship acquisition contracts is to require that any savings beyond
    currently firm contracts accrue to the government, and with very small
    backlogs the opportunity to recoup costs is minimal.
        There are several avenues available to the government to encourage
    or increase productivity-enhancing capital expenditures. These include
    but are not limited to:

             Direct government funding of productivity improvements
            where the benefits can be demonstrated to primarily accrue to
            the government. As noted above, the government captures all
            savings on downstream contracts, and in most of the major U.S.
            shipyards a majority if not all of the work performed is on
            government contracts. However, how to allocate such funding,
            and the limitations on direct government subsidy to those yards
            also engaged in commercial ship construction, make such an
            approach difficult.
             Agreement by the government to share estimated savings
            on future work (not yet under contract or negotiated) with the
            shipyards. Difficulties with this approach would be how to
            calculate the value of such savings on future contracts, and
            the risk (from the shipbuilder's standpoint) that there might
            not be sufficient future work for the yard to recoup the
            investment.
             Increased stability and reliability in the
            Government's long-range ship acquisition forecast, on a
            program-by-program basis. This would reduce the risk associated
            with a capital investment, although by itself it might not
            result in encouraging productivity improvements. From a
            theoretical competitive standpoint, each yard would like to be
            as productive as possible, but if confronted with an
            environment where Navy market share/number of contracts awarded
            is essentially fixed, there is a disincentive to make the
            product cheaper (and profits proportionally lower) unless the
            shipyard can share in the savings, a problem as noted above.
             The best approach would be for the government to
            authorize and enter into multi-year procurement contracts for
            significant numbers of ships, even if the rate of production
            was very low. This stable, firm book of business would enable
            the shipyards to make reliable assessments of the return on
            capital expenditures, with a reasonable percentage of the
            expected savings accruing to the shipyard over the period of
            forecast work. The government would reap the majority of the
            savings from such capital investments on all contracts beyond
            the current book of business, through lower negotiated or
            competitively awarded ship prices.

        Mr. Fricks. Mr. Chairman, as I said in my formal statement, the
    current condition of the shipbuilding industrial base is that it is
    surviving but struggling. The quandary for shipbuilders today is that
    the Navy has stated a need of 300-360 ships, which is the equivalent to
    10-12 ships per year, yet we continue to build about half that many. So
    the industry's challenge is whether to invest in a program to upgrade
    facilities for twice the work load or continue to retrench to build the
    number of ships that are actually being authorized each year. In order
    to realistically assess large capital expenditures for productivity
    improvements, it is critical to know how many and what kinds of ships
    are going to be built in the future.
        Mr. St. Pe. Productivity improvements, and capital expenditures to
    facilitate those improvements, are more important to corporations and
    their shareholders when procurement rates of ships decline. This is
    simply because efficiencies of production must be maximized when the
    number of individual products--items, in our case ships, upon which a
    business earns profit--is reduced. We must work to find more efficient,
    more cost effective ways to produce each item.

        2. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, there
    have been press articles which indicated that foreign shipyards are
    more efficient than the six major shipyards that build Navy ships.
        What is your opinion of such observations?
        Mr. Welch. There are many differences between foreign ``highly
    productive yards'' and U.S. yards. However, the bottom line conclusion
    is that there is little relevant basis for a direct comparison of
    foreign v. U.S. shipyard productivity.

             Foreign yards build almost exclusively commercial
            ships while U.S. yards build almost exclusively Naval ships.
            Japan and Korea combined have some 70 percent of the world
            market share for commercial ships. The U.S. has less than 1
            percent.

                     This market share was initially clearly
                    developed with extensive government subsidies. Whether
                    such subsidies, direct or indirect, continue today is
                    hotly debated.

             U.S. Naval ships are by far the most sophisticated,
            complex ships built in the world. Comparing productivity on a
            Rolls Royce versus a Chevrolet is misleading.
             Shipyard activity level volume is a critical
            determinant of productivity.

                     High volume and consistent levels of volume
                    enable a yard to attract the ``best and brightest''
                    management and engineers, to attract, retain and invest
                    in skills training of a dedicated, permanent workforce.
                     High volume, most importantly enables a yard
                    to constantly refine its production processes through
                    repeated, systematic lessons learned on sequential
                    ships.
                     Volume, and particularly standardized
                    repeatable volume, enables productivity enhancing
                    capital intensive facilities and automation.
                     Most telling, given the above, U.S. yards
                    build their relatively complex Naval ships at very low
                    volume runs (3 ship deliveries/year is a large run for
                    a U.S. yard; in comparison, one Korean yard, Hyundai,
                    builds 50 commercial ships a year).

        Mr. Fricks. Mr. Chairman, I know that many of you have heard about
    the low cost shipbuilding in Japan and Korea. I have been there many
    times. We have worked with their companies, and we have walked their
    factory floors and their dry docks. There is no mystery to their low
    cost model. They have stability in production. They have stability in
    design. This supports the serial production of a large number of
    identical ships. Because of that, they can invest heavily in their
    plants and in their up-front planning. These investments pay large
    dividends in reducing costs. Although the ships they build are almost
    exclusively commercial, and not nearly as complex as U.S. military
    warships, that model works for both.
        The U.S. shipbuilding industry stands ready to make those same
    kinds of investments if it becomes clear we have a dependable future
    market. That is not to say that this industry has not invested in
    itself. Newport News Shipbuilding has invested more than one billion
    dollars in the last 12 years. These investments, in computer-aided
    design, robotic manufacturing and new facilities have enabled us to
    substantially reduce the man-hours required to build carriers and
    submarines.
        Mr. St. Pe. We do not believe that foreign shipyards are more
    efficient, in an apples-to-apples comparison. Government subsidies and,
    in some cases, lower labor costs at these yards enable them to produce
    vessels at a lower unit cost. Korean shipyards for instance produce
    tankers for less than we can pay for materials. Second, most foreign
    shipbuilders do not produce ships of the complexity of a DDG-51 or an
    LHD. U.S. Navy survivability requirements are simply not required by
    foreign navies. These U.S. Navy requirements, which incidentally, we
    think are valid, require different engineering expertise, fabrication
    and test skills.

        3. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, some of
    your shipyards have commercial shipbuilding and repair work which
    lowers the overhead charged to Navy ship programs. What is your
    experience with commercial work and would commercial work enable you to
    lower overall costs charged to Navy ships?
        Mr. Welch. Commercial shipbuilding volume in U.S. yards is a major
    benefit to naval ship construction. The added volume from commercial
    work lowers overhead costs charged to the Navy ship in that yard.
    Equally, if not more important, the commercial work brings design and
    construction process improvements to Navy programs. 99 percent of the
    world's ships are built outside the U.S. The U.S. clearly holds a
    material lead in war ship product technology; however, the lead in
    commercial ship design and production processes technology as well as
    commercial ship production facilities technology largely resides in the
    world class foreign shipyards.
        U.S. yards, by producing commercial ships, are forced to constantly
    benchmark against and aspire to equal the technology improvements
    achieved by the world class commercial yards. These processes have
    tremendous spill over benefit to Navy ship design and construction
    efforts.
        Lastly, the commercial volume in U.S. yards yield added activity
    volume which enables U.S. ship builders to attract and retain a broader
    base of professional, experienced naval architects, marine engineers
    and production managers. This is of significant general benefit to
    naval programs, but it becomes a critical benefit during the periodic
    activity down turns between major naval new building programs.
        Mr. Fricks. Mr. Chairman, Newport News Shipbuilding, today, is not
    engaged in commercial shipbuilding, but we attempted to enter that
    market several years ago with less than favorable results.
        Because of the subsidies overseas the world commercial market is
    not available to U.S. shipbuilders and the domestic market is not that
    large. Commercial shipbuilding, however, can be an supplement, and
    therefore be of some help in maintaining the industrial base, albeit, a
    small one. Additionally, the greatest benefit from such commercial
    shipbuilding is likely to take place in the two shipyards that build
    military ships that are closer to the design to a commercial ship, such
    as the auxiliary ships built for the U.S. Navy.
        Mr. St. Pe. Litton Ship Systems has a very diverse background of
    commercial work over the past few decades--from drill rigs and hopper
    barges to tankers and cruise ships. We have found that unless the
    commercial product is selected to match a facility's workforce
    expertise and facility capitalization, there will be cost and schedule
    problems.

        4. Senator Sessions. Mr Fricks and Mr. St Pe, it has clearly been
    Congressional intention for shipyards to start construction on long
    lead components when that construction will result in overall cost
    savings to the taxpayers. This committee initiated legislation which
    became law authorizing advance construction of components for aircraft
    carriers and large amphibious ships.
        Has this legislation been useful in assisting you to smooth out
    your work load, retain skilled workers, and maintain established
    vendors resulting in overall cost savings to the government?
        Mr. Fricks. Mr. Chairman, this legislation has been useful at
    Newport News Shipbuilding. Specifically on CVN-77, we were able to use
    advanced funding for material to support the overall ship schedule,
    keep key shipyard workers engaged through what would have been a lull
    in activity, and deal directly with suppliers that were on the verge of
    economic collapse. Specific advanced funding material examples include
    the acquisition of main engines and turbine generators, long lead time
    items that would have adversely impacted our schedule for production if
    we had been required to delay those acquisitions until after contract
    award.
        We also produced 39 structural units during the advanced planning
    period, keeping our steel fabrication workers busy and giving us a leg
    up on the production curve. Without this work, we would have had to
    reassign and then subsequently retrain these workers.
        Finally, we were able to order special pipe fittings and machinery
    components from key suppliers that have suffered from the downturn in
    naval shipbuilding. Without these orders, some of these suppliers may
    well have gotten out of the Navy business requiring us to requalify new
    suppliers at substantial costs.
        Mr. St. Pe. Certainly, Congress has done its part to assist
    shipbuilder with advance appropriation. Unfortunately, in many cases,
    the funding doesn't reach the shipbuilders in the steady stream
    intended by Congress. For example, in looking at LHD-8, Congress has,
    over the past 3 years, appropriated $460 million for advance
    procurement, design and construction of advanced components. To-date,
    however, Litton Ship Systems has received only $142.5 million of this
    funding. So while the legislation is certainly useful, its application
    has not matched expectations.

        5. Senator Sessions. Mr. Welch and Mr. Fricks, Virginia-class
    submarine legislation included a section which limits termination
    liability for cancellation of a program to the appropriated amount
    remaining available for the program. Does this type of legislation help
    or hinder the shipyards and should that type of legislation be applied
    to other programs?
        Mr. Welch. Termination of a contract is a seldom used, but drastic
    action on the part of the government. The impact and implication on the
    shipbuilder being terminated is severe and could result in the closing
    of the shipyard during a period of low rate production.
        Any legislation that restricts and limits the ability of the
    shipbuilder to recover reasonable costs is devastating. For example,
    the facilities required to construct naval ships are specialized,
    expensive, and recouped through depreciation over a number of years. If
    a program is terminated, the remaining cost recovery is diminished if
    not totally lost.
        Limiting the liability that can be recovered in the event of a
    termination increases the risks to the business. Increased business
    risk results in lower valuation of the shipbuilder, which increases the
    cost of capital, which lowers earnings. Alternately, the government may
    be forced to accept a higher negotiated profit rate to accommodate the
    increased risk.
        Notwithstanding the risks assigned to the shipbuilder by the
    termination liability provision, the overall authorization and
    appropriation acts for the Virginia-class did provide benefits,
    specifically the advance construction and advance procurement of
    material for the second, third and fourth Virginia-class submarines
    with the funds appropriated in 1998. This authorization provided
    program stability and flexibility. This aspect of the legislation
    should be expanded and included in other programs. This provision can
    also provide cost savings going forward.
        Mr. Fricks. Mr. Chairman, the legislation authorizing the
    procurement of the first four Virginia-class submarines specifically
    limited termination liability in the event of cancellation of the
    program to the appropriations remaining available for that program.
    This ``block-buy'' of the first four submarines did provide some more
    flexibility than a normal acquisition of four individual subs. However,
    this did not allow the most efficient use of appropriations that could
    have been available under a true multi-year procurement, because the
    shipbuilders, not the government, would have been liable for material
    contracts in excess of available appropriations--a risk the
    shipbuilders could not take.

        6. Senator Sessions. Mr. Fricks, the Navy's report to Congress on
    converting design data on Nimitz-class aircraft carriers and developing
    a smart product model for CVN(X) concludes that it is cost effective to
    develop a smart product model for CVN(X) but is not cost effective to
    convert design data from previous carrier programs. What is your
    analysis of the cost effectiveness of 3-D computer designs?
        Mr. Fricks. Mr. Chairman, the return on investment of the up-front
    cost of developing a carrier smart product model is achieved through a
    combination of reduced manufacturing costs and reduced life cycle
    costs. For all new classes of ships, the Navy has determined that a
    smart product model is necessary to serve as the basis of the ship
    design to support construction, and then throughout the life of the
    class to maintain configuration and control of the model to maximize
    the potential for life cycle cost savings.
        Working with the Navy, we were able to demonstrate a clear return
    on the investment for product modeling those portions of the Nimitz-
    class, which will be redesigned and built for CVN-77 and the CVN(X). We
    demonstrated that return by using data from the CVN-76 island house,
    which was completely designed and built using smart product modeling.
        With respect to translating the entire existing Nimitz-class design
    into the smart product model, while we are sure it would provide some
    substantial benefit to life cycle costs, we have not yet been able to
    demonstrate a full return on the investment that would be required.
    Therefore, we have agreed with the Navy to focus scarce design dollars
    at those portions of the ship which are being redesigned.

        7. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, the
    Navy has determined that there are valid claims for over $522 million
    which must be paid in fiscal year 2001 to shipyards for programs that
    were appropriated and authorized in previous years. Of course, payment
    of additional funds for prior year shipbuilding expenses take funds
    away from current year shipbuilding programs. What is the cause of the
    prior year increases and is there a way to avoid or predict and budget
    for such cost changes in the future?
        Mr. Welch. The major factors contributing to required funding
    increases in Electric Boat's new construction contracts are: (a) cost
    escalation in the shipbuilding industry; and, (b) the effect of the
    declining vendor base on high value material.

             While government projections in escalation for the
            late 1990's and early 2000's used 1.5 percent to 2 percent
            escalation for labor indices, shipbuilders were experiencing
            and projecting 3 percent to 5 percent based on historical
            experience and negotiated union contracts.
             The reduction in vendors in the shipbuilding industry
            resulting from low rate production has also caused the trend in
            high value material to exceed the government funding escalation
            rates of 1.5 percent to 2.0 percent. Vendor quotes, for
            example, during the Virginia-class construction proposal
            process reflected escalation of approximately 6.0 percent per
            year. Purchase order placements on the Virginia construction
            program have validated this forecast.

        Government predictions and budgeted costs in the future should be
    industry specific in order to avoid the necessity of increasing funding
    amounts as programs progress.
        Mr. Fricks. Mr Chairman, we do not have access to the numbers that
    may relate to other companies programs, nor do we have access to Navy's
    numbers with respect to government furnished equipment, and therefore,
    I cannot comment on the totals you cite.
        However, I expect that all of this short fall arises for one or
    more of the same reasons I have cited in my formal testimony regarding
    the carrier and submarine programs--and is probably because one or more
    of the shipbuilding fundamentals I cited in my formal testimony is
    missing. Specifically, lack of stable production plan, numerous design
    or manufacturing changes coming late in the process, less than
    realistic targets for the shipbuilder, and overly optimistic estimates
    on escalation all contribute to this kind of short fall.
        Mr. St. Pe. As I said in my testimony before the subcommittee,
    procurement environments historically encourage unrealistic cost
    estimates. Over-optimism by the Navy, by Congress, and by industry
    often produces unrealistic cost and schedule estimates for first-of-a-
    class vessels--estimates done, in most cases several years before those
    ships are built. More than in any other industry, the cost and schedule
    estimates we provide in a competition for a lead ship contract are just
    that--our best estimates, based on what we know at the time. Why are
    these estimates so fragile, and so often understated? Very simply,
    because there are no prototypes in shipbuilding--not even when you
    consider some of the critically important computer simulation and
    modeling work we're doing these days. There are no competing concept
    ``fly offs.'' The first ship built to every new design--the lead ship
    of every class of Navy warships--would be considered, in every other
    industry, a testbed prototype . . . a research and development
    platform. Instead, in shipbuilding, the first built--the prototype--
    takes America's sons and daughters into harm's way. That is a cold,
    simple fact of life in shipbuilding. As is the length of time it takes
    to design and build these ships--4, 5 or 6 years after the estimate was
    originally completed. This ``working prototype'' factor must be taken
    into account in discussing ways to improve the acquisition process for
    ships. We must take a long-term approach, such as the approach that was
    so successful in CGs and DDGs. We absolutely must recognize that large,
    front-end investments can only be recaptured and maximized by allowing
    programs to run uninterrupted, with sustained levels of program and
    financial support.

        8. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, in your
    opinion, what acquisition reforms would result in lower costs for ship
    acquisition programs?
        Mr. Welch. There are a number of acquisition reform areas which
    have the potential to lower either the cost of ship procurement or
    total ownership costs:

             While not acquisition reform per se, a stable,
            predictable ship acquisition profile would inevitably lead to
            lower costs as builders were enabled to make productivity-
            enhancing improvements, facilities and equipment were sized for
            effective utilization rates, and the costs of cyclic employment
            patterns were reduced. This is not to imply that stability in
            and of itself is a panacea, or that other changes such as
            sharing of outyear savings resulting from capital expenditures
            wouldn't be required.

        As noted in my response to question #1, the best way to achieve
    stability in procurement would be to enter into multi-year acquisition
    contracts for appropriate programs. This might require reform or
    revision of current acquisition guidelines, which may have been
    appropriate in the high procurement demand/full capacity utilization
    environment of the cold war build-up to a 600-ship navy, but do not
    reflect the realities of today's low rate production environment.

             Acquisition reforms which lead to greater integration
            of the ship designer/builder into the life cycle support of the
            delivered vessels will also have significant payoffs.
            Segregation of design and/or construction contractors from
            provision of life cycle maintenance makes effective cost/
            benefit trade-offs by the designer/builder difficult. Funding
            levels and contract values established for a particular
            acquisition item may preclude implementation or even
            consideration of initiatives which could result in total
            ownership cost reductions. The Full Service Contractor approach
            has the potential to correct this problem, and in fact the LPD-
            17 acquisition appears to be just such a success story
            (recognizing that the up-front procurement cost may not go
            down--but the aggregate outlays certainly will, during the
            operational service life of the ship class).
             The move to performance-based specifications as
            opposed to how-to prescriptions has already resulted in
            significant cost savings, and further moves in this direction
            should be encouraged. The recent initiative to cancel obsolete
            or unnecessary MILSPECs, and replace them with existing
            commercial specifications where appropriate, has also been
            beneficial. It should be noted, however, that some issues have
            arisen when different suppliers or specific industries use
            different criteria or standards for related products.
             Greater responsibility by the ship designer/builder
            for selection, integration, and purchasing of shipboard systems
            and components is another area which has great potential to
            reduce overall ship procurement costs. This change can
            eliminate potential disconnects and incompatibilities in the
            final product, reduce parochialism and sub-optimization by
            independent government codes/systems contractors, and encourage
            commonality across system and component boundaries.

        Mr. Fricks. Mr. Chairman, having a stable shipbuilding program is
    high on everyone's list for achieving lower acquisition costs.
    Stability allows companies to better plan their resources, facilities
    utilization, capital investment and helps maintain the supplier base.
    Giving companies the confidence that the build program is stable will
    benefit the entire industry.
        Next, the Navy should be authorized to use multi-year contracting
    where appropriate. When multi-year contracting may not be appropriate,
    some level of advance planning and advance construction should be
    authorized. These concepts are complementary to advance appropriations,
    which, if done properly, would minimize funding spikes over the 5-year
    defense plan.
        I further believe that acquisition costs can be reduced if non-
    value added oversight could be eliminated, and changes to work scope
    were minimized. Each of these areas is very complicated to deal with
    and would require a great deal of industry and Government teaming to
    study how and what cost could be lowered.
        To summarize, give the shipbuilders a stable program, establish
    realistic targets, minimize change and provide appropriate funding
    mechanisms, then the acquisition cost will be lower.
        Mr. St. Pe. The Government is examining a number of different ship
    funding options. Advance material procurement . . . block buys . . .
    multi-year procurement . . . advance appropriations . . . are all
    potentially useful tools you can employ to stabilize shipbuilding
    programs and reduce their cost. We have direct experience with only one
    of these approaches--multi-year procurement on the DDG-51 program.
    Multi-year has saved the taxpayers more than $1 billion in the
    procurement of these ships at Ingalls and Bath Iron Works. We fully
    support funding approaches that lead to more ships being constructed,
    under stable procurement and production profiles.

        9. Senator Sessions. Mr. Welch, Mr. Fricks, and Mr. St. Pe, has the
    Maritime Technology Program, now named the National Shipbuilding
    Research Program, been successful in providing improved processes
    resulting in lower ship acquisition costs?
        Mr. Welch. Yes it has. The National Shipbuilding Research Program
    Advanced Shipbuilding Enterprise program is designed to bias R&D
    project selection toward those most likely to result in near term,
    widespread implementation, and in turn, lower ship acquisition costs.
    Through these projects, shipyards have moved R&D projects into fill
    production, launched an industry e-commerce net, standardized business
    processes across many shipyards, improved worker safety, and changed
    the culture of the work force. This high-leverage, broad, collaborative
    approach provides industry-wide improvements on the scale necessary to
    yield much more affordable Navy ships and move U.S. shipbuilding to a
    more competitive position internationally. Improvements made now before
    production of DD 21, T-AKE, CVN(X), and other programs planned in the
    decade (and early in the production of Virginia and LPD-17) will prove
    particularly valuable to the Navy.
        Mr. Fricks. Mr. Chairman, Newport News Shipbuilding supports
    continued funding for NSRP to continue its research efforts on new ship
    technologies and on technical productivity improvements.
        We have seen direct benefit at NNS from NSRP initiatives in the
    areas of improved supply chain processes, which have reduced cycle time
    and man-hours, and in the creation of lighter weight built-up
    structural stiffeners, which were needed to meet CVN(X) performance
    criteria.
        Mr. St. Pe. I noted in my testimony that Ingalls' cruise ship
    programs would not be possible without DOD's former MARITECH Program,
    now known as the National Shipbuilding Research Program, or NSRP, which
    enabled Ingalls to learn about and observe cruise ship building
    practices around the world. Without question, the ``lessons learned''
    in cruise ship building will pay great dividends for the Navy and the
    American taxpayer in future Navy shipbuilding programs such as DD 21.
    We strongly support NSRP, and encourage its consistent and full
    funding.

        10. Senator Sessions. Mr. Fricks, a January press article on an
    agreement between the Navy and Newport News Shipbuilding reported that
    the Secretary of the Navy ``expressed frustration with Newport News's
    failure to deliver promised cost saving.'' It further stated that the
    Secretary was ``pressuring them for the rest'' of the agreed to
    savings. Mr. Fricks would you please clarify what the agreement with
    the Navy is and whether or not Newport News has lived up to the
    agreement?
        Mr. Fricks. Mr. Chairman, I must say I found that report somewhat
    perplexing. First it was reported only after the Secretary in question
    had left office and that same Secretary had expressed no such
    frustration a month earlier when I met with him and briefed him on how
    we had met or exceeded our savings target in the MOA for the second
    year.
        The 1999 MOA is an agreement with the Navy to work together to
    reduce our overall costs by about $350 million over the 5-year period
    of 1999-2003 through a number of productivity and cost cutting
    initiatives. Many of those initiatives were in place before the
    agreement was signed. The first year of that agreement we agreed to
    reduce our costs by $25 million from what they would otherwise have
    been--we beat that target by almost $7 million.
        In 2000, we agreed to further reduce costs by another $55 million
    and we met or exceeded that target. We have worked with the Navy to
    embed these and future additional reductions into existing and future
    contracts.
        I would also note that less than a week after that first report,
    the Carrier Program Executive Officer told the press that the earlier
    report was inaccurate and that we had met or exceeded our goals.
                                     ______

                   Questions Submitted by Senator Jim Bunning

        11. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, when,
    and how often did you report to this committee your concerns regarding
    the level of funding for shipbuilding over the last 9 years?
        Mr. Welch. The following identifies when a General Dynamics
    executive testified to a Congressional Committee on submarine or
    shipbuilding since 1992:

             February 19, 1992, Electric Boat General Manager Roger
            Tetrault testified on the Structure of the U.S. Defense
            Industrial Base to the House Armed Services Committee The
            testimony focused on the impact of the Seawolf submarine
            program cancellation at Electric Boat and the Submarine
            Industrial Base.
             April 1, 1992, Electric Boat General Manager Roger
            Tetrault testified to the Senate Armed Services Committee on
            the rescission of the SSN-22 and SSN-23 Seawolf submarines and
            the impact to Electric Boat. Questions from the committee
            focused on the incremental cost estimates for completion of
            SSN-22 and SSN-23 and the minimum production level to sustain
            the submarine industrial base.
             April 7, 1992, Electric Boat General Manager Roger
            Tetrault testified to the House Armed Services Committee on the
            rescission of the SSN-22 and SSN-23 Seawolf submarines and the
            impact to Electric Boat. Questions from the committee focused
            on the incremental cost estimates for completion of SSN-22 and
            SSN-23 and the minimum production level to sustain the
            submarine industrial base.
             May 27, 1993, Electric Boat President, James E.
            Turner, Jr. testified to the Senate Appropriations Defense
            Subcommittee on the issue of Defense Conversion. Electric
            Boat's testimony discussed the reasons why the Submarine
            Industrial Base is not a viable candidate for conversion or
            dual-use.
             March 16, 1995, Electric Boat President, James E.
            Turner, Jr. testified to the House National Security Military
            Procurement Subcommittee on the overall acquisition plan for
            the New Attack Submarine program.
             April 5, 1995, Electric Boat President, James E.
            Turner, Jr. testified to the House Appropriations National
            Security Subcommittee on the overall acquisition plan for the
            New Attack Submarine program.
             May 16, 1995, Electric Boat President, James E.
            Turner, Jr. testified to the Seapower Subcommittee of the
            Senate Armed Services Committee on acquisition plan for the New
            Attack Submarine and attack submarine program issues.
             February 29, 2000, General Dynamics Marine Systems
            Group Senior Vice President, John K. Welch, testified to the
            House Armed Services Committee Procurement Subcommittee on Navy
            shipbuilding and the adequacy of Navy shipbuilding budgets.
            Testimony pointed out the need for additional shipbuilding
            funding, especially submarines, to meet the then current QDR
            force level goals and the need for additional ships above QDR
            levels to meet military requirements.
             March 2, 2000, General Dynamics Marine Systems Group
            Senior Vice President, John K. Welch, testified to the Senate
            Armed Services Committee Seapower Subcommittee on Navy
            shipbuilding and the adequacy of Navy shipbuilding budgets.
            Testimony pointed out the need for additional shipbuilding
            funding, especially submarines, to meet the then current QDR
            force level goals and the need for additional ships above QDR
            levels to meet military requirements.
             April 4, 2001, General Dynamics Marine Systems Group
            Senior Vice President, John K. Welch, testified to the Senate
            Armed Services Committee Seapower Subcommittee on Navy
            shipbuilding and issues impacting the shipbuilding industrial
            base. Testimony underscored the need for greater stability in
            Navy shipbuilding plans and increased application of
            alternative acquisition approaches such as multi-year
            procurement and advanced appropriations.

        Additionally, the six U.S. Navy shipbuilding companies are members
    of the American Shipbuilding Association (ASA)--our industry's national
    trade association. We have both collectively through ASA and
    individually sought to bring to the attention of national decision
    makers for a number of years the fact that annual Navy shipbuilding
    budgets have increasingly failed to keep pace with validated
    operational and military force structure requirements.
        We have tried to communicate that message on a nonpartisan basis.
    We have taken advantage of opportunities provided to testify before
    several of Congress' defense committees over the years on this problem
    and on our industry's response to low levels of production.

             The ASA has held a series of widely attended
            Congressional Seapower Forums on Capitol Hill open to Members
            of Congress, Congressional staff, and the media, to bring
            attention to the fact that Navy shipbuilding budgets have
            failed to sustain even the minimal level of new ship
            construction required to sustains a Navy fleet of 300 or more
            ships. Additionally, the ASA initiated an outreach program
            called the SEAPOWER Ambassador program in early 1998, which is
            still in operation today. The SEAPOWER Ambassador program
            conducted in conjunction with the U.S. Navy League has asked
            retired naval officers and community leaders who share our
            concern to volunteer to speak to local civic organizations
            about the crisis confronting the Navy Fleet and our national
            security from current inadequate Navy shipbuilding rates. We
            continue to seek more effective ways to get the general public
            and national decision-makers more aware of the SEAPOWER crisis
            confronting our Nation.

        Mr. Fricks. I, along with John Welch, testified before the Senate
    Seapower Subcommittee in the spring of 1995. The subject of that
    hearing was, among other things, the low rate of submarine production.
    The full transcript of that hearing is available in the committee's
    records.
        However, during the past 9 years, I and other senior members of
    Newport News Shipbuilding have probably had countless of conversations
    with members of this and other defense committees concerning the
    decline in the shipbuilding industrial base and the decline in the
    number of ships in the Navy fleet.
        Mr. St. Pe. (Mr. St. Pe's answers to questions 11-18 follow): As a
    shipbuilder, I would not presume to determine the fleet requirements
    for our national defense. I do, however, respond to these requirements
    by ensuring that my shipyards have the manpower, technology and
    efficiencies to meet them. Based upon studies produced by the
    Department of Defense, CBO, and independent ``think tanks'', the
    current requirement calls for a 300-ship fleet. In order to maintain a
    300-ship fleet, we must build 10-12 ships per year. At the current
    build rate, our fleet will decline to a 200--220 ship fleet. Although
    members of the Seapower Subcommittee historically have been supportive
    of sustaining a 300-ship fleet, the ships actually procured have been
    half the required number.
        Shipbuilding has been on a steady decline and the industry has
    responded to this trend by increasing efficiencies, streamlining costs
    and consolidation, In 1999, testifying as the President of the American
    Shipbuilding Association, I reported to this committee my deep concern
    that ``the low rate of shipbuilding clearly is impacting not only
    maintaining a 300-ship fleet, but producing the kind of savings that we
    all know can come about from sustained business in any manufacturing
    operation. Our own numbers say that if we are to maintain a 300-ship
    Navy, we need to build at a rate of about 10-12 ships. The six
    shipyards that are represented by ASA have spent about $1.3 billion in
    bringing into our facilities state-of-the-art technology to reduce
    overhead and improve efficiency. Our message here this morning is that
    the rate of shipbuilding has to increase in this country, and it has to
    start soon.''
        Over the past decade I have brought forward this message to
    Congress, Department of Defense, and the general public both
    personally--through testimony before several defense committees,
    personal meetings with Navy and DOD leadership, and professional staff
    members--and through the shipbuilding industry's trade association--The
    American Shipbuilding Association (ASA). The American shipbuilding
    industry, comprised of the six shipbuilding companies and top vendor
    partners, has held several Seapower Forums open to Members of Congress,
    staff and media in an attempt to bring attention to the declining
    shipbuilding rate that will, if allowed to continue at this pace, see a
    320-ship fleet reduced to 200. The Seapower Ambassador program, a joint
    effort between ASA and the Navy League of the U.S. has worked to
    educate the general public on the crisis we face with a declining naval
    force and the consequential risk to the shipbuilding industrial base.
        The Senate Armed Services Committee and the Seapower Subcommittee
    have been helpful in their attempts to reverse this trend by bringing
    attention to the gap between current requirements and proposed budgets,
    particularly by preventing the DDG program from slipping from the
    authorized three ships per year to two ships per year; by completing
    the procurement of LHD-7 and providing long-lead funding for the LHD-8
    program. The shipbuilding industry appreciates the efforts extended by
    all members of the committee and look forward to working together in
    the future to reverse the bow-wave decline in shipbuilding.

        12. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    did you say each time?
        Mr. Welch. Testimony stressed the need for program stability and
    increased shipbuilding procurement rates to preserve or optimize the
    then current ship procurement plan.
        Mr. Fricks. I do not have a record of what was said on each of
    these occasions. However, I have no doubt that members of this
    committee were fully aware of the concerns of the naval shipbuilders
    about the decline in the Navy shipbuilding industrial base.
        Mr. St. Pe. (See answer in question number 11.)

        13. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    responses did you receive from the committee members, either within or
    outside of the hearing context?
        Mr. Welch. Committee members were sympathetic to the issues
    impacting the shipbuilding industrial base as a result of the cut-backs
    in procurement and low rates of production. In 1992, key committee
    members were instrumental in reversing the funding rescission for the
    second and third Seawolf submarines, thus ensuring the preservation of
    critical skills and capabilities for the submarine industrial base.
    More recently, the Senate Armed Services Committee and the Seapower
    Subcommittee have taken a leadership role in trying to highlight this
    worsening problem and to propose and authorize specific actions to
    address the situation. The leadership and members of the committee on
    both sides of the aisle have urged the uniformed leadership of the Navy
    and Marine Corps to be more candid with the committee in testifying
    about the growing mismatch between requirements and budgets.
        As an example of this committee's action in previous years to
    reverse the Navy and this industrial base's decline, it was this
    committee and subcommittee which first acted to respond to a budget
    proposal several years ago to reduce DDG-51 destroyer procurement in
    fiscal years 1996 and 1998 from 3 ships per year to 2 ships per year.
    This committee took the lead to sustain the 3-destroyer per year
    procurement rate and to authorize and fund a 4-year multiyear
    procurement of DDG-51s from fiscal years 1998-2001 which helped the
    Navy and industry sustain the 3-ship per year procurement rate. In the
    last two sessions, this committee and subcommittee took the lead to
    statutorily extend the DDG-51 program's multiyear procurement authority
    through fiscal year 2005 at a rate of three destroyers per year. This
    committee has also been active in addressing submarine force level
    requirements, approving the successful teaming arrangement for the
    Virginia-class submarine program, and requiring the government's
    evaluation of new contracting strategies, such as block buy for
    submarine procurement.
        Further, this committee and subcommittee took the lead to require
    that the Department of Defense produce a 30-year projection of required
    shipbuilding rates and budgets to sustain the current requirement for a
    Fleet of at least 300 ships. These examples are by no means a full
    accounting of the many positive actions this committee and subcommittee
    have taken over recent years, but they are illustrative of the broad-
    based concern shared among committee members.
        Mr. Fricks. I do not have records of the specific responses we
    received from committee members during the course of these numerous
    discussions. However, as has been the case in this hearing today, there
    was general agreement amongst members of this committee and other
    defense committees that there was a serious problem developing in the
    Navy shipbuilding industrial base.
        Mr. St. Pe. (See answer in question number 11.)

        14. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    other avenues did you pursue, such as the Navy or the Department of
    Defense, to express your concern regarding the level of funding for
    shipbuilding over the last 9 years?
        Mr. Welch. General Dynamics has pursued an aggressive communication
    plan to educate, inform, and garner support from all stakeholders in
    Congress, Navy and DOD for increased shipbuilding levels and requisite
    funding. This activity has been supported and conducted with the other
    shipbuilders and industry groups such as the American Shipbuilding
    Association. On issues such the adequacy of overall SCN funding,
    General Dynamics relies heavily on our trade association, the American
    Shipbuilding Association (ASA), to deliver the message to Congress,
    including the SASC. The principal reason for the formation of ASA in
    1994 by the six largest U.S. shipyards was to focus on the issue of
    inadequate SCN.
        Mr. Fricks. Over the last 9 years, I and other senior officers of
    Newport News Shipbuilding have probably had countless of conversations
    with numerous officials within the Department of the Navy and the
    Department of Defense concerning the dwindling size of the U.S. Navy
    fleet and the problems this was creating in the Navy shipbuilding
    industrial base.
        In addition, over the last 4 years the American Shipbuilding
    Association, a trade association, composed of the six Navy ship
    construction shipyards, has spent several hundred thousand dollars in
    efforts to educate Congress and the public about the dwindling Navy
    fleet and the problems existing within the Navy shipbuilding industrial
    base.
        Mr. St. Pe. (See answer in question number 11.)

        15. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    did you say those times?
        Mr. Welch. Our message has been consistent over the last 9 years:

             Stability is key to ship production efficiency and
            affordability.
             Current low rates of production are not the most
            efficient or affordable to recapitalize the Navy's force
            structure.
             Congress, Navy, DOD and the shipbuilders must continue
            to be vigilant to ensure irreversible harm is not inflicted on
            the industrial base as a result of poor acquisition decisions
            or less than optimal industrial base strategies.

        Mr. Fricks. I do not have a record of these thousands of
    conversations, but I do believe that there was general agreement within
    the Navy if not also within the Department of Defense, that the Navy
    fleet was becoming too small and that the ship procurement rate was too
    low, resulting in problems in the Navy shipbuilding industrial base.
        Copies of some, if not all, of the communications by the American
    Shipbuilders Association, with Members of Congress on these issues may
    be obtained from that Association.
        Mr. St. Pe. (See answer in question number 11.)

        16. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, what
    responses did you receive?
        Mr. Welch. Congress, Navy and DOD have generally been supportive of
    our recommendations, although actions to remedy the industrial base
    situation have been impacted by overall lower defense spending and
    competition within the defense budget for higher priority requirements
    such as readiness.
        Mr. Fricks. I do not have a record of these numerous conversations,
    but I do believe there was a growing consensus within the Navy, the
    Department of Defense and the defense committees of Congress that ship
    procurement rates needed to be increased.
        Mr. St. Pe. (See answer in question number 11.)

        17. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, were
    there other ways that you could have raised your concerns over this
    issue, but didn't? If so, what were they? Why didn't you?
        Mr. Welch. No other means are apparent which could have more
    effectively raised our concerns over this issue. We believe that the
    shipbuilders, industrial base suppliers, Navy and key Congressional
    representatives have clearly communicated the concern and risks posed
    by the last decade's low rates of ship procurement and associated SCN
    funding.
        Mr. Fricks. I am not aware of any other specific avenues that I
    could have pursued to raise our concerns over these issues.
        Mr. St. Pe. (See answer in question number 11.)

        18. Senator Bunning. Mr. Welch, Mr. Fricks, and Mr. St. Pe, was
    there any concern regarding the inadequate funding levels for
    shipbuilding, requested by the Clinton administration, from the
    Democratic members of this committee, prior to the arrival of the
    current administration?
        Mr. Welch. Concern regarding the low levels of funding for
    shipbuilding (as submitted by both the former Bush administration and
    the Clinton administration) have been shared by members of both parties
    over the last decade. Members of the Congressional defense committees
    from both parties have expressed their concerns in opening statements
    or during the hearings identified in response to Question 11.
        Mr. Fricks. Yes, during the past several years, a number of
    Democratic Members of this committee have joined with a number of
    Republican Members in expressing concerns about the low levels of Navy
    shipbuilding.
        Mr. St. Pe. (See answer in question number 11.)
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

        19. Senator Kennedy. Mr. Welch, Mr. Fricks, and Mr. St. Pe, this
    committee has supported robust technology insertion efforts for
    shipbuilding programs. The subcommittee's position has been that the
    Navy cannot afford to wait for the ultimate in technology to continue
    modernizing the fleet.
        Some, however, have charged that inserting technology inevitably
    results in much higher costs and delays in production.
        I would ask each of the witnesses, are there ways that the Navy can
    pursue a technology insertion approach, while still achieving the cost
    savings of serial production?
        Are there ways we could improve the programs that are currently
    pursuing a technology insertion effort?
        Mr. Welch. It is the experience of the shipbuilding industry that
    anytime you build a ship for the first time you will not be as
    efficient as when you build it for the fifth time. With that said there
    are some approaches to technology insertion that can help to mitigate
    the impact of change to the cost and schedule of a ship class that is
    in production. These approaches are as follows:

             Employ Integrated Product & Process Development
            Process (IPPD) for Major Ship Upgrades: Electric Boat and the
            Navy have demonstrated the success of applying an Integrated
            Product & Process Development Process for a major warship
            acquisition, the Virginia-class submarine. The IPPD approach
            involved bringing the stakeholders together (including the
            shipbuilder) at the beginning of the design process to work the
            concurrent development of design products, tools and processes
            as well as construction support products based on an optimized
            manufacturing & assembly plan. With this approach, Electric
            Boat and Newport News Shipbuilding have achieved third ship
            performance on the traditional learning curve with the lead
            ship Virginia.
             It should also be noted that the Virginia program
            introduced significant new technology and innovation over
            previous classes which is a testament to the value of an IPPD
            approach to technology insertion. In addition, involving the
            trades early in the design process, results in a more
            producible design and reduces the risk of change during
            construction. IPPD for technology insertion should be supported
            in the future with funding profiles and contracts that provide
            this type of implementation.
             Insert Major Upgrades at the Start of a Multi-ship
            Procurement: Electric Boat supports an approach to technology
            insertion that bundles technologies into synergistic packages
            and couples these packages with a multi-ship acquisition plan.
            This ``Flight/Block Buy approach'' provides an affordable
            acquisition strategy for the Navy by enabling the shipbuilders
            to derive the same design-build efficiencies in design, co-
            production and procurement as realized during the baseline
            Virginia IPPD program.
             In addition, the approach would also encourage
            industry to continue investment into new tools and processes to
            reduce the cost of design and construction by allowing the
            investment across a block of ships rather than a single ship.
             Leverage Other DOD Programs and Support Government/
            Industry Partnerships: Electric Boat and a diverse team of
            suppliers have been supporting a joint DARPA/Navy initiative
            that was formed to develop approaches to improve payload and
            sensors for future submarine designs. Having successfully
            completed the objectives of the initial phase, two teams are
            working to select promising high value concepts and to develop
            and demonstrate new systems from these concepts in an at-sea
            environment.
             Many of the payload systems being considered by the
            DARPA/Navy Payload and Sensor Teams are being developed in
            other branches of the service--an approach that reduces
            development and total ownership cost yet will provide for the
            affordable introduction of technology across many diverse
            programs with the DOD.
             Tactical Tomahawk is one example of a technology
            insertion with broad implications across many programs.
            Electric Boat recommends that Congress continue to support
            increased R&D funding for technology insertion demonstrations
            using these kinds of collaborative arrangements.
             Use Commercial-Off-The Shelf (COTS) Electronics: One
            of the most significant developments in Navy warship production
            relative to technology insertion is the introduction of COTS
            technology. During the Virginia-class development program,
            Electric Boat pioneered efforts to develop innovative
            approaches to house COTS electronics in the demanding submarine
            environment. Efforts to date are now paying significant
            dividends on Virginia as the ships electronics systems have
            been designed based on the use of commercial technology.
             These same systems are able to take advantage of the
            significant growth in computer, communications and display
            technology that is available in the commercial sector without
            significantly impacting the platform design. Therefore, Navy
            warships can continue to be affordably upgraded with new
            technology and capability without any significant impact to
            ship construction. Platforms that utilize COTS electronics if
            properly accommodated at the start of a design will enjoy
            affordable technology insertion without impacting the
            efficiencies of serial production.

        Mr. Fricks. As I pointed out in my formal testimony, changes in
    ship design, especially those coming very late in the process are very
    costly. We are constantly working with the Navy in order to fully
    define technologies to be included in the ships we build. On CVN-76, we
    are using an innovative approach called ``design budget'' under which
    early decisions are made regarding the size and shape of various ship
    compartments along with the required heating, mechanical and electrical
    requirements of those spaces, while the technology is being developed
    separately. This approach permits the shipbuilder to proceed in an
    orderly fashion with the design and construction of the ship, while
    permitting the Navy to delay it's final determination as to the exact
    technology to be included in such spaces.
        On CVN-77, we are expanding our traditional shipbuilder's role to
    include full development and integration of the warfare system, a first
    for private industry. We will build upon our CVN-76 design budget model
    experience to establish a schedule for effective design and integration
    of this system working with our sub-contractor, Lockheed Martin. This
    strategy also utilizes the Virginia Advanced Shipbuilding and Carrier
    Integration Center (VASCIC), a new facility funding by the Commonwealth
    of Virginia and managed and operated by Newport News Shipbuilding.
    VASCIC will provide the capability to do full scale testing of
    technology much later in the construction program and thereby lower the
    risk associated with shipboard installation of electronic components.
        Mr. St. Pe. Both the CG-47 cruiser and DDG-51 destroyer programs
    are excellent examples of how technology insertion can be done in
    shipbuilding programs without driving up the acquisition cost or
    delaying production schedules. Both of these programs have multiple
    ``flights'' of ships with each successive flight more capable than the
    previous flight due to a successful technology insertion program. These
    programs have been successful with technology insertion because the
    insertions were timed so that the technologies were mature enough in
    development when the decisions were made on when the technology was to
    be inserted. Stable funding and building rates also contributed by
    ensuring we could retain sufficient experienced engineers to complete
    the integration of new technology.

        20. Senator Kennedy. Mr. Welch, Mr. Fricks, and Mr. St. Pe, there
    has been much discussion of ways to streamline the acquisition process.
    One of the reforms of the last several years was to institute so-called
    ``integrated process teams'' or IPTs in major acquisition programs.
    IPTs were intended to give greater transparency into the acquisition
    process, particularly so we could prevent cost and schedule problems
    that we had found in previous programs. The IPT process seems to have
    worked well in certain programs, perhaps not so well in others.
        I would note, however, that the existence of the IPT process in the
    LPD-17 program has not prevented problems in the program. There may be
    other programs where the new approach did not work perfectly.
        This is not an appropriate forum within which to review problems on
    specific programs. Nevertheless, I would like to hear from each of our
    witnesses on the ``process.''
        Can you tell us if you believe that there is a systemic problem
    with the implementation of the IPT process?
        Are there changes we need to make to acquisition reform to correct
    the lack of visibility that we had hoped to achieve through the
    ``lens'' of the IPT process?
        Mr. Welch. We believe there is no systemic problem with the
    implementation of the IPT process. We believe that, as in any new
    approach, the success of the implementation is directly related to the
    commitment of the total team. As successes, such as Virginia-class
    submarines, become more common, there will be more believers, which
    will bring more commitment, which will bring more success. This is not
    being critical of any program or team, just our observation on human
    nature that not all new approaches are equally embraced and are equally
    successful in every company and every situation.
        Mr. Fricks. I do not have anything to add to this question.
        Mr. St. Pe. The IPT process has had varying degrees of success. The
    more complex the program the greater the challenge for the IPT. In the
    LPD-17 program, the Government was allowed to participate in Team
    meetings, but was restricted from participating in decision making or
    any action where they could assume liability. The government chose to
    work around this limitation by influencing program direction and team
    decision making through the award fee process. The anticipated benefit
    of onsite Government/Alliance decision making was not realized as
    planned for in the Alliances bid proposal.
        Developing a new design tool, and training people to use this new
    tool on a non-concurrent basis, added time to the planned schedule.
    This added unplanned for time to the design schedule. Similarly the
    IPDE schedule was rigidly adhered to (required to be fully operational
    within 18 months of contract award) despite the lack of user input
    until the training was complete. Finally, the Government mandated a
    focused effort to gather significant Fleet input to the design during
    the first year of the program. This effort was out of scope (unplanned
    effort) for the Alliance. This Fleet input drove implied requirements,
    which the onsite government team members imposed into the design
    acceptance criteria. I recommend we avoid these pitfalls with future
    IPTs.

        21. Senator Kennedy. Mr. Welch, Mr. Fricks, and Mr. St. Pe, each of
    you have indicated in your testimony how important it is to achieve
    stability in the shipbuilding program for you to be efficient. One way
    of achieving some stability is through the use of multiyear contracts.
    Among the criteria that we use in evaluating proposals to enter into
    multiyear contracts are the following:
        The program has a stable design and minimal technical risk; and
        The program has realistic cost estimates.
        Not all ship programs would meet these criteria, particularly those
    early in their acquisition cycle.
        Do any of you believe that these criteria need to be changed?
        Are there other metrics that we should be using in evaluating
    shipbuilding programs for the purpose of providing longer term funding?
        Mr. Welch. A stable design and minimal technical risk for near-term
    activities and/or early ships of a contract is critical to the multi-
    year contracting process. Without stability in these areas, increased
    rework and surplus material will offset multi-year contract savings as
    the inevitable design iterations occur.
        However, as noted in the response to question 31, a multi-year
    contract is the most effective approach to introducing block changes or
    inserting new technologies into a class already in production. These
    changes/insertions must be based either on developed designs and
    matured technologies, or be planned for insertion into whatever ship in
    the batch can accommodate the changes with an acceptable level of risk.
        Fully accurate cost estimates are not necessarily a requirement
    prior to multi-year procurements. The basic economic order savings are
    inherent to the process regardless of the estimate quality for current
    or future work. Reduction of non-recurring costs, vendor base stability
    and other benefits will occur regardless of the ``reality'' of current
    cost estimates.
        Other metrics that should be used in evaluating shipbuilding
    programs for long term funding projections include:

             The criticality of the program to preservation of key
            elements of the shipbuilding industrial base, including design
            and production capabilities, production capacity, and essential
            personnel.
             The probability that the multi-year procurement
            profile will approximate the profile which would be arrived at
            if funded on an annual basis, i.e. if there's a reasonable
            chance that at least as many ships as are covered by the multi-
            year contract will be procured over the subject timeframe.
             Long term inflation and escalation trends, the impact
            of which may be mitigated by advance or long-range procurement.
             Industry consolidation efforts which may result in
            additional cost savings from synergies or elimination of
            redundancies multi-year contracts can provide the incentive for
            companies to make the near-term expenditures associated with
            such long-term beneficial consolidations.
        Mr. Fricks. I believe that the existing multi-year contract
    criteria should be reviewed with ship procurement in mind. The existing
    criteria were defined for programs other than shipbuilding. While I
    recognize that multi-year contract authority makes the Government
    liable for termination costs in the event that the program is
    ultimately cancelled, perhaps for reasons of technical risk or
    excessive cost, it still provides the most efficient use of the
    Government's money when multiple ships are to be procured.
        While I probably would not support the use of multi-year authority
    for the procurement of the lead ship of any class, I believe
    consideration should be given to changing the criteria for such
    procurement with respect to ships so that it could be used after a
    substantial portion of the lead ship of a class has been constructed.
        Mr. St. Pe. The criteria are reasonable except when the government
    desires technology insertion throughout the life of the program. In
    these circumstances the definition of ``stable design'' and ``minimal
    technical risk'' may come into conflict with the desire to have the
    latest technology. The definition for these terms should be clearly
    established before program initiation and remain fixed throughout the
    life of the program.

        22. Senator Kennedy. Mr. Welch, Mr. Fricks, and Mr. St. Pe, a
    couple of the prepared statements mentioned the National Shipbuilding
    Research Program, or NSRP. I believe that this was formerly known as
    Maritech.
        I understand that the funding that is likely to be available in the
    fiscal year 2002 budget would only support completing prior year
    programs, and would not support any new NSRP initiatives.
        Could each of you mention some examples of your successes in the
    NSRP or Maritech program for the record?
        Are there other projects you have in mind that you would submit for
    NSRP funding if money were available? Can you give us any examples?
        Mr. Welch. Electric Boat and four other shipyards are collaborating
    with IBM to implement e-commerce that will accommodate legacy computer
    systems. The 3-year Shipbuilding PARtners and Suppliers (SPARS) project
    is delivering a series of e-commerce tools built on industry-consensus
    business processes and operated on a server system for the shipbuilding
    and repair industry. The first tool developed was designed to
    reengineer and speed the Vendor Information Request (VIR) process. This
    process is the communication mechanism used by the vendor and the
    shipyard from purchase order placement to item delivery. Early evidence
    of savings in this historically paper and time intensive process has
    led Newport News and Electric Boat to purchase parts, working with
    seven different suppliers, using the SPARS VIR process for the
    Virginia-class. To date, 374 VIRs have been submitted electronically
    using the SPARS process. 292 of them have been closed--resulting in a
    demonstrated cycle time reduction of 63 percent (30 day average, now
    down to 11 days) and a 54 percent drop in the number of VIRs needed due
    to the improved process. In addition, a SPARS bidding system prototype
    has been demonstrated at Bath Iron Works. Ingalls and Avondale recently
    installed the system and will pilot several implementations over the
    coming months.
        As a result of Bender Shipbuilding and Repair's NSRP ASE project
    success in demonstrating and implementing the practical application of
    laser steel cutting, Electric Boat is working with the Office of Naval
    Research on the Advanced Steel Fabrication Processes project. The
    Bender project has exhibited an 8 percent reduction in steel plate
    usage, a 30 percent reduction in steel cutting costs., and a
    substantial drop in fitting and welding labor. The vision of the
    Electric Boat research project is the elimination of the dependency on
    two-dimensional drawings in the structural fabrication process. This
    project receives funding through ONR's Shipbuilding Initiative, which
    is a cooperative effort between ONR and NSRP to connect the
    shipbuilder's needs, as identified in the NSRP Strategic Investment
    Plan, with the technical capabilities of the Navy Maritech Centers of
    Excellence. NASSCO, through the NSRP ASE World Class Manufacturing
    Model project, produced a methodology for a best practice ship
    manufacturing model. The Manufacturing Model provides a roadmap for
    shipbuilder process assessment and improvement through the application
    of lean design and ergonomic principles. Electric Boat is currently in
    the early stages of applying NASSCO's demonstrated success to the
    construction of the Virginia-class.
        Having gained significant experience and results from creating the
    infrastructure of advanced tools known as Integrated Product Data
    Environment, we are ready to take the process, people and tools to a
    very much higher level. More effective interconnection, incorporation
    of new capabilities, more automation of the underlying engineering
    analysis, and direct incorporation of the specs and design rules can
    take the successes of ``design-build'' to an environment of ``conceive-
    develop-engineer-design-build-support.'' The result is the Next
    Generation IPDE or Collaborative Design-Build-Maintain. Its qualities
    include remote collaboration, rule-based design, enhanced product
    model, intensive simulations, and high-end integrated analysis
        Because the funding for NSRP was cut back in fiscal year 2001, the
    annual solicitation for new projects for fiscal year 2002 was very
    limited. Participating shipbuilders have specific projects in mind
    should additional funding become available.
        Mr. Fricks. Newport News Shipbuilding supports continued funding
    for NSRP to continue its research efforts on new ship technologies and
    on technical productivity improvements.
        We have seen direct benefit at NNS from NSRP initiatives in the
    areas of improved supply chain processes, which have reduced cycle time
    and man-hours, and in the creation of lighter weight built-up
    structural stiffeners, which were needed to meet CVN(X) performance
    criteria.
        Furthermore, you are correct in that we believe that the amount of
    funding that will be included in the fiscal year 2002 budget for NSRP
    would not support the initiation of any new projects. For that reason,
    we support the efforts of NSRP to add $10 million of additional funding
    for this program.
        Mr. St. Pe. The Maritech, now NSRP, Program has been extremely
    beneficial. This program permitted Ingalls to study cruise ship design
    and construction techniques used in Europe and successfully compete for
    the construction of the first large cruise ships built in the United
    States in 40 years. This study gave us insights for optimizing our
    facilities for construction of these ships, and helped us develop an
    investment program of over $150 million in capital improvements in our
    facilities that are already benefiting not only our commercial work,
    but our U.S. Navy work as well. Laser steel cutting and thin-plate
    steel welding technology are two other examples of successful NSRP
    funded technology. With adequate funding for NSRP we hope to pursue
    development of industry-wide design tools in the future.
                                     ______

               Questions Submitted by Senator Joseph I. Lieberman

        23. Senator Lieberman. Mr. St. Pe and Mr. Welch, the Navy conducted
    a study of the surface combatant industrial base several years ago to
    determine what level of production would be required to keep two viable
    shipyards in the business of building destroyers and cruisers. The
    study concluded that a minimum of three DDG-51s per year, with
    additional workload at Ingalls, would be necessary to achieve that
    goal. I also believe that the study concluded that, even with
    ``additional work,'' at a production level of two DDG-51s per year, one
    of the yards would probably be forced out of business. We have asked
    the Navy to update that analysis. The Navy has provided a report
    responding to that request. I believe that each of you have seen the
    portions of the Navy's report that deal with your own shipyard.
        I wanted to give the two of you an opportunity to give the
    subcommittee your views on the Navy's report.
        Are there areas of the Navy's destroyer industrial base study with
    which you find fault or where your situation is not accurately
    reflected?
        We will understand if there are comments that you may wish to share
    privately with the subcommittee because they might reveal business
    sensitive information. If you have concerns of a business sensitive
    nature, please provide those to the subcommittee privately.
        Mr. St. Pe. The Navy's Shipbuilding Industrial Base Report
    accurately reflects the projected conditions at Ingalls Shipbuilding.
    We have always maintained, and continue to state that the minimum
    procurement rate for surface combatants is three ships per year, plus
    some additional work if the government intends to sustain two
    ``building yards'' for surface combatants. This building rate permits
    Ingalls to sustain a minimum core work force with all critical skills,
    both engineering and production, required to build surface combatants.
    I believe that it is important for the Nation to sustain two surface
    combatant shipbuilders, to ensure that the country can purchase
    required combatants at the most competitive prices, and to sustain the
    ability to surge the rate of construction when necessary to meet
    emergent national security requirements. Acquiring a minimum of three
    surface combatants per year provides one-and-a-half ships per year in
    production work at Ingalls, a facility that has a surge capacity of up
    to 10 surface combatants per year.
        Mr. Welch. First, let me confirm--as was noted in the Senator's
    question, that we were provided only a partial, heavily redacted
    version of the Navy's recent report to the committee because of the
    business sensitive nature of the analysis. However, I can tell you that
    we agree with a number of the findings and conclusions of that Navy
    report. Those include:

             An average build rate of more than three surface
            combatants are needed to meet validated Fleet requirements.
             Mobilization requirements exist to preserve the dual-
            source surface combatant shipbuilding base--the Navy needs BIW
            and ISI to remain viable and competitive.
             Today's surface combatants require a different level
            and mix of skills--considerable training and continued daily
            utilization are required to maintain proficiency.
             Experience and technical maturity of skilled workers
            and engineers are almost irreplaceable--the ability to
            reconstitute/rehire would be difficult, costly and time-
            consuming.
             Both DDG-51 shipbuilders could face a significant
            threat to continued viability from the procurement profile of
            two ships per year.
             The current DDG-51 procurement profile will not
            mitigate the production gap between DDG-51 and DD 21 programs.
             The addition of DDGs to the procurement profile best
            ensures BIW and ISI remain viable for DD 21 and future
            programs.

        You have asked whether there are areas of the report with which we
    have concerns. There are. Again, let me remind the committee that we
    have only had access to a limited version of the report.
        A defense press article on the Navy update's to the 1993 Industrial
    Base Study suggested that due to greater Navy concern over the
    viability of the follow DDG builder, alternative procurement profiles
    going forward might involve allocating a higher proportion of future
    ships to the follow builder. From that press article, it appeared that
    the reporter had been given access to the entire non-redacted business-
    sensitive report.
        That would represent a significant reversal of the current Navy
    acquisition policy and approach in the DDG-51 shipbuilding program that
    has been in place since the fiscal year 2004 ship procurement. Fiscal
    year 2004 was the first fiscal year when the annual building rate fell
    to three destroyers. We would take exception to and question the
    underlying rationale for any such procurement policy change. We would
    do so for the following reasons:

             The current approach of evenly splitting DDGs between
            BIW and ISI has proven successful. The Navy has testified that
            the most recent DDG-51 procurement, the fiscal years 1998-2001
            shipbuilding multi-year procurement--currently underway at a
            buy rate of three ships per year split evenly between BIW and
            Ingalls--has saved more than a billion dollars, while providing
            stability to the industrial base at a critical juncture.
             Achieving stability and the preservation of critical
            surface combatant-unique skills at both DDG-51 shipbuilding
            yards does not appear served by a potential approach to
            awarding or allocating future DDGs in a way that provides
            greater stability to one, but not both, shipbuilders.
             Key assumptions for future workload on which the Navy
            report and some of its conclusions were apparently based have
            already changed:

                     The submitted fiscal year 2001 budget forecast
                    seven DDGs would be procured after fiscal year 2001.
                    Recent reports suggest only six DDGs are budgeted after
                    fiscal year 2001.
                     The report assumed that the JCC(X) Joint
                    Command and Control Ship program would start
                    construction in fiscal year 2004. Recent reports
                    suggest the earliest that future program would start is
                    fiscal year 2006. No industry competition to design,
                    let alone build, those ships has yet been held.
                     There remains great uncertainty about the
                    fiscal year 2002 and outyear LPD-17 shipbuilding
                    profile and schedule. Production of BIW's four
                    anticipated ships--only one of which is currently under
                    contract, will occur significantly later than
                    originally planned.

        At the current low rate of DDG-51 procurement, the only sound
    course is to continue to evenly split DDG-51 contracts between BIW and
    ISI. This course offers the best prospect to sustain the dual-source
    surface combatant shipbuilding base and the critical skills of both
    shipyard workforces for meeting future Navy requirements.
        In closing, we strongly believe the Navy needs both surface
    combatant shipbuilders to remain healthy, viable and competitive. The
    report said so. We agree. Sustaining an annual three-surface combatant
    build rate through the transition to full rate DD 21 production is
    essential.

        24. Senator Lieberman. Mr. Welch, your prepared statement mentions
    a Regional Maintenance Partnership, wherein Electric Boat is teamed
    with the New London Submarine Base and Portsmouth Naval Shipyard. I
    understand that this arrangement is attempting to share overhead and
    smooth out workload among the three activities.
        Could you describe how this is working?
        Mr. Welch. Across the country, Electric Boat (EB) has approximately
    600 people actively supporting Intermediate (I) and Depot (D) level
    submarine maintenance, a number which is expected to be around 1,000 in
    fiscal year 2004 when supporting a major depot availability currently
    planned for private sector accomplishment to smooth the Portsmouth
    Naval Shipyard workload.
        I-Level--Within the Northeast region, EB is providing skilled
    tradesmen to the Naval Submarine Support Facility (NSSF) for the
    performance of non-nuclear work under the New England Maintenance
    Manpower Initiative (NEMMI). EB also manages a team of EB employees and
    military personnel at the Nuclear Regional Maintenance Department
    (NRMD) to accomplish nuclear maintenance and repair. Both of these
    initiatives are at Submarine Base New London, contiguous to EB's Groton
    facility.
        D-Level--Portsmouth Naval Shipyard (PN'S) and EB signed a Resource
    and Infrastructure Sharing Agreement (RISA) in February 1999 with the
    goal of improving the efficiency of both activities. The resulting
    relationship has been very active. With the increased submarine depot
    maintenance workload, PNS has an ongoing need for EB support. The focus
    over the past year has been to get out in front of PNS's resource needs
    so that they can be planned and provided while minimizing the adverse
    affect to new construction resulting from surprise requirements. The
    result of this effort is PNS's commitment to continuously employ 66
    trade workers with a planned monthly augmentation depending on current
    availability status and needs. Additionally, EB is providing
    engineering and planning personnel to assist in shipboard problem
    resolution and planning documentation development. EB also routinely
    supports PNS when performing work at the SUBASE in Groton. On those
    occasions when EB is unable to provide the needed resources, Newport
    News is promptly contacted to provide the additional submarine
    maintenance support.
        Over the same period, EB embarked on an initiative to learn to use
    Navy paper and processes. Evolving from this initiative, EB and PNS
    have entered into a contract enabling the assignment of work to EB to
    be performed at the SUBASE or EB's Groton or Quonset Point facilities.
    The result is that costly travel and per diem expenses are avoided and,
    by PNS providing material and working paper, redundant costs to re-plan
    the work in EB's legacy systems are also avoided.
        EB recently completed the Selected Restricted Availability (SRA) of
    U.S.S. Dallas (SSN-700), and has started the SRA of U.S.S. Pittsburgh
    (SSN-720). Both of these availabilities are at Submarine Base New
    London.
        In summary, we consider our current maintenance participation to be
    particularly effective and mutually beneficial to EB and the Navy, as
    our skilled tradesmen provide an enhanced level of service to the
    Fleet, and we are able to keep them productively employed and level
    swings in the new construction workload. 'We believe that our
    customers--NAVSEA, the Northeast Regional Maintenance providers, and
    the ships, squadrons, and type commander--would agree with that
    assessment.

        25. Senator Lieberman. Mr. Fricks, I understand that you have been
    working on a similar arrangement in the Tidewater area.
        Mr. Fricks. That is correct Senator Lieberman. Under a memorandum
    of agreement between Newport News Shipbuilding and Norfolk Naval
    Shipyard, we are both exploring ways in which we can cooperate and
    share resources in an attempt to bring greater efficiency into the ship
    repair arena in the Tidewater area.
        While this is a relatively new undertaking, we believe it presents
    an opportunity for the Navy to obtain greater efficiency in its repair
    activities.

        26. Senator Lieberman. Mr. Welch and Mr. Fricks, do any of you have
    suggestions for other regional cooperation opportunities where we might
    expand this concept to make operations more efficient?
        Mr. Welch. Stability and predictability in new construction
    programs was a recurring theme during the testimony provided on the
    fourth of April. Within the maintenance program, both at the
    Intermediate (I) and Depot (D) level the same is true. Much of what has
    been successful in the Northeast has resulted from obtaining firm
    commitments to assign work and then to effectively plan for its
    accomplishment. Following are four recommendations for Northeast region
    submarine maintenance that could be extended to other regions and
    classes of ships:

             At the earliest possible time, assign work that is in
            excess of Naval Shipyard capacity to the private sector, e.g.,
            PNS and Groton homeported ships in the case of EB. In the
            Northeast, current examples would include assignment of the
            Engineered Overhaul (EOH) of U.S.S. Providence (SSN-719) in
            fiscal year 2004, the Depot Modernization Period (DMP) of
            U.S.S. Hartford (SSN-768) in fiscal year 2006, and nine
            currently unassigned Selected and Pre-Inactivation Restricted
            Availabilities (SRA/PIRA) scheduled through fiscal year 2005.
             Continue to level the workloads at Portsmouth NSY and
            EB by jointly planning utilization of resources. This would
            reduce overtime premiums, restore surge capability, and help
            ensure timely return of submarines to the Fleet. By extension,
            employ a more enterprise-wide (submarine maintenance) approach
            to workload and resource analysis and assignment, engaging all
            public and private sector providers.
             Expand EB participation in I-Level work at the Naval
            Submarine Support Facility (NSSF) and the Nuclear Regional
            Maintenance Department (NRMD). This would exploit the synergy
            of experienced shipyard tradesmen working with young sailors at
            the NSSF, provide flexibility and savings by providing unique
            infrequently used skills, and leverage existing regional
            facilities such as the EB graving docks. The opportunity also
            exists to selectively enhance the engineering and planning
            capability of NSSF to further leverage the D-level capabilities
            of the journeymen mechanics being provided under the New
            England Maintenance Manpower Initiative (NEMMI). This
            initiative would reduce the cost of separately contracting for
            what have traditionally been shipyard jobs.
             Utilize the existing EB/NNS agreement to cooperatively
            develop ``Best-Value'' solutions to the performance of
            submarine maintenance. Facilitated by a Navy-initiated
            consolidated contracting vehicle, this would foster improved
            communications, enable co-operative planning, optimize resource
            utilization, and minimize overhead costs and delays.

        Mr. Fricks. I believe there may be other regional cooperation
    opportunities. For example, in the San Diego Harbor, home today of one
    and the future home of three nuclear aircraft carriers, Newport News
    Shipbuilding is serving as an interface between the nuclear qualified
    employees of Puget Sound Naval Shipyard and the non-nuclear repair
    companies in the San Diego Harbor for the purpose of performing
    maintenance on the U.S.S. Stennis.

        27. Senator Lieberman. Mr. St. Pe and Mr. Welch, the Navy and the
    two submarine shipbuilders have been using the design build approach to
    acquire the SSN-774 Virginia-class submarine. This has apparently
    resulted in a much smoother transition into production for this class
    of submarines than we have been able to achieve in other cases.
        The next big combatant class we will be buying is the DD 21.
        Are we using all of the lessons that we have learned from the
    Virginia-class experience as we approach the DD 21 program?
        Has the Navy identified adequate resources to implement these
    lessons?
        Mr. St. Pe. The DD 21 program has not yet entered Phase III during
    which the detailed design for construction of DD 21 will be developed.
    The DD 21 will leverage lessons learned from all Navy shipbuilding
    programs both current and past as well as experience with the
    commercial cruise ships now under construction at Ingalls. The design
    build process for the Virginia-class submarine program will be
    thoroughly evaluated for application of successful processes that may
    be applied to the DD 21 program.
        Mr. Welch. Speaking with respect to the General Dynamics Bath Iron
    Works led Blue team, I can assure you that we are fully embracing the
    design build approach for DD 21.
        Resources necessary to implement these lessons are identified in
    the Phase III proposal previously submitted by the Blue Team.

        28. Senator Lieberman. Mr. Welch, with modern ships, an increasing
    share of the cost of warships comes from suppliers other than the
    shipyard. Therefore, we should be paying close attention to costs from
    suppliers if we are going to be able to afford fleet recapitalization.
        Your prepared statement (on page 8) mentions your approach for
    reaching out to subvendors in a program called ``Extended Enterprise.''
        Could you describe how this program is working?
        Mr. Welch. The extended enterprise program was initiated in the
    early 1990's to involve the supplier base at a more detailed level in
    the low rate production environment. The objectives of the program were
    three-fold:

             Contain Virginia (aka NSSN) material costs
             Minimize material availability risks for Virginia
             Maximize the potential value of suppliers to Electric
            Boat

        Each major area of the material supply chain was displayed and
    analyzed to achieve a robust, affordable network of sources :For the
    life of the program. The strategy employed was based upon full
    acquisition cost, not just manufacturing cost.
        Cross-functional teams consisting of personnel from; Materials
    Acquisition, Quality Assurance, Design and Construction Engineering,
    and Operations were utilized in conjunction with supplier
    representatives to perform the initial and ongoing follow-up reviews.
    Major tasks consisted of:

             Status Templates
             Work Plan
             Part Family Baseline
             Supplier Baseline
             Lifecycle Cost Framework
             Validate/prioritize/quantify opportunities and risks
            as they apply to cost and availability
             Conduct Supplier Visits/Surveys
             Establish Performance Targets
             Develop Potential Outcome Scenarios
             Ongoing Follow-up and Re-evaluation to access changes
            in condition/status

        The program is considered to be highly successful, with the
    following major benefits:

             Despite an environment of consolidation,
            rationalization and attrition, no major material impacts (i.e.
            shortages/performance shortfalls) have been experienced by the
            program.
             Limited/single/sole sources of supply have remained
            viable, capable businesses which are expected to support the
            next phase of acquisition.
             Subcontract material costs have been contained close
            to anticipated levels.
             A stable, technologically sufficient industrial base
            has been retained for future technology insertion and follow
            ship development.
             Limited vertical integration has been required by the
            shipbuilders to cost effectively produce the ship.

        29. Senator Lieberman. Mr. Welch, Mr. Fricks, and Mr. St. Pe, all
    of your statements stressed ``stability'' as a key attribute of
    building the fleet for the future. One of the prepared statements
    mentioned stability in reference to the Navy's new T-AKE Lewis and
    Clark-class of cargo ship.
        I believe that the Navy has historically used the auxiliary vessels
    in the shipbuilding account as a budget ``cushion'' to absorb other
    problems in the shipbuilding account or elsewhere.
        Is there some way for industry to demonstrate to the Navy that
    there is a real cost of this variability, or put another way, a virtue
    in stability?
        Mr. Welch. It is true that frequently the Navy's auxiliary ship
    programs become the ``cushion'' to absorb problems or opportunities in
    other shipbuilding programs. Auxiliary programs get deferred or
    delayed, R&D for such is intermittent, etc.
        There is clearly a price paid for the resulting loss of stability
    for auxiliary ship programs. The key benefits of stability which are
    compromised are:

             Ability to economically justify specialized facilities
            investment based on assurances of a certain size production run
            of ships.
             Stability in workforce. This avoids the very costly
            hiring--layoff cycle which gets built into the shipyard
            overhead costs. It enables the company to justify significant
            investment in personnel training, which greatly aids
            productivity.
             Employee commitment to the Company.
             Continuous process improvement on regularly scheduled,
            sequential follow-on ships.

        All of these benefits lead to clear (and substantial) productivity
    improvement which lowers the cost of Naval new buildings. If you remove
    the stability in the auxiliary ship programs you forego all these cost
    savings.
        The Navy's current LMSR Sealift Ship program is a classic example
    of the benefits of program stability.
        Eight ships were built in sequence. By taking advantage of this
    program stability, NASSCO has continuously improved its design and
    construction processes and the beneficial results to the Navy have been
    profound. NASSCO's Sealift ships were delivered to the Navy in the best
    quality condition of any newly delivered Navy ships. All eight ships
    have or will deliver well ahead of contract schedule. The Navy has
    obtained the equivalent of 2 years of an additional ship's service from
    these early deliveries. Additionally, these ships were delivered below
    contract target price with the Navy receiving a refund of a share of
    this cost saving underrun.
        Clearly stability in auxiliary ship programs can and does pay big
    dividends. The only improvement to this Sealift ship model would have
    been if all eight ships were authorized up front, in one group buy
    (instead of the original one firm plus five options, plus a follow-on
    7th, then a follow-on 8th ship). Had NASSCO been assured of all eight
    ships up front, NASSCO would have committed significant capital for
    productivity enhancing facilities improvements.
        Mr. Fricks. While Newport News Shipbuilding is not involved in
    building this class of cargo ship and therefore, does not have access
    to the specific cost figures related to that ship, I believe industry
    can easily demonstrate that instability in any ship class construction
    program has a real cost to the Navy.
        Mr. St. Pe. Litton Ship Systems' most recent experience with
    auxiliary ships is the TAO program during which Avondale built 16
    ships. This program was quite stable and enjoyed the attendant
    efficiencies. Avondale was able to sustain a qualified highly skilled
    work force, negotiate good prices for materials and thus leverage the
    learning curve advantages not only at the building yard but in the
    supply chain as well.
                                     ______

                Questions Submitted by Senator Mary L. Landrieu

        30. Senator Landrieu. Mr. Welch, Mr. Fricks, and Mr. St. Pe, when
    listening to your opening statements and reviewing your written
    testimony I was struck by a common chord that runs through them all. In
    a word, that common chord is stability. Let me assure you that I am in
    complete agreement with your assessment and believe this is probably
    the single item this Congress can address to reduce shipbuilding costs
    and ensure the taxpayers get the biggest bang for the buck. We are all
    aware of the facts concerning current ship purchase rates.
        I would like each of you to provide your best estimate for the
    required ship build rates on major Navy SCN programs to maintain the
    industrial base if that rate were guaranteed for the next 5 or 10
    years?
        What was your estimate based on?
        Mr. Welch. The question of the required ship building rate to
    maintain the industrial base has two interlocked answers--the build
    rate for a specific type of ship such as nuclear or surface combatant
    required to maintain the unique skills and capabilities associated with
    that program, and the aggregate build rate across all programs required
    to maintain not only the first-tier shipbuilders but also the
    suppliers, service providers, and second-tier yards which are an
    indispensable part of the equation.
        On a programmatic basis, the question is largely what rate will
    allow the pertinent shipyards to both maintain critical skills and
    capabilities, and deliver an affordable product, i.e. not burden the
    procurement price with unsupportable levels of overhead or with major
    cyclic employment costs. Our assessments are based on the studies of
    the submarine and surface combatant industrial bases which General
    Dynamics assisted the Navy in developing:

        The minimum sustainable rate of nuclear submarine construction
    (i.e. the SSN program) is approximately one ship every other year at
    each of the two yards currently engaged in the Virginia program, or a
    combined minimum rate of procurement of one ship per year. This will
    sustain necessary capabilities, albeit at something of a cost premium.
    However, the minimum efficient rate of production, at which cyclic
    employment and overhead absorption costs cease to be an issue, is
    approximately two nuclear submarines per year, with one delivery from
    each yard on an annual basis.

             Because of the almost 6-year construction span for an
            SSN, and the successive phases of construction each of which
            requires different capabilities (parts manufacturing/module
            construction/ship assembly/waterborne tests and trials),
            effective trade labor, equipment, and facility utilization can
            be achieved at or near that annual delivery rate.
             The minimum sustainable rate of surface combatant
            construction (i.e. the DDG-51/DD 21 programs) is approximately
            three ships per year, split equally between Ingalls and Bath
            Iron Works. Our estimate is consistent with the Navy's surface
            combatant industrial base study conducted in 1993 and updated
            in 2001.
             The minimum sustainable rate of amphibious warfare
            ship construction (i.e. the LPD-17 program) is approximately
            two per year, although this number is very much a function of
            what other work is ongoing at the yards in question. Future
            programs such as JCC (X) or LSD replacements are counted in
            this requirement as the follow-on to the LPD-17 program.
             The minimum sustainable rate of auxiliary ship
            construction (i.e. the T-AKE program) is a function of which
            yards are dependent on auxiliary ship work to maintain
            capabilities and keep overhead costs under control. Ideally,
            NASSCO would like to see two Navy auxiliary ship deliveries per
            year from its yard. This would consume roughly half of NASSCO's
            capacity, leaving the other half for commercial work. Any
            production rate below about one delivery per year at a given
            yard becomes very inefficient for the sorts of reasons
            discussed under submarines. If work is assumed split between
            two yards, for example NASSCO and Avondale, then the minimum
            sustainable rare is probably about two ships per year.

        Based on recent procurement rates and published studies, we assume
    that the minimum sustainable rate of construction for nuclear aircraft
    carriers (CVNs) and large-deck amphibious assault ships (LHDs) would be
    approximately one every 4 or 2 years, respectively. However, the rate
    for LHDs is probably affected by what other amphibious warfare or major
    auxiliary ship work is interspersed in the Ingalls workload.
        Adding up all of the minimums listed above, and assuming that there
    is a requisite level of concomitant commercial ship construction at
    NASSCO, Ingalls, and Avondale to support minimum workforces and
    facility utilization rates, would indicate that on average at least
    seven naval vessels need to be procured each year. However, a rate of
    construction which would not leave the industry hanging on the ropes,
    and would begin to achieve some level of efficient production, would
    probably be closer to 10 ships per year.
        This volume must now be discussed in the context of profitability.
    Providing a market rate of return is a function of securing sufficient
    volume that offers the opportunity to earn a risk-balanced rate of
    return. In the November 14, 1996 ``Navy Shipbuilding Practices Study''
    KPMG highlighted problems faced by the U.S. shipbuilding industry with
    respect to financial viability. Of the 43 U.S. Navy contracts analyzed
    (including DDG's 59-81), at ``Contract Inception'' fewer than 50
    percent implied an internal rate of return exceeding the cost of
    capital. After ``Significant Progress'' the number drops to only 12
    percent. These are clearly not outcomes that would be viewed favorably
    by owners or shareholders, and are not consistent with maintenance of
    the industrial base.
        In addressing these problems, consideration must be given to the
    procurement approach used to let these contracts, the financial terms
    and conditions of the contracts themselves, and expectations for the
    competitive landscape of the future.
        Mr. Fricks. I can only comment on the build rate for nuclear
    aircraft carriers and submarines, the two programs with which Newport
    News Shipbuilding is involved.
        As I said in my formal testimony, the industrial base is presently
    surviving but struggling with the present ship procurement rate.
    However, to bring more efficiencies and to strengthen the shipbuilding
    industrial base the Virginia-class submarine program should have multi-
    year procurement authorized at a rate of not less than two per year,
    beginning not later than fiscal year 2004. Additionally, in order to
    maintain a Navy with 12 carrier battle groups, nuclear aircraft
    carriers should be procured at a rate of one, not less than every 4
    years. Additional savings and efficiencies could be obtained with a
    single contract award for two or three nuclear aircraft carriers to be
    built over the next 8 to 12 years, as was done in 1981 and again in
    1988.
        These estimates are based on numerous studies conducted by Newport
    News Shipbuilding and the Navy regarding the most efficient ways to
    procure the number of nuclear aircraft carriers and submarines required
    by the Navy.
        Mr. St. Pe. The minimum production to ensure a stable, multi-
    skilled production work force which allows an improving learning curve.
        A minimum stable shipbuilding rate for each of the Navy
    shipbuilding programs in which Northrop Grumman's two shipyards are
    currently involved or in which the company expects to be are as
    follows:
        DDG-51 and DD 21--The Navy needs to procure a minimum of three
    surface combatants destroyers or cruisers per year. With two combatant
    building yards this will ensure each yard a stable minimum building
    rate 1.5 ships per year. A most economical and therefore most cost
    efficient building rate for the Navy is a procurement rate of five
    combatant ships per year or 2.5 ships per year for each of the two
    building yards.
        Large Deck Amphibious ships (LHD/LHA)--A minimum procurement rate
    of one ship every 3 years if these ships are to be built in a single
    shipyard.
        LPD-17--A minimum procurement rate of two ships per year assuming
    two shipyards are participating in the production.
        T-AKE--A minimum procurement rate of one ship per year assuming a
    single shipyard is producing the ships.
        Coast Guard Cutters (Deepwater Program)--A minimum building rate of
    one ship per year per building yard.

        31. Senator Landrieu. Mr. Fricks, in your opening statement you
    refer to the impact of various ship funding alternatives including
    multi-year funding, advance procurement, block buys and advance
    appropriations. I must confess that I agree with you completely and was
    quite surprised when I discovered that the U.S. Government does not
    treat the acquisition of warships costing literally hundreds of
    millions of dollars in the same way a business finances its capital
    programs. That is, on a cash outlay basis.
        Recognizing that stability truly is the key to cost savings, which
    of these acquisition reforms would be most effective in cutting the
    government's acquisition and life-cycle costs?
        What pros and cons do you see to the various approaches I mentioned
    above?
        Mr. Fricks. These various alternatives, such as multi-year funding,
    advance procurement, block buys, and advance appropriations, all
    support the first fundamental of a successful shipbuilding program--a
    commitment to stability. Therefore, I enthusiastically support them.
        What these alternatives do to varying degrees is allow the
    shipbuilder to plan ahead, invest ahead and buy several ship-sets of
    material at once--all of which help to reduce the costs of the ships.
        Advance appropriations are more in line with how business finances
    its capital programs, which is on a cash outlay basis. For example, if
    we build a new dry dock, we will approve the entire project but budget
    the cost over the future years when it is expended. It is certainly
    worthy of careful consideration. Using advance appropriations,
    shipbuilders can build more ships over the next 5 or 6 years and
    certainly build them at reduced costs.
        There is no question that the use of multi-year procurement of
    ships provides the most effective approach in cutting acquisition
    costs. If multi-year procurement were coupled with advance
    appropriations, there would be a real opportunity for the Government to
    obtain the ships it needs in the most cost effective manner. However,
    let me emphasize once again, that a long term commitment to a stable
    and increased production rate of all classes of Navy ships is essential
    if these alternative funding approaches are to reap their potential.

        32. Senator Landrieu. Mr. St. Pe, in your opening statement you
    made reference to the teaming concept between Avondale and the Navy in
    designing and building the LPD-17. Combined with such innovative
    practices as the Integrated Product Model and work sharing between the
    Ingalls and Avondale yards, we are beginning to see the fruits of that
    innovation in terms of reduced life-cycle costs for the ship.
        Please share with us your thoughts on the effectiveness of this
    teaming concept and what barriers, if any, are preventing us from
    achieving the maximum cost savings and efficiencies from process?
        What is the status of the LPD-17 program and what is your
    assessment as to Litton's ability to maintain the construction
    schedule?
        Do you see any potential for additional cost savings through either
    advance procurement or multi-year buys of additional LPD-17 hulls?
        Do you believe any of the technology and capital investments made
    for the LPD-17 program can be leveraged to produce cost savings in the
    Joint Command and Control Ship (JCC) program?
        Mr. St. Pe. The teaming process for LPD-17 includes many elements,
    which should be used in future programs. There have, however, been a
    number of barriers to achieving full cost saving, including FAR and CAS
    regulations that restricted the combined Government Alliance Team's
    ability to define the Government's role on the team. The Government was
    allowed to participate in Team meetings, but was restricted from
    participating in decision making or any action where they could assume
    liability. The government chose to work around this limitation by
    influencing program direction and team decision making through the
    Award Fee process. The anticipated benefit of onsite Government/
    Alliance decision making was not realized as planned for in the
    Alliances bid proposal.
        Developing a new design tool, and training people to use this new
    tool on a non-concurrent basis, added time to the planned schedule.
    This added unplanned for time to the design schedule. Similarly, the
    IPDE schedule was rigidly adhered to (required to be fully operational
    within 18 months of contract award) despite the lack of user input
    until the training was complete. Finally, the Government mandated a
    focused effort to gather significant Fleet input to the design during
    the first year of the program. This effort was out of scope (unplanned
    effort) for the Alliance. This Fleet input drove implied requirements,
    which the onsite government team members imposed into the design
    acceptance criteria.
        I assess Litton's ability to maintain the revised LPD-17 program
    schedule as excellent. We have now completed over 85 percent of the
    detailed design and started construction on the first ship. Early
    production returns are excellent, meaning we have very little
    production rework. That is reflective of an excellent design and our
    production personnel's understanding of the production documentation.
        Additional advance procurement funding will permit us to purchase
    long lead material using the in place very attractively priced options
    with our suppliers. Lack of advance procurement funding would force us
    to allow these options to expire thus necessitating the re-negotiation
    of prices for key long lead items. Multi-year procurement is very
    attractive for programs such as LPD-17 where the Navy procures multiple
    ships over an extended production run. The DDG-51 Aegis Destroyer
    program is an excellent example of the savings that can be achieved
    with muiti-year procurement.
        I am confident that the technology and cost savings from the LPD-17
    program can be leveraged for the Navy's planned Joint Command and
    Control ship (JCC) program. The degree to which this can be done will
    ultimately depend on the Navy's requirements for JCC. Certainly,
    leveraging the fully digital computer aided design of LPD-17 to modify
    it for.
        JCC requirements could potentially save millions of dollars in the
    acquisition of these ships. Additionally, if the program were to run
    concurrent with or immediately follow completion of LPD-17 production
    there would be an opportunity to take advantage of the hot production
    line and learning curve. This is true not only at the building yards
    but at key suppliers for components used in both classes of ships.

        33. Senator Landrieu. Mr. St. Pe and Mr. Welch, there is currently
    a more-than-academic debate in Naval circles about the efficacy of the
    ``Streetfighter'' concept advocated by Vice Admiral Cebrowski and the
    Naval War College.
        What is your assessment of the Streetfighter concept?
        Have your organizations done any research or preliminary work and
    estimates on this concept? If so, what is your assessment and what
    costs do you envision would be required to build several prototypes?
        Mr. St. Pe. Streetfighter is an interesting concept, but at this
    stage only a concept. As shipbuilders we don't attempt to define the
    Navy's mission or forces needed to accomplish it. We do try to
    understand the Navy's mission requirements in order to assist in
    defining what ships can most efficiently meet mission needs. I think
    the shipbuilding industry needs to understand more about what missions
    the Navy envisions for Streetfighter. How will it operate, what support
    concept does they Navy project? We have done some preliminary study of
    Streetfighter concepts, but it is difficult to estimate costs for
    prototype or production ships without a clearer understanding of what
    these ships would be expected to do. We have researched various hull
    forms, construction techniques and materials. Knowing some details, we
    can assist the Navy in exploring various solutions to meet the mission
    needs.
        Mr. Welch. Streetfighter has been discussed by the Navy as a
    concept for the future (post DD 21), but very little in the way of
    specific requirements is available to comment on. Our focus has been on
    the stated war fighting requirements of the DDG-51 Flight IIa changes,
    and for the last 3 years, the DD 21 program.
        General Dynamics has not to date, been formally solicited by the
    Navy to participate in development of the conceptual approach, and
    therefore has not invested in preliminary work related to this concept.

        34. Senator Landrieu. Mr. Welch, Mr. Fricks, and Mr. St. Pe, S. 127
    is currently pending before the Senate. It mandates that repair work on
    all vessels covered by the bill be performed in U.S. shipyards.
        I would like all of you to comment on S. 127 and how you believe it
    would affect your yards and what, if any, impact would it have on Navy
    ship construction and repair.
        Mr. Welch. We oppose S. 127 because it would be extremely
    detrimental to the U.S. shipbuilding industrial base. U.S. shipyards
    are building cruise ships again for the first time in over 40 years.
    Each ship represents over $400 million in direct revenue to the
    shipyard and thousands of jobs. Beyond these direct impacts, millions
    of dollars are being spent through U.S. subcontractors. S. 127 would
    kill this market, and retain only the comparatively insignificant
    market to repair cruise ships. Commercial shipbuilding is critical to
    maintaining U.S. shipyards especially in these periods of very low Navy
    shipbuilding.
        If commercial work is being done in a shipyard which also builds
    Navy ships, the overhead of the yard can be spread over a larger base
    of work thereby lowering the cost of Navy shipbuilding. The Jones Act
    and the Passenger Vessel Services Act, through the U.S. build
    requirement, provide the commercial shipbuilding market for U.S.
    shipyards, both large and small. S. 127 is no help to U.S.
    shipbuilding, and would drive up the cost of Navy shipbuilding.
        Mr. Fricks. Senator Landrieu, while Newport News Shipbuilding is
    not involved in any commercial ship construction, we believe that S.
    127 would be harmful to the Navy shipbuilding industrial base. The ship
    repair provisions in S. 127 would have very little impact in our yards.
    But, other provisions of S. 127, amending the U.S. build provisions of
    the Passenger Vessel Services Act to allow unlimited numbers of foreign
    built ships into the U.S. domestic coastwise trade, would have
    substantial adverse impact on those shipyards now building ocean going
    cruise ships and could adversely impact Navy ship construction programs
    at those yards.
        Mr. St. Pe. There is no need for a change to the Passenger Vessel
    Services Act. Large oceangoing cruise ships are once again being built
    in this country to serve the growing American market. Currently, two
    ships are under construction at Northrop Grumman Ingalls Shipbuilding
    (the first ship is more than 20 percent complete), with contract
    options for four more ships. Furthermore, smaller coastal cruise ships
    are being built in the U.S. to also serve American ports.
        S. 127 will amend the U.S.-build provisions of the Passenger Vessel
    Services Act allowing unlimited numbers of foreign built ships into the
    U.S. domestic coastwise trade--effectively giving away the American
    shipbuilding industry to foreign shipbuilders. The bill will jeopardize
    the construction of ships currently covered by contract options and
    ongoing contract negotiations, by interjecting tremendous uncertainty
    into the market that would discourage efforts to develop an American
    cruise ship industry to serve American ports. Under this proposed
    legislation, American companies would not be able to secure financing
    for American-built ships.
        With the low level of naval ship construction in the last decade,
    averaging just six ships a year, commercial ship orders have been
    critical to sustaining the 9,080 companies, employing 879,014 highly
    skilled Americans, in 47 states that make up the defense shipbuilding
    industrial base. Commercial ship construction has also reduced the cost
    of naval ships by allowing shipyards to spread their overhead cost
    across more ships. Without commercial ship construction the cost for
    naval ships will increase, and the defense shipbuilding industrial base
    will constrict, resulting in job losses to America's manufacturing
    base.
        We oppose S. 127 for these and other deficiencies. S. 127 will harm
    the American defense shipbuilding industrial base, weaken American
    national security, put shipbuilders out of work, jeopardize the
    economic viability of existing American cruise ship operating
    companies, and stop the construction of an all American cruise ship
    industry to serve American citizens and American ports.

        [Whereupon, at 11:10 a.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                            THURSDAY, APRIL 26, 2001

                                   U.S. Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.

         STRATEGIC AIRLIFT AND SEALIFT IMPERATIVES FOR THE 21ST CENTURY

        The subcommittee met, pursuant to notice, at 2:01 p.m.,
    room SR-232A, Russell Senate Office Building, Senator Jeff
    Sessions (chairman of the subcommittee) presiding.
        Committee members present: Senators Smith, Sessions,
    Collins, Kennedy, and Carnahan.
        Professional staff members present: John R. Barnes, Gary M.
    Hall, and Thomas L. MacKenzie.
        Minority staff members present: Creighton Greene,
    professional staff member; and Michael J. McCord, professional
    staff member.
        Staff assistants present: Kristi M. Freddo and Jennifer L.
    Naccari.
        Committee members' assistants present: Arch Galloway II,
    assistant to Senator Sessions; Kristine Fauser, assistant to
    Senator Collins; Derek Maurer, assistant to Senator Bunning;
    Menda S. Fife, assistant to Senator Kennedy; and Neal Orringer,
    assistant to Senator Carnahan.

          OPENING STATEMENT OF SENATOR JEFF SESSIONS, CHAIRMAN

        Senator Sessions. Good afternoon. I think it is time for us
    to commence our hearing and we appreciate General Robertson
    joining us and I thank our ranking member, Senator Kennedy, for
    his insight and for his participation on this subcommittee.
        The Seapower Subcommittee today will convene to review
    strategic airlift and sealift for the 21st century. The
    subcommittee has oversight and responsibility for three
    enablers of our strategic lift. One, the C-17, the C-5, and the
    C-141 aircraft and agreements with the U.S. airline industry.
        Two, the active duty; preposition and Ready Reserve Force,
    strategic lift ships and agreements with U.S. maritime
    industry.
        Three, the Military Traffic Management Command and
    agreements with the U.S. national transportation industry.
        I had about 10 years in the Army Reserve as part of a
    transportation unit. They work with the Military Traffic
    Management Command. There is great appreciation of the massive
    challenges they face when you talk about rapidly moving large
    amounts of cargo around the world.
        Of course, we all recognize that our Active Duty Reserve
    and civilian men and women are the key enablers which make the
    Defense Transportation System operate, and that specific
    personnel-related issue will be addressed by the Personnel
    Subcommittee. The highest strategic lift importance, no matter
    what the mission, whether at home or abroad, is this country's
    Defense Transportation System (DTS) which enables us to quickly
    extend a hand of friendship or the fist of war around the
    globe.
        Congress has aggressively exercised its oversight
    responsibility in assessing the requirements for strategic lift
    and then taking action. This oversight has resulted in
    legislation which focuses attention on strategic lift as a key
    enabler for carrying out the full range of military operations.
        To this end, Congress set up the National Defense Sealift
    Fund and enacted legislation which provides incentives for
    commercial ships and aircraft to install national defense
    features and to transport military personnel and equipment in
    crisis. The Mobility Requirement Study 2005 (MRS-05) examined
    the requirements for the Defense Transportation System to
    support two nearly simultaneous major theater wars. The study
    was forwarded to Congress in January of this year. In summary,
    the study concludes that the current plan to recapitalize
    strategic sealift, including prepositioned ships, will be
    sufficient to meet the 2005 requirements if the
    containerization, equipment, and commercial agreements are
    successful.
        The study also concludes that there appears to be a
    requirement for more C-17 aircraft, more than the 120 presently
    planned for procurement. While it is correct that the funding
    for the infrastructure, personnel, and systems are funded in
    the services' budget, we hope that today's witness will provide
    his unique insight into the requirements and programs needed to
    manage the strategic lift portion of the Defense Transportation
    System. Specifically, we hope to review and explore the
    following questions concerning strategic airlift and sealift.
        One, what are the budget and policy impacts of the Mobility
    Requirement Study 2005?
        Two, will additional C-17 aircraft be required, or will the
    present inventory objective of 120 suffice?
        Three, what modifications are required to bring 126 C-5
    aircraft to their required operational readiness?
        Four, what is the risk associated with having a one Major
    Theatre War (MTW) strategic lift capability and a two-MTW
    national security strategy?
        Five, is the Joint Logistics Over-the-Shore (JLOTS)
    capability adequate to offload strategic ships that arrive
    where a fixed port or facility is not available, and what are
    the strategic lift implications of the current Army
    transformation strategy?
        To answer these questions and others submitted by the
    members, we welcome the Commander in Chief of the U.S.
    Transportation Command (USTRANSCOM), Gen. Charles T. Robertson,
    Jr., USAF.
        General, we welcome you and thank you for your 33 years of
    service in the United States Air Force. Before we begin your
    testimony, I would like to recognize Senator Kennedy, our
    ranking member, for any comments he may have.

                 STATEMENT OF SENATOR EDWARD M. KENNEDY

        Senator Kennedy. Thank you. Thank you very much, Mr.
    Chairman. Thank you for calling this hearing today and our
    previous hearings as well. I want to join you in welcoming
    General Robertson to the Seapower Subcommittee today. The
    subject of strategic lift is not a new one for the
    subcommittee. We have taken significant action over the years
    in dealing with strategic lift issues on a bipartisan basis.
    This subcommittee played a significant role in establishing the
    U.S. Transportation Command. We encouraged the Department of
    Defense to focus on strategic sealift issues and urged the
    Department to undertake the original mobility requirement
    study. We authorized the needed resources for the strategic
    sealift shipping and we, Senator Cohen and myself, helped to
    restructure the C-17 program as a result of controversies that
    surround it.
        We supported the Maritime Prepositioning Force (MPF)
    enhancement program to provide an additional ship for each MPF
    squadron. Today's hearing continues the subcommittee's strong
    bipartisan interest in the broader strategic lift policy issues
    facing the Nation today. We all understand that Secretary
    Rumsfeld has conducted a review of defense needs. We look
    forward to its results. Possible major changes for the future
    include altering the current approach and size in forces which
    is based on handling two simultaneous MTWs. It seems unlikely,
    however, that Secretary Rumsfeld's review will lead to major
    reductions in strategic lift requirements, since the current
    lift structure is already based on supporting one MTW.
        Protecting our national security will undoubtedly require a
    significant continuing emphasis on force mobility, including
    basic requirements for strategic lift. We look forward to
    working closely with the administration in meeting these
    requirements.
        Thank you, Mr. Chairman, for calling the hearing and
    maintaining the subcommittee's interest in these very important
    issues. I look forward to hearing General Robertson.
        Senator Sessions. Thank you, Senator Kennedy. It appears
    there have been actions as a result of this subcommittee that
    have been beneficial. We salute you for those efforts. General
    Robertson, we will be glad to hear from you.

    STATEMENT OF GEN. CHARLES T. ROBERTSON, JR., USAF, COMMANDER IN
              CHIEF, UNITED STATES TRANSPORTATION COMMAND

        General Robertson. Thank you, sir. Mr. Chairman, Senator
    Kennedy, I really do appreciate this opportunity to come back
    again before the Seapower Subcommittee of the Senate Armed
    Services Committee to talk to you about U.S. Transportation
    Command (USTRANSCOM) and the Defense Transportation System
    (DTS). It's probably the second most important thing in my
    life, and my wife will occasionally even argue that point.
        I submitted a formal statement to the subcommittee. I would
    ask that it be taken for the record. It is very long. I doubt
    that anyone in this room except one who reminded me in the back
    that he had read it word-for-word will go through it point-by-
    point and word-for-word. It is my ``Statement of the Command''
    message to the subcommittee, and so I won't hold it against you
    if you do not read it. If you will allow me just a minute to
    give you some of the high points.
        Senator Sessions. Well, it will be made a part of the
    record and it will be reviewed by us. Thank you, very much.
        General Robertson. Thank you, Senator. Just a couple of
    points. First, I would say, as I will probably respond to many
    of the questions that are offered this afternoon, that as we
    discuss the U.S. Transportation Command and Defense
    Transportation System that it is a classic good news/bad news
    story. The first good news is that there is more good news than
    there is bad news. More good news than there was last year, and
    if you call me back again next year, there will be more good
    news next year, just based on the direction that we have taken
    and the support of this subcommittee.
        Let me tell you just a minute about who we are, who I think
    we are, and what we do.
        USTRANSCOM is 150,000 dedicated Department of Defense
    transportation specialists. They are our U.S. airlines. They
    are our U.S. air cargo carriers. They are the U.S.-flag fleet.
    They are our trucking and rail partners. They are our merchant
    mariners around the world, both licensed and unlicensed, who
    operate our ships and the air crews that operate our airplanes
    around the world. We are a Total Force, Active Duty, Air
    National Guard, Air Force Reserve, DOD civilian, and commercial
    partners who shoulder the load of the Defense Transportation
    System.
        It is not an attractive business and that is one of the
    major reasons I appreciate this subcommittee's attention to
    lift, because it is not glamorous. We do not drop bombs. It is
    just that no bombs get dropped until we act first. Nothing
    happens until something moves.
        At the personal level, we are the C-5 and the C-17 air
    crews you see delivering relief supplies around the world. We
    are your licensed and unlicensed merchant mariners, we are the
    commercial truck drivers and locomotive engineers and airline
    crews who move our economy every day. But even more, we are
    your John Q. Citizen, the person who puts aside his civilian
    job and his civilian suit on the weekends or frequently on his
    holiday vacation--to come out and serve our country as a member
    of the Reserve or the Guard. In fact, the 89th Airlift Wing at
    Andrews that you fly with on a regular basis, is a part of the
    Defense Transportation System. Finally, we are the trucks that
    move the household goods and the ships that move the POVs of
    our members as they go from station to station as a part of the
    Defense Transportation System.
        What do we do? We characterize our role in three ways: to
    get the troops to the fight; to sustain the troops at the fight
    while they are there; and to bring them home when the fight is
    over. Now, you have to define ``fight'' very liberally because,
    out of what we do, we are the airplanes that you see delivering
    the troops to and from Kosovo and to and from Southwest Asia,
    to and from Bosnia, and to and from Korea. We are the airplanes
    and ships that you see delivering relief supplies after the
    floods in Venezuela or Mozambique, after the earthquakes in
    India, and the earthquakes in Turkey and the earthquakes in
    Taiwan. We are the aircraft that air drop relief supplies to
    Antarctica in the middle of winter. We are the aircraft that
    repatriate the crews from the bombing of the U.S.S. Cole and
    from the recent China EP-3 incident. We are the aircraft and we
    are the ships that you see in the background delivering the men
    and the women and the supplies to the far off reaches of the
    globe and bringing them home again; and those ships and
    airplanes belong to the United States Transportation Command
    and its components.
        I hope you will ask about our readiness. I hope you will
    ask about our modernization programs, about our infrastructure
    challenges, and about our people. In every area, my answer to
    you will be that we are okay. That is a well chosen word. We
    are okay. The good news is that we are better in most every
    area than we were the last time I testified before this
    subcommittee. The better news is that in several of those
    areas, we are going to be even better in the months and years
    ahead. However, the bad news is in a few cases, we do have some
    concerns about the future.
        Senator Sessions, Senator Kennedy, rather than preempt your
    questions with any more dialogue, I will leave it at that and I
    look forward to your questions.
        [The prepared statement of General Robertson follows:]

           Prepared Statement by Gen. Charles T. Robertson, Jr., USAF

           TODAY'S UNITED STATES TRANSPORTATION COMMAND (USTRANSCOM)

        Today, America and the international community depend on the U.S.
    military to perform a wide range of warfighting, peacekeeping, and
    humanitarian missions. No matter what the mission, whether at home or
    abroad, this country's Defense Transportation System (DTS) enables it
    to quickly extend a ``hand of friendship'' or ``the fist of war'' to
    any location on the globe. The DTS, with its people, trucks, trains,
    aircraft, ships, information systems, and infrastructure, provides the
    United States the most responsive strategic mobility capability the
    world has ever seen. It is USTRANSCOM's responsibility to manage this
    strategic global mobility system.
        USTRANSCOM takes a holistic approach to managing the DTS, i.e.,
    strategic transportation planning and modal operations are
    interdependently managed. When the unified commands, services, or other
    government agencies require strategic transportation they need to make
    only one call: to USTRANSCOM.
        Because of USTRANSCOM's responsiveness and global reach, the
    command is in a constant state of activity. At every moment of every
    day, around the globe, USTRANSCOM's superb force of soldiers, sailors,
    airmen, marines, coast guardsmen, and civilians is accomplishing a wide
    array of joint mobility missions. For example, during an average week
    USTRANSCOM operates 1,669 strategic air mobility missions transiting 52
    countries, operates 22 military ocean ports in 13 countries, and has 20
    chartered military ships underway. Thirty-six additional government-
    owned and chartered vessels, loaded with military cargo, are
    strategically prepositioned around the world, significantly increasing
    the responsiveness of urgently needed U.S. military equipment and
    supplies during time of crisis. USTRANSCOM does all of this as a total-
    force team of Active Duty, Guard and Reserve personnel, civilians, and
    commercial partners, bringing the total synergy of U.S. military and
    commercial transportation resources to bear in times of crisis,
    wherever in the world they may be required.
        The capability of America's DTS is unparalleled in history. Never
    before has such a ready and capable mobility system existed in
    peacetime. But ``readiness'' and ``peacetime'' are often ambiguous
    terms when used to describe today's world environment. USTRANSCOM
    frequently finds itself operating at a near wartime tempo during
    peacetime. We are frequently called upon to surge to a combat
    operations tempo without benefit of our full wartime manning or
    activation of our agreements with industry for their surge capacities.
        That said, even though USTRANSCOM is generally ready and capable,
    there are a number of challenges in USTRANSCOM's critical personnel,
    infrastructure, and equipment underpinnings that concern me now and, of
    even greater concern, challenges that could impair command capabilities
    in the future if we do not set about to correct them soon.
        As you look at USTRANSCOM today, many of the visible features of
    the DTS are showcased daily around the world: the ships, aircraft,
    trains, and people who make day-to-day global mobility for the
    Department of Defense (and others) a reality. That said, many people
    are not aware of the wide variety of aggressive actions USTRANSCOM is
    taking behind the scenes to improve our transportation reliability and
    our global responsiveness to America's challenges. This statement
    serves as a ``State of the Command'' report and examines where we are,
    where we are going, how we are getting there, and the challenges we
    face. Ultimately, this statement is intended to portray the USTRANSCOM
    you see and know . . . as well as, the USTRANSCOM you may not see
    everyday.

                                  THE MISSION

        USTRANSCOM's mission is to provide air, land, and sea
    transportation for the Department of Defense (DOD), both in time of
    peace and time of war. To accomplish this mission, for day-to-day
    execution, we rely on USTRANSCOM's Component Commands: the Air Force's
    Air Mobility Command (AMC); the Navy's Military Sealift Command (MSC);
    and the Army's Military Traffic Management Command (MTMC). Relying on a
    blend of active and Reserve Forces, civilian employees, and commercial
    industry, the USTRANSCOM component commands provide mobility forces and
    assets in a force structure continuum designed to be able to make a
    seamless transition from peace to war.
        USTRANSCOM is a leader in DOD's reengineering efforts. As the first
    Secretary of Defense-designated ``Reinvention Commander in Chief
    (CINC),'' with authority to emulate leading edge business practices,
    USTRANSCOM is actively engaged in finding commercial best business
    opportunities and implementing those efficiencies for DOD. The command
    has pioneered DOD's efforts to leverage the strengths of U.S.
    commercial industry to significantly improve the daily service of the
    DTS to all customers, contributing significantly to our ability to
    guarantee wartime readiness. The command has also formed a supply-chain
    management partnership with the Defense Logistics Agency (DLA),
    creating a new Strategic Distribution Management Initiative (SDMI) that
    promises to streamline DOD's entire distribution system.
        While we are proud of the significant gains made in peacetime
    efficiency, we remain focused on our primary imperative: wartime
    readiness. Simply put, the USTRANSCOM wartime mission has three
    objectives:

            1. Get the warfighter to the fight.
            2. Sustain the warfighter during the fight.
            3. Bring the warfighter home after the fight is done.

        Accordingly, my number one mission at USTRANSCOM is strategic
    mobility support to the regional CINCs during crises. That said, as our
    Nation's policy and decision makers ponder changes to our National
    Security Strategy, they should always keep in mind that USTRANSCOM is
    only postured--from a force structure perspective--as a one Major
    Theater War (MTW) force with a two MTW mission and that the command is
    still evolving to meet even that requirement.
        Today, it is our assessment that we can meet the requirements of
    the first MTW with moderate risk, but that there are higher levels of
    risk associated with the second nearly simultaneous MTW. In fact, if
    the National Military Strategy were to evolve from the current two
    nearly simultaneous MTWs to something considered less stressful-one MTW
    and one or more Smaller Scale Contingencies for example, assuming no
    improvement to our current or projected posture, we would continue to
    operate at an elevated risk. The June 2000 Government Accounting Office
    (GAO) report titled, ``Military Readiness: Air Transport Capability
    Falls Short of Requirements'' (Code 702017) (Final Report NSIAD-00-
    135), highlighted the depth of the problem. This report stated, ``DOD
    does not have sufficient airlift and air refueling capability to meet
    the two major theater war requirements because many aircraft needed to
    carry out wartime activities are not mission ready.'' The GAO estimated
    that DOD is 29 percent short of being able to meet the established
    military airlift requirement and nearly 19 percent short of being able
    to meet the established air refueling requirement.
        USTRANSCOM's approach to posturing (and improving) itself to be
    able to meet DOD's transportation mission today and tomorrow requires
    flexibility and initiative, and is guided by the following four basic
    themes:

             Theme one: Maintaining readiness to perform our global
            mobility mission.
             Theme two: Continuing modernization and upgrade of
            aging equipment and infrastructure.
             Theme three: Improving key processes in the DTS.
             Theme four: Investing in the care and quality of
            USTRANSCOM's most valuable resource--its people.

                              THEME ONE: READINESS

        Regardless of the above, no matter what U.S. forces are called upon
    to do around the world, the American fighting machine cannot meet its
    two critical warfighting capabilities labeled ``dominant maneuver'' and
    ``focused logistics'' without USTRANSCOM forces in the vanguard. Recent
    exercises and operations demonstrate the day-to-day peacetime readiness
    and capability of the DTS. That said, the growing impact on our day-to-
    day peacetime airlift operation resulting from the continuing
    challenges associated with the low reliability rate of our aging C-5
    fleet, coupled with continuing reductions in overall strategic airlift
    flexibility as a result of the ``one-plane-for-two'' swap of C-17s for
    retiring C-141s, adds fuel to a growing list of additional concerns
    (not the least of which our assessment that our ``second of two MTWs''
    capability is high risk), and is a challenge begging a solution.
    Recent Operations
        USTRANSCOM's daily Global CINC-support mission, coupled with DOD's
    Joint exercise program, gives USTRANSCOM the opportunity to plan and
    execute regularly with the regional CINCs and their Service component
    commands and staffs. Additionally, it gives the command an opportunity
    to exercise surge shipping, prepositioned afloat stocks, military air
    and sea ports, air mobility crews and staffs, Reserve component forces,
    and the staff at USTRANSCOM. Last year, USTRANSCOM participated in 117
    Joint exercises worldwide. These exercises not only allow us to
    revalidate current capabilities, they also allow us to test new
    capabilities, as well as to improve the processes we use to move bulk
    DOD cargo within the worldwide transportation network.
        USTRANSCOM is a ``high tempo'' command. In fact, the command's
    operational pace during peacetime--especially that of our Air
    component--has increased dramatically since Operations Desert Shield
    and Desert Storm. As an example, let me describe USTRANSCOM's
    contributions to our most noteworthy mission since I last testified
    before this subcommittee . . . that being our support of combat
    operations in the former Yugoslavia. Beginning in February 1999, AMC
    tanker and airlift aircraft began our support to the Air War over
    Serbia and subsequent operations by leading the deployment of combat
    and combat support aircraft to Europe in support of an increasing
    military capability available to the North Atlantic Treaty Organization
    (NATO) in the theater. In March of that same year, Operation ALLIED
    FORCE began in earnest, with an air campaign that lasted 78 days . . .
    a campaign which ultimately required USTRANSCOM and its Component
    Commands to split their capabilities three ways to simultaneously
    support the three distinct mobility missions which emerged through the
    multiple phases of ALLIED FORCE.
        For example, at the commencement of ALLIED FORCE, USTRANSCOM's
    first mission was in support of the United States European Command
    (USEUCOM) and NATO strategic deployment of combat and combat support
    aircraft to European bases. In this phase, AMC air refueling aircraft
    established an air bridge across the Atlantic to deploy combat, combat
    support, and airlift aircraft . . . with our airlift deploying
    accompanying support personnel and equipment. Additionally, AMC
    deployed an MTW-sized air refueling force . . . augmented by forces
    generated through a Presidential Reserve Call-up of Guard and Reserve
    Forces . . . to bases in Europe to support theater air operations. MSC
    and MTMC simultaneously began deploying ammunition from the US, through
    European ports, onward to NATO airbases.
        As the air campaign intensified, two new missions evolved requiring
    substantial USTRANSCOM support. The first occurred when refugees
    streamed across Kosovo's borders into Albania and Macedonia. AMC
    supported NATO's relief efforts with military and commercial contract
    airlift missions to provide emergency assistance to refugees. The
    second additional mission was deployment of Task Force Hawk from the
    continental United States (CONUS) and Central European Bases into
    Albania. All USTRANSCOM components supported this effort with AMC
    providing airlift and air refueling support, MTMC operating seaports in
    Italy and Albania, and MSC providing sealift.
        It was during this phase that the C-17 became the ``workhorse''
    airlifter of the campaign by operating as both an intertheater and
    intratheater airlifter, flying 430 missions into Albania. The aircraft
    performed superbly and offered the combatant commander a new capability
    with its large capacity and ability to land and operate at very short,
    austere airfields. Finally, as the air campaign ended, USTRANSCOM
    supported Operation JOINT GUARDIAN, the deployment of NATO peacekeeping
    forces into Kosovo by air, land, and sea.
        Support to ALLIED FORCE was a total force effort by USTRANSCOM. AMC
    tanker aircraft, placed under the operational control of USEUCOM,
    performed nearly 7,000 air refueling missions, greatly extending the
    range and ``on-station time'' of U.S. and allied combat and combat
    support aircraft. An additional 654 strategic air refueling missions
    were performed in support of the various deployments. AMC also flew
    1,108 strategic airlift missions and contracted for an additional 66
    commercial airlift missions in support of ALLIED FORCE.
        Simultaneously, MTMC operated at two U.S. seaports and eight
    European seaports in support of the deployment and onward movement of
    unit equipment, supplies, and ammunition. As NATO air strikes began
    against Serbia, MTMC began transshipment operations at seaports closest
    to the strike area. The cargo was transported in vessels managed and
    directed by MTMC in support of Task Force Eagle and Task Force Shining
    Hope, the military and humanitarian programs to aid Kosovar refugees.
        The first big evidence of this support came in the form of the SS
    Osprey, which arrived May 2 in Durres, Albania. The Osprey's arrival
    signaled a critical surface transportation benchmark in the fielding
    and supply of American forces in Albania.
        The Osprey, a MSC charter, carried 60 vehicles, or 11,000-square
    feet of Air Force cargo. It was loaded by MTMC's 839th Transportation
    Battalion, Livorno, Italy and unloaded in Durres by MTMC's 840th
    Transportation Battalion, Izmir, Turkey. Unloading of the Osprey took
    place without incident. Within a week, MTMC initiated regular ferry
    operations from Brindisi, Italy, to Durres. For example, some 35,000-
    square feet of equipment and supplies were moved into Albania between
    May 7th and 11th. After arriving at Brindisi by rail from Germany, the
    freight was loaded aboard an Adriatic Sea ferry--chartered by MSC--and
    shuttled northeast by east, from Brindisi to Durres, in four ferry
    runs.
        A critical shift in surface transportation support took place with
    the cessation of hostilities, as MTMC shifted gears and began to focus
    on the movement of the Army task force assigned to perform peacekeeping
    duties in Kosovo.
        In the initial entry, MTMC delivered three shiploads of combat
    equipment from the 1st Infantry Division via Thessaloniki, Greece, on
    the northern Aegean Sea. The ship cargoes included hundreds of combat
    vehicles and scores of shipping containers with equipment to support
    the 7,000 soldiers of Operation Joint Guardian.
        Strategic sealift also played a key role in supporting the combat
    forces involved in Kosovo operations. MSC supported ALLIED FORCE with
    34 strategic sealift ships to include three prepositioning ships.
    Additionally, MSC tankers carried most of the fuel products used in
    support of the operation, totaling more than 300 million gallons. MSC
    supported 29 strategic lift movements, including movement of U.S. Army
    combat forces from Bremerhaven, Germany to Thessaloniki, Greece.
    Sealift carried over 1.2 million sq. ft. of vehicles and equipment;
    245,280 sq. ft. of ammunition; plus equipment and supplies to assist
    the more than 400,000 ethnic Albanian Kosovo refugees.
        Following ALLIED FORCE, USTRANSCOM supported a fairly steady series
    of special ``headline'' missions and humanitarian deployments around
    the world. For example, AMC airlifted two Federal Bureau of
    Investigation (FBI) teams to Kosovo in July and August of 1999 to
    assist in investigations of war crimes. In July 1999, an AMC C-141B
    aircraft, supported by two air refueling tankers, airdropped medical
    supplies over Antarctica to aid an ill American doctor. On 16 October
    1999, an AMC New York Air National Guard (ANG) ski-equipped LC-130
    airlifted this same physician from Amundsen-Scott South Pole Research
    Station to McMurdo Naval Air Station on Antarctica's northern coast.
    Only Air Force airlift aircraft and aircrews had the capability to do
    this challenging and lengthy mission during the bitterly cold Antarctic
    winter.
        A world away, USTRANSCOM continued its support of those in need
    following a massive August 1999 earthquake in Turkey. To aid Turkish
    recovery efforts, an AMC C-5 deployed 70 members of the Fairfax County
    Virginia Search and Rescue Team to Istanbul on a nonstop flight
    sustained by two air refuelings. All in all, AMC completed 20 airlift
    missions in support of Turkish relief efforts. A subsequent Turkish
    earthquake in November of 1999 claimed over 400 lives and injured over
    3,000. AMC and USTRANSCOM relief efforts for this earthquake mirrored
    the earlier efforts.
        In September 1999, USTRANSCOM responded to another earthquake, this
    time in Taiwan. Again, AMC deployed a rescue team from Fairfax County,
    Virginia and again, a C-5 aircraft deployed the team direct, nonstop to
    Taipei. This flight lasted 18 hours and required two air refuelings.
        The year 2000 found USTRANSCOM supporting flood relief in South
    America and East Africa. In Venezuela, USTRANSCOM flew eleven C-17 and
    five C-5 missions, transporting 189 passengers and over 527 short tons
    of food, water, blankets, water purification systems, and other
    supplies. These missions helped the people of Venezuela recover from a
    devastating flood that left almost 400,000 people homeless, 20,000 to
    30,000 dead, and destroyed 23,000 homes. In Mozambique, a 3-month
    relief operation resulted in the formation of Joint Task Force Atlas
    Response. During Atlas Response USTRANSCOM aircraft flew 596 sorties,
    carrying 1,172 passengers and 1,019 short tons of relief supplies to
    aid the almost 1 million people made homeless by the rising floodwaters
    from Cyclone Elaine.
        In our own country, on 2 February 2000, AMC flew a nine-person team
    and 160,000 pounds of Navy search equipment to California to assist in
    the recovery operations for Alaska Airlines Flight 261 off the
    California coast.
        This past summer saw the worst western wildfires in 50 years.
    USTRANSCOM and AMC flew 30 missions and deployed 3,682 Army and Marine
    passengers, and 206.7 short tons of equipment to battle the fires.
        During this same time period, USTRANSCOM completed the first
    rotation of U.S. forces supporting Task Force Falcon in Kosovo via
    airlift and sealift. The redeployment returned the original
    participants to U.S. and European bases and deployed replacements from
    U.S. bases to Kosovo. In April of 2000, AMC flew over 130 Polish troops
    and 102.5 short tons of their equipment into Kosovo, marking the first
    time Polish forces had been transported aboard a U.S. aircraft in
    support of NATO requirements. Also, for the first time, USEUCOM used
    trains to transport peacekeeping troops and equipment from Germany
    through Bulgaria and Macedonia into Kosovo. This rail-overland approach
    saved 7 days from the normal 12-day sea-overland method previously
    used. USTRANSCOM also supported the sixth rotation of U.S. forces to
    the International Stabilization Force in Bosnia with strategic lift.
        In October of 2000, the Aeromedical Evacuation (AE) System provided
    Strategic AE support to the 39 sailors injured during the USS COLE
    Bombing in the waters off of Yemen. The injured sailors were returned
    to the United States during a 2 week period utilizing strategic airlift
    coordinated by the Theater Patient Movement Requirements Center,
    located in Ramstein Germany and the Global Patient Movement
    Requirements Center, which is located at Scott Air Force Base (AFB).
        Additionally, USTRANSCOM and AMC relocated our Denton Humanitarian
    Cargo receiving and shipping hub from Pope AFB, North Carolina, to
    Charleston AFB, South Carolina, offering more direct access to
    strategic airlift and sealift to better support this important program.
    Utilizing military airlift and sealift, the Denton program moved over
    2.5 million pounds of humanitarian cargo from 86 donors to 39 countries
    in the year 2000 alone.
        The events just described are only a ``snapshot'' of the missions
    USTRANSCOM performed or participated in since USCINCTRANS last
    testified before this subcommittee. Though sometimes small in scale,
    the FBI deployments, Antarctic airdrop/rescue, earthquake relief,
    floods relief, airline crash recovery support, and wildfire support
    efforts demonstrate the tremendous reach and responsiveness unique to
    USTRANSCOM's airlift forces. They are also representative of the myriad
    of tasks mobility forces must be prepared to execute, most often on
    very short notice.
        Several points are important to note in assessing these events. For
    one, America's mobility force is often as busy in ``peace'' as it is in
    war. Even though responses to events such as Hurricane Mitch are not as
    large or sustained as ALLIED FORCE, such operations are conducted
    within peacetime manning and materiel constraints. At the same time,
    USTRANSCOM continues support for Joint Chiefs of Staff and regional
    CINC-sponsored exercises, ongoing operations such as NORTHERN and
    SOUTHERN WATCH, and channel airlift missions worldwide. As a result,
    the command's peacetime force structure must routinely surge to wartime
    operational levels. For aircrews alerted on short notice to fly relief
    support to disaster areas, move fighter and bomber squadrons to
    Southwest Asia or Europe, or replace deployed crews in moving channel
    cargo, the tempo can be very similar to wartime. The more frequently we
    do these missions, the more our people look and feel as if they are on
    a wartime footing during peacetime. The past few years have brought one
    deployment after another, hence the observation that USTRANSCOM is
    often as busy in peace as in war.
        All the above aside, although USTRANSCOM is heavily committed
    around the globe conducting a wide variety of critical peacetime
    missions, our ability to support the warfighter during two nearly
    simultaneous MTWs is our paramount indicator of command readiness.
    Readiness: Air Mobility
        Our newest airlifter, the C-17, continues to exceed expectations.
    As of March 2001, the C-17 program has delivered 72 of 134 programmed
    aircraft, as we continue fielding the operational wings at Charleston
    AFB, South Carolina and McChord AFB, Washington, as well as the
    training squadron at Altus AFB, Oklahoma.
        The C-17 is a tremendous success story. Without a doubt, it has
    very efficiently and effectively assumed its place as AMC's core
    airlifter as the C-141 retirement process continues. The C-17's
    reliability, versatility, and large capacity give combatant commanders
    options they never previously had at their disposal.
        Unacceptably low C-5 fleet mission capable (MC) rates create a
    shortfall in meeting Mobility Requirements Study 2005 (MRS-05)
    mandates. MRS-05 requires a C-5 MC rate of 65 percent, but in the past
    year, C-5 fleet MC rates hovered at (and were frequently below)
    approximately 58 percent. Over the last 2 years, AMC had to begin the
    unusual, but necessary, practice of assigning two C-5s to its higher
    priority missions to better ensure the missions would be accomplished
    reliably and/or on time. The net result is less aircraft available for
    tasking and less flexibility. But, given the current C-5 fleet MC rate,
    we believe this concept of operation reflects judicious management of
    critical assets in support of an equally critical mission.
        AMC's air refueling force performed superbly in ALLIED FORCE, and
    operationally is as ready as ever. That said, ALLIED FORCE (the Air War
    over Serbia) revealed two significant concerns. First, we discovered
    that our Reserve component tanker units need the same kind of
    maintenance spares kits as our Active-Duty units. Reserve component
    tankers are early deployers during large air campaigns and must be just
    as self-sustaining on arrival as our active units. Second, we
    revalidated our long held concern that AMC has a significant KC-135
    crew-to-aircraft ratio shortfall. The current ratios of 1.36:1 and
    1.27:1 (AMC and Mobility Forces, respectively) . . . inherited from the
    KC-135's Cold War days . . . are simply inadequate to meet our post-
    Cold War contingency requirements. ALLIED FORCE required a ratio of
    1.8:1 (only slightly higher than that required for Desert Storm and
    similar contingencies since) and we expect that future air campaigns
    will likely require the same. USTRANSCOM and the Air Force are working
    to resolve both issues (spares kits and crew ratio) through funding and
    force structure initiatives.
        To further quantify the future requirements of our 40-year old KC-
    135 force a Tanker Requirements Study 2005 and an Economic Service Life
    Study were recently completed. The results are just now being finalized
    and once complete, will allow us to better determine the most
    appropriate ``way ahead'' for this still reliable, but rapidly aging
    fleet.
        Even though this statement highlights worrisome gaps in airlift
    capacity, low MC rates, insufficient crew-to-aircraft ratios, and
    shortfalls of spares kits, you can remain assured that our aircrews and
    supporting ground crews are highly motivated and extremely capable. You
    may also be assured that we are working hard with both the Air Force
    and DOD to try to find the funding required to resolve these
    significant air mobility shortfalls for current and future
    requirements.
    Readiness: Sealift
        Thanks to investments made in our surge sealift forces, they are,
    today, more efficient and better able to meet lift requirements than
    ever before. That said, the recently released MRS-05 study indicates
    that cargo delivery requirements for two MTWs have increased by one
    million tons relative to the requirements projected in our previous
    analytical guidance--Office of the Secretary of Defense's (OSD) 1994
    Mobility Requirements Study-Bottom Up Review Update (MRS BURU). With
    this increased requirement as a backdrop, USTRANSCOM is working hard to
    identify solutions while building on today's successes.
        Early access to commercial shipping, combined with containerization
    of unit equipment, significantly shortens the time required to close
    forces for the counterattack phase of a MTW-type operation.
    Additionally, a properly sized and structured Voluntary Intermodal
    Sealift Agreement (VISA) program is essential to providing timely
    access to commercial shipping. Programs to improve the Ready Reserve
    Force (RRF) managed by the Department of Transportation's Maritime
    Administration (MARAD) have excelled at improving readiness. The RRF
    today is a well-maintained and ready force of 72 inactive ships plus
    four ships activated for prepositioning. As of December 2000, the RRF
    had completed 129 of 131 no-notice activations on time since Desert
    Storm (a dramatic turn-around from our dismal Desert Storm experience).
    MSC's surge ships--Fast Sealift Ships (FSSs) and Large Medium Speed RO/
    RO (LMSR) ships--regularly support joint exercises and their
    prepositioning ships provide forward-deployed combat equipment and
    sustainment supplies to the regional CINCs.
    Readiness: Forward Presence
        Another vital component of USTRANSCOM readiness is forward
    presence. Each transportation component command has forward based units
    and deployed forces around the globe. MTMC operates at seaports in
    Europe, Asia, the Middle East, and in the Pacific where MTMC personnel
    interact with allied governments, militaries, and local authorities.
    These forward-based activities allow instant access to seaports as well
    as to lines of communication radiating from those seaports. MSC's area
    commands maintain operational control of MSC ships that are assigned
    to, or pass through, their areas of responsibility. They include MSC
    Atlantic in Norfolk, Va.; MSC Pacific in San Diego, Calif.; MSC Europe
    in Naples, Italy; MSC Far East in Yokohama, Japan and MSC Central in
    Manama, Bahrain. These commands not only serve as focal points for MSC
    customers in their respective operating areas but are also direct links
    to MSC ships for maintenance, logistics and other services.
        AMC depends on a global network of ready, capable en route bases to
    support contingency and wartime deployments in support of regional
    CINCs. It is absolutely imperative that we continue to maintain
    adequate infrastructure at this declining group of core bases to
    support sustained strategic airlift operations during contingencies.
    Since 1993, major overseas en route air base locations declined 69
    percent from 39 to 12. Of particular interest are the changes
    associated with two specific forward bases in Europe: Rhein Main,
    Germany, and Rota, Spain. USTRANSCOM presence at Rhein Main will end by
    31 December 2005. United States Air Forces Europe has agreed to
    withdraw all U.S. forces from Rhein Main in exchange for a variety of
    key construction projects at Ramstein and Spangdahlem Air Bases, also
    in Germany. These projects do not add cargo or passenger throughput
    capability to the theater but are intended only to replace the
    capability lost at Rhein Main.
        On the Iberian Peninsula, the Air Force left Torrejon Air Base,
    Spain, and has been working to obtain a like capability at Rota Air
    Base, also in Spain. USTRANSCOM's air component, AMC, must have at
    least two capable en route air bases on the Iberian Peninsula. Iberian
    bases are key to supporting NATO, as well as to managing the easterly
    strategic airflow required in support of potential areas of conflict in
    the middle east. Our Spanish en route bases are also blessed with more
    favorable weather and fewer air traffic control and overflight
    restrictions than our other European ``oases.''
    Readiness: Partnership with Guard and Reserves
        The readiness of USTRANSCOM relies very heavily on our TOTAL FORCE
    partners in the National Guard and Reserve components. USTRANSCOM, more
    than any other unified command, relies on its Reserve components for
    both peacetime responsiveness and wartime capability. In every mode--
    air, land, and sea--USTRANSCOM Reserve components provide a majority of
    the command's military wartime capability. Since USTRANSCOM cannot meet
    any significant requirements without the immediate participation of
    Reserve Forces, it is imperative that they are adequately funded for
    training and modernization.
        USTRANSCOM's Reserve Forces are key to our peacetime
    responsiveness, and the command receives excellent support from Reserve
    volunteers. The Air Reserve Component (ARC) flies over 44 percent of
    AMC and local unit scheduled peacetime missions. These missions are
    accomplished both during scheduled monthly Unit Training Assembly
    periods, as well as during additional volunteer flying training
    periods. To support these missions, the aircrew must deconflict their
    flying commitments with their civilian responsibilities. Despite the
    high level of volunteerism, the Presidential Reserve Call-up (PRC)
    [formerly known as the Presidential Selective Reserve Call-up] is still
    essential for USTRANSCOM to be able to support any major contingency.
    Kosovo provides the most recent example where many volunteers responded
    but the command still needed a PRC to source approximately 3,300
    additional personnel, most of whom were used to support the deployed
    air refueling force, since 57 percent of our capability now resides in
    the ARC.
        A decision to request a PRC is not a business as usual proposition.
    It is an extraordinarily tough decision made only with full knowledge
    of the sacrifices it demands of our reservists, their families, and
    their employers. It cannot (and must not) be taken lightly or used too
    often.
    Readiness: Partnerships With Industry
        The readiness of the DTS also depends on timely access to
    militarily useful commercial transportation. USTRANSCOM's superb
    relationship with the U.S. commercial transportation industry allows
    DOD to leverage significant capacity in wartime without the added
    peacetime cost of sustaining comparable levels of organic capability.
    To ensure timely and efficient access to commercial capacity, the
    command has several agreements with industry.
        For wartime airlift capacity, the Civil Reserve Airlift Fleet
    (CRAF) provides 93 percent of DTS international passenger capacity, 98
    percent of DTS strategic aeromedical evacuation, and 41 percent of DTS
    international long-range air cargo capacity. It would cost the American
    taxpayer over $50 billion to procure and $1-3 billion annually to own
    and operate this capability as part of the U.S. military airlift fleet.
    Instead, the CRAF program guarantees peacetime business to
    participating airlines in exchange for their pledge to provide
    specified capacities in wartime.
        Based on the above logic, it is imperative that USTRANSCOM do its
    best to ensure the CRAF program continues as the success story it has
    grown to be. Our CRAF partners voluntarily support an unpredictable
    wartime requirement and, in exchange, deserve as predictable a
    safeguard of their capital investments as possible. In this respect,
    Aviation War Risk Insurance is vital to assure our CRAF carriers that
    they can recover from significant loss or damage in support of DOD. The
    recent practice of passing 1-year re-authorizations strains the mutual
    commitment between DOD and our CRAF partners and is a disincentive to
    those in, or contemplating joining, the program. USTRANSCOM fully
    supports recent congressional efforts to enact Aviation War Risk
    Insurance legislation in a 4-year increment and would encourage similar
    treatment for the Defense Production Act, another CRAF-related statute.
        For sealift we rely upon the commercial U.S.-flag fleet to move
    over 80 percent of sustainment cargo during wartime. The sealift
    companion to CRAF is the Voluntary Intermodal Sealift Agreement (VISA).
    Recently implemented in concert with MARAD and the U.S. maritime
    industry, VISA provides DOD wartime access to sealift capacity and
    intermodal infrastructure in return for peacetime business preference.
    When needed, VISA is activated in three stages of increasing levels of
    commitment. Implementation of this program, after several years of
    negotiations, is a major accomplishment for USTRANSCOM. DOD now has
    much quicker and far more effective access to U.S.-flag fleet
    capacities during both contingencies and war.
        A third formal agreement with industry in support of DOD is the
    Maritime Security Program (MSP). MSP provides an underpinning for VISA
    by helping to guarantee the continued presence of a healthy U.S.-flag
    commercial fleet operating in international commerce, and available to
    provide sustainment sealift capability in time of war or national
    emergency. In return for MSP financial assistance, participating
    carriers commit vessels and other transportation resources for DOD use
    in the event of contingencies. These vessels also provide employment to
    a number of the U.S. merchant mariners needed to operate RRF, surge,
    and commercial shipping during wartime. Although we are confident MSP
    continues to ensure the availability of near-term manning of U.S.-flag
    sealift capacity, it has not stopped the disturbing decline in the U.S.
    population of qualified civilian mariners. It is essential that we
    continue to monitor this domestic maritime workforce and, as necessary,
    take whatever protective measures might be required to maintain the
    numbers we will need in time of crisis. In addition to MSP, bilateral
    shipping agreements with allied nations are also established to
    increase surge sealift capability in time of war.
        All the above aside, USTRANSCOM's partnership with industry extends
    far beyond the formal contractual arrangements just outlined. In fact,
    the command interacts daily with the commercial sector in support of
    DOD customers. Commercial air and sea carriers carry tons of DOD cargo
    and thousands of DOD passengers annually, from scheduled channel air
    cargo and passenger movements to containerized cargo aboard ships
    destined for exercises, sustainment activities, and commissaries.
    Almost 70 percent of scheduled DOD passengers were carried by the
    commercial sector in 2000 and almost 40 percent of scheduled air cargo
    moved by commercial carrier.
        It is imperative that USTRANSCOM continue to foster partnerships
    with industry and remain sensitive to the business environment in which
    our commercial partners operate. The U.S. transportation industry is
    vital to national defense and USTRANSCOM strongly supports laws such as
    the Jones Act, the Cargo Preference Acts of 1904 and 1954, and the Fly
    America Act that contribute to the health of those industries and our
    accessibility to them.
    Readiness: Antiterrorism and Force Protection (AT/FP)
        DTS transportation assets and information systems are vulnerable to
    a variety of threats worldwide that could diminish readiness in peace
    and war. The increased attempts by rogue elements to acquire missile
    technology, as well as weapons of mass destruction, threaten every
    element of the DTS. The threats to transportation information
    management systems grow as well, not just from potential enemies abroad
    but also from attacks at home.
        Man Portable Air Defense Systems (MANPADS) are the most serious
    threat to our large, predictable, and slow flying air mobility
    aircraft. These systems are lethal, affordable, easy to use, and
    difficult to track and counter. According to a 1997 CIA Report, MANPADS
    have proliferated worldwide, accounting for over 400 casualties in 27
    incidents involving civil aircraft over the previous 19 years. This
    proliferation has forced air mobility planners to frequently select
    less than optimal mission routes due to lack of defensive systems on
    airlift aircraft.
        Increasing numbers of potential adversaries have developed, or are
    developing, sophisticated air defense systems. During ALLIED FORCE,
    concerns about the Yugoslav air defense system, especially mobile
    launchers and MANPADS, forced airlift planners to frequently use less
    efficient routings. To counter such threats, AMC and the Air Force are
    developing a Large Aircraft Infrared Countermeasures (LAIRCM) system to
    protect mobility aircraft.
        Our merchant ships that carry large volumes of high value DOD cargo
    during contingencies are also vulnerable to attack--in port, at
    anchorage, and in transit through disputed waterways and choke-points
    worldwide. Since they may operate independent of naval escorts, we are
    reviewing options to ensure protection from a growing number of
    asymmetric threats, including piracy and terrorism. Due to the
    relatively small size of the crews aboard our merchant ships,
    technology must be the force multiplier that gives them the capability
    to detect, identify, and deter threats. MSC is developing a ship
    defensive system that will use thermal imaging and intrusion detection
    devices to help protect merchant shipping utilized by DOD.
        Chemical or biological weapon attacks on en route or arrival
    airfields or seaports during deployments could significantly reduce
    throughput, slowing the deployment of combat forces. Even though our
    military aircraft and ships are prepared to operate in contaminated
    environments, our CRAF and VISA commercial carriers are not obligated
    to proceed into such areas. Given today's increased threat, we must
    provide reasonable protection for our commercial crews who, despite all
    precautions, could be exposed to contamination while supporting
    deployments. Additionally, AMC is developing and testing a procedure
    designed to protect commercial aircraft and personnel by reloading
    cargo from commercial aircraft onto military aircraft. This procedure
    will allow AMC to keep commercial aircraft flying into protected areas
    and to continue cargo movement into high-risk areas. This will
    hopefully ensure an uninterrupted flow of personnel and cargo into a
    theater.
        Significant progress has been made in improving the protection
    posture of merchant mariners. Five of six Maritime Union Schools have
    been certified to teach chemical, biological, and radiological (CBR)
    defense courses and three of seven maritime academies are preparing to
    teach MSC-sponsored CBR defense courses. Today, all FSSs, LMSRs, and
    prepositioning ships are CBR defense-equipped and MSC recently received
    funding to begin purchasing CBR defense equipment for inactive RRF
    ships. As of October 2000, $987,000 has been obligated to fully outfit
    36 RRF vessels.
        Progress is also being made in providing protection for CRAF
    aircrews. AMC stores and maintains protective clothing and equipment
    for issue to civilian aircrews prior to their entry into potentially
    hazardous areas. This equipment is currently stored in a central
    location for inventory and replenishment reasons and stands ready for
    immediate issue.
    Readiness: Strategic Brigade Airdrop
        Improved capability to mount a strategic brigade airdrop (SBA) of
    Army airborne forces is an important AMC readiness initiative. The C-
    17, as the C-141B's replacement for SBA, was initially unable to meet
    the Army's 30 minute SBA standard. Today, after working with the Army
    on both the C-17's hardware and procedures associated with SBA, AMC is
    now able to conduct an SBA within 28 minutes using a mix of C-17 and C-
    141B aircraft. By the time our C-141Bs have retired, we will have
    installed a Dual Row Airdrop System in the C-17 fleet, allowing our C-
    17s to drop twice as much cargo per aircraft, thereby decreasing the
    number of aircraft required for a C-17 only SBA and keeping formation
    ``pass time'' within the Army's time standard . . . another AMC/Army
    ``good news'' story.
    Readiness: Joint Logistics-Over-The-Shore
        I continue to be concerned about the readiness of our Joint
    Logistics-Over-The-Shore (JLOTS) capabilities . . . primarily due to
    the decline in CINC-sponsored JLOTS exercises. Many areas of the world,
    where we might be required to deploy, lack the kind of fixed port
    infrastructure required to offload the large ships that move the bulk
    of our land combat forces and sustainment cargo. JLOTS is a joint Navy
    and Army operation that utilizes a variety of landing craft, floating
    causeways and cranes, tug boats, and specially trained personnel to
    offload ships at sea and move cargo ashore without benefit of
    accessible or suitable ports. That said, to be able to implement this
    capability in a timely manner, it must be exercised regularly and
    realistically.
        Since 1998, USTRANSCOM has been able to execute limited JLOTS
    exercises. Four of the last five scheduled exercises were cancelled due
    to real-world operations, funding shortfalls, operations tempo
    (optempo)/personnel tempo (perstempo) concerns, and host nation/local
    political issues. Robust, realistic exercises must be conducted
    regularly if a ready, reliable capability is to be sustained. JLOTS
    exercises are time consuming and difficult to simulate. Personnel and
    equipment must be put offshore, in the surf, and on the shore to
    maintain proficiency. The planning between maritime units responsible
    for JLOTS and combatant command staffs that employ JLOTS operations is
    invaluable. As the designated DOD proponent for JLOTS, USTRANSCOM will
    continue to encourage the regional CINCs to include JLOTS scenarios in
    their overall exercise programs, as well as to assist them in
    programming and planning future such exercises.

                            THEME TWO: MODERNIZATION

        USTRANSCOM's modernization efforts are focused on being able to
    fully meet this Nation's strategic mobility requirements, across the
    spectrum of operations, while simultaneously reducing risk, ensuring
    future readiness, and providing a framework for meeting future MRS-05
    requirements. Continued acquisition of the C-17, upgrade of our C-5 and
    KC-135 fleets, standardization and modernization of our C-130 fleet,
    completion of existing sealift programs, improvements to the network of
    bases which comprise our global transportation infrastructure, and
    upgrades to the tremendous capability enhancers inherent in our
    transportation information systems capability, are all key pillars of
    our comprehensive modernization program. Additionally, we are looking
    well ahead to identify, develop, and program projects for the
    inevitable future recapitalization of aging air mobility and sealift
    systems, as well as our global transportation infrastructure.
    Modernization: Air Mobility
        This country's number one Defense Transportation challenge (read:
    ``shortfall'') is with its strategic airlift fleet. A significant gap
    in our ability to meet the needs of DOD agencies (and specifically the
    needs of the regional warfighting CINCs) around the globe . . . due to
    a simple shortage in the number of airlifters available coupled with
    significant maintenance challenges associated with our fleet of C-5
    airlifters. Consequently, USTRANSCOM's number one modernization goal is
    to, once and for all, complete the ``fix'' to our strategic airlift
    fleet. As suggested, one key to our airlift modernization requirement
    is a significant reliability enhancement and re-engining to AMC's C-5
    fleet. The C-5 fleet represents 50 percent of this Nation's organic
    airlift capability and carries approximately 50 percent of our wartime
    outsize and oversize cargo. There is no other aircraft in the world
    that can do what the C-5 does for America. Unfortunately, over this
    past year, MC rates for C-5s have averaged approximately 58 percent,
    well below our wartime requirement. Only two projects are required to
    make the C-5 ``well'': an Avionics Modernization Program (AMP) and a
    Reliability Enhancement and Re-engining Program (RERP). The AMP is
    designed to replace all the high failure and unsupportable avionics and
    flight control systems on the entire 126 aircraft C-5 fleet and make
    the C-5 compatible with international standards required for flight
    today and tomorrow's increasingly restrictive Global Air Traffic
    Management (GATM) airspace. RERP will replace engines and pylons, and
    upgrade aircraft skin and frame, landing gear, pressurization, and
    auxiliary power units . . . the C-5's most unreliable systems. A number
    of independent studies have shown that C-5 modernization efforts could
    improve the C-5 MC rate to 75 percent (or higher) by 2014, as well as
    extend the aircraft's service life past 2040, while simultaneously
    reducing our cost of ownership by over $11 billion in Life Cycle Costs.
        At the request of the OSD, AMC has completed an Outsize and
    Oversize Analysis of Alternatives, focused on the increased MRS-05
    airlift requirement, that defines needs, options, and costs, and using
    those inputs, recommends solutions. To meet this Nation's peacetime and
    wartime outsize and oversize requirements, results of that analysis
    recommend an operationally effective, best value mix of RERPed C-5s and
    new purchase C-17 aircraft. We agree completely with that analysis.
    America cannot afford to lose the C-5 fleet's organic capability or
    allow it to continue to atrophy. Without it, simply put, the cost and
    risk associated with meeting our wartime requirements would be
    unacceptable.
        In fact, it was USTRANSCOM's inability to meet our warfighting
    oversize and outsize airlift cargo requirement which led to the
    decision to significantly modernize the Air Force's strategic airlift
    fleet through the acquisition of the C-17 aircraft. That said, even
    with the currently approved C-17 ``multi-year procurement'' program, we
    will still fall approximately 10 percent short of being able to meet
    even the our operational war plans. Complicating matters even more, the
    ongoing retirement of our C-141 fleet (Active Duty by fiscal year 2003
    and Guard/Reserve by fiscal year 2006) is rapidly putting Air Mobility
    Command in a position, based on a simple shortage of airframes, where
    with increasing frequency, it is losing the flexibility to reliably and
    efficiently meet the country's peacetime requirements. Simply put, the
    authorized C-17 fleet of 134 programmed aircraft cannot and will not
    offer the same flexibility as did the 256 aircraft C-141B fleet it is
    replacing. Based on the current program, USTRANSCOM simply will not
    have as many aircraft ``tomorrow'' to meet its constantly increasing
    peacetime requirement, as it did ``yesterday.''
        Bottom line: this Nation's number one DTS ``shortfall'' is its
    ailing and numerically inadequate strategic airlift fleet. The simple
    solution to this challenge is at hand: We must get on with modernizing
    our C-5 fleet (AMP and RERP) and we must continue the C-17 acquisition
    program--up to the requirement specified in the recently released
    Mobility Requirements Study--2005 (MRS-05). Without a doubt, fixing
    Strategic Airlift is our number one DTS imperative.
        The ongoing modernization of the Air Force's 546 KC-135 air
    refueling tankers involves two primary programs: The first, an ongoing
    avionics modernization program called Pacer CRAG (Compass, Radar, and
    Global Positioning System) will be completed by 2003. Besides improving
    the aircraft's operational capability, Pacer CRAG reduces required
    aircrew members from four to three and significantly reduces
    maintenance costs. The second program proposes modifying 45 KC-135s to
    a MultiPoint Air Refueling System configuration, purchasing 33
    MultiPoint kits by 2007. Unlike Air Force aircraft, Navy, Marine and
    many allied aircraft require drogue nozzles for air refueling; yet only
    our KC-10 tankers currently have the ability to perform boom refueling
    and drogue refueling on the same sortie. KC-135s must currently land
    and be re-configured with a drogue adapter system for drogue air
    refueling missions. A MultiPoint capability on 33 aircraft will
    significantly increase our ability to provide air refueling to our
    sister services, as well as to our allies.
        The C-130 fleet consists of 700 aircraft composed of 15 different
    models and 20 variations. There are 514 basic combat delivery C-130s
    and USTRANSCOM owns 346 of them. Within USTRANSCOM, the C-130 serves
    two primary purposes: power projection and intratheater support of
    deployed forces.
        There are several challenges facing the C-130 fleet. The average
    active duty aircraft is 28 years old. Several of these aircraft will
    reach the end of their service life as early as 2002, and older onboard
    equipment across the remainder of the fleet is rapidly becoming
    obsolete and cost prohibitive to maintain. Three years ago, an AMC
    Tiger Team studied the problem and recommended replacing the oldest C-
    130 models with new C-130Js and modifying those with the longest
    remaining service life to a common C-130X configuration.
        The Air Force plans to purchase approximately 150 combat delivery
    C-130Js, retire an equivalent number of C-130Es, and modify the
    remaining 397 C-130E/H model aircraft to the standard ``X''
    configuration. As with the KC-135 Pacer CRAG program described above,
    the core of the C-130X program is a total cockpit Avionics
    Modernization Program (AMP). While we're at it, AMP will incorporate
    the requirements of the GATM environment, to include required upgrades
    to communications, navigation, and surveillance systems. The C-130 AMP
    is currently in source selection and the contract is expected to be
    signed in spring 2001.
        USTRANSCOM's number one force protection concern is with the
    vulnerability of its large, slow-flying aircraft to the ``terrorist''
    world's increasing shoulder-fired surface-to-air missile (MANPAD)
    capability. Consequently, high on our priority list is fielding of a
    Large Aircraft Infrared Countermeasures (LAIRCM) system which can
    counter that threat. The cost of this program, with an ultimate
    objective of equipping all ``at risk'' mobility aircraft, is
    substantial, but we feel the cost of losing a large airlifter, an
    aircrew, or its critical passengers and/or cargo is significantly
    greater. Currently, funding is approved in fiscal year 2001 for
    research, development, test and evaluation, and installation of LAIRCM
    on 20 aircraft (12 C-17s and 8 C-130s). Additional funding and options
    for additional installations will be coordinated in future Air Force
    Budget submissions.
        To operate in the increasingly crowded international airspace
    environment, AMC is committing more than $6 billion to modernize the
    communications, navigation, and surveillance systems of its air
    mobility fleet. As suggested, a modern and capable Global Air Traffic
    Management (GATM) suite is essential for access to the optimal but
    increasingly congested flight routes through which we are required to
    operate. To prevent backlogs, air traffic controllers must put more
    aircraft in the same airspace. In order to comply with international
    agreements related to safety, traffic separation, and communication,
    and for AMC aircraft to continue to be allowed access to this
    increasingly congested controlled airspace, we must keep pace with the
    GATM requirement.
    Modernization: Sealift
        Sealift modernization is a good news story. Our sealift capability
    meets three critical requirements: prepositioned equipment and supplies
    afloat for immediate response, surge for rapid power projection, and
    sustainment for support of protracted operations. Thanks to the
    commitments of the Navy and MARAD, our sealift force--including surge,
    RRF, and prepositioning--is more capable and ready today than it has
    ever been. By 2002, when our last LMSR is delivered, we will, at long
    last, meet the sealift requirements specified in the 1994 MRS BURU.
    That said, we do know that the total sealift requirement grew somewhat
    in the recently completed MRS-05 study. As well, our continuing concern
    with the shortage of heavy lift vessels required to deliver smaller
    floating craft has still not been resolved. We will be addressing
    solutions to these two issues in the months to come.
        Of 19 LMSR ships originally programmed, 18 have been launched and
    15 delivered. The latest, named after Medal of Honor recipient Private
    First Class Ralph E. Pomeroy, was launched 19 March 2001. Recently, a
    decision was made to make modifications to an existing LMSR, to use it
    to complete the Marine Corps' Maritime Prepositioning Force-Enhanced
    (MPF-E) program, and to build a 20th LMSR to complete the Army's
    prepositioning program. This win-win solution further enhances our
    sealift forces by adding capacity to the original MPF-E program and
    giving the Army a new LMSR to meet its requirements.
        MARAD continues to improve the RRF. Recently, it reconfigured
    several existing ships to provide additional deck space and modified
    existing spaces to increase overall capacity. As good as it is today,
    the current force is aging and will, over time, become more costly and
    difficult to maintain. Recapitalization of the sealift capacity
    provided by the RRF will eventually be necessary and we must plan and
    program accordingly to avoid having sealift capability decline again to
    its woeful pre-Desert Storm condition. Therefore, I wholeheartedly urge
    that we continue the funding, vigilance, and vision that sustain
    current levels of sealift readiness and capacity for the long term.
    Similarly, funding and vigilance to sustain the readiness of MSC's
    surge forces, the FSSs and LMSRs, must remain a priority in order to
    preserve these vital front-line deployment assets.
    Modernization: Infrastructure and Enablers
        Modern infrastructure, in CONUS and overseas, is critical to rapid
    and/or timely and efficient strategic deployment. Our domestic
    infrastructure of aerial ports, sea ports, railheads, and connecting
    highway and rail arteries are the ``launch platforms'' we use for our
    strategic deployments. As a predominantly CONUS-based force, these
    ``launch platforms'' mean more to us today than ever before. Overseas,
    our en route air mobility bases and seaports remain key to moving
    forces into a theater of operations. In the wake of the Cold War, our
    CONUS and overseas mobility infrastructure has been stressed in two
    fundamental ways: first, we have fewer overseas bases through which we
    can operate, and second, an increased (and increasing) deployment
    optempo is stressing that fewer number of bases in ways they have never
    been stressed before. Along with the Services and regional CINCs,
    USTRANSCOM must continue to diligently monitor our global mobility
    infrastructure and keep up with needed repairs and improvements.
        For example, to sustain large airflows during peacetime and
    wartime, AMC requires access to a network of air bases worldwide with
    sufficient fuel systems, ramp space, and other servicing facilities to
    accommodate large numbers of large aircraft. USEUCOM, USTRANSCOM, and
    the Joint Staff identified the need for at least six primary en route
    air mobility bases in USEUCOM and, partnered with DLA, have developed a
    comprehensive plan to improve the infrastructure at those bases.
    Likewise, we are working with United States Pacific Command (USPACOM)
    and DLA to identify and fix en route base shortfalls in the Pacific
    region. In fact, DLA and Air Force budgets now support all identified
    en route fuels projects. Significant construction began several years
    ago and continues in fiscal year 2002, but the infrastructure will not
    ``get well'' (i.e. fully meet the requirements laid out in our war
    plans) until the end of fiscal year 2006, and then only if all projects
    remain on track. Therefore, en route infrastructure investments will
    continue to be among the highest priorities at USTRANSCOM for some time
    to come.
        Over the past several years, Congress has been generous in
    providing USTRANSCOM with a modest separate funding line labeled
    Mobility Enhancement Funds (MEF). MEF infrastructure projects are, by
    definition, relatively low in cost (less than $5M) but with an
    excellent cost-to-benefit ratio. MEF provides funds for small, less
    glamorous, but high payback, improvements that are otherwise overlooked
    by the Services. Since Desert Storm, MEF has improved rail links to
    ammunition depots and military installations and funded a host of
    runway and ramp improvements in CONUS and around the world,
    contributing significantly to an increasingly efficient and effective
    DTS . . . in peace and crisis.
        An important milestone occurred last year when MTMC took over
    operation of a portion of Concord Naval Weapons Station, California.
    Previously, the only developed ammunition seaport for unrestricted
    operations was Sunny Point, North Carolina. Very important to our war
    plans, further development of this key West Coast ammunition port will
    significantly reduce shipment times to the Pacific region and provide
    much needed redundancy for strategic munitions sustainment.
        Another important enabler in need of modernization is the Army and
    Navy's JLOTS capability. The challenge? There is minimal JLOTS
    equipment forward deployed and current equipment can only offload ships
    during sea state two conditions (relatively calm seas) or less. We
    believe the regional CINCs will benefit significantly from a sea state
    three (SS\3\) capability, currently under development, that in some
    regions would allow substantially more operating time in rough seas. As
    suggested, the Army and Navy have programs in place that should attain
    SS\3\ capability by 2005 if fully funded.
    Modernization: Mobility Requirements
        MRS-05, mentioned earlier, identified a mobility requirement
    baseline for the beginning of the new millennium. A more comprehensive
    and realistic analysis than ever before conducted, MRS-05 used the
    fiscal year 2005 programmed force structure for all Services as
    outlined by defense planners and Service programs. The scenarios
    explored in the analysis also recognized the increased complexity
    involved in deploying forces from our post-Cold War global engagement
    posture, as well as our need to be able to respond to asymmetric
    attacks by enemy forces, including attacks using chemical weapons. This
    comprehensive, 2-year, end-to-end analysis looked at mobility
    requirements within the CONUS, between theaters (inter-theater
    mobility), and within individual theaters (intra-theater mobility).
    While prepositioning, surge sealift, and CONUS transportation assets
    were found largely satisfactory, some improvements are required in each
    area. That said, the most dramatic finding in the new study was its
    validation of the consensus belief across the DOD that we are operating
    today with a significant strategic airlift shortfall.
        Of particular interest has been the JCS and CINC review of the
    study. Without exception, their review supports an increased strategic
    airlift requirement of 54.5 million ton-miles per day (MTM/D) to meet
    the mandates of the National Military Strategy at a minimal
    ``moderate'' level of risk ( . . . versus the 49.7 MTM/D requirement
    goal outlined in the 1994 MRS-BURU study, and our current approximately
    45 MTM/D capability). While USTRANSCOM fully supports the Chairman's
    recommendation of a minimum 54.5 MTM/D, it must be understood that the
    range of options varied from 51.1 MTM/D up to 67 MTM/D. When the
    assumptions are adjusted, the study shows a significantly higher demand
    for organic (military) airlift assets and capability.
    Modernization: Shaping the Future DTS
        Given the probability, at some point in the near-future, that the
    CINCs will be tasked, once again, to support an operation on the high-
    end of the spectrum of conflict, i.e. a high intensity Small-Scale
    Contingency or a Major Theater War, the Services are working hard to
    transform themselves to meet the challenges of the 21st century.
        Responding to this reality, the Army has articulated a new vision
    for a strategically responsive and dominant force designed to meet the
    full spectrum of future military operations. The Army's
    ``Transformation'' will occur in three phases, culminating in an
    ``Objective Force'' whose goal is to send a brigade anywhere in the
    world in 96 hours, a division in 120 hours, and five divisions in 30
    days.
        Similarly, the Air Force has transitioned to an Expeditionary
    Aerospace Force (EAF) structure to improve its responsiveness to the
    diverse needs of our National Security Strategy and the warfighting
    CINCs. Organized into smaller Air Expeditionary Force (AEF) packages,
    the EAF provides standard sets of capabilities to the regional CINCs
    while simultaneously providing more stable, predictable rotations for
    Air Force people. The Air Force goal is to be able to deploy five AEF
    modules anywhere in the world in 15 days.
        As a supporting command, USTRANSCOM's job is to be able to rapidly
    project these transformed forces quickly and reliably anywhere in the
    world. The future DTS must be as flexible as technology will allow,
    complete with state-of-the-art information systems, modernized
    transportation vehicles and support equipment, and top-of-the-line
    trained personnel to operate the technology. Simultaneously,
    USTRANSCOM's operational processes must be updated to take advantage of
    the technologies and capabilities we are pursuing.
        It is obvious that future strategic mobility aircraft and ships
    will need to move greater amounts of cargo faster. Among the possible
    capabilities that we are studying include: high speed sealift vessels
    that cross the oceans and offload cargo in a fraction of today's time;
    large airships that carry several times the cargo of today's
    airlifters; floating off-shore base modules that are moved to crisis
    areas and assembled as multi-modal transshipment bases; super short
    take-off and landing tactical transports that carry C-130 size loads to
    small, austere landing zones; and multi-mission strategic mobility
    aircraft with a common airframe for airlift and aerial refueling (and
    perhaps even Command and Control, Reconnaissance and Surveillance).
    USTRANSCOM, along with industry, is actively exploring these and other
    future technologies and concepts for military and commercial use. Given
    current lead times for design and development, it is imperative that we
    stay abreast of industry initiatives, articulate militarily useful
    requirements, and insert them early in the design of future systems.
        Every regional CINC knows well that he cannot prosecute his mission
    without adequate and reliable strategic lift.
        On 27 March 2001, Gen Tommy Franks, CINC, U.S. Central Command,
    testified before the Senate Armed Services Committee. His comments are
    representative of what I hear from the other regional CINCs every day:
        ``With few permanently stationed forces in the region, our vitally
    important power projection capability depends upon strategic lift and
    robust land and sea-based prepositioned assets. Our ability to deploy
    forces and equipment quickly remains the linchpin for conducting rapid
    response to contingencies in USCENTCOM's AOR. We must continue
    modernization and maintenance of our strategic deployment triad:
    airlift, sealift, and prepositioning.
        The accelerated retirement of the C-141 fleet and the significant
    challenges of maintaining readiness levels of the C-5 fleet make
    continued production of the C-17, progress toward C-5 modernization,
    and support of the CRAF program critical to meet major theater war
    deployment timelines. Our requirements for strategic airlift combined
    with intratheater airlift are addressed in MRS 05, which we support.
        The procurement of Large Medium Speed RO/RO (LMSR) ships is on
    track and will significantly enhance our lift capability. Under the
    current procurement plan, we will meet our force and sustainment
    deployment timelines with these LMSRs and Ready Reserve Force (RRF)
    assets by the end of fiscal year 2003.
        Prepositioning in the region, the third leg of the strategic
    deployment triad, helps mitigate our time-distance dilemma, ensures
    access, demonstrates our commitment to the region, and facilitates
    sustainment of forces until the Sea Lines of Communication (SLOCs) are
    established . . . .''

                       THEME THREE: PROCESS IMPROVEMENTS

        Our processes, the collection of rules and procedures which govern
    our day-to-day business practices are under constant revision as we
    seek to improve the speed and reliability of our customer service. Our
    goal is a set of ``most effective and efficient'' processes that are
    applicable across the entire spectrum of our activities, from
    interaction with our commercial transportation providers to our
    ``warfighter CINC'' customers. Whether the issue is information
    technology, supply-chain management, doctrine or training, USTRANSCOM
    is constantly searching for the best business practices available
    today.
    Process Improvements: Information Management
        DOD relies on USTRANSCOM to do more than just provide multimodal
    planning and transportation support to U.S. forces worldwide. We also
    provide information systems critical to managing the DTS. Our systems
    are robust, reliable, and available to our customers worldwide.
    Transportation management today is not just about moving people and
    cargo but also about the timely and accurate movement of shipment
    information.
        The role of information technology (IT) at USTRANSCOM today has
    moved beyond being a great enabler of our current procedures, to the
    point now where it has become the catalyst for the introduction of new
    processes designed to change future business practices. In order to
    maximize IT investments and mission support, USTRANSCOM has designated
    a Chief Information Officer (CIO) to conduct strategic planning and IT
    management. The USTRANSCOM Command, Control, Communications, and
    Computer Systems (C\4\S) Director fills that function and today wears
    two hats: CIO in peacetime and Director of C\4\S in wartime.
        The USTRANSCOM CIO and I are working closely together to develop an
    enforceable enterprise-level architecture. It is our vision that such
    an architecture, properly constructed, will establish system,
    technical, and operational views of the present and future that will
    set the policy and chart the development of information technology
    solutions for as far out into the future as we can see. The
    architecture documenting our current environment was delivered in 1998,
    and in December of 2000 we completed our ``To-Be'' Enterprise
    Architecture. Now, we are focused on establishing the foundation for
    managing our information technology investments.
        The Global Transportation Network (GTN) is USTRANSCOM's pivotal
    information system for the management of transportation information
    both today and in the future. GTN is changing the way military
    organizations and our commercial partners conduct their operations. In
    fact, USTRANSCOM is moving to the next phase of GTN process improvement
    with the recent announcement of our GTN 21 initiative. With near real-
    time visibility of high priority materiel moving through the DTS,
    customers can make operational decisions faster than ever before. GTN
    is linked to a wide variety of transportation IT systems across DOD and
    the commercial transportation sector, contributing significantly to
    total in-transit visibility (ITV), i.e. the ability to track the
    identity, status, and location of any passenger or piece of cargo
    moving in our system. Today, commanders, planners and logisticians,
    whether they be on CINC-level staffs or in tactical units on the
    battlefield, expect accessible and reliable ITV. USTRANSCOM is
    dedicated to giving it to them--from end-to-end.
        Within AMC, Mobility 2000 (M2K) is another 21st century process
    improvement designed to guarantee a near real-time digital data link
    connection between AMC aircraft and our worldwide command and control
    centers, to include Federal Aviation Administration en route air
    traffic control centers. M2K will significantly improve both our
    capabilities and our safety, linking AMC not only to our aircraft, but
    also to this country's global network of air traffic control systems,
    allowing totally integrated flight management. We will begin M2K
    modification of our aircraft in fiscal year 2002 but, unfortunately,
    based on current funding availability, will not be able to complete the
    program until fiscal year 2014.
    Process Improvements: The Deployment Process
        USTRANSCOM is also pursuing a number of initiatives, many in
    partnership with United States Joint Forces Command, to improve the
    deployment process. One of the most far-reaching projects currently
    underway is orchestration of the several sub-initiatives associated
    with the Chairman of the Joint Chiefs of Staff's 72-hour standard for
    generation of Time-Phased Force and Deployment Data (TPFDD) required
    for any sizable deployment of DOD forces. The TPFDD is basically a list
    and schedule of deploying units and all their deploying equipment and
    is typically developed jointly by the combatant commander, the
    Services, and USTRANSCOM. In the past, TPFDDs have taken weeks to
    develop and implement. Our improvement initiatives include four key
    areas for improvement, which we believe, collectively, will decrease
    the time required to develop the TPFDD down to the Chairman's desired
    standard.
    Process Improvements: Leading DOD's Distribution Revolution
        Currently no single DOD organization is tasked with measuring the
    overall effectiveness, design, or optimization of DOD's global
    distribution/supply chain management system. As a partial remedy to
    this disconnect, in February 2000 the Defense Logistics Agency (DLA)
    and USTRANSCOM partnered to lead a revolution in DOD's supply and
    transportation systems. The primary goal of our ``revolution'' has been
    to create a warfighter-based, value-added, logistics capability which
    will allow DOD to more rapidly, effectively and efficiently fulfill its
    mandate under the National Military Strategy. The key component of our
    partnership is the Strategic Distribution Management Initiative (SDMI),
    an initiative formed to provide senior DOD leaders with logistics
    process improvement recommendations that balance four major customer
    focus areas: service, cost, readiness, and sustainability.
        SDMI ``cutting edge'' efforts analyze and compare current
    distribution requirements, patterns, processes, and systems against an
    ideal ``to-be'' integrated distribution supply chain. The initiative is
    designed to optimize support to the warfighter by analyzing material
    stockage through warehousing, storage, distribution, and strategic
    transportation practices and linking them to each regional CINC's joint
    theater distribution system. In the short time since we set off on this
    journey, SDMI has conducted in-depth analyses of the air and surface
    distribution channels, performed modeling and simulation diagnostics,
    and started developing processes and digital tools that imbed velocity
    in our customer support. SDMI's initial focus is on four major areas:
    stock management, surface distribution, air distribution, and financial
    processes. A flag officer heads each effort in consultation with OSD,
    the Joint Staff and military service representatives.
    Process Improvements: Command Streamlining
        USTRANSCOM has fully embraced a series of organizational
    initiatives designed to streamline our operations and increase
    effectiveness. A prime example of these changes is taking place within
    our Army component, Military Traffic Management Command (MTMC). MTMC
    has adjusted portions of its headquarters staff and shifted some
    planning and operational responsibilities to its subordinate commands
    while simultaneously centralizing personnel, logistics, administration,
    resource management, passenger, and personal property functions at
    their headquarters in order to keep field elements focused on force
    projection and sustainment. MTMC has also standardized the organization
    and size of its battalions and groups making them more flexible and
    responsive and better able to project Deployment Support Teams
    worldwide, thereby making MTMC forces more flexible and responsive.
    These centralization and standardization changes have produced
    impressive results. MTMC is now operating with a 5 percent smaller
    staff and has realized a $57.6 million cost avoidance over the last
    fiscal year.
        Future initiatives at MTMC will pursue contracting for the
    management of container and rail assets, and address options for better
    integration of operational functions up and down the chain of command,
    as well as across commands. Through all of this, USTRANSCOM and MTMC
    will continue to work with our commercial partners to identify,
    evaluate and, where appropriate, pursue better business practices to
    improve our support to our customers.
    Process Improvements: Agile Transportation for the 21st Century
        With one eye always on the future, USTRANSCOM is initiating an
    Advanced Concept Technology Demonstration that will concentrate
    exclusively on enhancing the DTS. As the single manager for the DTS,
    USTRANSCOM requires system-wide visibility of all transportation assets
    and intermodal resources to optimize the employment of its lift
    capabilities in response to movement requirements. Agile Transportation
    2000 (AT 2000) will enable USTRANSCOM to better determine
    transportation feasibility, estimate costs, project throughput
    capability, foresee potential choke points, and make modal and
    intermodal decisions. AT 2000's operational objectives include:

             Development of decision support tools to better manage
            the DTS in peacetime and in crisis surge modes
             Cost Avoidance for DTS services for CINCs and services
             Improvements in the quality of service for component
            customers

        Finally, a major goal of Agile Transportation for the 21st century
    is to develop a ``near real-time'' capability to provide a
    transportation plan to a supported CINC within 4 hours of USTRANSCOM
    receiving the CINC's TPFDD.
    Process Improvements: Business Practices
        The longstanding partnerships between USTRANSCOM and commercial
    industry afford a unique opportunity to infuse best business practices
    of the civilian sector into the DTS. Recognizing this opportunity, the
    Secretary of Defense designated USTRANSCOM as DOD's first ``Reinvention
    CINC.'' Since that time, USTRANSCOM has played a key role in the
    development of reinvention proposals that will change the way DOD does
    business in the areas of business finance, workforce and organizational
    shaping, and process streamlining. For example, USTRANSCOM is seeking:

             Improved financial controls-real-time visibility of
            our financial status and improved flexibility in directing
            funds toward emerging opportunities.
             Improved organizational controls--the ability to shape
            our workforce and organizational structure in response to
            changing market conditions.
             Improved process controls--the ability to rapidly
            evolve our business rules, information processes, and
            contracting decisions for optimal efficiency and effectiveness.
    Process Improvements: Management Reform Memorandum #15
        A significant change is taking place in the way USTRANSCOM conducts
    its day-to-day business with its customers and vendors. Government-
    unique documents are going out the window. In their place are
    commercial forms and streamlined automation of our business practices.
        Improvements to USTRANSCOM's business processes have been underway
    for some time. That said, our efforts have been elevated to the next
    level with our implementation of Management Reform Memorandum #15 (MRM-
    15)--Reengineering Defense Transportation Documentation and Financial
    Processes. MRM-15 memorandum, signed July 7, 1997, by Deputy Secretary
    of Defense John Hamre, set in motion a revolution in business practices
    for DOD transportation services.
        USTRANSCOM is the functional manager for MRM-15, which is virtually
    overhauling our defense transportation and payment processes. The
    changes we are making streamline procedures, reduce paperwork, and
    eliminate the need for government-unique payment centers dedicated to
    paying transportation services. A major initiative under MRM-15
    eliminates government-unique documentation, to include freight
    Government Bills of Lading and military manifests for commercial
    sealift movement.
        Currently, the DOD is using U.S. Bank's PowerTrack service, an
    online payment and transaction tracking system, basically reducing the
    payment cycle to carriers from an average of 60 days to 3 days. This
    new service is now used almost exclusively for worldwide express
    movements and sealift intermodal container service, as well as for
    commercial transportation payment of freight movements within the US.
    Additionally, PowerTrack's single-source information center provides
    instant access to shipment data for both carriers and shippers.
    Furthermore, it automates reconciliation of freight bills and invoices,
    and guarantees timely payments. A collateral benefit is that PowerTrack
    provides a strong information component which will serve as an
    analytical tool to accelerate our move into true distribution
    management for the entire DTS.
    Process Improvements: Personal Property Enhancements
        Our effort to improve the household goods (HHGs) movement process
    is a critical quality of life issue for DOD members. The current
    program, unchanged for 35 years, has drifted far from the quality move
    our service members and their families deserve. To remedy this
    unsatisfactory situation, and based on congressional language in the
    National Defense Authorization Act (NDAA) for Fiscal Year 1996, three
    different, but related, pilot programs are currently ongoing.
        All three pilot programs have proven themselves to be significant
    improvements over the current program. Unfortunately, since the onset
    of these initiatives, because they are still only pilot programs, only
    a small number of DOD members have experienced the program improvements
    our ``test group'' has enjoyed. At best we have ``touched'' only an
    estimated 46,000 of the 613,000 households we move each year.
    Consequently, less than 10 percent of our shipments have received any
    of the benefits a complete HHGs reengineering will bring. That still
    leaves 567,000 shipments per year unaffected by any real systemic
    improvement. Left to its scheduled course, our HHG reengineering
    efforts will not touch the remainder of these DOD families for several
    more years. We believe DOD can realize improvements much sooner than
    planned by incorporating those successful pilot features which have
    already proven successful across all three initiatives into the current
    program now. It is USTRANSCOM's recommendation, for the good of DOD
    personnel worldwide, that we incorporate these core cross-pilot
    initiatives now versus waiting until the pilots are complete and the
    final report rendered.
        To bring these pilot successes into the current program, we have
    established a task force team, comprised of industry representatives
    and DOD personnel, to review and coordinate the proposed changes. As a
    reminder, our proposal to begin integrating our most successful pilot
    features into the current program now is not intended to replace or
    stop the pilots, but merely to capitalize on their successes early--
    with the real winner being our military families around the world.
        As demonstrated in the ongoing pilots, there is additional cost
    associated with giving our Service members the kind of move they
    deserve. Today, our Service members not only receive a substandard
    move, they also simultaneously incur a host of out-of-pocket expenses
    not covered by their moving allowances. That said, we are aware that
    the military services have not programmed the necessary funds near term
    for the increased costs required to fix this unsatisfactory situation.
    Therefore, to lead turn this, USTRANSCOM has begun soliciting the
    support of senior leaders in DOD, the administration, and Congress to
    begin identifying funds now, so that we can start including these core
    improvements in our fiscal year 2002 move program. In my view, we
    cannot start too soon to rectify our deplorable HHGs movement system.
    Process Improvements: Global Privately Owned Vehicle (POV) Contract
        Another critical quality of life issue for military personnel
    assigned overseas is the movement of POVs to new duty stations. In
    September 1998, MTMC awarded a 2-year contract with three 1-year
    options to handle the approximately 75,000 vehicles per year that DOD
    ships. Now in its first option year, the program is a real success
    story. Customer satisfaction rates are up from 77 percent to 99 percent
    and claims ratios have decreased from 11 percent of shipments to 5
    percent. Furthermore, because all CONUS vehicle processing centers are
    contractor-owned and operated, MTMC has realized outsourcing cost
    savings through the closure of 12 government-owned vehicle processing
    centers and the reduction of 39 positions. The contractor assumes full
    movement responsibility and full claims responsibility up to $20,000
    per vehicle except during the ocean portion of the shipment. Any
    responsibility for ocean damage is with the ocean carriers in
    accordance with the separate contract with them. With this new POV
    shipment program, along with enhanced intransit visibility, DOD has
    simultaneously realized a strengthened partnership with ocean carriers,
    supported our VISA participants and VISA program goals, and promoted
    financial stability for our partner ocean carriers. The program has
    been so successful that the projected cost of the 2-year contract fell
    from the original $394M to $350M, a savings of $44M. Rates per POV fell
    $70 for the three option years, providing savings in those years of $5M
    per year and $15M overall. Effective the second quarter of fiscal year
    2001, the contractor assumed responsibility for vehicle cleaning and
    agriculture inspections at no cost to the government (saving an
    additional $1.5M), developed a new computer system to provide total
    end-to-end visibility of POVs in shipment and absorbed the $3M in costs
    for that system.
    Process Improvements: Aeromedical Evacuation (AE) System
        It has been recognized that today's AE system was built for ``a
    world that no longer exists.'' With the reduction in DOD's overseas
    medical footprint since the end of the Cold War, we have seen an
    increased requirement for a more rapid, responsive AE system. Last
    year, an AE Tiger Team formed by Air Mobility Command reviewed the
    existing system, end-to-end, and proposed a more responsive, flexible,
    and capable system adaptable to missions across the spectrum of
    operations. The goal is to build a single, integrated, requirements-
    based AE system that operates as efficiently in peacetime as it is
    designed to operate in war.

                               THEME FOUR: PEOPLE

        It should go without saying that the real strength of USTRANSCOM's
    readiness and warfighting capability lies in her exceptional men and
    women. It is only through their frequently extraordinary efforts that
    we are able to provide and maintain a ready, dependable DTS . . .
    around the world, every day. In these times of increased operations
    tempo, we must remain sensitive to the quality of life of our Service
    members. Meeting their needs not only leads to better readiness and
    higher retention, it is simply the right thing to do.
        That said, I am not encouraged with the trends associated with
    retention of our highly-trained aircrews. To be blunt: pilot retention
    is at historic lows . . . a condition which stretches USTRANSCOM's
    ability to maintain readiness. I am also concerned by significant
    losses of experienced enlisted aircrew members. The percentage of
    aviators accepting increased retention bonuses rose slightly this past
    year but still falls below the level we require to sustain the force.
    Just as troubling, second-term reenlistment rates, my primary indicator
    of enlisted retention, are dropping significantly among several
    critical support fields, and it appears that monetary incentives alone
    are not going to solve the problem.
        In addition to inadequate compensation, ``workload'' is the other
    factor at the root of our retention problems. Aircrews and support
    personnel spend too much time away from home or work too hard while
    they are at home compensating for deployed personnel and training time
    lost to previous deployments. Today, as I said earlier, the peacetime
    workload is often as heavy for active duty aircrews and support
    personnel as during wartime. The situation becomes even more tenuous
    for our guardsmen and reservists who must balance high peacetime
    operations tempo demands with the stresses of their civilian careers.
    Although we have taken some steps to mitigate the effects of the
    unprecedented peacetime operations tempo, now we need to take the next
    step and increase support manning and aircrew-to-aircraft ratios to the
    levels required in this new environment in which we are operating.
        With our frequent wartime optempo going head-to-head with manning
    levels and ratios established in the Cold War, we are wearing our
    people out and as a consequence, many who would prefer to stay are
    leaving for more stable and predictable civilian careers. In my view,
    it is more cost-effective to increase manning than to have to
    continually prematurely replace experienced personnel . . . and I
    suggest that it is ``high time'' we got on with fixing the problem.
        Another USTRANSCOM area of concern is the availability of trained
    and qualified merchant mariners. The goal here is to ensure a trained
    and efficient U.S. merchant marine workforce sufficient to support
    domestic and international waterborne commerce as well as to guarantee
    national emergency and wartime sealift and auxiliary manning needs.
    MARAD supports the maintenance of a viable U.S. merchant mariner pool
    through the MSP, enforcement of cabotage laws, enforcement of
    government cargo preference requirements, and maritime training and
    education. DTS prepositioned, surge, and sustainment sealift are all
    dependent on this pool of qualified U.S. merchant mariners. While no
    significant problems are apparent in manning the surge fleet through
    fiscal year 2003, the projected speed of mobilization, combined with
    the projected length of future conflict, portends significant
    shortages. Current ``drags'' on the pool of merchant mariners include
    the relative unattractiveness of the career due to salaries, lifestyle,
    and work environment. Limited new vessel construction coupled with the
    reduction in crew size required on our newer ships is aggravating the
    situation. Through MSC, USTRANSCOM is partnering with maritime labor
    organizations, the U.S. Coast Guard (USCG), and MARAD to refine a
    mariner tracking system and to develop contingency sealift crewing
    processes and mechanisms. This partnership will look at methods of
    increasing the availability of both licensed and unlicensed mariners
    while simultaneously continuing to urge the administration and Congress
    to support those programs that serve to maintain this critical
    personnel resource pool into the future.
        Over the past 2 years, there have been significant enhancements in
    the military health system, making the TRICARE benefit more accessible
    to our entire military family--both to our active duty members and
    their families, as well as to our retirees of all ages. We are grateful
    to Congress for the hallmark provisions of the fiscal year 2001 NDAA,
    which--among other things--expanded the military health care benefit
    for active duty members and their families, returned military health
    care to our Medal of Honor recipients, and perhaps, most significantly,
    returned the promise of health care for life to our senior patriots
    (over age 65), as well as extending to them the comprehensive pharmacy
    benefit they so richly deserve. Over the past several years, Service
    members have voiced apprehension that benefits promised to them upon
    entering the military have changed or may change in the future. They
    wondered if the quality health care promised to them and their families
    would be there when they need it. They watched to see how we kept faith
    with retirees and placed significant weight on this factor when making
    their career decisions. I am hopeful that this year's landmark
    legislation will reaffirm for active duty members our Nation's
    commitment to truly take care of them and their families if they choose
    a career with us. Indeed, if we can regain and retain the troops'
    confidence, this legislation can be a tremendous retention tool.
        That said, even with the great strides that have been made at the
    legislative and operational levels in improving our military health
    care program, many challenges remain. Although patient satisfaction
    with TRICARE has steadily increased over the last several years, issues
    surrounding access, claims processing, and other bureaucratic
    ``hassles'' associated with the program are still major
    ``dissatisfiers'' among our beneficiaries. Recent programmatic and
    legislative changes to the program, such as the fiscal year 2000 NDAA
    introduction of Beneficiary Counselors and Assistance Coordinators,
    designed to resolve user concerns on the spot, provide patients with
    significantly improved advocacy in our military treatment facilities.
    That said, much remains to be done, and the men and women of the
    military health system are working hard to implement the additional
    reforms needed to keep our promise of quality health care delivery for
    the entire military family.
        TRICARE aside, Congressional support for our people extends well
    beyond the health care arena. For example, pay and benefits, to include
    adequate housing and/or housing allowances, remain major concerns as we
    strive to adequately care for the men and women who daily sacrifice so
    much for our Nation.
        I am hopeful that last year's landmark legislation will translate
    into a reaffirmation of Congress' and the administration's commitment
    to take care of our members and their families as they, in like manner,
    commit to a career of service to our country. This legislation should
    be another significant retention tool and, likewise, should form the
    basis for all necessary follow-on quality of life initiatives. I can
    not emphasize strongly enough how important it is that we do whatever
    is necessary today to win the battle for the hearts and souls of our
    very talented men and women and their families. The risk--in continued
    loss of combat capability and readiness to execute the national
    military strategy today and in the future--is too great to accept.

                                 FINAL THOUGHTS

        Since President Reagan ordered the establishment of USTRANSCOM on
    18 April 1987, the command has evolved into a truly unique joint
    organization with a customer focus second to none. On any given day,
    the USTRANSCOM team can be found providing critical strategic
    transportation to a host of U.S. and international agencies, from our
    regional CINCs to the myriad of other U.S. government agencies with
    global interests. No matter what the mission assigned, the customers
    supported, or the major world event to which America has chosen to
    respond, the connection I would have you make--and remember for all
    future events--is that if there is a U.S. response, that response is
    borne on the shoulders of the men and women who operate the air, land,
    and sea components of USTRANSCOM. There are not many headlines for what
    they do. In fact, we call them this country's ``quiet heroes.'' These
    dedicated transportation warriors stand ready every day to
    professionally execute their global mobility mission-and in so doing,
    to successfully enable our national military strategy.
        While ready to perform any mission assigned today, we remain
    focused on, and committed to, preparing for the future. Accordingly,
    our focus is on the readiness of our people, our processes, our
    systems, our infrastructure, and our partnerships with industry.
        I am extremely proud of today's USTRANSCOM ``Total Force Team'' of
    civilians, active duty, Guard, Reserve, and industry partners. It is an
    honor for me to lead the highly professional members of USTRANSCOM and
    its Service components who comprise our National Defense Transportation
    team. I look forward to the future and remain confident that USTRANSCOM
    will continue to provide the most effective and responsive strategic
    mobility capability in the world.

        Senator Sessions. Very good. Thank you, General Robertson.
    Desert Storm and Desert Shield mark the first time in U.S.
    history the military had a single command to coordinate the
    strategic air- and sea-lift during a major military operation.
    During that operation, the Transportation Command lifted the
    equivalent of two Army Corps, two Marine Corps Divisions, and
    28 Air Force tactical fighter squadrons into Southwest Asia. It
    was a remarkable thing. As I recall, it was about 6 months
    before, we felt we were sufficiently positioned to commence
    hostilities. I had occasion to talk to a former higher officer
    in the Military Transportation Management Command (MTMC) in the
    mid 1990s, and he told me he did not think it could be done at
    that time in the same amount of time. In fact, he thought it
    would take longer.
        Now, I know a lot of ships have been brought on line, but
    the total number of sealift ships are going down. My question
    to you is first of all, would you compare the strategic sealift
    and airlift capabilities of Desert Storm to today's
    capabilities and those that are projected for 2005?
        General Robertson. I will, sir. If I could, I would like to
    make one point about the difference in the United States
    Transportation Command before Desert Storm, as opposed to
    since.
        Senator Sessions. Please give us your observations on that.
        General Robertson. It slightly changes the complexion of
    the picture. When the Transportation Command was formed, it was
    the result, as many things are, of a negotiation between those
    who wanted it and those who did not. The result was a middle
    ground solution which basically said that USTRANSCOM was
    responsible for the movement of the Department of Defense
    forces and materiel in time of war, not in time of peace.
        Therefore, when General H.T. Johnson, my predecessor, who
    was the CINC in Desert Storm, had to take on that mission, he
    had not practiced it in peacetime the way he would have to do
    it in wartime. We stumbled a little bit in Desert Shield/Desert
    Storm, if you go back and read the history. Yet we learned from
    that lesson and as a result, my predecessor went back to the
    Secretary of Defense, who, in turn went back to Congress to
    revise the charter to make USTRANSCOM the responsible agent for
    the movement of the Department of Defense in time of peace and
    in time of war.
        When I talk to the warfighting CINCs, the first thing I
    tell them is to know what I will do for you in wartime, you
    just have to observe what I do in peacetime, and if you do not
    like the way I do it in peacetime, you better correct me to 100
    percent because I am going to do the same thing for you in
    wartime. I have set up my systems to operate in peacetime just
    as they will operate in wartime.
        Now, to get to your specific question. We learned a lot of
    lessons out of Desert Shield/Desert Storm. We characterized the
    Defense Transportation System as a strategic triad of
    prepositioning ships that are out stationed around the world on
    a continuing basis, a surge sealift fleet which we use to move
    rapidly from the continental United States and other points
    around the world to the areas of operation, and the strategic
    airlift fleet, which is the fastest, quickest way to move
    troops and forces to the theater.
        If I take each one of those individually and compare them
    to the way we moved that mountain of men and equipment in
    Desert Shield and Desert Storm, you can see that from 1992 when
    the war ended, to the studies that came after Desert Storm to
    today, we have increased our capability to move the force from
    a sealift perspective from 53 percent to 135 percent.
        Senator Sessions. I do not want to interrupt you, but we
    have gone down in total ships during this period of time.
        General Robertson. Yes, sir.
        Senator Sessions. Substantially. Over 500.
        General Robertson. Yes, sir.
        Senator Sessions. How do we increase our airlift and
    sealift capability while we have seen this decline in numbers?
        General Robertson. We have bought faster and much more
    capable ships. We have increased the capability of the ships we
    own and maintain. The Ready Reserve Force in Desert Shield/
    Desert Storm when we activated that fleet, was only 25 percent
    successful activating on time. A lesson learned from Desert
    Storm is we implemented in conjunction with the Navy and the
    Maritime Administration (MARAD) a no-notice activation program
    for the Ready Reserve Force. Since that time, we have been 99
    percent successful in activating those ships; 133 of 135 no-
    notice activations on time or early. The two that were late
    were less than 10 hours total late; so the Ready Reserve Force
    is phenomenally better than it was. Our shipping fleet is
    newer, faster, more modern, and much more capable than it was,
    and we have significantly expanded, probably by a third, the
    size of the prepositioning fleet which is also newer, more
    capable, and more modern.
        On the airlift side, if you take 1996 as a baseline where
    we had the capability to move about 48 million ton-miles a day,
    as a result of the tradeoff between the C-141 retiring and the
    C-17 coming on-line, we are down to about a 44.5 million ton-
    miles a day capability. We are down some from our 1996 peak.
    Now, that is going to improve as the C-17 continues to come on
    line with its increased capability, but the new requirement, as
    you mentioned, in the Mobility Requirement Study of 2005, is
    about 54.5 million ton-miles a day. Currently, we are nearly 10
    million ton-miles a day short of that. Even if we get
    everything that is in the current budget, we will still be over
    5 million ton-miles a day short.
        If you look at it from a sealift perspective, we are much
    better than we were in Desert Storm. We think we will be able
    to close the force not even in the same time but faster. From
    an airlift perspective, we have a ways to go to be able to meet
    the capability we achieved in Desert Shield and Desert Storm.
        That said, we also would not have to move as much now, as
    in Desert Storm, because our in-transit visibility capabilities
    have increased significantly. The mountain of containers that
    never got opened in the desert after Desert Storm are not
    required any more because we know better what we are moving and
    where it is. Our procedures and processes with our customers
    have significantly improved. We are definitely a better
    transportation system than we were in Desert Storm. However, in
    sum, it is the airlift side, the strategic airlift side, that I
    worry the most about.
        Senator Sessions. Senator Kennedy.
        Senator Kennedy. Thank you, Mr. Chairman. General
    Robertson, the companion effort to the Mobility Requirement
    Study, MRS-05, had been the airlift oversize and outsize
    analysis of alternatives. We have been awaiting the delivery of
    that study, but nothing has arrived yet. I called Secretary
    Rumsfeld earlier today to ask about the status of the study and
    urged him to release it expeditiously. The Secretary did not
    have any specific information immediately available to him on
    the status of the study, but he said he would get back to us.
    Could you give us any information on the status of the study?
        General Robertson. The study is done. We have finished
    dotting the last I and crossing the last T with our masters in
    OSD, and I think that, probably as the Strategic Review is
    wrapped up and vetted in OSD, the Analysis of Alternatives
    (AoA) will soon be releasable. I talked to the Secretary
    yesterday and did not address that specific question, but I do
    not think that there is any reason why it will not be
    releasable soon.
        That said, I will tell you what it says.
        Senator Kennedy. That is even better.
        General Robertson. Basically, what the Analysis of
    Alternatives looked at was the delta that I just mentioned
    between the strategic airlift requirement and what we have
    today. For example, it looked at the strategic airlift movement
    requirement for the national strategy or for the one-MTW part
    of the national strategy and tried to assess what the best-
    value solution was to closing that gap.
        There are really only two airplanes that are capable of
    filling the strategic oversize/outsize requirement we look at,
    and those are the C-17 and the C-5. With the requirement to
    close a gap of 10 million ton-miles a day, the solutions, well,
    the problems are obvious. The first problem is we have been
    laboring with the C-5 for many years. It does not meet the
    requirements of the air crews, the Air Force, or the Department
    of Defense because of its reliability and maintainability
    problems. One of the solutions to our shortfall is to fix the
    C-5 once and for all, and we think it is definitely fixable.
        The other side of the problem is, even if we fixed 126 C-5s
    and brought their reliability up to that promised by the
    programs that we have offered, the Reliability Enhancement and
    Re-engining Program (RERP) and the Avionics Modernization
    Programs (AMP) on the C-5 would not close the airlift gap. We
    still need to procure more C-17s to bring us up to the
    capability required, 54.5 million ton-miles a day.
        Our proposal to the Secretary of Defense was that we re-
    engine the C-5, the Reliability Enhancement and Re-engining
    Program, complete the Avionics Modernization Program on the C-5
    and effectively close out the challenges that are well
    documented with the C-5's reliability and maintainability, and
    then, procure C-17s up to the number that we need to meet the
    MRS-05 requirements.
        Here is what we proposed on the C-5. There are a host of
    people in the Department of Defense who do not think the C-5
    can be fixed. That its reliability problems are so significant
    that no matter what we do to the systems on the C-5, we can not
    bring it up to a level that is acceptable. Our proposal
    suggests that the best way to approach the C-5, when you have
    76 of the 126 that are C-5A models and that are 35 years old,
    and you have 50 of them that are C-5B models that are only 12
    years old and are already more reliable than the A models, that
    we produce a success story first. We produce a success story by
    beginning with the newer airplanes, the ones that are equipped
    with air defensive systems, the ones that fly the most on a
    day-to-day basis, and then we go back to re-engine the A models
    afterwards; after we have convinced the naysayers that this re-
    engining program will yield the results that it suggests.
        That will give a future CINC the opportunity, if the
    modifications meet our expectations or if the naysayers are
    correct, to make a much more informed decision about what to do
    with the A models, which by then will be approaching 40 years
    old, as to whether the re-engining should be pursued or whether
    we should continue to buy C-17s. That is basically what the
    Analysis of Alternatives recommended, sir.
        Senator Kennedy. Was that the recommendation of the
    Institute for Defense Analyses (IDA)?
        General Robertson. IDA, I think, just recommended that we
    re-engine the C-5s and did not come up with a specific flow
    pattern.
        Senator Kennedy. What was their rationale?
        General Robertson. Sir, they concurred with everything that
    the contractor came up with as far as the recommendation was
    concerned, the effectiveness of the modifications proposed, and
    the subsystems chosen to be modified. They came within a
    percent or 2 of what the contractor said he could come up with
    as far as the question of reliability. As far as mission
    capable rate. As I recall, they did not propose a particular
    sequence or number of airplanes to be modified.
        Senator Kennedy. What is the difference in the cost between
    the alternatives that you are looking at? I had heard from the
    studies as you described it, that the report had talked about
    the re-engining of the C-5A, and you have given us at least
    what the Air Force desires as its best judgment as the way to
    meet the requirement. What is the difference? What's the spread
    just in terms of resources?
        General Robertson. The re-engining of the C-5 is the most
    cost-effective solution to closing the gap on a million ton-
    miles per day basis. Basically, we project it will cost around
    $48 million a copy to re-engine the C-5. A new C-17 would cost
    you somewhere in the vicinity of $150 million to $175 million,
    depending on the terms of a new multi-year contract, which is
    why we recommend both solutions. We have to re-engine the C-5
    and we have to continue to buy C-17s.
        Senator Kennedy. May I just continue for a minute, Mr.
    Chairman, on this subject matter?
        Senator Sessions. Sure.
        Senator Kennedy. Just on the difference between the C-5As
    and C-5Bs. As I understand, your prepared statement says that
    you have taken to the practice of assigning more than one C-5
    aircraft to the core mission in order to ensure the mission is
    completed. Currently low reliability of C-5As and C-5Bs would
    cause you to do this. Is that correct?
        General Robertson. That's correct, sir.
        Senator Kennedy. There is a C-5 Avionics Modernization
    Program and a C-5 Reliability Enhancement and Re-Engining
    program. Would these solve most of those reliability concerns?
        General Robertson. It is my assertion that they will, sir.
        Senator Kennedy. If these programs replaced current engines
    with newer commercial engines and upgraded the components,
    landing gear, electrical, hydraulic and fuel systems, etc., it
    would result in a much improved mission capable rate. Would we
    get an effective increase in the number of aircraft that the C-
    5 reliability would be improved to the point that we assign one
    aircraft to one mission?
        General Robertson. Absolutely, sir. To put what I put in my
    statement into context, what we are talking about here is
    covering very important missions in a peacetime environment. If
    we were in a war, obviously we could only spare one airplane
    per mission. But you are absolutely correct, sir. If we could
    bring the mission capable rate on the C-5 from its 59 to 60
    percent level up to the projected 75 percent mission capable
    rate, obviously we would have far more airplanes available on a
    day-to-day basis than we have today.
        Senator Kennedy. If I, just on this area, could complete,
    Mr. Chairman. General Robertson, this subcommittee has been
    very interested in the C-5 Avionics Modernization Program and
    the C-5 Reliability Enhancement and Re-engining Program (RERP).
    These programs, in combination, would solve most reliability
    concerns about the C-5 fleet that you mentioned in your
    testimony. Although the Air Force intends to modernize the
    avionics on all C-5s, the picture is less clear with regards to
    the RERP program. Last year the Air Force proposed to start the
    RERP engineering and manufacturing development on C-5B
    aircraft, but postponed the work on the C-5A model aircraft.
    One of the arguments of this approach used is that the C-5B
    aircraft has defensive systems and therefore could be used in
    more areas of concern.
        Given the current shortage of aircraft capability and the
    additional deployment flexibility that defensive upgrades would
    provide, why isn't the Air Force more aggressive in upgrading
    the C-5A aircraft with effective defensive systems? It seems
    that these planes are such a large target in a world of
    enormous uncertainty, particularly in these third world
    situations. Why wouldn't we want to do that in any event?
        General Robertson. Sir, we do. Force protection, if you
    rank force protection and defensive systems on our aircraft in
    the priority list that I rank my concerns, the force protection
    of the aircraft is number three. It is sort of an apples and
    oranges dilemma, because there is a personnel concern and an
    overall strategic concern. We should modify the aircraft, but
    then it becomes a matter of dollars and cents, versus
    priorities and relative risk, as it is with so many things.
        Right now, we do not even have the right system to put on a
    C-5 to properly protect it as a large, slow moving, fairly
    predictable airplane against the proliferation of shoulder-
    fired, surface-to-air missiles around the world. We are working
    on that system today. The system we need is expensive. That is
    the problem. It is an expensive system that we think we are
    going to need, and we have to field it, test it, and then come
    back and retrofit the airplanes. I am not sure that it would be
    worth the money today, although I could be proved wrong
    tomorrow if we have an accident or incident, to put a partial
    or an older system on an airplane that only offers 10 to 15
    percent ability to protect the airplane against the threat that
    it is going to face tomorrow, or even today.
        Senator Kennedy. If you upgrade one and not upgrade the
    other, what does that do in terms of maintenance, to have two
    entirely different kinds of planes? Does that not cost extra
    maintenance funds?
        General Robertson. Yes, sir. Absolutely, again, you hit the
    point that I would hit on KC-135s, and C-130s, as well as on C-
    5s. Commonality of the fleet is absolutely, critically,
    important to maintenance in the field today. That is why I
    would propose to re-engine the whole fleet once we prove that
    it will work on the C-5B, because we want the fleet to be as
    homogeneous as possible across the board. As we field each new
    block of C-17s, we are going back, to avoid the mistakes that
    were made in the past on other aircraft, and retrofitting all
    of the previous C-17s so that when we get to the final C-17,
    they are all the same.
        As another example, the C-130X program is an attempt to
    take 20 different models of C-130s and modify them into a
    standard C-130X configuration. So yes, sir. You will not hear
    any disagreement from me that we ought to standardize the
    fleet.
        Senator Kennedy. Thank you. Thank you, Mr. Chairman. Thank
    you for the help on responding to questions. Others can say
    well, it has not been released yet and when it is released I
    will comment on it. It is very helpful to get your insights on
    it and we want to try, and I am sure the Secretary would
    respond, to have as much subcommittee information prior to the
    markup as we can available to the subcommittee. Your responses
    have been enormously helpful and valuable to the subcommittee.
    I am very grateful to you.
        General Robertson. Thank you, sir. Regarding the overall
    gist of the questions, sir, the sooner we get on with modifying
    the C-5s, the better off we will all be.
        Senator Sessions. Thank you, Senator Kennedy. That was an
    important part of a decision that I think we will have to be
    making as to how we are going to deal with the C-5A. We now
    have Senator Collins and Senator Smith who have joined us.
    Thank you, I will recognize Senator Collins.
        Senator Collins. Thank you very much, Mr. Chairman.
    General, I apologize that I was not present to hear your
    testimony. In your written statement you said that even with
    the currently approved C-17 multiyear procurement program, we
    will still fall approximately 10 percent short of being able to
    meet our operational war plan. Similarly, the General
    Accounting Office (GAO), in a report in June, estimated that
    the DOD is 29 percent short of being able to meet its
    established military aircraft requirements, and nearly 19
    percent short of being able to meet the established air
    refueling requirements. First, let me ask you whether your
    findings are consistent with GAO's.
        General Robertson. Let me say in this case that I am
    delighted that the GAO and I agree. I say that in jest. They
    measure it a little bit differently than we measure it. In
    basic answer to your question, we generally agree that there is
    a shortfall that needs to be addressed, and the only difference
    we have is over what the baseline is.
        Senator Collins. In that regard, would a more aggressive
    airlift modernization program call upon us to authorize the
    purchasing of more C-17s than is currently planned under the
    multiyear procurement now underway?
        General Robertson. My short answer is yes, ma'am.
        Senator Collins. Do you have a specific number in mind on
    how many C-17s would be necessary to fulfill the current
    requirements?
        General Robertson. Yes, ma'am, I do. I would say for
    starters the number is 50 to 60 more. If you are using the
    original multiyear procurement of 120 aircraft as your
    baseline, and based on our assumption on how the C-5 re-
    engining program is going to proceed, we think we need 50 to 60
    more C-17s to meet the requirement. That number may change
    slightly, depending on this initiative that you probably read
    about--commercial C-17s. If that proceeds, the military
    requirement will adjust downward slightly.
        It may change slightly if we decide that we are not going
    to do a complete re-engining of the C-5 plane 5 or 10 years
    from now and instead choose to start replacing C-5s with C-17s,
    and in that case we would want more. In that regard, I'd say
    come back two CINCs from now and ask the question and we will
    have a better answer. What I have tried to do is posture my
    successors with a program that we need to begin now, as you
    suggest, then be able to make a couple of ``branch and sequel''
    decisions in 5, 6, or 8 years as to which direction we go based
    on the new requirement, based on DOD's new transformation
    initiatives on the evolution of the Air Force's new
    expeditionary concept, on the new requirement based on whatever
    new national military strategy we might have, and the adjusted
    requirement based on what happens with the C-5 re-engining
    program.
        Senator Collins. I want to follow up on your reference to
    the possible marketing of the C-17 aircraft to civilian
    carriers. It is my understanding that the Air Force is
    considering lending assistance to Boeing in marketing the C-17.
    Is that accurate?
        General Robertson. Lending assistance? It is probably best
    said that we are partnering with Boeing to try to find a viable
    commercial provider who can pursue the commercial oversize/
    outsize market and place those aircraft in the Civil Reserve
    Airfleet (CRAF) for my use whenever I want. What that really
    does is allow the Air Force and Department of Defense to have
    these aircraft available to us at a greatly reduced cost.
        Senator Collins. It would drop, I would assume, the unit
    costs significantly?
        General Robertson. Well, we would presume that this
    commercial provider would pay the bulk of the cost of the
    aircraft. In the end, on a day-to-day basis, we would save on
    the operation and maintenance of the aircraft from the market
    that our commercial provider would develop in this commercial
    world. So yes, ma'am.
        Senator Collins. What is the status of that proposal? What
    do you see as the pros and cons of pursuing the proposal?
        General Robertson. The obvious pro is the lower unit cost.
    I do not know of any cons. I am open to suggestions, but in my
    view, it is a ``win/win'' for the Department of Defense to be
    able to have a C-17 available in a Civil Reserve Air Fleet,
    like we have 747s and 767s, on a daily basis at a fraction of
    the cost. In my view, that is the most significant pro, and I
    do not see any cons.
        I must also say that this is not an easy thing to do. This
    is something that we have never tried before as the Department
    of Defense. There are only a couple of commercial providers who
    are interested. Boeing and Headquarters Air Force are in talks
    with these folks to see whether they think they can develop the
    market or not. We do not want to go out and establish a
    relationship with someone who does not have the credentials to
    do that, an excellent marketing plan, and proven operations as
    part of the Civil Reserve Air Fleet. We are all proceeding very
    carefully.
        Our next step, though, is to work with the State Department
    to make sure that we can satisfy their concerns that this
    capability will not be used to benefit a foreign entity, and
    that this would be a U.S.-owned, U.S.-operated aircraft in
    accordance with the rules of the Civil Reserve Air Fleet. That
    said, we have not met any resistance from the State Department,
    from the FAA, who will have to certify this as a civilian
    commercial airplane, as opposed to a military airplane, or from
    the Defense Threat Reduction Agency.
        We may end up having to disable some militarily unique
    systems. There will be no problem with that, as far as we can
    see. Basically, in the end, as you work your way through all of
    these wickets that we are finding as we go, we think it will be
    a ``win/win'' situation if we can find a contractor who is
    viable enough to turn this commercial oversize/outsize market
    into something profitable for himself.
        Senator Collins. Thank you. Thank you, Mr. Chairman.
        Senator Sessions. Senator Carnahan.
        Senator Carnahan. Thank you, Mr. Chairman. I certainly want
    to welcome General Robertson here today. I want to express my
    appreciation for the exceptional performance of the
    Transportation Command which you so diligently head. Since the
    Berlin Airlift drove a wedge through the Iron Curtain, the
    United States has recognized the value of strategic
    mobilization in peacetime, as well as in war. By the end of
    that operation, American and British pilots had flown 92
    million miles to deliver nearly 2.3 million tons of food and
    supplies to Germany and Berlin.
        The role of airlift in military operations has only
    increased since that time. For that reason today, I wish to
    focus my remarks on the work of the Air Mobility Command. Over
    the last 5 years, the Department of Defense has begun to
    identify necessary changes in strategic airlift requirements.
    In addition to meeting the demands of the two Major Theater War
    strategy, the United States military has faced the challenges
    of small scale conflicts, peacekeeping operations, and
    terrorist attacks. The Mobility Requirements Study 2005 takes
    these developments into consideration, and from what my
    colleagues and I can see, this document shows that our current
    airlift capacity cannot meet our strategic needs.
        According to the Department of Defense, the Air Mobility
    Command must increase its ability to transport personnel and
    heavy equipment by almost 10 percent. To implement this
    recommendation, the Air Force would have to procure a total of
    180 C-17 Globemaster aircraft or increase the airlift capacity
    through other means--that is, 60 more C-17s than what is
    currently planned. In light of this report, it seems that the
    most recent defense budget proposal does not devote sufficient
    funding to correct our deficiency in strategic airlift.
        The report also notes that we are beginning to change the
    way we plan our military strategy. Throughout the last decade,
    our forces have engaged in disaster relief and humanitarian
    assistance and small, fast-paced missions throughout the world.
    Currently we must devote most of our resources to preparing for
    a Gulf War scenario. It is time for us, I believe, to examine
    our ability to respond to terrorism and to weapons of mass
    destruction and small scale conflicts. Let me conclude by
    revising an old military adage. Napoleon Bonaparte once said,
    ``An Army travels on its stomach.'' But today I suggest that
    the Army also travels on wheels, and on wings, and on waves. To
    meet our mobilization needs we must take heed of that and raise
    our airlift capabilities as well. Thank you. I will look
    forward to hearing your testimony.
        General Robertson. Thank you very much, ma'am. I agree 100
    percent.
        Senator Sessions. Senator Smith.
        Senator Smith. Thank you, Mr. Chairman. I would like to
    probe a little deeper on Senator Collins' points about dual-
    use. I think that is the best way we can put it.
        Given the circumstances right now where we have procurement
    problems, especially in airlift and sealift, a lot of our
    equipment is reaching the end of its lifespan. Are you
    advocating something like the C-17 proposal, where the
    commercial vendor would purchase those aircraft off the
    military line at a reduced rate, or whatever the rate might be
    for the U.S. government cost, and then have that fleet
    available in the barn for lease in a time of need for the
    United States military? When I say, are you advocating, you are
    advocating that as opposed to pressing forward to purchasing
    more C-17s outright? I would like to know where you are coming
    from on that.
        General Robertson. Until you got to the end, I agreed, sir.
    I support exploring the possibility of it.
        Senator Smith. You prefer to own, and if that is not an
    option?
        General Robertson. To be perfectly honest, on a peacetime
    basis, it is like the Civil Reserve Air Fleet. If I owned all
    the aircraft in the Civil Reserve Air Fleet, almost 400
    airplanes, I couldn't use them on a peacetime basis. They would
    sit on the ramp or I would expend a lot of money keeping their
    associated air crews trained, not having enough flying cargo
    from paying customers to absorb a portion of that cost. Mine is
    both a business as well as a military profession. I get paid
    for the cargo I move for my military and other U.S. government
    customers.
        It would be the same way with the commercial C-17s that we
    are proposing. On a day-to-day basis, I may or may not need
    them. However, my strategic airlift fleet today at 70 C-17s, is
    stretched very thin. When we get to 120 C-17s, we will still be
    stretched because all the C-141s will be long gone. When you
    get to 170 C-17s on a day-to-day basis, depending on what
    direction the world goes and what direction the national
    strategy goes, I may not be able to use every one of them. Like
    the Civil Reserve Air Fleet, I would have no problem with the
    same airplanes being over there in the commercial fleet on
    call, that I do not have to pay for.
        Senator Smith. It was not meant to be a hostile question.
    It was meant to be one of support. It sounds good to me. In the
    best case, we own them all and we have them at our disposal.
    Yet given the circumstances and the ground that we have to
    cover in terms of our readiness, it seems to me that this is
    one way that we might be able to do it, in airlift. Where as
    long as, I think you said this, there is a vendor that has the
    capacity to purchase those aircraft, and as long as they would
    be available, at least in some situation. You never need them
    until you need them.
        Let me say that this is not unprecedented. With the
    National Defense Features Program for the Navy, did we not have
    a similar situation there?
        General Robertson. Exactly.
        Senator Smith. We can probably do the same thing with some
    of the commercial ship tankers, as a former handyman aboard a
    tanker. It would seem to me that we could fit commercial
    tankers to military usage if we needed to, to avoid the kind of
    situation that happened in the Gulf awhile back.
        General Robertson. You will not get any arguments from me.
    I am a strong supporter of the National Defense Features
    Program. I did not want anyone to walk away thinking it is an
    either/or situation. I need more C-17s.
        Senator Smith. I understand. I hear you and you made that
    very clear. I commend you for saying that. I think it is
    obvious Congress and the Executive Branch would have to make
    that decision. You have been very candid here and given the
    fact that we do have a lot of ground to make up, it is an
    option that I think the Senate, the House, and the President
    ought to consider. I think it is good that Senator Collins
    brought it up.
        One other question, Mr. Chairman. On the KC-135 tanker,
    which is also getting up there in years, although we have been
    saying that about the B-52 and that keeps flying though twice
    as old as its pilots now. As far as that tanker fleet, in terms
    of refueling capability----
        Senator Sessions. That is the KC-135 air tanker.
        Senator Smith. Yes. Right. KC-135E. If we re-engine that
    program, does that help bridge the gap of those aircraft?
        General Robertson. The remaining KC-135s, yes, sir, it
    would. In that regard, there is another study that has not been
    released yet; well, two studies. The KC-135 is approaching 40
    years old. Current Air Force projections are that it will be
    around until it is 80 years old, at least the last one until it
    is 80 years old.
        Out of concern over the rising amount of time that these
    aircraft are spending in depot being fixed, the rising costs of
    spare parts on an airplane that was produced 40 years ago--I
    flew in a B-52--it was older than me then, so I know what you
    are talking about.
        Senator Smith. A great aircraft.
        General Robertson. Yes, sir. Well, regarding the KC-135, we
    did a Tanker Requirement Study and we did a KC-135 Extended
    Service Life Study. These are working their way through the
    approval process now. Basically, we said okay, based on what we
    know of the national strategy in the future, how many tankers
    will we need and, bottom line, we think we need about as many
    as we have today, or at least as much capability, from a
    ``boom'' perspective, to refuel 5 years from now the airlifters
    and bombers of all services that are expected to be employable,
    at that time, in support of the national strategy.
        Then we said, ``Well, how long will the KC-135 last?'' We
    went to the engineers, did another study, and basically they
    concurred with our original assessment that the KC-135 will
    last at least 20, 30, 40 more years. Also, if you look at the
    reliability of the KC-135 today, operating at about a 95
    percent departure reliability rate, I have a hard time saying
    replace it today, even though it is already 40 years old.
        At the same time, the amount of time required for
    maintenance is growing and the costs per flying hour is
    growing, and so we do have to pay attention to the KC-135.
        Senator Smith. So re-engining them is an option?
        General Robertson. We have about 100 that have not been re-
    engined. When we talked about commonality earlier, re-engining
    the remaining KC-135s is another example of commonality of the
    fleet that will help the maintenance force.
        Senator Sessions. Thank you, Senator Smith. We appreciate
    your service as Chairman of this Subcommittee.
        Senator Smith. I do not think I chaired this, Senator Snowe
    did.
        Senator Sessions. I thought you had this job previously.
        With regard to the C-5, if they are re-engined, do you have
    an opinion about the life of the C-5?
        General Robertson. Sir, the engineers project and I
    basically agree with them that the C-5 will last at least
    another 40 years.
        Senator Sessions. Does it have any special capabilities
    that make it preferable or, or that make it have advantages
    over the C-17? Maybe you can explain its unique capabilities.
        General Robertson. There are a few things that the C-5 can
    carry that a C-17 cannot. Not very many, but there are a
    couple. The real benefit of the C-5 is it carries almost twice
    as much as the C-17. It closes the gap twice as fast as the C-
    17 when you are talking about closing the force. That said, it
    takes up a lot more ramp space and does not turn as fast as the
    C-17. However, it is a tremendously huge box in which to carry
    Army, Marine, Navy, Air Force equipment.
        Senator Sessions. So your view is that we spend $48 million
    to $50 million to refurbish the C-5?
        General Robertson. About $48 million.
        Senator Sessions. As opposed to $150 million to $70 million
    for the C-17. Is that a good economic investment for another 40
    years of life?
        General Robertson. Not instead of, but in addition to.
        Senator Sessions. I know the numbers may not be hard now,
    but for Senator Smith's question, how many more than the 120
    projected C-17s is it your best judgment that you will need?
        General Robertson. If we re-engine the C-5 and if we get
    the mission capability rate increase that we project, then we
    will need 50 to 60 more C-17s.
        Senator Sessions. You would like to have 10 more in the
    civil reserve fleet?
        General Robertson. That is the difference between 50 and
    60.
        Senator Smith. Fifty and 60 in what time period?
        General Robertson. We would like to begin a multiyear now.
    The current C-17 multiyear is winding down. We would like to
    begin another multiyear this year to carry on the buy of 15 per
    year, so probably fiscal year 2008 is where that buy will
    stretch out to.
        Senator Sessions. In the Mobility Requirement Study 2005,
    in determining our strategic airlift and sealift capabilities,
    having lived with these issues and being responsible for them,
    are you concerned that there may be shortcomings in the
    assumptions or parameters that were utilized to draw these
    goals and requirements?
        If you would, would you share with us any concerns you
    might have about that study and--just how much this
    subcommittee should rely on it and what we should be thinking
    about in that process.
        General Robertson. When the study began a little over 2
    years ago--that is how long it has taken us to push this study
    through to its conclusion--the assumptions for the study were
    developed by a small group into which I did not have entry. As
    the study progressed, I thought that we would work our way
    through those assumptions, some of which I did not necessarily
    agree with. As the study came to about its midpoint, it was
    developing a conclusion that I did not think the military could
    live with, and so I raised an objection to those assumptions.
        When the final study came out, as you probably read in the
    executive summary, the range of alternative capabilities
    required is from 51.1 million ton-miles a day to 67 million
    ton-miles a day. The Chairman had talked with the service
    chiefs and CINCs and settled on a requirement of 54.5, which is
    somewhere in the range between those two.
        The assumptions are complicated and technical, but,
    basically, the study assumed that we would get almost instant
    response to a presidential recall, to recall the force faster
    than I thought was possible given the political environment
    that existed around the last two presidential recalls.
        Senator Sessions. It is not the personnel responding, but
    their equipment responding. Is that correct?
        General Robertson. Sir, it is the decision process. It is
    the actual making of the decision to recall units and/or
    personnel from the reserve, and what will happen in the fog of
    war to slow down that decision. Since I need them early,
    according to the study, and because time is critical to the
    CINC who's engaged in a shooting war, airlift becomes the only
    solution to close that speed or close that gap.
        That is the period of time that we have lost. In the same
    way, it is the decision to activate the Civil Reserve Air Fleet
    and the decision to activate the Voluntary Intermodal Sealift
    Agreement. Every day that you lose is a day that you are not
    closing the force, and to make up that time difference, airlift
    then becomes the only solution.
        It was the assumption that said we would move nothing else
    during the time of a conflict except that which was going to
    the war-fighting CINC. In other words, I would not be able to
    move the President; I would not be able to move any member of
    Congress who chose to travel around the world; I would not be
    able to move the Secretary of State or Secretary of Defense who
    would negotiate the cease fire agreement. I could only move the
    force. I would not be able to support any other CINC, just that
    single engaged CINC. Therefore, I did not think that was a
    realistic assumption.
        Based on a two Major Theater War (MTW) concept, the
    assumption took a significant portion of the airlift force,
    even before I finished moving the equipment and personnel
    required by the first CINC and swung it to the second CINC. I
    did not think that that first CINC would be all that eager to
    let his air flow stop before I had closed his force. It was
    those kinds of assumptions that troubled me.
        Senator Sessions. You would have to provide some support,
    right?
        General Robertson. Exactly. Yes, sir.
        Senator Sessions. The assumption was it all would be----
        General Robertson. It basically assumed no weather, no
    aircraft problems, and no losses of airplanes. I was concerned
    that those might not be realistic assumptions in a time of war.
        Senator Sessions. When you came out with the 51 and 67, the
    CINCs and everybody agreed on 54.5 million tons.
        General Robertson. A million ton-miles per day.
        Senator Sessions. Per day. Is that realistic or not?
        General Robertson. 54.5 will allow me to close the CINC's
    force and allow me to do about three other, what we call
    concurrent missions at the same time, of the array of missions
    that I would not be able to do. The Chairman, the Chiefs, and
    the CINCs decided that that was acceptable from a risk
    standpoint to be able to make that recommendation.
        We are measuring risk, that is what we are doing. What is
    the risk to the troops on the ground, who are fighting the war,
    and of me being able to close his reinforcements before he
    dies? The assessment of the Chairman and the CINCs was that if
    I had 54.5 million ton-miles, that would yield a medium risk
    war plan and that was acceptable.
        Senator Sessions. Senator Carnahan.
        Senator Carnahan. Just one question. According to recent
    mobility studies, increasing dependence on the civil reserve
    fleet would not greatly enhance our airlift capability. Do you
    believe that civilian purchases of C-17s will make the air
    fleet more valuable in meeting our airlift requirements?
        General Robertson. If we could use more of the day-to-day
    commercial Civil Reserve Air Fleet, we would. We already give
    them a significant amount of credit for moving their portion of
    the required 54.5 million ton-miles a day. About 20.5 million
    ton-miles a day would be moved commercially.
        The problem is, there are certain things that only the C-5
    and C-17 can move. In addition, when we put a volume of
    commercial aircraft into a theater in response to a conflict,
    they take a long time to unload and they take up a lot of space
    on the ramp. As a result, we have problems with saturation that
    a C-17 or a C-5 that are basically drive-on, drive-off, does
    not create.
        Therefore, we take the ``how much'' and the ``what'' of
    what we carry, and take the turn time that different aircraft
    require on the ground, and we put it all into a giant gray
    computer that says you cannot use any more civilian capability
    due to ramp congestion. However, a C-17 in the commercial fleet
    is still a C-17. It can still back up. It can still turn around
    on a dime. It can still use ``drive-on'' and ``drive-off''
    ramp, it can still land on a short field and do all the things
    that a military C-17 can do and, therefore, it is still
    contributing to the overall oversize airlift effort. A good
    question. Thank you, ma'am.
        Senator Sessions. Senator Smith.
        Senator Smith. I am done.
        Senator Sessions. I want to run a few matters by you,
    General Robertson. Maybe you can enhance the answers in writing
    later on. Two weeks ago I visited two mine warfare ships in the
    Persian Gulf. In your written statement, you indicated that you
    have a continuing concern for the shortage of heavy lift
    vessels required to deliver small floating craft such as mine
    warfare vessels. What is your assessment of the warfighting
    impact of the efficiency and heavy lift ships and what solution
    do you see for that?
        General Robertson. The ability to move Coast Guard cutters,
    mine counter-warfare ships, and small Army ships is a
    significant problem for the warfighting CINC and it is one that
    we have not resolved. We need to preposition them, but there
    aren't enough assets to do that on a day-to-day basis. Another
    option would be to have a float-on/float-off (FLO/FLO)
    capability or lift-on/lift-off (LO/LO) capability to put three
    or four of these on a boat and move them rapidly in response to
    a crisis.
        The Navy is looking at what the solution to that is. It was
    reamplified as a concern in our new Mobility Requirement Study
    (MRS-05). I am confident that within the upcoming months,
    within the next year, the Navy will fix on what the correct
    solution to that problem is. It may be something as simple as
    leasing a FLO/FLO or LO/LO ship, and keeping it in the Ready
    Reserve Force or something like that.
        Senator Sessions. If you had a ship like that in the Ready
    Reserve Force, you have to negotiate with the ship and reach a
    contract that you can take priority over their time at any
    point and have to pay them on that?
        General Robertson. Yes, sir.
        Senator Sessions. Is it cheaper than operating on a daily
    basis?
        General Robertson. I do not know the answer, sir. I really
    do not know the cost/benefit analysis. I do not know that it
    has even been done, but we have to be able to give you and give
    ourselves the most cost effective answer to that question. It
    is a problem we have to solve.
        Senator Sessions. When you look at the fleet that we are
    operating, it certainly does not strike me that--the sense of
    which we can get virtually as good service with the reserve
    fleet, then that is an option we have to give consideration to.
        General Robertson. Yes, sir.
        Senator Sessions. The Army's transformation to a lighter,
    more mobile, more lethal force and the desire to be able to
    field a brigade in combat anywhere in the world in a timely
    fashion is extremely important. Has the command conducted any
    analysis to determine whether or not you can support the
    movement timelines the Army has established for this?
        General Robertson. We have done some rough analysis, sir. I
    am not sure it is something I would want to hang my hat on, but
    basically the first requirement of the Army, is to move the
    Interim Brigade Combat Team (IBCT) in 96 hours. If we stretch,
    we can meet it, if we do not do anything else in the world with
    our current airlift. That is another reason why we need to make
    sure we enhance our airlift fleet. We are working hand-in-
    glove----
        Senator Sessions. That is based on current capability?
        General Robertson. Yes, sir.
        Senator Sessions. But if you had the enhanced C-5 and new
    C-17s----
        General Robertson. Yes, sir. It is more than just aircraft.
    Aircraft is a big part of the issue. It is also a question of
    infrastructure, because it is a matter of how fast it takes you
    to move from Fort Lewis to McChord to load the C-17s, and how
    much ramp space you have at McChord to park C-17s and C-5s.
    Ninety-six hours is pretty quick. So there are some
    infrastructure concerns that are being studied, analyzed, and
    categorized as well. The Army and the Air Force will have to
    work out those issues.
        As the Army works its way towards its final solution for
    the transformed Army, we are working hand-in-glove with them to
    make sure, when we begin the next Mobility Requirement Study,
    that we take the Army transformation fully into account.
        Senator Sessions. They are going far with a big program and
    making a big commitment to altering their way of operating.
        General Robertson. At every level. My Deputy Commander in
    Chief is an Army three-star. We have transporters on the Army
    staff at the General Officer level who understand what it takes
    to move the Army, and we are in lockstep as they develop their
    requirements. We assess, give them feedback, and they alter or
    proceed depending on how we assess their needs and proposed
    alternative solution.
        Senator Sessions. In your written statement, you indicate
    USTRANSCOM's support of NATO peacekeeping forces in Kosovo.
    What has been your experience regarding allied commitment to
    coalition and alliance strategic lift and airlift?
        General Robertson. Sir, they would like to do it. Many of
    our allies would like to have the capability that we have
    today. Unfortunately, this desire has not made it high enough
    up on their funding priority list. They are trying to meet,
    which I believe many of our NATO allies are trying to meet as
    well the basic requirements of NATO standardization,
    interoperability, yet have not gotten around to try and work
    the transportation piece. Therefore, they will be an AOR
    limited force for some time to come unless we provide that
    capability for them.
        Now, the British have stepped out with their first C-17
    acquisition, and they will provide the core of what we think is
    the leadership to lead them to that strategic solution that
    they all need.
        Senator Sessions. Do we have any agreements with the
    British on that C-17 that they have purchased?
        General Robertson. No, sir. No specific agreements other
    than maintenance kinds of agreements, and simulator sharing.
        Senator Sessions. Not use?
        General Robertson. No, sir.
        Senator Sessions. You mentioned the Man Portable Air
    Defense Systems in your remarks that they may be the most
    serious threat to your strategic airlift. Would you explain
    that in a little more detail?
        General Robertson. Since the end of the Cold War,
    intelligence estimates have postulated that shoulder-fired
    SAMs, Stingers, SA-7s, and the like, have proliferated
    throughout the terrorist organizations of the world. It is my
    concern that a large aircraft, one not equipped with proper air
    defenses, one that would fly a fairly scheduled route, easily
    identifiable and carrying U.S. troops or U.S. cargo, becomes a
    very vulnerable target, either on takeoff or on landing from
    the remote places that we operate. We have some defensive
    systems as we discussed earlier, but those defensive systems,
    in my view, are not adequate to protect large, slow-moving
    aircraft. We need to improve our capabilities in order to
    operate in environments where tension suggests that those SAMs
    may exist.
        Right now, we either do not operate or we go around those
    areas, which in a crisis would significantly slow the closure
    of the force. However, that is not something we would want to
    do.
        Senator Sessions. Well, are we making sufficient headway
    toward creating and implementing a defense system?
        General Robertson. We are making progress. Obviously, every
    time you come up with a question like this, the answer becomes
    one of how much money you can invest. This is a technology that
    is available, but it is leading edge technology, which means it
    is expensive technology. The Air Force is proceeding, I would
    say ``prudently,'' with a small subset of systems to see if
    they will work on the C-17 and C-130 before we go into a larger
    buy to see if we can start to reduce the cost of the system.
        Senator Sessions. Could we be more intense about that? Is
    that an area you would suggest that may need more funding and
    attention than it is receiving now?
        General Robertson. It will need more funding within a year
    or so, yes, sir. As we finish the development of a system and
    test it on the C-17 over the next year and decide to make a
    full force implementation and decision, we will decide on more
    funding.
        Senator Sessions. General, I am a supporter of the Maritime
    Security Program (MSP). That ensures 47 active U.S.-flag and
    U.S. citizen crew, commercial military-use vessels are
    available to support the Department of Defense during a war or
    national emergency. In your view, has the MSP successfully
    provided you with additional sealift capability that meets your
    requirements?
        General Robertson. Yes, sir. I am a supporter of MSP as
    well. I will tell you, if you ask me, I will sing out in
    support of anything that increases the health and vitality of
    the U.S.-flag fleet and the men and women who crew that flag
    fleet. MSP has been a valuable contributor to the health of
    that fleet. There is a lot more that I could say about MSP but
    I will wait for your next question.
        Senator Sessions. My next question is that congressional
    reauthorization for the MSP will be coming up before long.
    Current authorization expires in 2005. Do you agree that
    congressional reauthorization of this MSP is required to enable
    U.S.-flag vessel operators to initiate long-term vessel
    procurement, recapitalization, and other U.S.-flag merchant
    fleet development programs?
        General Robertson. Sir, I do, and I would probably add--
    although I am not the expert on MSP--that the industry is
    actively considering how to approach reauthorization. However,
    in sum, if I am asked as CINCTRANS, I would say yes, we need to
    get on with reauthorization and probably sooner, rather than
    later.
        The MSP as it is currently structured, in my view, does not
    adequately compensate the carriers who get the MSP funding for
    what MSP was designed to provide. In other words, the per ship
    stipend I think has had its value outstripped by inflation and
    it needs to be adjusted.
        Senator Sessions. Has that been a problem maintaining ships
    in the system?
        General Robertson. It has not been a problem, but it will
    be soon. We are trying to take the curve which is driving
    inflation and the other curve reflecting the value of the
    dollars we provide, and get additional resources before those
    lines cross. I would say that we are pretty close.
        Senator Sessions. One more thing on MSP. I am a believer in
    free trade, but I also believe this Nation has an obligation to
    maintain certain infrastructure. Do you agree with the
    continuation of U.S. ownership and control requirements that
    are critical to the continued viability of the MSP and its
    related support for DOD, sealift, and other national security
    efforts?
        General Robertson. The answer is yes, sir. The ``U.S.'' in
    the U.S.-flag fleet and the ``U.S.'' in the U.S. Merchant
    Mariners who crew that fleet, I believe are as important to me
    as the CINC and to the other warfighting CINCs that I support.
    However, that is a simple answer to a much more complicated
    question, and the way the rules are currently structured, that
    layer of U.S. ownership required of a U.S.-flag ship owned by
    non-U.S. companies is expensive to the companies who do that.
    It is an issue that the industry is currently discussing
    potential solutions to.
        I cannot tell you here what the pros and cons of any
    particular solution to that might be. I am not even sure that
    there is an easy solution to it. It is something that we need
    to address because, in the end, just like the MSP stipend that
    we give to the companies for committing their ships to us, it
    all comes down to how much cost companies are required to
    assume for being a U.S.-flag ship and a member of the U.S.-flag
    fleet.
        Senator Sessions. I have one more question. General, would
    you comment on the status of the Denton Humanitarian Cargo
    Program? Retired Admiral Denton is from my hometown, a former
    Senator from Alabama, a prisoner of war for quite a number of
    years, and an American hero. He is now giving of himself to
    develop a humanitarian cargo program by which a military and
    commercial craft can be utilized to move cargo to areas of the
    world that are in desperate need of humanitarian aid. How are
    we doing with that? Can you give us an update?
        General Robertson. Senator Denton is a hero of mine as
    well, both for his work as a Senator and what he did before. We
    are the implementors of the Denton Humanitarian Cargo Program.
    We have traditionally implemented the Denton/Humanitarian Cargo
    Program with aircraft. Last year, we sat down with Senator
    Denton and figured out a way to move cargo using sealift as
    well.
        If I can insert for the record how many million pounds of
    humanitarian cargo we have moved free of charge under the
    Denton Humanitarian Cargo Movement Program, I would like to do
    that. Basically, what we did last year was move our Denton
    program office from Pope Air Force Base, North Carolina, where
    it was basically C-130-centered and limited, to Charleston
    where we have the C-17 to give us more capability to project
    that Denton cargo throughout the world.
        [The information follows:]

        Since the Denton Humanitarian Cargo Movement Program began in 1985,
    we have moved slightly more than 39.1 million pounds of humanitarian
    cargo.

        It is a tremendously successful program. I have an office
    at U.S. Transportation Command headquarters that monitors the
    volume of Denton cargo available to be moved. Our goal is to
    keep that outstanding volume at the lowest possible level, so
    that we put that humanitarian cargo to the earliest possible
    use whenever we can move it. It is a great program, sir, and it
    is one we are doing our best to make Senator Denton proud of.
        Senator Sessions. I appreciate that. I thank you for your
    service and for your candid and valuable testimony. It has been
    very helpful to us. These do represent critical questions to
    America's defense. All we have to do is think back to the Gulf
    War and how much had to be moved and the stresses that placed
    on us. From everything I have learned, we have replaced a lot
    of different things. Your leadership has been helpful in that.
    If there are no other questions, I thank General Robertson for
    his testimony. We are adjourned.
        General Robertson. Thank you, Mr. Chairman.
        [Questions for the record with answers supplied follow:]

                  Questions Submitted by Senator Jeff Sessions

        1. Senator Sessions. Recently I visited two mine warfare ships in
    the Persian Gulf. Your written statement indicated that you have a
    ``continuing concern with the shortage of heavy lift vessels required
    to deliver smaller floating craft'' such as mine warfare vessels.
        What is your assessment of the warfighting impact of the deficiency
    in heavy lift ships and what solutions are being pursued?
        General Robertson. The Mobility Requirements Study 2005 (MRS-05)
    identified difficulties with moving Navy mine countermeasure ships,
    110-foot Coast Guard Cutters and Army watercraft. The Joint Staff has
    asked USTRANSCOM to conduct a study of the heavy lift need to ensure
    that we understand the full requirement and the impacts on the current
    plans and Ready Reserve Force (RRF) assets. In addition, the services
    are working the heavy lift issue by addressing their specific aspects
    of the problem:
        Mine countermeasure ships. The Navy and the Maritime Administration
    are conducting a deck strength study to evaluate whether RRF ships can
    support the weight of lift-on/lift-off operations for mine
    countermeasure ships. Should such operations prove infeasible, the Navy
    will evaluate other alternative transportation modes, including
    commercial heavy lift sources, float-on/float-off operations and
    prepositioning options.
        Coast Guard cutters. The Coast Guard is procuring shipping cradles
    that will permit the 110-foot cutters to be loaded onto selected RRF
    ships.
        Army watercraft. Regional commanders in chief, in conjunction with
    the Services, are reviewing watercraft needs and, where shortfalls are
    identified, will revise prepositioning requirements in order to meet
    required delivery dates and intra-theater surface lift requirements.

                    COALITION AND ALLIANCE LIFT CAPABILITIES

        2. Senator Sessions. Your written statement indicated that TRANSCOM
    supported the deployment of NATO peacekeeping forces in Kosovo.
        What has been your experience with regarding allied commitment to
    coalition and alliance strategic lift and airlift?
        Do coalition and alliance operations put additional requirements on
    your planning for sealift and airlift?
        General Robertson. Generally, our allies and coalition partners
    often have transported their forces. For that reason, USTRANSCOM's
    recent strategic lift of friendly forces has been limited to augmenting
    multilateral peacekeeping in Sierra Leone, Kosovo, and East Timor in
    1999-2000. The following is a summary of recent support to our allies
    and partners.
        On 12 May 2000, one Air Mobility Command (AMC) C-17 flew 42 short
    tons (STONS) of ammunition to Sierra Leone in support of the United
    Nations (UN) peacekeeping force. From 17 through 20 April 2000, one C-
    17 flew four round robin missions from Poland to Kosovo via Ramstein to
    deploy 130 Polish troops and 102.5 STONS for the Kosovo peacekeeping
    force (KFOR). This lift was undertaken at the request of the Commander
    in Chief of United States European Command who wanted to expedite the
    movement of peacekeepers into a troubled location in Kosovo after a
    violent incident there. Finally, from October 1999 through February
    2000, AMC flew 26 airlift missions to deploy peacekeeping forces from
    two Asian, two Southwest Asian, and one African nation to East Timor.
    The deployment airlift moved 3,510 passengers and 384.7 STONS.
    Additionally, three voyages by Military Sealift Command (MSC)-
    controlled ships moved 46,832 square feet of cargo and six passengers.
    Redeployment of one Asian contingent required eight AMC airlift
    missions that carried 501 passengers and 102.9 STONS along with one MSC
    voyage that transported four passengers and 9,846 square feet of cargo.
        Two conclusions emerge from these operations. First, leadership by
    allies and participation by regional forces contributed to meeting the
    lift requirements. For example, the United Kingdom secured Freetown,
    Sierra Leone in May 2000, and the UN was able to deploy additional
    peacekeeping forces to Sierra Leone using other than U.S. airlift.
    AMC's deployment of Polish forces to Kosovo (mentioned above) amounted
    to a NATO show of force in the face of an isolated civil disturbance.
    KFOR was able to contain the immediate unrest and deter the need for
    further reinforcements. Australia assumed the initial leadership of
    peacekeeping forces in East Timor and deployed its own forces. Second,
    sheer distance can increase the need for strategic lift. The relative
    proximity of West African nations to Sierra Leone enabled deployment of
    peacekeepers without USTRANSCOM's assistance. Since May 2000,
    USTRANSCOM's role has been to deploy U.S. forces to Nigeria in August
    and October 2000 (FOCUS RELIEF I) and to Ghana and Senegal in May 2001
    (FOCUS RELIEF II) to train local forces for peacekeeping duty in Sierra
    Leone. Incidentally, the FOCUS RELIEF I deployment came to 13 missions
    which moved 320 passengers and 342 STONS with redeployment in December
    2000. Last month's FOCUS RELIEF II deployment amounted to five missions
    carrying 224 passengers and 208 STONS. Unlike Sierra Leone, the
    isolated location of East Timor furthered the need for U.S. strategic
    lift to assist those nations willing to provide peacekeeping forces.
        In response to your second question, there are no requirements in
    our operation plans for the U.S. military to provide airlift and
    sealift to coalition and alliance operations.

        3. Senator Sessions. During my visit this month to one of our
    overseas commands, it was highlighted that port facilities are not
    always available when and where they are required. Joint Logistics-
    Over-the-Shore (JLOTS) is the program that is supposed to provide the
    means to offload the large cargo ships when no seaport facility is
    available.
        First, is JLOTS important; second, if so, are there JLOTS
    deficiencies; and third, if there are deficiencies, is there a plan to
    correct them?
        When is the last time the JLOTS requirement was reviewed and
    exercised in each potential theater of operations?
        What are your concerns regarding JLOTS and what are your plans to
    address those concerns?
        General Robertson. JLOTS capabilities are critical to DOD's global
    power projection strategy. JLOTS enables DOD to project and sustain
    forces worldwide in areas where seaports are unavailable, inadequate,
    or have been damaged or denied by enemy actions.
        Current Army/Navy force structures can provide offload capability
    for strategic sealift ships; however, there are deficiencies. First,
    Army/Navy systems are not fully interoperable and cannot operate in sea
    state 3. Second, the lack of sufficient heavy lift sealift capability
    makes timely delivery of JLOTS watercraft to theaters of operations
    impossible.
        Interoperability and sea state 3. Initiatives by the Services are
    in-place for fixing the problems, but funding and design technology
    changes will negate full fielding of sea state 3 capability by fiscal
    year 2005. A Joint Integrated Process Team, comprised of Army/Navy
    staff, oversees the sea state 3 program to field three systems to
    provide sea state 3 operating capability. These are 1) the Rapidly
    Installed Breakwater (RIB), 2) the Joint Modular Lighterage System
    (JMLS), and 3) the sea state 3-crane system. The RIB is an Army System.
    An advanced technology demonstration will put the RIB through full
    phased testing during the summer of 2002. No production funds are
    available for the RIB at this time. JMLS is a Navy system. Testing of
    the JMLS 8-ft. module has been halted due to safety problems and
    current JMLS design is not capable of conducting bare-beach operations.
    Navy is reevaluating this concept and potentially will move to 24-ft.
    modules. Fielding may be delayed until fiscal year 2009. Once fielded,
    Army/Navy causeway interoperability problems will be solved. The sea
    state 3 crane is also a Navy system, and is on track. Initial
    installation will be on the Flickertail State, a Ready Reserve Force
    auxiliary crane ship, in the 4th quarter of fiscal year 2001. Full
    fielding on all crane ships by 2005 is on track.
        Heavy Lift Shipping. The Department of Defense (DOD) is in danger
    of losing a critical sealift capability to transport, JLOTS-enabling
    watercraft into a theater. Current Operation Plans (OPLANS) require
    delivery of Army JLOTS watercraft, as well as Navy Mine Countermeasure
    (MCM) ships and U.S. Coast Guard 110 ft. cutters to theaters. Besides
    prepositioning and transoceanic self-deployment, the only other viable
    option for transporting watercraft is via heavy lift ships. DOD,
    through the Army's prepositioning program, leases one vessel, the
    American Cormorant, a float-on/float-off (FLO/FLO) type heavy-lift
    vessel capable of lifting all types of watercraft. There are 14 FLO/FLO
    vessels comparable to American Cormorant in the world merchant fleet-
    all foreign flagged. The Army lease for the American Cormorant expires
    in fiscal year 2002. Without this lease, American Cormorant will revert
    to commercial status, probably be re-flagged foreign, and removed from
    the DOD inventory of shipping. Loss of U.S.-flag FLO/FLO shipping
    capability exacerbates existing watercraft transport shortfalls,
    reduces DOD planner flexibility, and introduces risk of relying solely
    on the worldwide fleet charter market to supply FLO/FLO type heavy lift
    shipping capability to execute CINC OPLANS. Joint Staff/J4, with the
    assistance of the United States Transportation Command (USTRANSCOM), is
    conducting a study on this issue to make recommendations on the best
    options for resolving this lift shortfall based on current validated
    requirements.
        A comprehensive review of JLOTS requirements was last done in the
    1995-1996 timeframe. The Joint Staff/J4 and Services reviewed CINC
    requirements, Army/Navy force structure, equipment, and capabilities. A
    report produced by the Joint Staff/J4 in November 1996 led to the JLOTS
    Master Plan which synthesized interdependent enabling technologies,
    training, and command and control functions to meet Service and unified
    command logistics over-the-shore and joint logistics over-the-shore
    requirements. Currently there is no plan to re-look these requirements.
        Planning Guidance requires Army/Navy to conduct an annual liquid/
    dry cargo JLOTS exercise in conjunction with the Chairman, Joint Chiefs
    of Staff's Exercise Program. JLOTS was last exercised in the United
    States Pacific Command (USPACOM) theater in June 2001, and in the
    United States Central Command (USCENTCOM) theater in 1996. USTRANSCOM,
    as the supported and supporting CINC, executed a CONUS-based JLOTS
    exercise in 2000. The Chairman, Joint Chiefs of Staff promulgated a new
    JLOTS exercise schedule for fiscal year 2002 through 2006. This
    schedule exercises JLOTS in USPACOM every odd year, USCENTCOM in 2002/
    2006, and the United States Southern Command in 2004. To ensure an
    annual JLOTS exercise, unified commands are authorized to develop
    alternate JLOTS exercises in their theaters or in the continental
    United States in the event the primary exercise containing JLOTS is
    canceled. USTRANSCOM has worked closely with the unified commands to
    develop this schedule. United States European Command (USEUCOM) has
    elected to conduct their staff training during the USCENTCOM JLOTS
    exercises.
        To answer your last question, my greatest concern with JLOTS is the
    lack of capability to deliver JLOTS force within the timelines
    established by the unified commands in their major theater war plans.
    As I noted before, Joint Staff/J4 is conducting a study to make
    recommendations on the best options for resolving the lift shortfall
    based on current validated requirements. Once this study is complete,
    your support may be needed to fund the recommended solution.
        My last concern is that current JLOTS requirements are based on
    1996 strategy and assumptions. The time may be right to review the
    JLOTS program. My staff will discuss this at the next JLOTS Board
    meeting with unified command and service representatives and request a
    formal review by the Joint Staff. I believe the time is right to
    revalidate whether sea state 3 capability will still be needed under
    our future mobility strategy and determine how new intra-theater assets
    being proposed, such as the Army's high-speed Theater Support Vessel
    might impact current generation of lighterage and watercraft that,
    constitute a portion of our heavy lift sealift requirement. We will be
    addressing these issues with the Joint Staff and services.

        4. Senator Sessions. In the past, Army and Navy reservists and Army
    National Guard have coordinated training with Ready Reserve Force ships
    in port. The feedback from units involved was that the results were
    superb and far superior to lectures, paperwork, and training films.
    Unfortunately, it has been reported that this valuable training is no
    longer conducted for units that do not have a Ready Reserve Force ship
    nearby.
        What initiatives can be taken to coordinate the weekend training
    and 2 weeks active duty training to leverage the synergistic results of
    real world scenarios?
        General Robertson. The United States Transportation Command depends
    on a blend of Active and Reserve Forces, as well as, government
    civilian employees and the commercial transportation industry. The
    training and synergy of all these elements are important to the proper
    operation of the Defense Transportation System. I can tell you the
    training of Reserve Forces is, and will continue to be, a priority of
    USTRANSCOM and its component commands. In the past 2 years, real world
    training opportunities have increased both for weekend drill time as
    well as annual training (AT). The Military Traffic Management
    Command's, Deployment Support Command, Readiness, Mobilization, and
    Reserve Affairs Office schedules annual training and other training
    opportunities for Reserve units based on operational requirements at
    Military and Strategic Seaports. As an example, the 1184th
    Transportation Terminal Battalion (TTB) located in Mobile, Alabama
    supported six missions in fiscal year 2000 at the ports of Mobile and
    Beaumont loading more than 2,275 pieces of equipment. In fiscal year
    2001, the 1184th TTB is scheduled to support eight missions at the
    ports of Mobile, Beaumont, and Gulfport. Additionally, the unit is
    scheduled to support the Operation Bright Star redeployment during
    their fiscal year 2002 AT.
        All Commanders, both Active and Reserve, interested in utilizing
    Ready Reserve Force (RRF) ships for training, contact the local
    Maritime Administration (MARAD) representative for specific
    coordination and their supporting Regional Support Command (RSC) for
    funding. The RRF is a quick response surge sealift fleet under the
    custody of the MARAD. Again using the 1184th TTB as an example, during
    the mid 1990s, two RRF roll-on/roll-off (RO/RO) vessels (Capes Taylor
    and Texas) were moored in Mobile, Alabama, affording local units the
    opportunity to obtain hands-on ship loading operations experience.
    MARAD relocated the two vessels from Mobile, AL to Houston, TX.
    However, there are currently six Ready Reserve Force vessels located in
    the New Orleans area (approximately 2 hours travel time from Mobile,
    AL).

        5. Senator Sessions. Both the Army and Navy have expressed interest
    in a capability similar to the capability of the high-speed fast ferry
    ship leased by the Australian Ministry of Defense. There have been
    press reports that the Army intends to procure a ship similar to the
    fast ferry ship and the Navy Warfare Development Command has expressed
    interest in leasing a ship for experimentation.
        Is there a requirement within the Transportation Command for the
    capabilities of a fast ferry type of vessel?
        Are there plans within the Transportation Command to evaluate the
    application of the capabilities of a fast ferry type of vessel to a
    Transportation Command requirement?
        Is the Transportation Command involved in independent or services'
    evaluation of the fast ferry capabilities?
        General Robertson. USTRANSCOM is actively engaged in the testing
    and evaluation of high speed ships (HSS) for utilization by DOD in
    concert with our commercial partners. USTRANSCOM, through the
    congressionally-sponsored program Center for the Commercial Deployment
    of Transportation Technology (CCDoTT), has actively participated in the
    research and development of high speed sealift ships and agile port
    technology since 1995. The goal of the CCDoTT program is to facilitate
    systematic evaluation of various HSS hull form designs, and the
    associated technologies, in a cost effective manner. This will help
    expand the collective HSS knowledge base, while providing subsequent
    insights into the potential feasibility/capability of implementing
    these concepts on a larger scale. In light of the current technology
    explosion in the commercial sector, it behooves the Department to
    invest R&D dollars now in order to achieve the speeds necessary to meet
    future rapid force projection requirements. USTRANSCOM works directly
    with the High Speed Sealift/Agile Port (HSS/AP) Executive Steering
    Committee, the HSS/AP Innovation Cell, Office of Naval Research and
    Naval Surface Warfare Development Command to guide in the overall HSS/
    AP CCDoTT program.
        Although there is no official requirement for a high speed inter-
    theater/intra-theater ferry, USTRANSCOM plays a very active role in
    identifying potential research and development efforts for possible
    utilization by DOD. The U.S. Army has an operational requirement
    document (ORD) for a high speed sealift ship to upgrade their existing
    logistics theater support vessel program. The Army's Tank Automotive
    and Armaments Command (TACOM) and the Navy Warfare Development Command
    (NWDC) are currently coordinating the lease of an existing high speed
    ferry to determine its applicability in meeting mission requirements.
    USTRANSCOM will continue to work very closely with TACOM and NWDC to
    monitor the progress of the test and evaluation. The lessons learned
    from the lease will be applied to the development of the next
    generation of high speed, trans-oceanic cargo ships to meet our future
    strategic sealift requirements.
                                     ______

                   Questions Submitted by Senator John McCain

        6. Senator McCain. As part of the Maritime Security Act of 1996,
    the Maritime Security Program (MSP) was created in an attempt to avoid
    the transportation problems experienced by the military during Desert
    Shield and Desert Storm, and to address concerns raised by the maritime
    industry regarding military movements during times of national
    emergency. The goal in establishing the new program was to strike a
    balance between the demands of our Nation's military and the commercial
    interest of vessel operators. As such, jurisdiction of the program was
    directed by Congress to the Secretary of the Department of
    Transportation (DOT). The President has proposed as part of the fiscal
    year 2002 budget submission to transfer the program to the Department
    of Defense (DOD).
        What has occurred that would require placing the MSP under the
    jurisdiction of DOD?
        If the transfer is allowed to proceed, what will have to occur for
    the DOD to assume jurisdiction over the MSP? Can we expect a
    legislative submission in the near future?
        Assuming the MSP would come under your command if transferred to
    DOD, how would you plan to efficiently manage the program?
        General Robertson. I have not seen the analysis underlying the
    proposed transfer of the Maritime Security Program (MSP) from the
    Maritime Administration (MARAD) to the Department of Defense (DOD).
    That said, I understand the logic behind the proposed change is to co-
    locate ``like programs'' (strategic sealift) within DOD. This is a
    change from the way we have been implementing the program since its
    inception. Clearly DOD's core competency has been in the ``definition''
    of the military sealift requirement, while MARAD's core competency has
    been tied to the commercial, trade-related and promotional needs of the
    U.S.-flag fleet and its associated mariner base. With each department
    working to its strengths, we believe we have had a successful and
    viable program. Along that line, if and when this program transfer
    takes place, we must seek to maintain that same effectiveness.
        I am unclear, at this point, as to what roles and responsibilities
    might actually be transferred under this proposal, as no details have
    yet been provided. That said, aside from the obvious legislative and
    funding adjustments which would be required, DOD must determine who
    within the Department will actually administer the program. Once DOD
    determines the responsible agency, that agency will have to do a
    certain amount of requirements determination and ``task organization''
    to most efficiently manage the program. I have seen no proposed
    legislation on this issue, but would anticipate, if the transfer is
    actually to occur, that the appropriate transfer language will be
    developed by June of this year.
        Without the details of the transfer, it is hard to lay out a
    transition blueprint. We are taking the first steps now to lay the
    groundwork for a coordinated transfer plan with OUSD (C/TP) and Navy to
    ensure our readiness to assume the responsibilities of administering
    MSP at the beginning of the fiscal year if we are tasked to do so. My
    primary goal would be to set up a system as successful as the one we
    enjoy in the current DOD/DOT MSP relationship. At the least, we would
    have to develop the internal expertise (legislative, financial, public
    promotion, etc.) to execute and monitor the program. Clearly, it would
    involve a thorough review of the requirements needed to properly manage
    the program and allocation of the resources needed to meet those
    requirements.
                                     ______

                  Questions Submitted by Senator Rick Santorum

        7. Senator Santorum. Kvaerner Philadelphia Shipyard and American
    Automar have sought my support in adding $40 million in funding to the
    National Defense Sealift Fund during consideration of the Fiscal Year
    2002 National Defense Authorization Act.
        These funds would support the U.S. shipbuilding industry by
    providing for, under the National Defense Features (NDF) Program, the
    installation of military specific modifications in commercial ships
    that could be employed to support military requirements in a crisis.
    Kvaerner Philadelphia Shipyard believes that the current fleet of
    vessels that are chartered to carry out the ammunition resupply mission
    are old and slow and in need of replacement.
        I am aware that Mobility Requirements Study 2005 (MRS-05) examined
    the number and mix of mobility systems needed to support two nearly
    simultaneous major theater wars. In addition, MRS-05 constituted an
    end-to-end analysis, investigating mobility requirements in the
    continental United States as well as between theaters and within
    individual theaters.
        MRS-05 noted that the sealift investments made in response to the
    Mobility Requirements Study--Bottom-Up Review Update in 1995, have
    proven to be sufficient and that the Department's overall mobility
    capability can be further augmented through aggressive use of
    commercial sealift enabled by selective containerization of unit
    equipment.
        With MRS-05 in mind, and based on your expertise of U.S. military
    sealift requirements, please indicate whether you believe additional
    funding is required in the National Defense Sealift Fund to support the
    NDF Program.
        General Robertson. Additional funding for the NDF Program would be
    beneficial to the Department of Defense as well as the shipbuilding and
    operating sectors of the U.S. industry. This program, which has not
    been funded in recent years, has potential to contribute to the growing
    partnership between DOD and industry. As I have stated previously, we
    must be responsive to good proposals as they are generated, but not at
    the expense of DOD's ``top line''.
        Currently Kvaerner Shipyard in Philadelphia has under construction
    fast container ships, which if modified using NDF funding, could be of
    considerable military utility. Modification of the ships with NDF
    funding would require the company that owns or controls them to make
    the ships available at the direction of the Secretary of Defense for
    strategic sealift purposes. Additionally, if the ships are offered
    under a competitive containership procurement, they could have further
    military utility as charter vessels. Kvaerner has requested $40 million
    per vessel be made available under the NDF program to modify these
    ships to install self-sustainment cranes and other militarily useful
    features. The Military Sealift Command currently has eight
    containerships under charter, which preposition approximately 13,500
    20-foot containers of ammunition and sustainment cargo. Replacing any
    or all of these re-flagged ships in a competitive procurement with
    newer, faster, U.S.-built container ships would not only continue to
    satisfy our prepositioning requirements, but would also improve
    TRANSCOM's ability to deliver sealift in a contingency once
    prepositioned cargo is offloaded.
        Further, as Ready Reserve Force ships grow older it is important
    that recapitalization funding be allocated to replace the critical
    sealift capacity represented by this aging fleet. The NDF program could
    prove to be a very cost-effective way to do this. However, as I have
    noted before, while new funding is needed it should not come at the
    expense of other DOD programs.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy

        8. Senator Kennedy. General Robertson, your testimony (page 24)
    mentions the need to begin considering ways to recapitalize the RRF. In
    previous Defense Authorization Acts, Congress has provided authority to
    use National Defense Sealift Funds (NDSF) to pursue an expanded program
    to provide more sealift capability through the National Defense
    Features (NDF) Program.
        Are you expecting to make greater use of this program as a
    supplement to any future RRF modernization activities?
        General Robertson. In terms of Ready Reserve Force (RRF)
    modernization, the RRF is nearing completion of seven roll-on/roll-off
    deck expansion projects which started in 1998. These cost-effective
    projects added a spar deck to each ship netting an increase of 250,000
    square feet of deck space to our overall surge fleet capacity which
    enables us to attain our MRS-05 surge requirement. These projects were
    funded through the Maritime Administration (MARAD) Planning,
    Programming and Budget System (PPBS) submissions and cost savings, not
    the NDF program. Since the NDF program started in 1996 industry has not
    viewed it as beneficial to their needs due to costs of maintenance, and
    legal restrictions imposed on commercial use of NDF. However, recent
    legislation has made it more appealing. Today one company is building
    two medium speed CV2600-class container ships, designed to achieve 23
    knots, under the Department of Transportation (DOT), Title 11, Loan
    Guarantee Program, and is seeking congressional support for NDF funds
    to put cranes aboard these ships to make them self-sustaining and more
    militarily useful. The company's intent is to lease these new ships
    back to DOD for afloat preposition duty. I believe NDF is good for
    industry and DOD. Additional funding would make the program more viable
    if funds were available within the NDF line of the NDSF to respond to
    proposals as they are generated. However, I would not be supportive of
    this program if funding came out of our top line as this would impact
    the readiness of the programmed surge Ready Reserve Force which
    supports MRS-05 surge sealift requirements and CINC OPLAN deployment
    timelines.

                              TANKER REQUIREMENTS

        9. Senator Kennedy. General Robertson, recently, a number of Air
    Force witnesses have been complaining that the current tanker fleet,
    and apparently even those with the newer engines, is getting too old,
    and is spending too much time in depot maintenance. Many of these
    statements of concern have been supported by anecdotal information, but
    we have not seen a broader analysis of the fleet-wide situation.
        Your prepared statement mentions that you have completed a tanker
    requirements study and an Economic Service Life Study of the strategic
    tanker fleet.
        Will these studies provide more complete information on the
    problems that the Air Force is facing with its tanker fleet?
        If not, can you provide the subcommittee with more specific
    information on the problems that confront the Air Mobility Command in
    keeping the current tanker fleet in a ``mission capable'' status?
        General Robertson. Senator Kennedy, thank you for highlighting a
    key concern of mine. The recently completed KC-135 Economic Service
    Life Study documents many of the problems Air Mobility Command faces
    with the tanker fleet. Air Mobility Command and the Oklahoma City Air
    Logistics Center jointly executed this study. The study was conducted
    to determine the cost of ownership and the availability of aircraft to
    the warfighter through the year 2040.
        Let me take a moment to describe how we determine aircraft
    availability. Aircraft availability was calculated by taking the Total
    Active Inventory and subtracting projected numbers of aircraft in
    programmed depot maintenance, unscheduled depot level maintenance,
    modification status and field not mission capable status.
        The KC-135 Economic Service Life Study took into account the
    Oklahoma City Air Logistics Center KC-135 Aircraft Availability
    Improvement Plan. Aircraft available will most likely improve (based on
    short-term programmed depot maintenance improvements) from 292 aircraft
    in 2000 to 340 aircraft in 2005 and then decrease (due to age-based
    challenges) to 290 aircraft by 2040. Short-term improvements include
    reduction in programmed depot maintenance inputs, concurrent work of
    modifications, and increased production capability.
        Another tanker review, the Tanker Requirements Study for Fiscal
    Year 2005 (TRS-05), was conducted by Air Mobility Command in
    partnership with the Office of the Secretary of Defense Program
    Analysis and Evaluation division. The primary objective of this study
    was to determine the number of tanker airframes and aircrews needed to
    meet global aerial refueling requirements in the year 2005.
        TRS-05 identified the need for approximately 500-600 KC-135R-
    equivalent tankers available to meet air refueling requirements,
    depending upon the scenario. None of the scenarios examined showed
    excess tanker capability; the study identified shortfalls for aircraft,
    which are driven in large part by the high number of KC-135 aircraft in
    depot. Assuming the Economic Service Life Study projections for 2005
    are correct and assuming the KC-135 number of aircraft can achieve an
    85 percent mission capable rate, many of the tail shortfalls could be
    mitigated using workarounds examined in the study. If the in depot
    remains at the current level, a significant tail shortfall results in
    most of the scenarios analyzed.
        These two studies form the foundation for the upcoming Air
    Refueling Analysis of Alternatives. This cost-effectiveness study will
    help us determine the best way to meet the Nation's future air
    refueling requirements.

        10. Senator Kennedy. General Robertson, you mentioned during the
    hearing that there may be some equipment that the C-5 can carry, but
    that is beyond the capability of the C-17 to carry. Can you identify
    what that set of things may be?
        General Robertson. The C-17 Globemaster III and the C-5 Galaxy are
    the backbone of the strategic airlift arm of Air Mobility Command. Each
    aircraft is capable of carrying the vast majority of DOD's current
    inventory. Both the C-5 and C-17 routinely transport outsized cargo
    loads such as the M1-A1 Abrams Main Battle Tank, the Multiple Launch
    Rocket System (MLRS), and the Patriot Missile Launcher.
        The C-17 and C-5 cross sectional loading areas are very similar;
    the main difference is the length of the cargo compartment. The C-5 is
    the largest airlifter in the free world. Its counterpart the C-17 is
    smaller, yet more agile, and is not capable of carrying relatively few
    pieces of military cargo primarily only due to the shear size and/or
    weight of the items. The type of cargo that can be carried by the C-5,
    but are either too large or too heavy to be loaded on the C-17 are:
    Mark V Special Operations Craft, Deep Sea Rescue Vehicle (DSRV), AFE-
    TAG 89-08 and AFE/PRO (Titan Payload Adapter), ACTS Satellite Shipping
    Container, MILSTAR Structure Payload Transporter, Shuttle Orbiter
    Transporter, and the NAVY FFG-7 Frigate Reduction Gear on its Transport
    Trailer.

        11. Senator Kennedy. General Robertson, this subcommittee has been
    very interested in the improving reliability for the C-5 fleet. You
    said during the hearing that the Oversize and Outsize Analysis of
    Alternatives (O&O AoA) was nearly completed.
        Does that study include specific information on the condition of
    the fleet, by specific series, including such data as reliability
    status, flying hours expended, remaining airframe life, etc.? If not,
    can you provide such data for the record?
        General Robertson. Senator Kennedy, Air Mobility Command (AMC)
    identified a deficiency in meeting its wartime outsize and oversize
    cargo airlift requirements because of the poor reliability of the C-5
    Galaxy fleet. The O&O AoA was conducted by AMC under the guidance of
    the Office of the Secretary of Defense to examine solutions to correct
    a deficiency in our Nation's outsize and oversize strategic airlift
    capability. The AoA developed and examined alternatives that satisfy
    Mobility Requirements Study Bottom-Up Review Update (MRS BURU) and
    preliminary Mobility Requirements Study 2005 (MRS-05) requirements to
    airlift outsize and oversize cargo. The goal was to determine the most
    cost-effective alternative to mitigate the outsize and oversize cargo
    airlift capacity shortfall generated by declining C-5 reliability. The
    AoA recommends that AMC complete the Avionics Modernization Program
    project on the C-5 fleet and begin the Reliability Enhancement and Re-
    engining Program (RERP), starting with the C-5Bs, to achieve a minimum
    75 percent Mission Capable (MC) rate. Simultaneously, the study
    suggests the Air Force should continue to procure additional C-17s to
    meet new requirements. This ``best value'' recommendation will satisfy
    the increase in the O&O requirement established in MRS-05.
        The AoA is finished and we are awaiting completion of the new
    administration's Strategic Review before releasing the results to you
    and the public. The AoA contains some of the information you are
    requesting. However, the AoA focused on the time frame of fiscal year
    2005, not today. As a result, much of today's data is not included in
    the final report.
        The AoA reiterates previous study results that emphasize the C-5's
    potential service life beyond 2040. Several studies, accomplished
    independently over that last decade, point to a long-lasting airframe.
    Specifically:

            1994 Scientific Advisory Board: C-5 structural life at greater
            than 50,000 hours
            1996 Lockheed-Martin Phase III Study: Estimates C-5 service
            life of greater than 60,000 hours
            1997 IDA review: With proper fleet management the C-5 fleet
            should last past the year 2040 (25 years past modernization)
            1999 SAF/AQ directed independent C-5 review (team members from
            AF, NASA, FAA): The projected economical use of the C-5 to the
            year 2040 is quite feasible
            2000 O&O AoA (IDA Report): None of the (known) structural
            problems would terminate the life of the C-5 before 2040

        The figures included in this response describe Departure Rates (Fig
    1), Mission Capable Rates (Fig 2), and Flying Hours (Fig 3).

                                     ______

                Questions Submitted by Senator Mary L. Landrieu

        12. Senator Landrieu. General, like the Chairman I am also a strong
    supporter of the Maritime Security Program (MSP) and the Maritime
    Security Act which requires that MSP vessel operators be majority owned
    by U.S. citizens. These programs are critical to ensuring vessels are
    available to TRANSCOM to meet wartime shipping requirements.
        Do you believe the partnership between MSP vessel operators and
    TRANSCOM has worked well and does it provide DOD with the required
    sealift capacity?
        Do you support the maintenance of the current Maritime Security Act
    requirements on ownership of vessels?
        There has been discussion about possibly moving responsibility for
    operation of the Maritime Security Program from the Maritime
    Administration (MARAD) to the Department of Defense. Given MARAD's
    expertise on the commercial shipping industry, what is your opinion of
    this idea?
        General Robertson. Our partnership with the participants of the
    Maritime Security Program (MSP) has worked well to date, as these
    carriers are the nucleus for the Voluntary Intermodal Sealift Agreement
    (VISA). The VISA program has allowed DOD to develop wartime plans with
    the commercial sealift industry rather than rely on simply chartering
    or booking space on whatever vessels happen to be on the market at the
    time of a contingency. The 47 MSP vessel requirement was identified by
    USTRANSCOM, and coordinated within DOD, to meet specific sealift
    requirements that will be levied on U.S. commercial fleet during a
    Major Theater War (MTW). It is the capability of these ships, and the
    other 62+ vessels enrolled in the VISA program, combined with the
    vessels in the organic fleet that will meet the overall MTW shipping
    requirements.
        It is important to maintain a mechanism that will guarantee
    accessibility of the commercial fleet during contingencies. The current
    requirements support that accessibility, and we must strive to preserve
    this program regardless of where its administrative functions reside.
        USTRANSCOM has concerns about the proposed transfer of MSP to DOD.
    The current arrangement allows USTRANSCOM the ability to influence the
    program in the interest of readiness while not being directly
    responsible for obtaining funding or protecting the program. MARAD's
    current role in administering the program has worked well, allowing us
    to distance ourselves from the politics while ensuring our sealift
    requirements are met. This current proposal makes DOD carry the
    funding, administrative and legislative responsibility of the program.
    However, a strong commitment by all agencies to continue to maintain
    and enhance MSP in support of USTRANSCOM operational plans will
    continue to ensure the program's health and viability.

        13. Senator Landrieu. General, when reviewing your prepared
    testimony, I was struck by a ``good news/bad news'' story--our sealift
    capability. You note that in 2002, when the last Large Medium Speed RO/
    RO (LMSR) ship is delivered, we will at last meet the sealift
    requirements documented by the 1994 Mobility Requirements Study--Bottom
    Up Review Update (MRS BURU). That's the good news. The bad news is
    that, the recently released Mobility Requirements 2005 Study indicates
    that cargo delivery requirements for two Major Theater Wars have
    increased to a level one million tons greater than the 1994 study.
    Plainly put, we'll still be in a deep hole with no plan to get out.
        What is your best estimate on the number of additional LMSR ships
    (or others if you deem appropriate) necessary to cover that shortfall?
        What is your estimate based on?
        General Robertson. I do not believe there is a need for additional
    LMSRs. The Mobility Requirements Study 2005 (MRS-05) final report,
    signed by the Secretary of Defense in January 2001, states that the
    sealift investments made in response to the 1994 MRS-BURU, particularly
    with the additional LMSRs, have proven to be sufficient. All of the
    lift requirements analyzed in MRS-05 have a size and a time element
    attached to them. The time element for this additional lift requirement
    does not equate to more ships due to the availability of second and
    third trip voyages as well as our commercial partnerships through the
    Voluntary Intermodal Sealift Agreement (VISA). Additionally, the report
    found that DOD's overall organic sealift mobility capability could be
    further augmented through aggressive use of commercial sealift enabled
    by selective containerization of unit equipment.
        Over the last several years, we have made a concerted effort to
    maximize our use of containers in an effort to align our shipping
    requirements with the types of ships available. Together with
    containerization of unit equipment and access to commercial shipping,
    timelines are significantly shortened for moving equipment and
    sustainment to both theaters.

        14. Senator Landrieu. General, you have correctly criticized the
    abysmal state of the military's current household goods shipment
    system. I can't agree with you more. Given the economic and quality of
    life sacrifices we ask our military to make by moving every couple of
    years, I believe the least the government can do is ensure their
    belongings are moved in a timely manner without being damaged or
    destroyed. I've heard good things about the pilot programs you mention
    in your prepared statement and agree on the urgent need for reform in
    this area.
        What immediate changes would you recommend to implement those pilot
    programs?
        Does the Department of Defense require congressional approval to
    implement any of those changes?
        General Robertson. The Military Traffic Management Command is
    pursuing the incorporation of successful pilot features into the
    current personal property program as an interim solution while waiting
    for the evaluation of the pilots. This approach will allow service
    members and their families to begin realizing improved services much
    sooner than planned. The proposal is not intended to replace the
    pilots, but to capitalize on their successes--the real winner being the
    military family. In order to implement these pilot successes into the
    current program, a task force has been established, comprised of
    industry representatives and DOD, to review and coordinate the proposed
    changes. The features that are proposed for implementation are: (1)
    full replacement value coverage for lost and damaged items; (2) direct
    claims settlement with the contractor; (3) a toll free number for
    direct communication between the contractor and the member; (4)
    business awarded based on best value rather than low cost; and (5) use
    of customer satisfaction surveys to allow service members' input for
    the primary measure of carrier performance.
        I do not believe congressional approval is required. The fiscal
    year 1999 defense authorization language required that the Military
    Traffic Management Command provide reports on the pilot to Congress.
    Two interim reports were provided: February 1999 and May 1999. The
    Military Traffic Management Command's final report was provided in
    August 1999.
        We have noted that ongoing pilot programs are providing less than
    10 percent of our service members the opportunity to experience an
    improved move process through the pilots, while more than 90 percent
    suffer the status quo. Implementing the successful features of the
    pilots will put us one step closer to our goal of improved quality of
    life for all service members. The military services have identified
    successful features of the pilot programs for immediate implementation.
    However, the transportation costs associated with these improvements
    are expected to increase. The Functional Economic Analysis conducted
    for the Military Traffic Management Command's Pilot Program indicated
    that transportation costs would increase between 18-25 percent in the
    pilot regions (outbound shipments from North Carolina, South Carolina,
    and Florida). If we implement the successful features of the pilots
    worldwide, we could expect an estimated 15 percent increase, which
    equates to approximately $250 million annually. As is the case with
    many programs, funding will be a major hurdle.

        15. Senator Landrieu. General, Fort Polk is home of the Joint
    Readiness and Training Center, a key facility used by the Army to train
    units prior to overseas deployment. The high throughput through Fort
    Polk requires advanced transportation facilities and they are currently
    constructing a new railhead to increase their throughput.
    Unfortunately, all units and equipment transported by sea have to be
    transported all the way to Beaumont, TX, for embarkation on transport
    ships.
        The city of Lake Charles, LA, has worked hard to return their
    facilities to a state-of-the-art port.
        I understand that you are not prepared to answer questions on this
    issue now, but I would like you to report back to us on efficacy of
    using Lake Charles as an embarkation port and what constraints, if any,
    prevent its use in the next 90 days.
        General Robertson. In 1997, a Gulf Coast strategic port selection
    study was conducted, which included the Port of Lake Charles, LA. At
    that time, Lake Charles' infrastructure did not meet the required
    baseline criteria. The Port of Lake Charles, LA, does, however, have
    adequate draft, berth length, apron width, and rail access to
    accommodate one Fast Sealift Ship (FSS) or Large Medium Speed RO/RO
    (LMSR) ship. The Ports for National Defense are reviewed every 3 years.
    The Port of Lake Charles, LA, is included in the Ports for National
    Defense as a potential alternative to deploy military equipment during
    contingencies. The Military Traffic Management Command Transportation
    Engineering Agency (MTMCTEA) published an updated Gulf Coast Ports for
    National Defense in March 2000.
        Requirements for port services are contingency driven. The Port of
    Beaumont, TX, is currently meeting these requirements in the Gulf Coast
    Region. This port is exercised two or three times annually as part of
    Joint Readiness Training Center rotations or Sea Lift Emergency
    Deployment Readiness Exercises in preparation for future contingency
    missions.
        Since Beaumont is the prime Gulf Coast strategic port, use of this
    port to support these exercises is important in order to maintain
    wartime readiness. Co-location of our active duty unit at the port
    makes operations at Beaumont cost feasible and eliminates the need for
    travel. Additionally, the port of Beaumont gives us the flexibility to
    load and discharge the Army's largest cargo ships in three distinct
    locations at the port.
        In the event additional Gulf Coast Corridor Port capability becomes
    necessary, the Port of Lake Charles, LA, will be considered in the port
    selection process. To complete the selection process, a team is
    established, comprised of representatives from MTMC, MARAD, and TEA.
    The evaluation begins with the collection and analysis of port
    characteristic data. Then team members tailor and prioritize the
    criteria based on requirements to support a worst case operations plan.
        Finally, the team recommends port selection. Strategic port
    selection is derived by a need. Currently there is no requirement for
    additional capability in the Gulf Coast Corridor; therefore, no
    evaluation team has been established at this time.

        [Whereupon, at 3:23 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                             THURSDAY, JUNE 7, 2001

                                   U.S. Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.

         NAVY AND MARINE CORPS EQUIPMENT FOR 21ST CENTURY OPERATIONAL
                                  REQUIREMENTS

        The subcommittee met, pursuant to notice, at 2:04 p.m. in
    room SR-232A, Russell Senate Office Building, Senator Edward M.
    Kennedy (chairman of the subcommittee) presiding.
        Committee members present: Senators Kennedy, Lieberman,
    Landrieu, Reed, Sessions, and Bunning.
        Committee staff member present: Creighton Greene,
    professional staff member.
        Minority staff members present: Romie L. Brownlee,
    Republican staff director; Gary M. Hall, professional staff
    member; Ambrose R. Hock, professional staff member; and Thomas
    L. MacKenzie, professional staff member.
        Staff assistants present: Beth Ann Barozie and Jennifer L.
    Naccari.
        Committee members' assistants present: Menda S. Fife,
    assistant to Senator Kennedy; Frederick M. Downey, assistant to
    Senator Lieberman; Marshall A. Hevron, assistant to Senator
    Landrieu; Elizabeth King, assistant to Senator Reed; David
    Schanzer, assistant to Senator Carnahan; Arch Galloway II,
    assistant to Senator Sessions; Kristine Fauser, assistant to
    Senator Collins; and Derek Maurer, assistant to Senator
    Bunning.

        OPENING STATEMENT OF SENATOR EDWARD M. KENNEDY, CHAIRMAN

        Senator Kennedy. Senator Sessions will be joining us in a
    few minutes. I will make a brief opening statement and then we
    will proceed.
        The subcommittee meets this afternoon to discuss Navy and
    Marine Corps equipment issues and needs in order to meet future
    operational requirements. We will hear from several witnesses
    today: Vice Adm. Dennis McGinn, Deputy Chief of Naval
    Operations for Warfare Requirements and Programs; Lt. Gen.
    William Nyland, Deputy Chief of Staff for Programs and
    Resources; Maj. Gen. William Whitlow, Director, Expeditionary
    Warfare; Rear Adm. Michael McCabe, Director of Air Warfare;
    Rear Adm. Bruce Engelhardt, Deputy Director, Submarine Warfare;
    and Rear Adm. John Kelly, Deputy Director of Surface Warfare. I
    welcome each of our witnesses and look forward to their
    testimony.
        I want to commend Senator Sessions for originally calling
    this hearing, and I thank Senator Sessions for his service as
    chairman of our subcommittee. We have, over the long period of
    time on this committee with Secretary Cohen and Senator Snowe
    and others, enjoyed a good bipartisan effort, as we should
    continue to do. I have enjoyed the chance to work with the
    Senator and look forward to that continued relationship.
        I welcome the fact that we have had these hearings. I have
    indicated informally that because of the Senate floor schedule
    and my managing the secondary education bill, I will not be
    able to spend the time that I would have liked, but I will
    carefully read the statements. There are some questions to
    which I look forward to receiving responses.
        This subcommittee has been particularly bipartisan. The
    members have worked closely together to deal with these
    important issues to help the Navy and the Marine Corps respond
    to challenges in the uncertain world we face. We have supported
    improved mine countermeasures. Our ships have to operate in
    waters close to potential enemy shores. We have supported
    improved ship self-defense, because by operating close to the
    shores our ships have less warning of missile attacks. We have
    helped the Navy improve its ability to provide surface fire
    support to forces ashore. I look forward to continuing these
    efforts.
        The Secretary of Defense is currently conducting a broad
    strategy review about how best to provide for our national
    security in the years ahead. We look forward to receiving his
    recommendations. At the same time, there are a number of areas
    where the subcommittee can review the performance of specific
    programs and consider the best ways of meeting current and
    future operations requirements. We will continue to need strong
    naval forces to protect our interests in many areas overseas.
    We may need to change our approaches in some areas, but we will
    still need to ensure that we do not lose the very real
    advantages that our Navy and Marine Corps so skillfully
    provide.
        Before hearing from our witnesses, we will recognize
    Senator Sessions for his opening remarks.

                   STATEMENT OF SENATOR JEFF SESSIONS

        Senator Sessions. Thank you, Mr. Chairman. It is a matter
    that I think is our responsibility as a committee, to mark up a
    bill that covers our area of the waterfront, and to do so we
    need a record that justifies what we recommend. Your testimony
    is critical to that.
        Senator Kennedy, I thank you for your cooperation when I
    briefly served on this committee as chairman, and for your
    long-time involvement in wrestling with the issues which really
    allows you to be extraordinarily valuable. I do not believe
    that we have any disagreements on any of the issues that are
    important to us. Thank you for your leadership.
        I also know that you have been deeply involved in the
    education bill, and I understand that you have to leave.
        Senator Kennedy. Thank you, Mr. Chairman. It is easier when
    we do not have a Sessions amendment over there. [Laughter.]
        We will start off with Vice Admiral McGinn. I will not have
    the chance to get into it, but we are going to request that the
    hearing give some focus on what has happened to the Navy
    seapower research and development and procurement programs. We
    were briefed last year, and I expect perhaps after you give
    your statement that you might make some comment on that.
        Following Vice Adm. McGinn, we will have General Whitlow.
    We have had a longstanding interest in the mine countermeasure
    programs. I understand there may be a problem with one of the
    assault breaching systems, and it is not whether it works as
    advertised, but whether the system performance will meet the
    needs of the fleet. Perhaps you would be able to comment on
    that.
        Then--Admiral Kelly--I was going to ask a question on the
    extended range guided munitions issues. We will either have you
    make some comments about that, or I will submit some questions.
    We are obviously going to have some questions on the V-22 and
    the Tomahawk programs and others. I see my good friend, Senator
    Lieberman, here as well, if you want to say a brief word.
        Senator Lieberman. No, Mr. Chairman. Thanks for convening
    the hearing. I look forward to the testimony.
        Senator Kennedy. At this time, I will insert into the
    record the statement of Senator Smith.
        [The prepared statement of Senator Smith follows:]
                    Prepared Statement by Senator Bob Smith
        Mr. Chairman and members of the subcommittee, I agree with the
    testimony provided by these fine representatives of the commercial
    shipbuilding industry. I am concerned about the statement that the
    shipbuilding industry is ``surviving but struggling.'' The 1997
    Quadrennial Defense Review called for a 300 ship Navy to deal with
    operational requirements and issues of national security. The testimony
    provided today notes that during the years 2001 to 2010, the average
    number of ships scheduled for construction is 6 per year. If we assume
    that the average service life of our warships is 30 years, we will need
    to build a minimum of 10 ships per year to sustain a 300 ship fleet.
    Consequently, we cannot maintain force structure without increasing
    construction rates. While extending the life of our warships is an
    option, metal fatigue, corrosion, and reactor aging create risks to
    which we should not subject the men and women of our naval service.
        I ask my colleagues to authorize and appropriate adequate funds for
    a 300 ship fleet. This funding should include a budget for the four
    major ship types--carriers, amphibious, submarines, and surface
    combatants. Our naval force should be the juggernaut expected of the
    world's last superpower.

        Senator Kennedy. Admiral McGinn.

     STATEMENT OF VICE ADM. DENNIS V. McGINN, USN, DEPUTY CHIEF OF
        NAVAL OPERATIONS FOR WARFARE REQUIREMENTS AND PROGRAMS;
     ACCOMPANIED BY MAJ. GEN. WILLIAM A. WHITLOW, USMC, DIRECTOR,
       EXPEDITIONARY WARFARE; REAR ADM. MICHAEL J. McCABE, USN,
       DIRECTOR, AIR WARFARE; REAR ADM. BRUCE B ENGELHARDT, USN,
       DEPUTY DIRECTOR, SUBMARINE WARFARE; AND REAR ADM. JOHN M.
              KELLY, USN, DEPUTY DIRECTOR, SURFACE WARFARE

        Admiral McGinn. Thank you, Mr. Chairman, for the
    opportunity to come over this afternoon and address the
    Subcommittee on Seapower. With me today are the experts in
    their warfare areas, as well as my good friend and comrade-in-
    arms, General Spider Nyland. We are here to address your
    questions on those issues and programs affecting the ability of
    the United States Navy and Marine Corps to carry out our vital
    mission of providing seapower, forward presence, and credible
    combat capability across the mission spectrum. Our daily key
    challenge in our business lies in striking the right acceptable
    balance between current readiness, taking care of the fleet we
    own and operate today, and investing in our future capability
    while at the same time, perhaps even more importantly,
    continuing to recruit and retain our most precious resource,
    the sailors and marines who constitute our fleet.
        As I make recommendations for warfare requirement
    priorities and program resourcing decisions to the Chief of
    Naval Operations, I am keenly aware that this committee takes
    interest in them. In the written statement that I provided, and
    I respectfully request that it be entered in the record, I laid
    out my rationale concerning changing naval concepts of
    operations and priorities.
        This rationale is reflective of a sea change in the Navy,
    led by the Chief of Naval Operations, in response to the
    mismatch between resources and requirements he faced as a fleet
    Commander in Chief in the Atlantic fleet.
        Admiral Clark, as a result, initiated an alignment of the
    Navy staff with the fleet in order to reconcile the resource-
    requirements mismatch. Our goal is to ensure that our program
    of record will deliver the warfighting capability that we need
    today and in the future.
        Our emerging priorities for investment, by which I believe
    the Navy can best improve our warfighting capability for every
    dollar invested, are networks, sensors, weapons, and platforms.
    Platforms, our ships, submarines, and aircraft, have long been
    viewed as the principal symbols for any discussions about naval
    warfare capabilities but, as I believe the members of this
    committee fully realize, these platforms in and of themselves
    do not deliver the combat capability we need in the future
    unless and until they are networked to the rest of the fleet
    and to other services capabilities.
        Networks ensure that, using the right sensors, we are able
    to provide shared and common knowledge of the battle space so
    that with the highly precision munitions that we are developing
    and fielding we can rapidly shift from our forward-deployed
    peacetime presence role to one of focused and very lethal power
    projection.
        The combat capability established under the prioritization
    of networks, sensors, weapons, and platforms will truly enable
    us to better achieve sea control in order to support joint
    land, air, and expeditionary forces from the sea.
        In my written statement, I also provided this warfare
    rationale in lieu of specifics on our programs due to the
    unique nature of our current situation wherein we face
    significant requirement resource balancing challenges while at
    the same time participating in an ongoing top-down Department
    of Defense strategic review.
        On a daily basis, we deal with specific programmatic issues
    such as mine countermeasures, amphibious ship readiness and new
    radar programs for our next generation aircraft carriers. These
    programs, as well as many others, will be clearly linked to the
    outcome of the analytical processes and studies that are
    currently underway in the strategic review.
        I am confident that, as we in the Navy continually
    transform and modernize our forces, we will leverage
    technological opportunities offered by advanced, unmanned,
    undersea and surface vehicles such as the long range modern
    reconnaissance system, unmanned air vehicles and combat air
    vehicles. These capabilities, once fielded, will provide
    greater flexibility and freedom to maneuver in the littoral,
    especially in conjunction with the improved short access and
    survivability that we will gain from capabilities such as that
    provided by ship self-defense systems.
        Ongoing discussions regarding other key sea power programs
    such as LPD-17, SH-60 Romeo helicopter, and the P-3 Orion
    aircraft program, are also of great importance. The ultimate
    success of these programs greatly depends on the performance of
    the Navy-industry team working to deliver warfighting
    capabilities to the fleet when it is needed. As you are well
    aware, there have been delays in the LPD-17 and the SH-60 Romeo
    programs. We are working diligently with the industry teams
    involved to put these programs back on track.
        On the P-3 program, with the coordination of Congress and
    industry, we terminated the sustained readiness program when it
    became apparent that it was inexecutable at an affordable level
    of resourcing. We are now analyzing future alternatives to fill
    the critical mission of the current P-3 fleet, and ways to
    transition from that fleet to the best solution that our
    analysis of alternatives leads us to.
        The recently announced delay of the down-select for our
    land attack destroyer, DD 21 as we call it, is also receiving a
    great deal of attention. As part of the strategic defense
    review, the Office of the Secretary of Defense has directed an
    updated study on shipbuilding that will help determine the most
    effective mix of ships in our programs, as well as the overall
    level of shipbuilding funding required to maintain a fleet of
    sufficient size to meet our national security strategy.
        The outcome of that study will help us to be confident that
    the decisions we make regarding this major surface combatant
    investment will deliver the warfighting capability we need in
    sufficient numbers at the right time.
        Senators, with the expert assistance of the experienced
    warfare sponsors who are with me today, we are ready to address
    your questions regarding these specific programs and any other
    issues of concern or interest. Thank you again for this
    opportunity, and we look forward to your questions and also to
    continuing to work with you, your committee and staff,
    throughout the coming year. Thank you, sir.
        [The joint prepared statement of Admiral McGinn, General
    Whitlow, Admiral McCabe, Admiral Engelhardt, and Admiral Kelly
    follows:]
    Joint Prepared Statement by Vice Adm. Dennis V. McGinn, USN, Maj. Gen.
     William A. Whitlow, USMC, Rear Adm. Michael J. McCabe, USN, Rear Adm.
           Bruce B. Engelhardt, USN, and Rear Adm. John M. Kelly, USN
        Thank you for the opportunity to be here today, and for your
    support of the United States Navy. I'll begin by briefly speaking to
    the unique and enduring contributions that forward deployed naval
    forces make to our national security. Clearly, our great Navy requires
    an ongoing investment by our Nation, but that investment brings a
    tremendous return for our Nation--every day, throughout the world,
    wherever our national interests are found.
                           the value of naval forces
        There are four principal returns on that investment in the Navy:

             First, command of the seas upon which the world's free
            trade structure rests;
             Second, U.S. sovereign power, overseas engaged every
            day in support of our national interests.
             Third, the sustained access to the battlespace from
            forward deployed U.S. naval power that can maintain sea
            superiority in order to both project offensive fire power
            ashore as well as theater missile defense overland in the
            critical opening days of conflict
             Fourth, how naval forces forward enable the
            transformation of our sister Services to lighter and more
            rapidly deployable expeditionary forces that can flow into
            theater under the Navy's protective defensive shield overland
            while also providing ``artillery from the sea''.
                                   alignment
        With this strategic template in mind, the Chief of Naval Operations
    (CNO) Admiral Vern Clark established my N7 organization to align the
    efforts of the staff here in Washington with the needs of the fleet
    that provides the return on the Nation's investment. This close
    alignment of structure and goals is critical as the Department of
    Defense conducts its overall strategic review and develops adjustments
    to the fiscal year 2002 budget and associated fiscal year 2003-2007
    programs.
        I am responsible for determining warfighting requirements and
    maintaining oversight of those programs that will deliver the
    capabilities required by our Nation. To achieve this, I must maintain
    close alignment with the fleet to understand their current readiness
    issues, and also with those organizations within the Navy responsible
    for experimentation. With these in mind, I am charged with charting the
    course to achievement of the Navy's future capabilities. The balance
    between those current readiness issues and future capabilities is at
    times difficult to strike.
        In order to transform the current Navy into the kind of force
    envisioned for the future security environment, I must understand the
    characteristics of that environment and consider all of the missions it
    will likely demand. That future force will need to be able to provide
    sustained assured access to those regions where U.S. strategic
    interests lie, while maintaining the command of the sea that ensures
    the stability and security of the maritime commons upon which our
    economic prosperity relies. The force that provides this freedom--the
    U.S. Navy--will face a world increasingly interconnected through
    information technology and economic ties. A world where proliferation
    of modern weapons, advanced computing power and technologies, and
    global communications enable sub-national and regional actors to play a
    greater role in world events. Where terrorists and non-traditional
    adversaries may attempt to leverage asymmetric capabilities to their
    gain, and at our expense.
        To prepare for this environment, I believe we must continue and
    accelerate the development of Network Centric Warfare tactics,
    techniques and procedures while iteratively developing the hardware and
    software necessary to maximize the potential of these concepts. Some
    have recently begun to refer to this new approach as ``Spiral
    Development''--taking that which we know works and implementing a
    working solution allowing further development in place. In essence, we
    field the 80 percent solution and iterate upon it based upon fleet
    input, rather than wait for the 100 percent solution which may never be
    achieved in development, and which might still fall below fleet
    expectations. Our goal is to rapidly transform our current fleet into
    the interoperably networked, agile, expeditionary force required for
    the 21st century threat. This concept will allow precision targeting of
    those aimpoints that will generate only those effects required to win
    in conflict.
        Thus, as the Navy forges ahead into the 21st century, we will
    retain the core capability of sea dominance to provide free transit of
    the world's oceans. To an even greater extent than today, we will
    rapidly leverage technological advances to apply decisive force in
    combat. We will remain an expeditionary force that provides a return on
    the Nation's investment across the entire spectrum of conflict--from
    peace, through crisis, and in high intensity conflict.

                                 TRANSFORMATION

        This ``Rapid Transformation'' has begun. For the Navy,
    transformation is not about getting lighter. It is about gaining more
    capability per pound. If one of the major news sources ran a headline
    that I had recommended arming the E-2C Hawkeye with Standard Missiles,
    or that I wanted to outfit the entire Nuclear Aircraft Carrier Fleet
    with Aegis Combat System; or that the Navy wanted to procure Joint
    Surveillance Target Attack Radar System (JSTARS), I believe your
    committee's interest would be piqued. Yet that is exactly what Network
    Centric Warfare will enable--without the Navy having to procure the
    equipment for previously non-enabled platforms! By networking our force
    and ensuring its interoperability with the Joint Force, we provide the
    benefit of the E-2C's antenna height and capability to the Standard
    Missile shooter via Cooperative Engagement Capability (CEC). We've
    demonstrated interoperability with JSTARS and the U-2 in Fleet Battle
    Experiments and Limited Objective Experiments. Our vision is of a
    deployed Navy with seamless reachback to shore-based forces to enable
    access to tactical expertise from our Continental U.S. based centers of
    excellence. This same reachback will improve the quality of service for
    our people through distance learning programs and connectivity to the
    ``real world'' while forward deployed. We envision ships, aircraft, and
    submarines linked with a common picture of their tactical environment,
    able to achieve desired effects through precision targeting, to include
    the most time-critical targets. A Navy with the tools required to
    leverage its inherent mobility through rapid and accurate decision
    making, and the weapons required to achieve lethal and decisive results
    in combat while leveraging the strengths of our allies and coalition
    partners.
        The following slide is a depiction of the capability linkages that
    Network Centric Warfare will enable. These are key to Navy's
    transformation to the force we envision.

                             PROCUREMENT PRIORITIES

        For the Navy to achieve this vision, we must prioritize the
    application of our resources to networks first. This will provide the
    greatest return for the expenditure of our investment dollar. The data
    links and systems which will network our existing forces are
    fundamental, but must be populated with information provided by
    advanced sensors, for these will enable the granularity necessary to
    provide knowledge to the forces or ``nodes'' on our network. These
    forces will employ increasingly precise weapons based upon the
    knowledge provided to the warfighter via this ``expeditionary sensor
    grid''. Finally, our resources must be applied in the most efficient
    manner to recapitalizing the platforms that will carry naval
    warfighters to the littorals, capable of projecting power and even
    defense ashore, from the sea.
        This prioritization upends the traditional focus of our budgets,
    and to some, appears to endorse a reduction in force structure size.
    This is not the case--numbers do matter--but the number is less
    important than the capability inherent in those numbers! Thus, given
    the resource-constrained choice between a given number of platforms and
    a lesser number of those same platforms enhanced by a full complement
    of offensive and defensive capabilities and sensors, I would opt for
    the lesser number of more-capable platforms. The balance that must be
    achieved hinges upon the Global Naval Force Presence Posture (GNFPP),
    our National Security Strategy, commitments by the National Command
    Authorities to support contingency operations, and the level of
    resourcing available. Regardless, by applying this prioritization to
    the choices, I believe we will arrive at the most capable force for the
    future, while making the hard choices required to provide capability
    today.
        While there has been much recent debate about the relevance and
    survivability of the Aircraft Carrier, note that the Navy vision of
    transformation does not entail moving away from this platform. The
    Aircraft Carrier remains survivable based upon its mobility, which
    vastly complicates an enemy's targeting problem (a 700 square mile area
    of uncertainty in only 30 minutes). It is also survivable because of
    its robust design, defensive systems, and connectivity to the battle
    group's netted defenses as well. Still, this misses the point. The
    Carrier Battle Group and the Aircraft Carrier itself are lethal to
    enemy forces, with an ever-increasing ability to strike and destroy
    those enemy systems and capabilities that would threaten not only
    itself, but the other friendly forces and non-combatants in the region
    as well. Its myriad capabilities in peacetime presence, heightened
    tensions, crisis and high-intensity conflict are simply unparalleled.

                                EXPERIMENTATION

        Much has been made in the media of innovative and captivating
    concepts being discussed openly at our centers of excellence in higher
    learning and experimentation. Among the many concepts we are looking at
    are conceptually small, nimble yet heavily armed surface combatants
    capable of sustained high speeds. Just as present day forces reflect
    the work of many previous years of analysis over a wide range of
    available options to meet the Navy's missions, these concepts represent
    the continuing process of assessment of alternative options for
    potential forces of the future.
        Unlike programs that produce specific pieces of hardware or
    software, these are concepts with which the Navy might conduct Maritime
    Warfare in the future. Utilizing a broad range of evolving and new
    technologies, they provide a basis for discussion inside the Navy, as
    well as a means to engage the private sector through interested
    organizations and industry, to encourage debate and solicit the best
    ideas on fulfilling future Navy missions.
        These concepts are not intended to be, nor will they be developed
    as programs unless a full vetting of alternatives is performed which
    concludes they are the most appropriate options for future forces. If
    determined to be promising, components of these concepts may be
    developed as part of other new or existing programs, as opposed to
    stand-alone programs.
        This is the role of Experimentation in today's Navy. We do not shy
    away from ideas that might challenge the Program of Record, for if the
    Program of Record cannot pass muster when compared to conceptual
    alternatives then it indeed deserves to be challenged. The programs and
    concepts we are experimenting with constitute the groundwork for the
    ``Navy After Next''. The ``Next Navy'' already exists in our budget,
    and you are clearly familiar with the programs that will reconstitute
    today's Navy, such as CVN(X), F/A-18E/F and Joint Strike Fighter (JSF),
    Virginia-class Submarine, DD 21 and LPD-17. These recapitalization
    programs have established Operational Requirements Documents from which
    we can evaluate developmental performance. Yet while we understand
    those validated requirements, we learn more about their ramifications
    on cost and other performance tradeoffs as we progress in development.
    As unacceptable situations--such as cost overruns, changing threats, or
    unacceptable performance in unforeseen regimes--arise during
    development, I believe we must make informed and fully-vetted
    requirements tradeoffs in order to field a needed capability
    improvement that is ``good enough'', although it may not meet the
    originally stated requirement definition to the letter.

                                  CONSTRAINTS

        The ongoing strategic review comes at a critical time for the Navy.
    Strategic reassessment of required operational tempo, force structure
    levels and mix, and new initiatives in Ballistic Missile Defense will
    factor strongly in the administration's guidance and resource level
    requests. These factors will provide the boundaries within which the
    Navy must determine the best achievable balance between readiness and
    modernization. The priorities reflected above for application of
    modernization resources--Networks, Sensors, Weapons and finally
    Platforms--will be reflected in the mix as the Navy rapidly transforms
    to continue ensuring freedom of the seas.

                             NAVY TODAY; NAVY NEXT

        Today's Navy incorporates the most impressive array of capabilities
    ever fielded upon the world's oceans. It is more than ready for the
    tasks it faces on a daily basis, and equal to the likely challenges our
    potential adversaries are capable of presenting. Nevertheless, it is
    ``wearing thin'' from heavy use and insufficient upkeep,
    recapitalization and maintenance. We have knowingly sacrificed these in
    order to maintain the strategic depth which best offset the risks
    assumed under the prevailing strategy. Although we have seized upon the
    catalytic concept of Network Centric Warfare as a capstone concept for
    transforming the Navy, we have had little discretionary capital to
    apply when faced with the near-term challenges.
        With a growing emphasis on the Asia/Pacific region, the Navy's
    combat credible forward presence will be required perhaps even more in
    the future than today. The requirement to recapitalize our force will
    be undiminished, and facing the future security environment described
    above, our modernization accounts will require significant resources.
    As the other Services continue their transformation to lighter more-
    expeditionary fighting forces, the Navy will assume an even more
    significant role in providing the sea-based fires and logistics that
    will enable that transition. Under those circumstances, an adept, ably
    netted, and highly lethal force, able to project offensive combat power
    and a defensive ``umbrella'' far inland from the sea will be
    fundamental in crisis, and the command of the sea, which some take for
    granted, even more critical.

                                   CONCLUSION

        America rests its prosperity upon seapower. Nowhere is this more
    appreciated perhaps than in this committee. Yet something as
    fundamental as this is often overlooked. The strength and health of our
    Navy, today and in the future, underwrites the health and strength of
    our Nation. Our Nation's considerable investment of resources in the
    Navy has been returned manifold times by our vigilance and capability
    to command the seas. As we face the future, it is important to
    recognize both the opportunities and challenges before us. To reap the
    maximum benefit of our investment, it will be critical to apply our
    resources wisely, prioritized to meet the challenges ahead with the
    right investments, and with capabilities both flexible and unassailable
    by those who covet our prominence.

        Senator Lieberman [presiding]. General Nyland, I understand
    you are next.

    STATEMENT OF LT. GEN. WILLIAM L. NYLAND, USMC, DEPUTY CHIEF OF
                    STAFF FOR PROGRAMS AND RESOURCES

        General Nyland. Thank you. I would like to thank the
    chairman, Senator Kennedy, Senator Sessions and members of the
    committee, for the privilege to appear before you today to
    discuss your Marine Corps. I would ask that my formal statement
    be included in the record, and I would also like to briefly
    update you on the Corps since my predecessor, Lieutenant
    General Williams, appeared before the committee last year.
        First, on behalf of the marines and their families, I would
    like to thank you for your continued support in addressing many
    of the resource challenges we have faced in recent years. Your
    efforts reveal not only a commitment to assuring the common
    defense, but also a genuine concern for the welfare of our
    marines and their families. Your support has been and will
    continue to be critical to the readiness in the Corps.
        Second, as we enter the uncertain world of the 21st
    century, the strategic role of the Marine Corps, as defined by
    the 82nd Congress, to provide a capable expeditionary force and
    readiness that is versatile, adaptable, and powerful, remains
    more relevant than ever before. Once-stable nation states are
    imploding, and ethnic hatred, religious strife, and clan
    warfare serve as tinder for transnational events.
        Coupled with this is a radical shift in world demographics,
    economic interdependence, and technological diffusion. In
    short, it is a time of great uncertainty and instability. With
    that in mind, we are well on our way toward fielding systems
    that will allow the Corps to enhance our capabilities as the
    Nation's premier expeditionary force for the 21st century.
        The major systems that compose the foundation of our
    strategy and operational concepts include the Joint Strike
    Fighter (JSF), the Advanced Amphibious Assault Vehicle (AAAV),
    the MV-22, and the Landing Craft Air Cushion (LCAC). The
    convergence of many of these initial capabilities occur in
    fiscal year 2008. Together with the indirect fire support
    systems of the lightweight 155 and the HIMARS, High Mobility
    Rocket System, will enable the Corps to take full advantage of
    emerging and available concepts and technologies.
        Our expeditionary fighting vehicle, the AAAV, will deliver
    over-the-horizon maneuver capability that begins afloat and
    continues ashore. Most recently, this superb program, the
    winner of two Packard awards, entered the engineering and
    manufacturing development phase, having completed the Defense
    Acquisition Board review in November.
        The MV-22, whose technology the blue ribbon panel just gave
    a thumbs up and called a national asset, will provide greater
    range, speed, and flexibility, enabling the rapid build-up of
    combat power ashore.
        The LCAC Service Live Extension Program (SLEP) will
    significantly enhance our ship-to-shore maneuver from over the
    horizon. Similarly, the Joint Strike Fighter will bring
    stealth, versatility, and the Nation's leading edge
    technologies to the battlefield. To date, the two-concept
    demonstrators' performance have both been superb.
        Also critical in the evolution of expeditionary maneuver is
    indirect fire support. Our modernization efforts address this
    vital capability through the lightweight 155 and the HIMARS.
    These two joint programs with the Army are on track, and will
    greatly enhance maneuverability and flexibility on the
    battlefield, to include greater range and lethality.
        Collectively, these systems enable the Marine Corps to
    successfully operate in a changing world, exploiting our
    expeditionary maneuver warfare concept. These systems will
    deliver the needed support to ensure success for the troops on
    the ground. Through these efforts, and with your support, we
    are prepared to embrace the challenges and opportunities of the
    future. Naval forces, Navy and Marine Corps expeditionary
    forces, and integrated air-land-sea combined arms units are
    ideally suited to meet these challenges. They are powerful
    instruments of national policy and provide the national command
    authorities with a multitude of diplomatic and military options
    to support U.S. foreign policy initiatives.
        I look forward to serving the committee today and to
    receiving your questions. Thank you again for the opportunity
    and for your continuing support.
        [The statement of General Nyland follows:]

             Prepared Statement by Lt. Gen. William L. Nyland, USMC

        Mr. Chairman, Members of the Committee, it is my privilege to
    appear before you today to discuss Marine Corps operational concepts
    and the research and development and equipment required to carry out
    those concepts in the 21st century.
        On behalf of marines and their families, I would first like to
    thank you for your continued support in addressing many of the resource
    challenges we have faced in recent years. Your efforts reveal not only
    a commitment to ensuring the common defense, but also a genuine concern
    for the welfare of our marines and their families. Your continued
    support is absolutely critical to the readiness of the Corps.
        As we enter the uncertain world of the 21st century, the strategic
    role of the Marine Corps, as defined by the 82nd Congress--to provide a
    capable expeditionary force-in-readiness that is versatile, adaptable,
    and powerful--remains more relevant than ever before. Once stable
    nation states are imploding and ethnic hatred, religious strife and
    clan warfare serve as tinder for transnational events. Coupled with
    this is a radical shift in world demographics, economic
    interdependence, and technological diffusion. In short, it is a time of
    great uncertainty and instability.
        To meet the threat demands of the new century, the current National
    Military Strategy (NMS) calls for flexible and multi-mission capable
    forces to respond to the full spectrum of conflict. The NMS stresses
    the need for Joint forces that can address multiple small-scale
    contingency operations, and that are able to transition rapidly from
    peacetime operations to full-scale conflict. Naval Forces--Navy and
    Marine Corps expeditionary forces--integrated air, land, and sea
    combined-arms units--are ideally suited to meet these challenges. They
    are powerful instruments of national policy and provide the National
    Command Authorities with a multitude of diplomatic and military options
    to support U.S. foreign policy initiatives.

                  MARINE CORPS EXPEDITIONARY MANEUVER WARFARE

        Expeditionary Maneuver Warfare (EMW) is the Marine Corps capstone
    concept for the 21st century. Built on the twin pillars of our
    philosophy of maneuver warfare and our expeditionary culture, EMW
    prepares the Marine Corps to meet the challenges and opportunities of a
    rapidly changing world. The concept describes the evolving
    characteristics and capabilities that the Marine Corps will employ to
    promote peace and stability and to mitigate or resolve crises.
        EMW describes the ``axis of advance'' for future enhancements. In
    doing so, the concept focuses on:

             Strategic Agility: to ensure rapid and fluid
            transition from pre-crisis state to full operational capability
            in any distant theater. This requires ready forces that are
            both sustainable and rapidly tailorable for multiple missions
            or functions. They must be agile, lethal, swift in deployment,
            and always prepared to reconstitute or move immediately to the
            scene of an emergency or conflict.
             Operational Reach: to rapidly project, support, and
            sustain relevant and effective power, in conjunction with other
            forms of national influence. This can be accomplished
            independent of host nation support and against distant
            objectives across the breadth and depth of a theater of
            operations.
             Tactical Flexibility: to create an overwhelming tempo
            of action through synchronized application of effects, and
            responsive and adaptive command and coordination. These effects
            will rapidly erode an enemy's cohesion.
             Support and Sustainment: to enable the enduring
            expeditionary logistics capabilities of Naval Forces in order
            to project influence. This will be accomplished by optimizing
            our deployment support, force closure, force sustainment,
            reconstitution, redeployment, and strategic reach back
            capabilities.
             Joint/Multinational Enabling: to enable Joint, Allied,
            and Coalition operations (and inter-agency coordination) by
            blending the unique, combined-effects capabilities of Marine
            Forces with complimentary capabilities of others. The forward
            presence posture and rapid response time of sustainable Marine
            Forces provides unmatched enabling capabilities for the Joint
            Force Commander.

        These enhancements will bolster our ability to reassure and
    encourage our friends and allies while we deter, mitigate, or resolve
    crises through speed, stealth, and precision.

                    THE MARINE AIR-GROUND TASK FORCE (MAGTF)

        The Marine Corps operates as MAGTFs, fully integrated, and scalable
    combined-arms forces that include air, ground, and combat service
    support units under a single commander. MAGTFs are organized, trained
    and equipped from the operating forces assigned to Marine Corps Forces,
    Pacific; Marine Corps Forces, Atlantic; and Marine Corps Forces,
    Reserve. The Commanders of Marine Corps Forces Pacific and Atlantic
    provide geographical combatant commanders with scalable, flexible
    MAGTFs that possess the unique ability to project mobile,
    reinforceable, sustainable combat power across the spectrum of
    conflict. Marine Corps Forces, Reserve provides ready and responsive
    marines and Marine Forces who are integrated into MAGTFs for mission
    accomplishment.
        From the decks of ships, to deep inland objectives, marines deploy
    and operate as a combined-arms team--infantry, artillery, combat
    engineers, logistics, and aviation. These MAGTFs are self-sustaining,
    rapidly deployable, and generate maximum combat power with minimum
    logistic support ashore. They operate effectively alongside other
    services as well as allied forces and are well prepared to
    significantly contribute to future joint and combined operations.
        MAGTFs are comprised of elements that vary in size and composition
    according to the mission and are specifically tailored for rapid
    deployment by air, land, and sea.

                             ELEMENTS OF THE MAGTF

        Command Element (CE): The Command Element is the MAGTF headquarters
    task organized to provide joint force command and control, intelligence
    fusion, and crisis action planning. Because we fight shoulder to
    shoulder with the Army, control the skies with the Navy and Air Force,
    and come from the sea, we aggressively seek joint solutions to our
    communications and command and control requirements. Technologically
    advanced weapons systems require joint, secure, technologically
    interoperable systems to support them. The modernization of the command
    element requires the fielding of MAGTF command and control systems that
    support joint and combined warfighting; therefore, we are participating
    in the joint family of interoperable pictures that will integrate us
    vertically from the firing unit level to the National Command Authority
    level and horizontally across all Services. We must modernize and
    transition several of our existing capabilities to meet requirements in
    a joint environment. The improved capabilities provided by programs
    such as the Common Aviation Command and Control System (CAC2S), Unit
    Operations Center (UOC), Cooperative Engagement Capability (CEC), and
    the Joint Tactical Radio System (JTRS) are critical in allowing
    commanders the ability to manage, direct, and influence an increasingly
    complex battle space, while also allowing reach back to our bases and
    stations, the fifth element of the MAGTF. With your support we will
    continue to improve our existing systems and drive toward joint
    solutions.
        Ground Combat Element (GCE): The Ground Combat Element is formed
    around ground elements that maneuver from expeditionary bases both
    afloat and ashore. The primary equipment and weapons systems in our
    ground combat element are aging and reaching their programmed service
    life all at the same time. We have taken advantage of Service Life
    Extension Programs (SLEPs), which have enabled us to marginally improve
    our legacy systems, but cannot fulfill our modernization needs. Our 28
    year-old Amphibious Assault Vehicles (AAVs), which originally had a
    programmed life of 10 years received a service life extension to add
    another 10 years to their life, and are now undergoing a rebuild to
    extend their service life until our new expeditionary fighting vehicle,
    the Advanced Amphibious Assault Vehicle (AAAV), is fielded in fiscal
    year 2006.
        Our reliance on aging equipment negatively impacts our capabilities
    in many ways. Among them, the buildup of combat power ashore is slowed
    and more predictable, and our single artillery piece lacks sufficient
    range to provide essential fire support to maneuver elements.
    Additionally, the countless hours of maintenance on our aging ground
    systems directly impacts the quality of life of our marines. The
    replacement of the 17,000-vehicle fleet of High-Mobility Multipurpose
    Wheeled Vehicles (HMMWVs) with the HMMWV A-2 is a crucial step in our
    efforts to modernize our ground mobility. Acquisition of major
    replacement systems such as the AAAV, the High Mobility Artillery
    Rocket System (HIMARS), the Lightweight 155mm howitzer (LW155), and the
    M88A2 Hercules Improved Recovery Vehicle, is only part of the solution.
    We need to accelerate the pace of procurement and fielding of new and
    replacement equipment.
        Aviation Combat Element (ACE): The Aviation Combat Element is
    formed around aviation maneuver units employed from expeditionary bases
    both afloat and ashore. The majority of our aircraft, our KC-130F, CH-
    46E, CH-53D, and UH-1N, have exceeded their projected service life. Our
    KC-130Fs are 19 years past planned retirement. Our CH-46Es and CH-53Ds
    are more than 30 years old, and the average age of our CH-53Es is 12
    years. Replacement aircraft, specifically the KC-130J, and the MV-22,
    as well as upgrades to our UH-1N and AH-1W fleet are critical in order
    to significantly improve operational capabilities, resolve existing
    safety deficiencies, and reduce life-cycle costs.
        Combat Service Support Element (CSSE): The Combat Service Support
    Element of the MAGTF is formed around tailored support units that
    provide the full range of combat service support functions and
    capabilities necessary to support the readiness and sustainability of
    the MAGTF as a whole. Despite the importance of combat service support
    to the flexibility and responsiveness of our forces, we continue to
    rely on aged vehicles, trucks, and materiel handling equipment that
    needs replacement. For example, our five-ton truck fleet is at the 19-
    year point of its planned 20-year life. Acquisition of the Medium
    Tactical Vehicle Replacement (MTVR), a cost-effective replacement for
    our existing tactical trucks, and the M88A-2 Hercules Improved Recovery
    Vehicle, a successor to our 24-year old tank retriever, is crucial in
    our efforts to modernize.
        Supporting Establishment: The Supporting Establishment is the
    ``fifth'' element of the MAGTF. Our bases and stations provide direct
    and indirect support to the MAGTF as well as the means by which we
    develop, train and maintain a modern force. They are platforms from
    which we project expeditionary power and support the quality of life of
    our marines and their families back home. As a critical part of our
    readiness, we must ensure our bases and stations are also a significant
    part of our modernization effort.

                        NAVAL EXPEDITIONARY CAPABILITIES

        Key to exploiting the tremendous potential of Naval Forces, and in
    particular, Marine Corps expeditionary units, is a robust Navy ship
    construction program for modern amphibious lift. These platforms
    facilitate rapid, decisive operations from the sea, across the spectrum
    from humanitarian operations to power projection for combat. Our
    amphibious lift requirement is well defined, requiring modern ships to
    meet forward presence requirements while maintaining the flexibility to
    surge additional forces for the uncertain crises of the future.
    Although our amphibious lift requirement is for sufficient ships to
    lift 3 Marine Expeditionary Brigade (MEB) Assault Echelon (AE)
    equivalents, fiscal constraints have resulted in plans which limit the
    planned and programmed amphibious force to 2.5 MEB AE equivalents, a
    total of 36 ships (or 12 Amphibious Ready Groups). This requirement
    will be sustained with the completion of the twelfth LPD-17 class
    amphibious ship, modernizing and enhancing our amphibious lift
    capability. Currently, the Navy is planning a future amphibious force
    of 12 big deck ships (a mix of aging LHAs and newer LHDs), 12 newer LSD
    41/49s and, with your continued support, 12 new LPD-17 San Antonio-
    class ships.
        Today, the Navy-Marine Corps team relies on some amphibious ships,
    which, like our ground and aviation equipment, are reaching the end of
    their service lives. The LPD-17 class ships will replace four aging
    classes of ships and will provide increased operational capabilities
    and greater amphibious lift per ship. As our LHAs approach the end of
    their service lives in 2011, we can improve our big deck capability by
    using the LHD-8 as the transition ship to a LHA replacement. This will
    be a critical component of a powerful Navy-Marine Corps team, providing
    capable ships as platforms for deploying and employing modern forces.
        Another critical component of our strategic lift capability is the
    Maritime Prepositioning Force (MPF), which provides the Unified
    Commanders thousands of C-17 sortie equivalents of combat equipment and
    sustainment already forward located in their areas of responsibility.
    However, the MPF ship leases will expire between fiscal year 2009 and
    fiscal year 2011 and we will need National Defense Sealift resources to
    replace these cost effective and proven strategic assets with MPF
    Future ships. Because the U.S. has never been able to rely exclusively
    on forward basing or overseas access as means of positioning forces,
    and with base access increasingly problematic, Naval forces must
    continue to provide robust assured access with forward presence and the
    projection of power and influence from the sea. Our Sea Based Logistics
    concept envisions use of the sea as maneuver space and a sanctuary for
    the safe-basing of long range, precision Naval fires, force assembly,
    maintenance, and resupply in future operations. MPF Future will be a
    key enabler of the sea-based operations necessary to support
    expeditionary maneuver warfare, providing support for forces already
    forward deployed or deploying in amphibious ships as well as rapid
    response with tailorable and scalable stocks for crises.
        To continue to assure access in the littorals, modernization is
    necessary to overcome the logistical challenges of ship-to-shore
    movement, to improve Naval Surface Fire Support (NSFS) in
    ``transforming fires,'' as well as to improve Navy and Marine Corps
    mine countermeasure capabilities.
        An objective of Naval forces' ship-to-shore movement is to avoid,
    or go around, the mine threat. Efforts in increasing mine warfare
    capability in the waters greater than 40 feet are commendable, and the
    organic capability envisioned in the Carrier Battle Group will greatly
    enhance assured access. However, we can ill afford to move 3,000 miles
    to theater and be stymied by mines and obstacles in the last 3,000
    yards. We applaud the steps taken to leverage technology to improve our
    surf zone, shallow water, and very shallow water mine countermeasure
    capabilities-aimed at the far-term (fiscal year 2010 and beyond). This
    will ``take the man out of the minefield'' by developing standoff
    breaching capabilities for this most challenging of water regions. We
    remain concerned about the capabilities to address this critical region
    in the near- and mid-term.
        The Landing Craft Air Cushion (LCAC) SLEP will ensure that LCACs
    continue to provide over-the-horizon logistical support long past their
    current 15-20 year service life. This program will significantly
    enhance the LCAC's command and control, navigation, performance and
    service life, resulting in a landing craft that will support Navy and
    Marine Corps expeditionary operations for the foreseeable future. The
    LCAC is an important part of our tactical mobility triad with the MV-22
    Osprey and the AAAV expeditionary fighting vehicle.
        Using the sea as a base for long range, precision fires, marines
    look forward to modernization or replacement of today's destroyers and
    cruisers with future surface combatants and submarines equipped with
    modern naval guns and missiles. With our Navy assuring blue-water
    access to a littoral environment where anti-ship missiles, diesel
    submarines, and sea mines proliferate, the Navy is also exploiting all
    technological advances to improve our surf zone, shallow water, and
    very shallow water mine countermeasure capabilities.

                                 THE WAY AHEAD

        At the dawn of the 21st century, we are ushering in the MV-22
    Osprey tilt-rotor aircraft, AAAV, Joint Strike Fighter (JSF), MTVR,
    Logistics Vehicle System Replacement (LVSR) Program, LW155, and the San
    Antonio-class Landing Ship LPD-17, all of which promise to greatly
    enhance the Corps firepower, mobility and mission flexibility, and are
    integral to the Corps' concept of enhanced power projection. These
    major contributions to the development of warfighting concepts,
    weaponry, and equipment will enable the Corps to operate in the 21st
    century with a confidence born from a proud heritage of innovation,
    ingenuity, and a willingness to continually adapt to changes across the
    spectrum of conflict. While we have a viable plan to field this, and
    other new and improved equipment, I remain concerned about the slow
    pace of our modernization efforts.
        Dramatic increases in operational requirements, coupled with
    topline constraints over the last several years have forced us to fund
    near-term readiness at the expense of equipment modernization and
    investment in infrastructure.
        Our equipment (ground and aviation) modernization accounts have
    been funded well below the historical ``steady state'' level for most
    of the last decade. As a result, much of our ground equipment,
    aircraft, and weapons systems have reached or exceeded the end of their
    useful service lives. We are facing block obsolescence in our major
    ground and aviation equipment. The costs to maintain these systems--in
    terms of both dollars and man-hours--continues to climb. While we have
    taken advantage of SLEPs for both our aviation and ground systems,
    these efforts cannot fulfill our modernization needs.
        Our reliance on aging equipment negatively impacts our
    capabilities. Countless additional hours of required maintenance
    directly impact the quality of life of our marines and allow less time
    for their training. We can no longer afford to delay the modernization
    of our force.
        The continued support of Congress has allowed us to make
    significant progress in solving some of our most pressing needs,
    however, these problems did not occur overnight and neither will a
    solution. Based on our current strategy and structure, the Marine Corps
    requires an increase of approximately $1.8 to $2.0 billion per year
    sustained for the next 8 to 10 years in order to meet tomorrow's
    challenges and to maintain the ``expeditionary force in readiness'' our
    Nation requires. This estimated shortfall in funding may change as a
    result of the Secretary's strategy review that will guide future
    decisions on military spending. However, an accelerated modernization
    program will allow us to maintain the technological advantage we
    currently enjoy on the battlefield, will reduce our operating costs,
    and will allow marines to spend more time doing what the American
    public expects of them--training and deploying in the defense of our
    vital national interests.
        Your marines deeply appreciate your unwavering support.
        Mr. Chairman, I would be happy to answer any questions.

        Senator Lieberman. Thanks, General. Do I understand that it
    is time to go to questions?
        Admiral McGinn. Yes, sir.
        Senator Lieberman. Thanks very much for your testimony.
        Admiral McGinn, let me begin with you and ask you, as I
    think about this priority list you have given us of network
    sensors, weapons, and platforms, if I looked at the budget for
    2002, and I suppose in another sense when we get it, whenever
    we get it, would those priorities be reflected?
        Admiral McGinn. No, sir, not to the level that they need to
    be to truly move us in the direction of the capabilities the
    network centric warfare will provide us. We are underinvested
    in those programs. I would say that that is principally due to
    the fact that, as we have come down in force structure and in
    funding, as our forces have aged, as we have continued to
    retain, or recruit and retain the best quality force, the
    priorities for those programs being less visible have not been
    there in our end game budget decisions, but I assure you that
    in the future they will be.
        Senator Lieberman. So I presume that in some sense the
    priorities may be inverted, that we are spending more for
    platforms?
        Admiral McGinn. Yes, sir. In the past I think that is
    exactly the way it has been, almost a perfect inversion,
    principally because of the higher visibility of platforms, and
    then weapons, then sensors, then finally networks.
        The other factor, Senator Lieberman, that is at work here
    is the technological opportunities that are being presented to
    us. We see it in the commercial sector as well as in the
    military technology. They have really created some wonderful
    opportunities for us to move faster into a capability that is
    represented by network centric warfare.
        Senator Lieberman. I think your priority list is the right
    order, so the question is, what can we do to make sure that the
    budget for next year better reflects those priorities?
        Admiral McGinn. I will give you a partial list of the types
    of systems that constitute our networks, cooperative engagement
    capability, MIDS, or LINK-16 capability, a relatively new
    system called naval fires network that we are just about ready
    to finish up a battle experimentation series with later this
    month. On the land side, which is so critical to support the
    sea-based side of our Navy and Marine Corps internet, those are
    examples of the types of networks that will help us to achieve
    the kind of connectivity of forces that we need to achieve.
        Senator Lieberman. Well, I hope we stay in touch there, and
    that you are successful in advocacy within the Pentagon on the
    budget process. If not, I hope that we can be of assistance to
    you in making the transformation, because I do think it is an
    important one.
        In the written statement you presented, you said that your
    vision of transformation does not move away from the aircraft
    carrier, since its capabilities are unparalleled and there has
    been some questioning about the carriers lately. Can you
    discuss for a moment how the carrier fits into the vision you
    presented of networks, sensors, weapons, and platforms?
        Admiral McGinn. The carrier, representing as it does the
    centerpiece of one of our key combat deployment units, the
    carrier battle group, is absolutely essential to providing
    mobile and flexible air power from the sea.
        We are continually assessing threats from all sources,
    whether they are mines or submarines, surface-delivered
    missiles, or even theater ballistic missiles to the carrier
    battle group as a whole piece. We think that there simply is
    not a substitute. If the Nation needs tactical aviation at sea,
    that can operate from international waters and does not need
    the permission of any host nation to fly combat operations or
    reconnaissance operations, provides a tremendous amount of
    flexibility across the entire spectrum from establishing a no-
    fly zone all the way to major theater warfare, and at the same
    time provides a tremendous amount of sustained fire power that
    can last for as long as a campaign might last. There just is
    not a substitute for that, so it is a key, not just naval, but
    a national asset.
        The principal demand for the services of these carrier
    battle groups comes from the unified commanders in chief
    (CINCs). We have a regular process of crafting a global naval
    force presence posture in which the individual warfighting
    CINCs are represented, and they negotiate with the chairman and
    the Joint Staff on seeing who gets these very, very critical
    assets, critical for peacetime forward presence as well as any
    type of contingency response.
        Senator Lieberman. I wonder if you want to take this
    opportunity to respond to some of the criticisms that have been
    directed toward the carriers. I gather the main focus is
    without--I am probably not doing the argument justice, but is
    their vulnerability. Obviously they have tremendous
    capabilities, as you have described, but that in an age of
    increasingly sophisticated missiles, for instance, a carrier
    may be vulnerable to attack.
        Admiral McGinn. Yes, sir. We track very closely
    developments of other nations, potential enemy nations in terms
    of their threats to our forces across the spectrum, not just
    aircraft carriers, and we try to stay a couple of generations
    of technology ahead. We do that with technology, we do it with
    tactics and concepts of operations, but the trends for our
    carriers are very positive in this regard. We are increasingly
    a nuclear carrier force, which gives us even more flexibility
    and mobility and speed and presents a tremendous targeting
    problem for any would-be enemy. We have a hard time ourselves,
    as the best Navy on the face of the earth, in trying to target
    moving targets ashore, and when you try to do that in a
    featureless ocean it becomes even more difficult.
        The investments we have made in aircraft such as the F/A-
    18E/F, our long-range stand-off missiles, Tomahawk, and
    tactical Tomahawk, allow us the opportunity of moving further
    away from any potential threat if we choose, or if we feel it
    is required or prudent to do so, or to move in closer for the
    added volume of fire power that is represented by sortie
    lengths, and times to target.
        We are also investing very much into our overall area
    defense capability against a variety of targets, our mine
    countermeasures, our mine warfare program, our antisurface
    warfare program, ASW programs, and the threat that tends to be
    mentioned in any discussion about vulnerability of aircraft
    carriers tends to be some sort of an air-delivered or surface-
    delivered cruise missile investments in area defenses.
        The continued refinement of the SPY-1 AEGIS system,
    improvement of our Standard missiles, the individual ship self-
    defenses, are all of the things that we rely on as a second and
    third order lines of defense if the aircraft carrier were ever
    found and precisely targeted by an enemy.
        Lastly, the inherent naval engineering design of aircraft
    carriers given their size, their tremendous compartmentization,
    the high-strength steel, make them tremendously robust
    platforms. If they were found, targeted, and some sort of enemy
    warhead got through all of these defenses, the ability to
    withstand damage is absolutely the best of any ship on the face
    of the earth.
        I would point to the bad days of the Cold War, when we
    faced a peer competitor that was armed with tactical nuclear
    weapons, and we had a strategy in which we were prepared to
    defend our aircraft carriers and to take the fight to the
    enemy. However, that has gotten better. We are much more
    asymmetric in terms of our capability to do that with any
    competitor, certainly in the near to midterm, and we will make
    sure that we stay ahead in the long-term through technology
    investments.
        Senator Lieberman. Thanks, Admiral. My time is up. I would
    yield now to Senator Sessions.
        Senator Sessions. Thank you, Senator Lieberman. I would
    like to ask General Nyland and maybe the others about some fire
    support questions for the Marine Corps.
        Both the Commandant of the Marine Corps and Chief of Naval
    Operations have stated that fire support for our forces ashore
    is inadequate. Many of the forcible entry missions of the
    Marine Corps require both naval gunfire support and organic
    Marine Corps artillery support.
        This subcommittee has committed to and has stated the need
    for naval surface fire support, and has supported a number of
    initiatives to provide that fire support. My question, General
    Nyland, is what is your assessment of the Marine Corps' present
    and future organic fire support capabilities?
        General Nyland. Yes, sir. I would have to use the word that
    you use, sir. At present, it is inadequate. However, I do feel
    that we have programs that are in place, both organic systems,
    as well as naval surface fire support systems, that will take
    us out of this degraded status and bring us back up where we
    need to be. I am confident that the top-down strategy review
    will reveal, given the state of the world and the potential for
    future conflict, that the DD 21's validity and value will be
    certainly characterized as a necessity and a relevant element
    of the future strategy.
        Similarly, the program we have underway to enhance the 5-
    inch 62-gun on the cruiser and convert those on the later
    models of the DDG-51 class ships all will go a long way toward
    correcting a deficiency we have had for quite some time.
        Senator Sessions. What is that you just mentioned on the
    cruiser?
        General Nyland. The 5-inch 62-gun. On the later models of
    the DDG-51 it is already aboard and is expected to continue on
    the follow-on ships.
        Senator Sessions. What is its capability?
        General Nyland. I might defer to Admiral Kelly to get a
    little bit more specific.
        Admiral Kelly. If I could take that, sir, the 5-inch 62-gun
    which is at sea today is capable of firing our existing 5-inch
    inventory. It is also capable of employing the Extended Range
    Guided Munition (ERGM) round which is under development and
    which has recently completed a successful test firing, a
    significant step forward. We believe that program is on track
    now, and proceeding to field that capability.
        In the Future Years Defense Program (FYDP), we will field
    29 of these 5-inch 62-guns, with more to follow after that, and
    all told should field in excess of 70 of them when the full
    program is completed in about 2011, based on the current
    schedule.
        Senator Sessions. I guess one of the things I would like to
    pursue is the ERGM round, that is, the 5-inch round that has
    great range. It is 60 miles?
        Admiral Kelly. Yes, it projects out to 63 miles.
        Senator Sessions. Is it correct that there have been some
    problems with getting that under development?
        Admiral Kelly. That is correct. That is why I mentioned the
    recent successful test which put the pieces together and fired
    them not at full G-loading, but the individual components have
    been subjected to full G-loading. That was a significant step
    forward, demonstrating that we have come to grips with some of
    the technological challenges that we were facing.
        Senator Sessions. General Nyland, what I would like to
    pursue at this point is, assuming the ERGM were to develop as
    it is projected to do, as I understand it, there is some
    concern about whether that meets surface fire support needs. Is
    that correct?
        General Nyland. Well, sir, I believe it is a portion of the
    overall fire support needs, because the real need turns out to
    be volume.
        Senator Sessions. Based on your analysis of your forces in
    a hostile environment, you need sustained volume.
        General Nyland. That is correct, and the 5-inch 62 with the
    ERGM will be a complementary weapon to the advanced gun system,
    which is a 155-Howitzer battery equivalent. The systems
    altogether will provide the cohesive volume of fire and the
    rate of fire that we need.
        Now, the ERGM is a great round, but you cannot fire it
    quite as rapidly as you can an unassisted round, so that is why
    it needs to be complementary with the advanced gun system. That
    would be developed on the DD 21.
        Senator Sessions. Then, as I understand, your concern would
    be that there is some uncertainty about where we are with the
    155 support.
        General Nyland. I think the 155, from the standpoint of the
    advanced gun system, makes great sense, sir, and I think it
    will be a tremendous weapon. From the standpoint of the 155,
    from our own organic fires, we are very comfortable that that
    program is moving ahead quite well. We had some initial
    difficulties.
        The number 1 gun has just completed its critical design
    review successfully, no discrepancies. The number 2 gun has
    been delivered and has met all the contractor testing. In fact
    today it is up at Aberdeen for mobility testing and
    successfully fired this morning. We believe the 155, and some
    of the initial difficulties that we had with the spades and
    some of the other issues, have been resolved, and that that
    program is ready to move on out.
        Senator Sessions. Admiral Kelly, first let me ask you, do
    you agree that the Marines need the 155 ship-based capability
    to adequately support the ERGM?
        Admiral Kelly. Yes, we do.
        Senator Sessions. You do not think the ERGM itself is
    sufficient?
        Admiral Kelly. No, sir. We think the ERGM is a very
    important piece of the capability that we need to deploy. To
    get the full answer you have to look at the spectrum of targets
    that you have to take on. You have to look at being able to
    capitalize on the benefits of maneuver warfare that we are
    heavily investing in in our lighter, more mobile forces.
        We are trying to field a capability to take the enemy on in
    our terms, to use maneuver to our advantage, to have deployed
    on a broad spectrum of platforms the capability to, within the
    time line necessary, and that is an important piece of this. We
    need to be responsive within the time line, the tactical time
    line required to put a round where it needs to be in order to
    enable us to take advantage of maneuver warfare, so I do not
    have to trade marines or soldiers one for one with an opponent,
    so I can achieve a tactical advantage by maneuver that might
    cost me a lot more lives, a lot more capability, or having to
    field a much larger force to do it if I cannot take advantage
    of maneuver.
        I need to field these systems on a broad spectrum of ships,
    and we are working to field a 5-inch 62, as I have talked
    about. We are working to field LASM, the land attack Standard
    missile capability, which will provide a very responsive, very
    lethal weapon that will be ready to meet those kinds of
    maneuver requirements. The ALAM AOA, analysis of alternatives,
    completes in July. The advance gun system development is
    underway. The lessons that we are learning in ERGM, the 5-inch
    62, 5-inch round we will be able to apply to the larger caliber
    155 round.
        We are also working with the Army to make sure that we take
    full advantage of learning the lessons that they are learning
    from the development of their guided projectile program. We do
    not want to lose sight of the fact that we also have a very
    critical requirement for close air support capability, which
    comes not only from the Marine Corps indigenous aircraft
    capability, but also from tactical air.
        Senator Sessions. My time has expired, but I just wanted to
    follow up a little bit there. The 155 capability under our
    present configurations and plans is only viable on the DD 21.
        Admiral Kelly. It will be fielded on the DD 21, that is
    correct.
        Senator Sessions. That is your only plan at this time, to
    bring it on?
        Admiral Kelly. That is correct.
        Senator Sessions. It does not appear to be suitable for
    placing on the current ships.
        Admiral Kelly. The plan right now is to field it on DD 21,
    and we believe that is the correct way to do it. I cannot tell
    you and would have to check for the record whether or not it is
    feasible to field it on another ship. Arguably it would be,
    however. I am not sure. You would have to do alterations, et
    cetera.
        Senator Sessions. I hope that we can deal with the ERGM. It
    seems to me to be a potentially wonderful weapon, and at a cost
    of $15,000--or where are we now on the estimated cost of each
    round?
        Admiral Kelly. I would need to take that one for the record
    for you.
        [The information referred to follows:]

        The 155mm Advanced Gun System (AGS) is being competitively
    developed as an integral part of the Zumwalt-Class Destroyer (DD 21)
    acquisition strategy. The DD 21 Alliance, in coordination with both the
    Blue and Gold teams, selected United Defense Limited Partnership (UDLP)
    as the prime contractor for the AGS design and development.
        The 155mm AGS, with ``fully automated'' ammunition handling system
    and a family of munitions/propelling charges, will achieve ranges of up
    to 100 nautical miles. Zumwalt-class destroyers will have two AGS gun
    systems capable of independently firing 12 rounds per minute from
    separate automated magazines, which will be below deck. Each ship will
    be capable of storing 1200-1500 rounds--a magazine capacity sufficient
    in size to meet USMC operational requirements. With AGS, DD 21 will
    have the ability to deploy a high volume of precision-guided munitions
    with significantly improved ranges, accuracy, volume, firing rates and
    response times compared to the current generation of Naval Surface Fire
    Support (NSFS) systems.
        The AGS with 600 Long Range Land Attack Projectiles (LRLAP) the
    minimum requirement, will weigh approximately 330 metric tons. DD 21
    will have two of these for a weight of 660 metric tons. In order to
    accommodate this significant load, DD 21 has been designed as a total
    ship system with gun placement a primary consideration in the ship
    architecture. The 5,,/62 caliber Mark 45 Mod 4 gun with 232 ERGM rounds
    and 210 conventional rounds being put into service now weighs
    approximately 61 metric tons. Due to the large increase in weight, it
    does not appear to be practical to install an AGS on any existing
    platform without significant ship modification. However, a detailed
    naval architecture study would be required on each ship class to
    determine the feasibility of such an installation.

        Senator Sessions. But it is in the range of 15?
        Admiral Kelly. I believe that is correct.
        [The information follows:]

        The Extended Range Guided Munition (ERGM) program is still in
    development (pre-Critical Design Review (CDR)), and currently has a
    range for estimated Average Unit Cost (AUC) for the first 24,000
    production units of $28K to $48K. The quantities being procured per
    year and the associated learning curve can cause large fluctuations in
    the estimated AUC. In addition, this estimate does not include:

             Results to be gained from Army-Navy precision-guided
            munition efforts to leverage commonality across the ERGM,
            Excalibur, and Advanced Gun System (AGS) Long Range Land Attack
            Projectile (LRLAP) Programs
             Efficiencies to be realized from Raytheon's Design for
            Manufacturing and Assembly (DFMA) efforts ongoing as part of
            the development program; estimated up to 10 percent reduction
            in cost
             P\3\I efforts to reduce unit cost and stimulate
            competition
             Low Cost Alternative Guidance Electronic Unit
            development with Charles Stark Draper Laboratories; potential
            10 percent to 20 percent reduction in cost
             Competition Factor--Competition may further drive down
            the cost in production.

        Within 60 days after the CDR the contractor is required to provide
    the Program Office a price for the first 80 Low Rate Initial Production
    rounds. That information will give more insight to the cost of the ERGM
    round.

        Senator Sessions. Compared to the million-dollar Tomahawks,
    the ERGM is something that could be very valuable. One of my
    concerns was what General Nyland suggested that that does not
    provide continuous fire power that can hold the enemy's head
    down while Marine Expeditionary Units and combat units can
    maneuver effectively. Other than that concern are there other
    concerns about your forces in a combat environment, gaps that
    you think are necessary to protect you and allow them to
    maneuver effectively?
        General Nyland. Not specifically gaps, but perhaps reduced
    capabilities. Our pace of modernization has been slowed over
    the last 10 years, where in fact modernization and
    infrastructure often have been the bill-payer for current-day
    readiness. While we have plans for many of the systems I
    mentioned in my opening remarks, their initial operational
    capability arrives in about the time frame 2008.
        Regrettably, the pace at which we purchase them, many of
    them, do not finish showing up until perhaps 2016 for the MV-22
    or 2021 in the case of the Joint Strike Fighter. In my mind the
    better course of action would be the investment to pull that
    full operational capability to the left, thereby providing the
    Nation the premier enhanced expeditionary force that much
    earlier, as opposed to less economic rates of purchase and
    drawing out the total modernization of our force, sir.
        Senator Sessions. Thank you. If we purchased it more
    rapidly it would actually be cheaper per unit than drawing it
    out?
        General Nyland. Yes, sir, absolutely.
        Admiral McGinn. If I could, Senator Sessions, on that
    point. I would like to emphasize for the record that we need to
    do a better job at funding all of our programs at economic
    order quantity, particularly our weapons programs. Due to the
    strains in the budget created by a higher bill for readiness
    and manpower, we have had to sacrifice the rate of
    modernization, which has caused us to in many cases keep
    programs barely alive or viable, but well below the level of
    production that would be described as an economic order
    quantity.
        Senator Sessions. That is the death spiral that has been
    referred to?
        Admiral McGinn. Yes, sir.
        Senator Lieberman. That is why we have a tall order ahead
    of us, and why we await the result of the strategic review and
    the budget proposal that is going to be made so that we can try
    to right the imbalance that has existed.
        It is one thing to talk about transformation, but if your
    modernization budgets have been as constrained as they have
    been, for reasons that are understandable, then there is a lot
    of transformation that needs to be done. To make it more than
    either rhetoric or appealing plans we have to give you the
    money to do it, and we have to convince everybody here in
    Congress.
        Admiral, we have authorized, and Congress has appropriated,
    for the SH-60 Seahawk remanufacture program. I have heard there
    may be some feeling within the Navy that remanufacture is going
    forward in a way that is more expensive than anticipated. Is it
    correct that you may be thinking of buying new?
        Admiral McGinn. Yes, sir, it is, and I would like to call
    on Admiral McCabe, the Director of Naval Aviation Warfare, to
    give you a more detailed response.
        Senator Lieberman. I notice General Nyland moved the
    microphone over to Rear Admiral McCabe as I began that
    question.
        General McCabe. Senator, thanks for that question. I am
    happy to talk about the helicopter force. I would like to
    broadly talk about it first. Our helicopter master plan intends
    to use the MH-60, then the 60-R, to move from eight type-model-
    series to two type-model-series. In addition to that, there is
    a fleet study going on right now that we would be happy to
    brief you on when it finally is approved that also provides for
    more helicopters in the battle group and adjusts where they are
    on the carrier and the numbers of helicopters in the total
    force.
        Ideally, we would like to buy 241. That is the requirement,
    I believe, for the 60-R. It is a very important helicopter to
    us. We believe we cannot fight well in the littoral battle
    space without an updated and modern helicopter force, though
    there have been problems with integration of the mission
    systems in the 60-R. If I were to attempt to place blame, I
    could not. Both contractors and the Government I would say
    would share equally in that.
        We have through Naval Air Systems Command (NAVAIR)
    undertaken a detailed technical review, which is completed, of
    one of the contractors. We will receive a brief on the second
    one, which is almost complete. In the context of looking at the
    program, which in effect has slipped about a year, it has
    become clear to us--and we asked the question last fall--it
    looks like the cost of a remanufactured helicopter is moving
    close to the cost of a new one.
        Talking briefly about the remanufactured helicopter, it
    would reuse the dynamic components currently on the helicopters
    when they come from the fleet, so you would replace those
    through the normal IL&S fleet replacement program which you
    have seen come over which we need supplemental money for again
    this year.
        As we looked at that and factored that into the total cost
    of the program, the cost of a new helicopter started to become
    much more attractive to us. In addition, as we pull aircraft
    from the fleet, that creates a bath tub in the fleet in terms
    of available aircraft, and as you were remanufacturing the
    helicopters you would have a bath tub of about 5 years, where
    each year you would be about 40 under what you needed.
        The new helicopter program, if we went in that direction,
    we would have the benefit of not having a bath tub. In
    addition, you could actually produce new helicopters more
    rapidly than you could remanufacture them with the line fully
    operating. For all of those reasons, and in addition to the
    fatigue life on the helicopters, which we are looking now at
    studying and extending their fatigue life from 10,000 to 12,000
    hours, it made sense to us to start to look at that new
    helicopter program as a total investment program.
        We have completed our review and made recommendations, and
    I think you will see the result of that when we finally get a
    chance to see the 2002 budget.
        Senator Lieberman. So we may see it in the so-called budget
    amendment, the detailed proposal for the 2002 budget? Okay,
    that is great. Thanks for informing us of that.
        General Nyland, obviously we are all sad about the loss of
    life in the V-22 crashes. The full Armed Services Committee
    held their hearing recently and heard from the panel that is
    reviewing the V-22 program. I think the full committee is going
    to come back to that later, but even if the Defense Department
    decides to proceed with the program, replacing the CH-46 fleet
    I gather could be delayed by several years. I wanted to ask you
    about the extent to which you feel the Marine Corps can rely on
    the CH-46 to meet the operational requirements in the interim.
    If you could, describe what you will need to ensure that that
    fleet will support operating squadrons in the interim.
        General Nyland. Yes, sir. The CH-46 has been a very
    venerable work horse for us, and if we have movement to the
    right in the MV-22 we fully expect the 46 will continue to
    fulfill our meeting the assault capabilities. To that end, we
    will continue to look for ways to enhance and upgrade its
    performance. We have money in the current budget, for instance,
    that will enhance the engine's performance. That was an area
    that needed some work.
        We are okay as far as fatigue life on the basic air frames.
    Many of the aircraft have been through SDLM, scheduled depot-
    level maintenance repair. The others are inspected annually
    inside a 30-month cycle that would require them to go back to
    the depot-level maintenance if that is required. I think we are
    comfortable that we can continue to work our way forward and
    maneuver with the CH-46, but obviously we will not be doing it
    with the same capability and tactical flexibility that will be
    afforded by the MV-22.
        Senator Lieberman. OK. Well, we will see some more details
    there, too, I presume, in the budget coming over in June, about
    what you need to keep that as good as you can have it.
        General Nyland. Yes, sir, and we are, in fact, right now--
    the Department of the Navy, as well as OSD and industry--are
    working very hard to take a look at what the Blue Ribbon Panel
    has determined to be the way ahead, and put that in place as
    far as the rest of the machine, and I might even defer to
    Admiral McGinn, who is a member of that executive committee
    that met just as recently as last week to talk about the way
    ahead.
        Admiral McGinn. Actually, Senator Lieberman, it was Tuesday
    of this week we had our first executive steering committee for
    the V-22 program. The intent is to bring together the Marine
    Corps, Navy, Air Force Special Operations Command and the
    industry teams in order to decide the best way ahead to get the
    V-22 program back on track to make sure that we can address all
    of the discrepancies identified in prior testing, both
    technical and operational, up to this point, and to address all
    of the issues raised by the mishap investigation board from
    that tragic accident in December as well as the one last April
    in Arizona. It is also to carefully go through the
    recommendations of the Blue Ribbon Panel to ensure that we take
    all of those into consideration and put together a program that
    recognizes the need to get on with the replacement for the CH-
    46 fleet in the Marine Corps, but one which does not get so
    driven by the clock that we do not do it right.
        Senator Lieberman. Thanks. I wondered, with the indulgence
    of my colleagues, if I could just ask one more question, which
    is a large question. I would ask you to give us a short answer,
    but you are more than welcome to give us more in writing. This
    is a review we have asked you to do on the 30-year shipbuilding
    program and the impact on American shipbuilding that naval
    acquisitions will have on the health of our shipbuilding
    program in general.
        We had an earlier hearing in which there was a lot of
    anxiety expressed, that I shared, about the fact that the
    numbers are rapidly taking us down below 300. My question at
    this point is, just for a quick status report, and to learn
    what extent the work is that you are doing on that report,
    integrating both the Navy and the Marine Corps into the QDR and
    the strategic review that Secretary Rumsfeld is performing.
        Admiral McGinn. I think, Senator Lieberman, that the
    shipbuilding study that has been directed as part of the QDR
    and the top-down review will take into careful consideration
    the shipbuilding industrial base study that was directed
    previously. I will personally ensure that it does, since my
    organization is involved with that, as well as the acquisition
    side of our Navy staff.
        Senator Lieberman. I appreciate that. As you may have
    noticed, power moves quickly here in the Senate. I have to go,
    and so I am pleased to leave you in control, Senator Sessions.
    [Laughter.]
        Senator Sessions [presiding]. Senator Bunning, we are
    delighted to have you with us.
        Senator Bunning. I am sorry I am late, but I did have an
    opening statement that I would like, with unanimous consent, to
    be put in the record.
        Senator Sessions. Without objection, it will be made a part
    of the record.
        [The statement of Senator Bunning follows:]

                   Prepared Statement by Senator Jim Bunning

        Thank you Mr. Chairman. Gentlemen, I would like to join my
    colleagues in welcoming you. We all appreciate your lifelong service to
    this country.
        The state of our sea services is something that greatly concerns
    me. The United States has always been a maritime Nation and this has
    not changed. It is vital to our national security that we remain
    capable of projecting power to any point on the globe. Our naval forces
    our a vital part of that capability. They provide a flexibility not
    found elsewhere. I am looking forward to working with all of you to
    ensure our naval forces can meet our Nation's national security
    requirements.

        Senator Sessions. I just would like to pursue some concerns
    I have about the P-3. It has made a lot of news lately.
        Rear Admiral McCabe, while the upgrades are ongoing, and
    continue for the P-3, the viability of the structural integrity
    appears to be less certain. Starting in fiscal year 2003, the
    P-3 and EP-3 aircraft will start to reach their fatigue life.
    Last year the Government canceled a sustained readiness
    program, and we have been informed that instead of attempting
    to extend the service life of the P-3 a new platform, the
    multimission maritime aircraft, is scheduled to enter the
    component advanced development phase in fiscal year 2002, with
    procurement scheduled to begin later in the decade.
        My question first would be, with the loss of P-3 aircraft
    due to service life in the not-too-distant future, does it make
    sense to back away from previous plans to extend the life, and
    do we have money to fix them, and can they be fixed? If we do
    not have the money to fix them, how do we have money to buy new
    ones? Maybe you can give us your insight into where we are with
    the P-3, which is a critical part of our defense structure.
        Admiral McCabe. Yes, sir. Particularly from our viewpoint,
    we have a strong support in the Navy for the P-3 family and
    going to MMA. Let me talk you through this. I think we can make
    some sense of it.
        We talked about the SRP program, which was canceled. There
    are still some airplanes. We finished with the airplanes that
    are in Greenville, Texas, yet 10 remain to be finished in
    Greenville, North Carolina. We did, in fact, cancel the SLEP
    program, the service life extension program, and then we took a
    hard look at MMA.
        Senator Sessions. Now, in not extending the service life,
    where does that leave you with the dying off, or elimination of
    the aircraft?
        Admiral McCabe. Yes, sir, Senator. What we did continue was
    the service life determination program called SLAP, which is
    ongoing right now, and will determine two things that are very
    critical to us. We will take an airplane to full life
    expectancy, and will have the result of that back when we
    fatigue-test the test unit to failure, in 2004. We will also
    have back in 2003 a particular, precise service examination
    program called SSI, which is focused on those parts of the
    airplane that are the fatiguing elements that need to be
    addressed.
        We got a good look at the airplane in SRP, and in certain
    areas, came in worse shape than we expected.
        As a result of all of these factors, we need to finish the
    SLAP and do the SSI. We are looking at the fatigue life of the
    airplanes, because you are correct, in the 2005 time frame the
    EP-3 family starts to have some problems, and then in the 2007
    time frame the P-3 program starts to have some fatigue problems
    as well. If we do not address those problems, we will not be
    able to get into the MMA IOC time frame, so this is a two-part
    program. Taking care of the fatigue element of the P-3s has
    been acknowledged as something we have to do.
        The second part of it is, we moved the Initial Operational
    Capability (IOC) for Multi-Mission Maritime Aircraft (MMA) from
    2015 up into the 2010, 2012 time frame, and because we did
    that, it changed some of the expectations of what we needed to
    do to the fleet of airplanes.
        Some other things became clear to us in the past year. Much
    like we were looking at the 60-Rs I discussed earlier, we
    looked at the remanufacture in a parallel way with the P-3, and
    determined that the cost of doing that was proximate to buying
    new P-3s. Then, if you factored in commercial derivatives, the
    total cost of ownership savings and some acquisition profiles
    that you could get, that the cost of all of them were the same.
    Since we have had trouble with remanufacturing being successful
    there, and we are stressed with old airframes and operations
    and support (O&S) cost, we moved to accelerate the MMA program
    and began to focus on a move in the AoA, toward studying very
    seriously commercial derivatives, which will be finished this
    year.
        Also part of that is the development of long-duration UAVs,
    which we believe is also part of the future solution for MMA.
    We see our future in the next years, the MMA/AoA finishing, and
    will be determining our path for that, so we will need to do a
    couple of things. We will need to precisely look at MMA and
    what we want to do, which we are currently studying and also
    look at the service life issues for the P-3 family, the SSI
    inspections that I spoke of, specifically focused on certain
    fatigue elements.
        In answer to your question about the funding, there is no
    question about it. We believe that there is some attractiveness
    looking at the commercial potential for this airplane in
    particular. We also have engaged in conversation with the Air
    Force. They are interested in common wide body.
        We might be interested in different air frames, but in
    common systems between the two services in terms of what we
    would like them to do, we have some great fiscal challenges out
    in the 2010 time frame for this committee's interested
    airplanes, helicopters, strike fighters not included, the E-2s
    as well as P-3s. We are looking at a lot of serious discussions
    in our area of the world about major program adjustments,
    possibly force structure, other ways of uniquely financing or
    making attrative the commercial side of this for this kind of
    airplane.
        We acknowledge that it is a challenge, but we believe that
    by doing all these things we will end up in the long run with a
    better package for that particular mission area.
        Senator Sessions. Have you made a decision that the life
    expectancy of these P-3 aircraft are not significantly
    extendable, or at least is not economical to do so? Is that a
    firm decision you have reached?
        Admiral McCabe. We believe that if we cannot introduce the
    MMA by the 2010 time frame, that we will suffer a degradation
    in the inventory in P-3s with some operational impact. We
    believe we can extend them out to that time frame with this
    series of focused fatigue inspections and improvements, and
    keep the cost under control while we are investing in the new
    aircraft.
        Senator Sessions. That is a pretty rapid drop-off after
    that point.
        Admiral McCabe. Yes, sir.
        Senator Sessions. Like the KC-135 that has been out for 40
    years, which are being refurbished and continuing to be used.
    Do you not see that is possible for the P-3?
        Admiral McCabe. Well, this also goes into O&S cost. We
    spend almost--I could get you the actual number if you wanted
    it, but somewhere between $800 million and $1 billion a year on
    O&S costs on the P-3s. Ideally, if we were to go to a
    commercial derivative, just in theory, to discuss that, we
    would like to try to generate the O&S cost savings from that
    very quickly. It would make sense to move out of the P-3 and
    move into the other aircraft more on the economic order
    quantity to get the benefit of that kind of a move. We could
    always extend the airplane out further, but we think it would
    be a better investment to go in a different direction.
        Senator Sessions. You think there are commercial aircraft
    that are suitable?
        Admiral McCabe. That is the challenge of the AoA. Secretary
    Danzig asked the AoA to focus on commercial derivatives in
    addition to what they are looking at, so we are looking at a
    variety of commercial derivatives and existing potential
    candidates.
        Senator Sessions. I think you are asking the right
    questions. That is the real critical point. This aircraft goes
    out of inventory. We could see the end coming, and I will just
    ask this, simply, if you can tell me. Is this an unexpected
    expense? Is the fact that it could not be refurbished and
    extended, does that mean that we have now greater long-term
    expenditure than we expected just a few years ago?
        Admiral McCabe. No, sir. I think it is quite different. We
    started to focus on our aging aircraft and what they cost us,
    and it is between 10 and 14 percent growth a year in operation
    and support cost for the aging aircraft.
        About 8 percent of that we believe we can demonstrate due
    to aging aircraft and not just the cost of operating. We see
    with remanufactured airplanes you tend not to get the benefit
    of new materials and better reliability, and we really are
    pushing for better reliability both on the airplane and the
    weapons system. There are parts of the P-3 weapons system that
    are, frankly, not very reliable, and so we would be able to
    upgrade the weapons system as well.
        Senator Sessions. Thank you, Madam Chairperson.
        Senator Landrieu [presiding]. Thank you, Senator. Let me
    ask Senator Bunning if he would like to take his turn, and then
    I will go after that.
        Senator Bunning. Thank you very much. This is my first. I
    was not here earlier.
        Senator Landrieu. Go right ahead.
        Senator Bunning. Rear Admiral Kelly, I have some questions
    for you. I understand your office has reviewed the Sea RAM
    concept and the Royal Navy Sea Trails. Do you believe Sea RAM
    is a good way to enhance force protection in the fleet?
        Admiral Kelly. We think that the Sea RAM program is
    definitely worth exploring. This combines the sensor suite from
    the close-in weapons system with the RAM launcher. RAM has
    achieved a wonderful performance record. I believe the most
    recent tally is 160 successes out of 165. The biggest problem I
    have with RAM is it is shooting down all my targets.
        We see potential there to help us address future
    requirements and to put together, out of those two components,
    a very capable, stand-alone, self-defense system, so we are
    working closely with the British to monitor the testing they
    are doing. I had meetings with my counterparts in London last
    week, in which we went through the status of the program. We
    will continue to monitor their nonfiring tests, which they will
    complete this year, and then we will step back and look at the
    results of those and decide on the best path to proceed ahead.
        Senator Bunning. Admiral, in March of 2000 Admiral Clark
    sent a message stating that the Phalanx Block 1B was needed in
    the fleet to provide force protection against terrorist
    threats. Obviously, we all know what happened on October of
    2000. We had the attack on the U.S.S. Cole, demonstrating the
    damage that a small boat loaded with explosives can do to a
    major naval combatant. Do you agree with Admiral Clark's
    statement? Do you consider this need urgent?
        Admiral Kelly. Yes. I think that a close-in weapons system
    (CIWS), 1B version, combines very real improvements in air
    defense capability. It also provides a significant antisurface
    capability, enabling us to engage small boats, those kinds of
    things which potentially could be used by terrorists, or could
    be used in just surface warfare, which we had not had before.
        We are fielding the close-in weapons system 1B, and we need
    to continue to do that. We are also reviewing whether or not it
    would be wise to move to 1Bs for the overhauls we do on other
    mounts, and we are looking at trying to do that.
        We have roughly 359 close-in weapons systems at sea today
    on our ships, by far our most popular, significant combat
    system on our surface ships. We are trying to balance the cost
    to modernize, to move to the 1B, with the growing overhaul
    requirements that we have for our existing close-in weapons
    system mounts which are aging, and which need to be overhauled
    in order to assure their readiness. That is a balance we are
    going to have to strike within the assets we can put toward
    this program, but clearly there are real benefits from close-in
    weapons system 1B.
        Senator Bunning. This will be my last question, Madam
    Chairperson. A recent GAO report identified that fleet Phalanx
    systems suffer from a lack of funds for timely overhaul. It has
    left the fleet with reduced readiness, and degraded force
    protection. The frequency of overhauls recommended by the Navy,
    an in-service engineering agency, and the original equipment
    manufacturers are being exceeded. Do you agree that maintaining
    force protection readiness by performing needed Phalanx
    overhauls is important?
        Admiral Kelly. Yes, Senator, I do. I agree with the remarks
    that were made. As I mentioned before, we have a very large
    inventory of these mounts. These mounts form the final layer of
    defense for our ships.
        It is important not to look at the close-in weapons system
    capability alone, through a soda straw. We have to look at the
    combined capability, the overall defensive capability that we
    have at sea on these ships. We have shortfalls that we need to
    address in close-in weapons system overhauls. We are working
    with the fleet to ensure that we overhaul those mounts which
    they feel are most urgent, but we need to devote additional
    assets to do that. I agree with that statement.
        Senator Bunning. Can you answer the question? Do you agree
    that maintaining force protection readiness by performing
    needed Phalanx overhaul is important?
        Admiral Kelly. Yes, sir, it is.
        Senator Bunning. Thank you.
        Senator Landrieu. Let me just follow up that line of
    questioning with a little bit broader question for you and
    anyone on the panel that would want to answer it. Can you just
    each maybe briefly describe to the subcommittee the actions you
    are taking for improving our readiness posture for responding
    to unconventional threats? Obviously the Cole is one
    unfortunate and recent example, but Admiral, can you bring us
    up to date on that?
        Admiral McGinn. Yes, ma'am. When the CNO came over some
    weeks ago and testified at the Cole hearing, he outlined a
    whole series of initiatives that we have undertaken, along with
    the fleet commanders, in order to improve our posture to
    protect ourselves better against unconventional attacks, or
    terrorist attacks.
        One of the key parts of that, of course, is to improve our
    ability to understand the potential vector of an attack,
    improve our intelligence capabilities, and also to get the
    right blend of technology and manpower to our ships and to our
    naval stations here in the United States, as well as, in
    particular, abroad, in order to present a more formidable
    target for any would-be terrorist group. This takes the form of
    greater investments in sensors for seaborne attack, for pier-
    side attack, investments in fire power in the form of personal
    side arms for security force personnel, as well as in ships,
    small caliber guns with a much higher accuracy range and rate
    of fire.
        I will defer to my other shipmates here to amplify on that
    in their specific areas, and I would like to start with General
    Bill Whitlow, our Director of Expeditionary Warfare.
        General Whitlow. Good afternoon, Madam Chairperson. We are
    looking very closely with the other services at a myriad of
    systems, some of which have already been spoken to. I will not
    belabor those points, but in the expeditionary warfare arena we
    basically have many of the force protection systems inherent in
    platforms, for instance, amphibious readiness groups, when they
    deploy with marines and aviation assets on board.
        What we have done is encourage those operational units to
    look at their tactics techniques and procedures to enhance the
    systems they already incorporate. For instance, they have a
    procedure using Marine helicopters, Cobras to be specific, when
    they do high-threat area transits. Those helicopters and the
    Harriers on board will be in an increased state of alert, or
    even airborne, watching for anything from small boats which
    could provide a threat, all the way up to more sophisticated
    threat targets. Those are the areas we have looked at.
        We also are exploring in depth less-than-lethal measures.
    This would be Navy-wide. For instance, in foreign ports, or
    perhaps in times of increased tension, friendly ports, or
    Continental United States (CONUS) ports, there could be less-
    than-lethal types of systems that we may be able to in the
    future put around ships. This would mean you will not have to
    ratchet up, from ``stop or I'll shoot you'' to ``stop or I just
    have the capability to stop you,'' very much as police
    departments do with their weapons, rather than use their
    sidearms, use pepper spray or other systems. We are exploring
    that in depth, and as soon as the CNO's review is complete we
    will probably begin to field some of these systems that are
    more pertinent to specifically Navy-related issues.
        Senator Landrieu. Would anyone else like to comment?
        General Nyland. Madam Chairwoman, if I could go just a
    little further for the purposes of the Marine Corps, as General
    Whitlow has indicated, those units that are aboard the ARGs do
    a great deal of work in this area. In addition, we have the
    Fleet Antiterrorist Support Teams (FAST), which we have under
    the control of the fleet operational CINCs, which makes them
    available at their calling to come and assist in this.
        We have undertaken a program in the Marine Corps to expand
    the basics of their training into every battalion in the Marine
    Corps so that now a battalion that is not necessarily
    associated with the marine expeditionary unit but, say, is
    perhaps on deployment to the Western Pacific, or may just be
    out somewhere in the continental United States training, would
    have this initial capability for some antiterrorism capability.
        In addition, down at our warfighting lab we are looking at
    some of the nonlethal devices that General Whitlow mentioned.
    One that has been in the press here in recent months is the
    vehicle-mounted active denial, which is sort of a skin-warmer.
    There are some tests going on now to make sure that is all it
    does do, and that there is not any permanent damage, and then,
    of course in the aftermath we continue to work with our
    Consequence Biological Incident Response Team should that
    become necessary.
        So we, too, are pursuing, as Admiral McGinn indicated, ways
    to know where we might look, the intelligence and the sensors,
    electronic devices, as well as these other vectors.
        Admiral McGinn. If I could perhaps close out this answer,
    Senator. We acknowledge the attack on the Cole, this is a clear
    and present danger to U.S. forces worldwide, and we are not
    waiting for any type of program to deliver capability. We have
    moved out very, very smartly in enhancing our level of force
    protection and antiterrorist posture.
        The fleet commanders have been particularly active in this,
    with the reallocation of personnel into the force protection
    force and the training aspects of it. In virtually every aspect
    of our deployed and nondeployed life we have brought force
    protection and antiterrorism tactics and capabilities right to
    the very top of our priority list.
        Senator Landrieu. I appreciate that. For the record, that
    is good information to get, and we want to continue to work
    with you on this subcommittee in that regard. Let me ask one
    other question. Another issue that this subcommittee has dealt
    with now for many years, and we still sort of struggle with to
    try to find the appropriate response, is this idea of multiyear
    procurement, or advanced appropriations for our shipbuilding
    necessities and major weapons system purchases.
        I come from State government, Senator Sessions does, many
    of us do. We are somewhat surprised when we get here to
    Washington to learn the Federal Government buys things much
    differently than State governments. In our experience most of
    the businesses we know that have capital budgets and long-term
    amortization of these big items for a number of reasons. It can
    save you money. In this case the taxpayer can also bring more
    stability to budgeting.
        I know that there is some concern about the down side, but
    could you all take a moment, since I have been fairly
    supportive of this idea, to talk about the pros and cons you
    see to the various approaches that have been mentioned? I think
    in the tight budget situation that we are facing we are going
    to have to be creative and smart about how to meet the
    requirements that we clearly have, and this might be an answer.
        Admiral McGinn. I completely agree we need to bring
    stability to our funding profiles, particularly for our major
    capital investments.
        If you look at the history of our shipbuilding and aircraft
    investment, there is a very uneasy sawtooth-like shape to the
    curve of investment from year to year, and from a business
    standpoint, and we hear this all the time from our industry
    partners. This does not make life easy for them as primes, and
    it particularly does not make life easy for the second and
    third tier vendors that they are trying to keep viable from an
    economic sense.
        We will try anything that can be done to bring stability to
    funding profiles. Recognizing that there is a critical need for
    us to have oversight and to make sure that we do not commit
    ourselves to a path that we would not want to be on a few years
    down the road, we need to do what we can to stabilize funding
    for shipbuilding, for aircraft procurement, for weapons
    procurement, and to take into consideration the best business
    practices and create more capability for ourselves for the
    dollars available.
        We are absolutely convinced, based on analysis, that we can
    get more warfighting capability, not necessarily by just adding
    more dollars, but by stabilizing whatever level of dollars are
    available. You see this in some of our very successful aircraft
    programs, the Air Force's multiyear procurement with the C-17,
    and the Navy's F/A-18E/F. There are tremendous savings. You
    actually get more aircraft for the same amount of money than
    you would have if it were not a multiyear procurement, so we
    are very much in favor of a strategy for funding that
    stabilizes it.
        Senator Landrieu. Thank you.
        Senator Reed.
        Senator Reed. Thank you very much, Madam Chairperson.
        Admiral, again, you mentioned in your testimony a need for
    effective countermine and antisubmarine warfare (ASW) measures
    to protect the carriers and the rest of the battle group. Do
    you believe the ASW budget will be sufficient this year, and
    what areas would you prioritize in terms of these resources?
        Admiral McGinn. We have, Senator Reed, a Director of
    Antisubmarine Warfare who is not with us today because he is
    what we call an integrated warfare sponsor. He looks across all
    of the programs of the other sponsors that are with me here
    today, the other warfare area commanders, and is constantly
    assessing their individual investments, their platforms and
    their weapons and sensors in the ASW arena.
        As a result of Capt. Jerry Ferguson's work we have a much
    better understanding of where we are adequately invested and
    where we are underinvested. I anticipate that you will find
    that the upcoming budget will increase that investment in
    overall ASW, but I want to also say that we are still not
    satisfied with that level of investment for antisubmarine
    warfare.
        I just recently was out in San Diego for the fleet-run and
    sponsored ASW improvement program. They are doing great things
    in the fleet to improve training, and are devoting a great deal
    of time, both at sea and ashore to improving our ASW
    capability. We are attempting to match that level of commitment
    and enthusiasm in our investments in ASW networks and sensors
    and weapons.
        Finally, before coming to Washington last October, I was
    the Third Fleet Commander out in the Eastern Pacific. We saw an
    enormous improvement in our capability to do theater ASW simply
    by tying together the various command and control nodes of
    ASW--P-3 aircraft, surface combatants, submarines, and
    submarine control centers ashore--by a system that we called
    WCAN, Web Centric ASW Network. It brought a tremendous amount
    of shared knowledge to the whole theater ASW platforms. That is
    an example of where you can leverage information technology and
    gain a disproportionate return in capability.
        The other example of ASW investment of information
    technology (IT) I would use is the advanced rapid commercial,
    off-the-shelf (COTS) insertion program and our submarine sensor
    programs, wherein you do not change anything in terms of the
    sensor physics, you simply have a much better capability with
    COTS processors to differentiate between signal and noise in
    the underwater environment.
        Senator Reed. Thank you, Admiral. Let me turn to a more
    specific issue with General Whitlow. General Whitlow, last year
    the Navy restructured the integrated combat weapons systems
    effort, changed contractors, and for some of us it came as a
    surprise. In the deliberations last year of the subcommittee
    there was no additional request for funds or suggestion that
    this program was in that particular situation.
        Could you describe how the program has changed over the
    last several months, and also perhaps indicate why there was
    not a warning of the program's difficulties?
        General Whitlow. Well, Senator, I cannot indicate why there
    was not a warning. I will have to take most of that for the
    record, because it is very complex. I can tell you we have
    several of our programs under review, by and large for many of
    the reasons Admiral McGinn just stated, how we look at things.
        The new leadership in the Navy has forced us, rightfully
    so, to review how we are doing, whether it is mine warfare or
    antisurface warfare, and to integrate accordingly, rather than
    stovepipe it in, also whether it is procurement or the combat
    operations system. By and large that is what has been
    generated. However, I am not aware that the committee was not
    notified as such, but I will find out and get back to you for
    the record.
        [The information follows:]

        Since the contract award in April 2000, the prime contractor
    (Raytheon) missed several cost and/or schedule milestones, which led to
    a $7M cost variance and a 35 percent cost overrun in December of 2000.
    NAVSEA (PMS-490) issued a stop work order, and the program was
    restructured to transfer the ICWS integration role from Raytheon to the
    government (PMS-490) and subsystem development to Lockheed Martin and
    NSWC CSS Panama City.
        A series of briefings were held both within the Navy and externally
    to select Congressional Staff. The staff of Representative Kennedy (D-
    RI) was briefed or 13 December 2000. On 22 January 2001, PMS-490
    briefed ASN(RD&A) (Acting) and obtained concurrence to transfer System
    Lead and TSS functions from Raytheon to Lockheed Martin. In March 2001
    PMS 490 briefed ASN(RD&A) (Acting) and obtained concurrence to transfer
    Detect and Engage functions to CSS. Professional Staff Member briefings
    were conducted for the SASC on 16 May 2001, and the HASC on 24 May
    2001.
        Subsequent to the Seapower hearing Navy staff (N752) contacted
    Professional Staff Members Gary Hall and Creighton Greene and Senator
    Reed's MLA, Elizabeth King. They indicated that no further action is
    required.
        The Navy regrets that some key Congressional contacts may not have
    received timely information concerning this re-structured program and
    the causal factors that created the requirement to change. We will work
    to ensure Congress receives timely information on program status.

        Senator Reed. I would appreciate that, General, very much.
        Let me also raise another issue within your area of
    responsibility. I understand there may be a problem with one of
    the assault breaching systems. Apparently the problem is not
    whether the system works as advertised, but whether the
    system's performance will meet the needs of the fleet. This
    could be a situation where the original requirement was not
    validated. I assume this might be one of those areas that you
    alluded to and questioned seriously. Could you elaborate on
    this? I believe it is Sabre.
        General Whitlow. Yes. The Sabre distributed explosive
    technology (DET) system is a DET-related and net-related
    explosive system that is designed to be launched from the air
    cushion vehicle, the landing craft, or LCAC, if you will. Over
    a year ago the Navy decided, in concert with the Marine Corps,
    to take a very close look at this entire system for several
    reasons, which, if you will afford me the time, Madam
    Chairperson, I will attempt to explain to you.
        The first reason is the sheer size. We have a deficiency in
    overall assault lift across the Navy. The sheer size of this
    system, it was believed at the time, precluded it from being an
    operationally capable system, even if it worked, and at that
    time it had not yet gone to operational evaluation (OPEVAL). I
    will get to that in a few moments. We decided during a fleet
    exercise which just concluded this spring--Colonel Blitz out on
    the West Coast--that we would do an operational concepts
    exercise to see if we could literally move this behemoth of a
    system from storage, to the ship, to the landing craft, to the
    beach, in order to address the mine threat in the very shallow
    surf zone area, which has some physics-related challenges to
    it.
        In the meantime, during last October, I believe, early
    October, the Navy Operational Test and Evaluation Force
    (OPTEVFOR) did an operational test off of San Clemente Island
    with the same system. We are currently awaiting the final
    report of that now.
        This summer both the Navy leadership, through the NROC,
    which is Navy requirements, and the Marine leadership will look
    at their various aspects of this system when we get the report
    from the OPTEVFOR folks, as well as the Center for Naval
    Analyses, who has done the study on how the Sabre DET system
    would be moved. Once we have the results from those reports,
    both services' leadership will take a look at it, and then we
    will review if we want to go forth.
        For instance, it is thought that the system will take up so
    much space aboard amphibious shipping, if you will, from which
    it will have to be deployed, that you would not be able to
    carry anything else. You might be able to clear a lane, but why
    do that? There would not be anyone coming behind you, because
    all of that space would have been taken up.
        That may be a mite of an exaggeration, but that is what we
    needed to look at. It has to fit. That was the marine concern.
    There are also some fleet operation concerns with this system.
    It is launched from an LCAC. The LCAC has to hover in the surf
    zone to launch this system. An LCAC does not hover well. It
    does not have an automatic pilot.
        Now, the phase 2 of the LCAC SLEP will have a navigation
    system and the hover system to allow it to operate in this
    regime. From there, we should be able to go forth. However,
    there were a myriad of questions that really needed to be
    answered throughout, such as the concepts of employment, to
    include the fusing. We are still having development, and some
    fusing issues with this system.
        So we thought it was time to take a review, a strategic
    pause, if you will, and thoroughly look at the system, rather
    than have a behemoth system that frankly is not deployable.
    That is exactly where we are, Senator.
        Senator Reed. Thank you, Madam Chairperson. If I may ask
    one additional question, briefly. If this system is scrubbed,
    and frankly it is not particularly a glowing report you have
    given on its potential, do you have anything else?
        General Whitlow. Yes, sir. In the meantime, I have
    transferred funds to the Marine Corps Systems Command to review
    another option, which we stole basically from an ally, and that
    is a very unsophisticated mechanical option. It is basically a
    marine amphibious tractor, remotely controlled, which costs
    about $1.92 to do with a mechanism on it, so when it comes
    ashore it can sweep the beach and continue up to and through
    the high water line.
        We do not know if this will work or not, but I will tell
    you, one of our good friends and allies is exploring the same
    option at a much-reduced cost.
        The reason we decided to look at that is, the Marine Corps
    will very shortly have an excess of amphibious tractors
    available because of the development of the new amphibious
    tractor, so that could be an option.
        Senator Reed. Thank you. General, thank you very much.
    Thank you, Madam Chairperson.
        Senator Landrieu. Thank you. Senator Bunning has another
    round, and then we will take a few more questions.
        Senator Bunning. I do have a couple of questions for
    General Nyland. In your prepared statement you said that the
    Marine Corps needs an increase of $1.8 to $2 billion a year for
    the next 8 to 10 years in order to meet tomorrow's challenges
    and to maintain the expeditionary force and readiness that our
    Nation requires. What in the world are you talking about?
        General Nyland. Yes, sir. What that figure is designed to
    do was to address the pace of modernization as we have been
    experiencing over the last few years, which is quite slow. We
    looked at readiness in the Marine Corps across four pillars;
    the marines and their families, the legacy systems we operate,
    the modernization in the new systems, and the infrastructure.
    What that $1.8 to $2 billion across that period of time will
    do----
        Senator Bunning. That is annually, now?
        General Nyland. Yes, sir--will correct all the deficiencies
    in all four of those pillars. Many of the things that we
    already have, had a vision that we have needed on the example
    under the modernization. As I discussed a little earlier, a lot
    of these start to show up in the year 2008. Many of them do not
    complete showing up until the year 2016, or further.
        The object of the $1.8 to $2.0 billion across that period
    of time are all executable programs that will take the full
    operational capabilities of the modernization piece, as well as
    the marines and their families and the infrastructure of the
    bases and stations, and modernize it all to the absolute best
    that it has ever been.
        Senator Bunning. OK. It is my understanding that we are
    going to have a supplemental in the vicinity, presently the
    vicinity of $6 billion for DOD. Are you talking about some of
    that being part of the money, or are you talking about this
    being in future budgets?
        General Nyland. Sir, I am speaking in a future budget.
        Senator Bunning. So the Marine Corps is going to need $2
    billion approximately, annually, in the DOD's budget.
        General Nyland. To speed the pace of modernization and
    reach that enhanced capability sooner.
        Senator Bunning. Sooner than what?
        General Nyland. Sooner than it is currently programmed.
    Currently, if we look at the way we are purchasing things,
    modernization is extremely slow, often becoming the bill-payer
    for legacy systems in current readiness. This is designed to
    speed up the Marine Corps of the future, rather than waiting
    for the last of it to come in in slow pieces, anywhere from
    2015 to 2020, and bring all of that to the left, and provide
    that enhanced expeditionary capability for the Nation sooner.
        Senator Bunning. I am trying to understand if we are making
    up what we are behind in a supplemental of $6 billion or so,
    trying to catch up. What will your $2 billion extra per annum
    in the regular budget do to the overall DOD budget? I know we
    do not have one yet, but we are doing the bottom-up study. If
    it is going to be $2 billion for the Marine Corps, what will it
    be for the Navy? What will it be for the Army? What will it be
    for the Air Force? Overall, how many dollars are you talking
    about?
        General Nyland. This number is based on the current
    structure and the current strategy.
        Senator Bunning. Just for the Marine Corps?
        General Nyland. That is correct, yes, sir.
        Senator Landrieu. Senator, I do not know if this would
    help, but the studies we have seen across the board range from
    a low of $10 billion to $50 billion annually, and there is
    going to be some sort of consensus.
        Senator Bunning. We do not have a bank in the United States
    big enough to handle that right now, Madam Chairperson.
        Senator Landrieu. I know, so we are going to have to come
    up with some interesting arrangements.
        Senator Bunning. Interesting funding.
        Senator Landrieu. But that is what the studies generally
    show.
        Senator Bunning. Thank you, General.
        Senator Landrieu. Senator Sessions.
        Senator Sessions. Thank you. Admiral McGinn, I appreciate
    your comments about networks. Earlier this year, I was in the
    Persian Gulf, onboard the San Jacinto when they talked about
    network systems and the need to upgrade those, and the
    possibilities that could be achieved with upgrading. To
    reiterate, do you think you are on track for that? Are we not
    doing the things we need to do to get that network where you
    need to be?
        Admiral McGinn. The technology is available today, Senator,
    to greatly upgrade our capabilities by networking, but our
    investment in those networks and in those sensors is slower
    than what we would like to have. It is frustrating for all of
    the services, and I will speak for the Navy, obviously.
        Senator Sessions. Here again you are using legacy system
    moneys to keep operating. You are not able to go to the higher
    level of modernization you would like to.
        Admiral McGinn. I have used the term, perhaps overly
    loosely, venture capital. At the same time we are being
    presented with technological opportunities that truly increase
    our capability, increase our operational availability, and
    lower our cost of ownership we are unable to free up the
    dollars to invest in that technology because of the demands of
    increasing manpower bills, increasing bills for operations and
    support and maintenance of the legacy forces that we have.
        Admiral McCabe used the example in naval aviation of on
    average anywhere from 10 to even as high as 14 percent per year
    increase in the cost of ownership of an aging fleet. That is
    caused by things wearing out. That is caused by traditional
    vendors going out of business because of a much smaller
    business base trying to maintain aging aircraft.
        For all of these reasons we would like to have the ability
    to accelerate our investment in information technology,
    particularly for our systems of forward-deployed networks like
    you saw on San Jacinto and in the Truman battle group in the
    Gulf.
        Senator Sessions. Along that line, I know you are working
    on the multifunction radar and the volume search radar for
    surface ships. The goals of these radars are increased
    capability, lower life cycle cost and personnel cost. There
    have been press reports regarding some difficulties with these
    systems. Where are we? Will they be ready for the CVN-77, the
    next carrier, and how do you feel about the status of that? Are
    you committed to it still?
        Admiral McGinn. Yes, sir. With your permission, I would
    like to call on Admiral Kelly, and for follow-up Admiral
    McCabe, to discuss the carrier aspect of it.
        Admiral Kelly. Senator, the multifunction radar is on
    track. There is real hardware. You can put your hand on it. The
    transmit and receive module technological challenges have been
    worked through. We believe it will meet CVN-77. Volume Search
    Radar (VSR) is slave to the DD 21 competition tied to
    nondisclosure support restrictions that we have there. Both
    teams have briefed their VSR proposals to the Navy, and funding
    through down-select in that competition is adequate to support
    that program to that point.
        If I could briefly return to the previous question, I think
    that we talked briefly about antisubmarine warfare, and this is
    with respect to networking. Many folks view antisubmarine
    warfare as a defensive effort. We need to go off that on
    antisubmarine warfare. Networking provides a tremendous
    opportunity to do that.
        If we can tie together our improved capacity to monitor the
    environment, if we can network the sensors that we have out
    there, and tie them together real time, or near-real time, much
    as we have done with the air defense capability that we have
    two prototypes at sea now doing, we are going to be able to
    significantly improve and rapidly improve our ability to do
    antisubmarine warfare with the equipment we have out there
    right now. As we tie that equipment into the new sensor
    capabilities that we are going to field in the SQQ-89 and other
    systems, it will enable us to take back much of that
    antisubmarine warfare capability. I think it is one of the keys
    to counter the increasingly quiet diesel threat we have out
    there.
        Senator Sessions. Just to follow up a bit there, on the new
    radar systems, this will reduce the moving parts, and reduce
    personnel. Will it pay for itself in reduced costs, or is it an
    upgrade in the capability that you are seeking?
        Admiral Kelly. Senator, it will significantly upgrade
    capability and have substantially lower operation and
    maintenance costs. At what point would it pay for itself? I
    have to take that for the record for you.
        [The information follows:]

        The Multi-Function Radar (MFR) and Volume Search Radar (VSR) are
    being developed for the Zumwalt-class destroyers, CVN-77, and
    potentially other ship classes. The MFR/VSR radar suite will
    significantly reduce personnel and maintenance requirements as compared
    to existing radars, in part due to the incorporation of solid-state
    technology. They are planned for introduction into the fleet in 2008 on
    board CVN-77.
        The Multi-Function Radar and Volume Search Radar are in the
    development phases. Raytheon Systems Company of Sudbury, Massachusetts
    is executing the Multi-Function Radar Engineering Development Model
    contract, while the Volume Search Radar is being developed as an
    integral part of the DD 21 ongoing competitive design.
        The following information illustrates that investment in this
    important next-generation technology will yield cost savings in the
    long run.

                                 COST AVOIDANCE

        The Multi-Function Radar and Volume Search Radar are planned to
    replace the functions of several in-service radars. These in-service
    radars necessitate continuing investment in the manpower required to
    operate and maintain them, repair costs, as well as obsolescence of
    repair parts support for some of them. For example, the SPS-48E radars
    are no longer in production. A production line restart could be quite
    expensive. These in-service radars include:

             SPS-48 Long-range three-dimensional air search radar
             SPS-49 Long-range two-dimensional air search radar
             MK 23 Target Acquisition System fire control radar
             SPQ-9B Surface and air search and fire control radar
             MK 95 Illuminators for missile control
             SPN-43 Aircraft marshalling and control radar

                            MANPOWER COST AVOIDANCE

        The projected number of personnel required to maintain and operate
    a Multi-Function Radar/Volume Search Radar suite is much fewer than for
    in-service radars. For the ships envisioned as hosting the Multi-
    Function Radar and Volume Search Radar, the net reduction in the number
    of operators required for all ships in the radar suite concept is
    estimated to be over 500 personnel.
        The resulting annual savings in manpower costs alone is
    significant. These new radars will be introduced into the fleet
    beginning in 2008; the savings would accumulate each year and increase
    with each ship outfitted with these radars.

                        OPERATIONS AND MAINTENANCE COSTS

        Operations and maintenance expenses for our in-service systems are
    costly. Advances in solid-state technology alone will significantly
    decrease the maintenance that today both burdens our sailors' workload
    and costs the Navy in terms of both readiness and repair expenses.
        Based on the projected maintenance requirements for the new radars,
    the operations and maintenance cost for the new radar suite is expected
    to be significantly less than the cost for the in-service radars they
    replace. The annual cost avoidance savings to the Navy for the Multi-
    Function Radar/Volume Search Radar suite will be in the tens of
    millions of dollars per year when all ships have been fielded.
        Both the Multi-Function Radar and Volume Search Radar are still in
    development. The manpower and maintenance savings, outlined in the
    previous paragraphs, make it apparent that significant cost savings
    will be achieved by the incorporation of these new radars in the fleet.
    At this point in the development of the radar suite, coupled with
    sensitivities in the competition for DD 21, it may be premature to
    forecast the development costs with certainty. The point at which this
    new radar system's cost reductions will equal the Navy's initial
    investment is dependent on, among other things, the number of ships on
    which MFR/VSR will be used, when those ships are brought into service,
    and final radar suite design. Development cost is, likewise, a function
    of force structure. We look forward to the opportunity to provide more
    definitive projections when the force structure is more defined and the
    DD 21 down selection is completed.
        I would also add that the inclusion of these important radars in
    our surface combatant force structure is not just a matter of cost
    savings, but also represents investment in greater capability that will
    enable our forces to operate in the future, littoral environment. If we
    were to depend solely on our in-service radars, we would sacrifice some
    of our future ability to project offense and defense ashore in support
    of joint forces.

        Senator Sessions. That is sort of another example of a
    system that would be more capable and less costly to operate,
    but you do not have the money for it.
        Admiral Kelly. Absolutely. Again, that would apply to a
    previous subject that Senator Bunning brought up on the CIWS
    1B. It is a perfect example of a system that we would like to
    invest in at a greater rate, so that we could, in fact, lower
    the manpower demands on maintaining the older version of the
    CIWS, while at the same time giving us a significant upgrade
    capability for air and surface targets.
        Admiral McCabe. Senator, the radar for the carriers, is
    very, very important. For example, this summer we have to make
    a decision on CVN-77. Based upon how this is doing we have to
    decide on the shape of the island. We believe not only from all
    the things you talked about, but also the desire of the
    carriers to get away from rotating antennas in terms of
    signature reduction and other kinds of warfighting impact, and
    so we are very strongly interested in the radar on the aviation
    and carrier side.
        Senator Sessions. Thank you. I am going to have to go to
    another meeting, but I want to thank you for your
    contributions. I have enjoyed working with you as the chairman
    for a short time, and also I look forward to working with you
    in the future. I know Senator Landrieu cares deeply about these
    issues, and understands them very well.
        Thank you for your service to your country. I look forward
    to working with you in the future.
        Senator Landrieu. Thank you, Senator. Let me just follow up
    with two questions, and then we will probably bring this
    hearing to a close.
        I have a broad, yet basic question, Admiral McGinn. I
    reviewed in your statement, just to paraphrase, you stated that
    while numbers matter, the number is less important than the
    capability inherent in those numbers, and you are referring to
    the ship capacity. Obviously, this is a source of much debate,
    and we continue to debate this. In the seventies, as you are
    aware, there was a debate over the high mix, low mix ships. The
    Navy ultimately chose to do both. Those are embodied today in
    our Spruance-class destroyers, the Perry-class frigates.
        I agree with the longstanding American tradition of quality
    over quantity, but that is true only to a point. I wanted to
    ask you, are we putting our Navy into an ever-tightening spiral
    which will ultimately stabilize, at which our Navy is incapable
    of meeting peace or wartime requirements? Do you agree there is
    a number below which the Navy cannot drop, if so, what is it?
    Let me just follow up with, given what is happening with the DD
    21, should we be buying more guided missile destroyers (DDGs),
    amphibious transport docks (LPDs), and perhaps an additional
    multi-purpose amphibious assault ship (LHD) to carry us over
    until that comes online?
        Just a few comments about the specifics of that and
    anything else you want to add, or any of the other panelists.
        Admiral McGinn. Yes, ma'am. In terms of numbers versus
    quality, it is a constant discussion, as you mentioned, about
    what is the right balance between numbers and the capability
    that is resident in each of the units inside of those numbers.
        You have to have not only the right kind of total size of
    Navy, measured by the numbers of ships and aircraft and
    submarines, but also the right composition of those ships, the
    right types for the various mission areas.
        In terms of what is the number below which we really cannot
    meet the national security strategy, that will depend
    principally on what the requirements of the forward-deployed
    warfighting CINCs, the joint CINCs are for presence, for
    peacetime, for rapid crisis response, and for major theater war
    responsiveness.
        That can greatly vary, depending upon the level of risk
    that the Nation is willing to take, whether or not you assume
    that we will have a relatively stable and peaceful area in one
    part of the world that would allow us to apply our naval
    capabilities, and the numbers of ships in another area that is
    perhaps less stable. That is always a difficult question and a
    calculated risk.
        Right now, with the national security strategy that we are
    operating under and which is being reviewed by the Secretary of
    Defense and the services, we are at a level of ships below
    which we start increasingly gapping our presence in the three
    major hubs overseas, the Mediterranean European theater, the
    Central Command Persian Gulf area, and in the Western Pacific.
        In order to maintain our present level of naval force
    structure, number of ships, we would have to start buying at
    the rate of between eight and nine ships, or in some cases, in
    some years up to 10 ships per year. In the past, including in
    2001, our level of investment has been much lower than that.
        If I averaged across a Future Years Defense Plan, we would
    need on average of about $3 to $4 billion more per year in the
    shipbuilding account, and that is taking into consideration the
    discussion that we had earlier about the need to stabilize
    funding and try to achieve much more industrial capability from
    the dollars that we invest in.
        In terms of the individual ship types that we mentioned,
    Admiral Kelly spoke earlier of the key role that our land
    attack destroyer DD 21 plays in supporting both the Marine
    Corps and the Army in naval surface fire support. Our LPD-17
    program is intended to go a long way toward making up that
    shortfall in assault lift capability that General Whitlow
    talked about earlier. In fact, it is our procurement goal to
    buy 12 LPD-17s in order to address that critical need, and to
    do it in a way that greatly modernizes that particular ship
    type.
        We are continuing to operate the LPD-4 class, the Austin-
    class ships at an increasing cost of ownership, and increasing
    cost to the sailors and marines that man those ships in terms
    of the habitability and the effectiveness of the ships. We want
    to get on with the replacement of the Austin-class LPDs.
        The LHDs have been a very successful program. Every one
    that is delivered is better, based on the lessons learned from
    the previous one that has been delivered, and we are seeing
    that trend in LHD-8 as well. These are all critical to
    maintaining our Navy and Marine Corps assault capability that
    literally brings answers to the National Command Authority
    across a full spectrum, from humanitarian assistance, disaster
    relief due to a natural disaster, all the way up to a so-called
    kick-down-the-door type of major theater war in a region, in
    which we would rely on that credible combat power from the sea.
        I would defer to General Whitlow.
        Senator Landrieu. General, could you talk more specifically
    about the LPD-17s?
        General Whitlow. Yes, ma'am. Previously you asked that
    question, and it is entirely important and prudent for this
    Republic to have this capability.
        I spoke just yesterday with a senior defense official. He
    said, since it is the 57th year anniversary of the Normandy
    landing, we will probably never do another one of those. I
    said, you are right, and we could not if we wanted to.
        That said, the Marine Corps and the Navy do not envision
    doing those types of operations. We are much smarter than that.
    The LPD-17 alone brings us such capability, as Admiral McGinn
    stated, to address everything from the humanitarian, human
    relief aspects, all the way up to major theater war, with
    forward-deployed forces.
        I maintain, and have done some personal calculations, that
    we spend a large amount of our rhetoric both here and in
    defense talking about airlift, which constitutes about 8
    percent of the total requirement for wartime lift. The LPD-17,
    ships like her, the LHD and subsequent ships, provide the other
    92 percent of combat lift and sustainability for this country,
    should we have to maintain an operation of any longevity
    whatsoever.
        The importance of the LPD-17 and ships like her is to
    provide the 3.0 Marine Expeditionary Brigades (MEBs) worth of
    lift. What are three Marine Expeditionary Brigades? Frankly, it
    is not a lot of combat power. Fifty-seven years ago today, just
    about 200 times that was going across the Omaha and Utah beach
    in Northern France, 200 times that.
        Three Marine Expeditionary Brigades is just enough. It is
    also the Nation's only forcible entry capability where, when
    the other guy does not want you there, or we need a port and/or
    airfield for follow-on forces, whether it be preposition, or
    flown in from the United States, CONUS, it is the only way this
    country has to leverage that capability. The LPD-17 I think is
    one of the most important assets that we will procure in the
    next couple of decades, and we need to get on with it.
        Senator Landrieu. Well, of course, this chair loves to hear
    that, since we build them in Louisiana, so I can appreciate
    that ringing endorsement and have been part of that project.
        I think I have gotten all of my questions in. Does anyone
    else want to add anything--on that point or something broader,
    that we have not asked you, that you would like to get into the
    record?
        Admiral Kelly. Madam Chairwoman, I would like to point out,
    in addition to the remarks with respect to shipbuilding, which
    I wholeheartedly endorse--I believe that there are tremendous
    opportunities to modernize the existing force structure that we
    have to get substantially longer life out of the ships that the
    American taxpayer has already paid for, which are real bargains
    as far as upgrading them, to field rapidly new capabilities
    that will enable us to support the marines in our land attack
    role, and also to take on emerging missions such as theater
    ballistic missile defense.
        In particular, cruiser conversion is a program that has the
    potential to help us take advantage of the investment we have
    already made in our Aegis cruiser fleet and upgrade that to
    field the capability rapidly to help us meet the challenges
    coming. I would also urge consideration of how we can best
    modernize what we have already paid for and get our very fine
    return on that investment.
        Senator Landrieu. Thank you. Admiral.
        Admiral Engelhardt. Madam Chairwoman, I would also like to
    talk about the 8 to 10 ships that we need to buy from the
    submarine point of view. In 2004, when we deliver our first
    Virginia-class, that will be the first new submarine
    commissioned for 5\1/2\ years, so this idea that numbers matter
    is really important to us. We have studied since the end of the
    Cold War the number of submarines needed. The answer is 68 on
    the far term in 2015, and right now we are hovering between 50
    and 55, so you are absolutely correct on the assertion that
    numbers matter, and we are working to that. They have to be the
    right numbers with the right capabilities, as Admiral McGinn
    has said.
        Senator Landrieu. Thank you. Anyone else?
        Admiral McCabe. Madam Chairperson, we talked about the
    number of ships that we are short and will see in the
    supplemental, the increase in flight-hour funding is such
    because of the increased cost of maintaining an aging force.
    You will also see in future budgets that we still need to
    address the number of airplanes that we need to be buying as
    well.
        Ideally, we would be buying on the order of 180 to 200
    aircraft per year, and recent budgets have been well less than
    that. We will not be able to get at the age of the force and
    bring down those O&S costs until we increase our procurement
    quantities of new aircraft both for the Navy and the Marine
    Corps. That would be inclusive of both sides of the Department
    of the Navy.
        General Nyland. Madam Chairwoman, I would like to only make
    two points as we close. The first would be, I appreciate your
    comment on some of the additional studies. I view the $1.8 to
    $2 billion as quite modest, when you look at the range that
    goes from $65 billion to $120 billion. Second I would only echo
    what General Whitlow and Admiral McGinn have said about the
    LPD-17: a wonderfully combat-capable ship with tremendous
    flexibility, and often lost, a tremendous enhancement for the
    quality of life for the sailors and marines who live aboard it.
    We think it is a marvelous ship.
        We thank you, and thank you for the opportunity to appear
    before the committee today.
        Senator Landrieu. Well, thank you all. It has been a great
    hearing. I appreciate all of the testimony and the fine work
    that you all do for our country. I would like to say in
    closing, as one of the Senators that has been helping to try to
    design this budget, that there are tremendous budgetary
    challenges before this Nation. We are going to have to use all
    of our best brains, goodwill and intelligence to figure it out,
    because to go through any strategic review of any major
    enterprise, let alone our whole defense review, which is good
    that it is underway, and almost anything that comes out is
    going to require a significant investment on the front end to
    make the changes necessary.
        I have used this in speeches at home, just like when we
    reformed welfare. Eventually over time it will save money.
    However, there had to be some initial investments to turn that
    corner. I just hope that we are going to be sensitive--if we
    can do it without that, it will be the first major turn-around
    done without an infusion of some serious investment. On the
    short end you have to spend a little bit more money, but on the
    long end, you are saving the taxpayer dollars.
        We have to be prepared, I think, as a Nation to do that,
    and then we will be well-served over the long run. That is
    probably going to be the most significant, probably one of the
    most important debates over this whole Congress, so thank you
    for your forthcoming comments and for the work that you are
    doing to help us to make the right decisions.
        Thank you all. The hearing is adjourned.
        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Edward M. Kennedy

                                 PROGRAM STATUS

        1. Senator Kennedy. Admiral McGinn, Senator Sessions and I had
    intended that this hearing would deal with what has happened in the
    Navy's Seapower research and development and procurement programs since
    we were briefed last year. I believe that this was clear in our
    invitation letter, and I know that our staff talked to your staff to
    ensure that the witnesses provided the information in the prepared
    testimony that will be useful to the subcommittee as background for
    reviewing the fiscal year 2002 authorization request.
        While I found your prepared remarks interesting, I do not believe
    that they responded to the need of the subcommittee to have an update
    on the Navy's investment programs.
        Can you provide such an update to the subcommittee for the record?
        Admiral McGinn. While maintaining our sailors' and marines' quality
    of life, we strive to attain and sustain fully modern, credible,
    expeditionary warfare capabilities that provide combat-ready naval
    forces that can influence directly and decisively events ashore
    throughout the spectrum of operations in peacetime, crisis, and war.
    This force, at a minimum, will consist of 12 Amphibious Ready Group
    equivalents, a total of 36 modern amphibious warships.
        While transitioning to a net-centric, state-of-the-art, Naval
    Expeditionary Force, we must have the expeditionary capability to lift
    3.0 (fiscally constrained 2.5) Marine Expeditionary Brigades (MEB), the
    assault echelon of the United States' only legitimate, self-sustainable
    forcible entry capability--a Marine Expeditionary Force (MEF).
        The basic cornerstone of Naval Expeditionary Forces is assault
    shipping and the supporting platforms and systems that enable its
    assured access and battle space awareness. An update of our investment
    programs is as follows:
    LHD-8
        The Amphibious Assault Ship LHD-8 provides the capability to
    embark, deploy, and land a marine landing force in an assault by
    helicopters, landing craft air cushion (LCAC), amphibious assault
    vehicles, and by a combination of these methods. An LHD is the primary
    aviation platform within an ARG.
        Principal Characteristics: Length: 844 ft.; Beam: 106 ft.;
    Displacement: 40K long tons; Troops: 1686 (net); Vehicles: 22.9K sq.
    ft. (net); Cargo: 125K cu. ft. (net).
        LHD-8 is viewed as a transition ship to the Amphibious Assault Ship
    (LHA) replacement program. Upon delivery of the LHD-8 a yet to be
    determined LHA will be retired. Based on the significant total
    ownership cost savings, the decision was made by N8 and ASN (RDA) to go
    to gas turbine propulsion and all electric auxiliaries.
        Congress appropriated advance procurement funding in fiscal years
    1999/2000/2001. Utilizing the fiscal year 1999 funds a contract was
    awarded to Litton Ingalls for the detail design of the gas turbine
    propulsion plant in July 2000. Procurement of long lead material and
    construction of components as authorized by Congress was awarded in May
    2001. A construction contract award is planned for December 2001 and
    construction will begin in fiscal year 2002. As approved by Congress,
    the fiscal year 2002 request includes incremental funding of $267M
    which, when coupled with previous appropriations, provides 61 percent
    of the total LHD full funding requirement of $1.82 billion.
    LPD-17
        The LPD-17 Program is a 12-ship procurement. It was designed to
    replace four classes of legacy amphibious ships, many of which have
    been decommissioned. The contract for the lead ship was awarded to the
    Avondale Alliance in 1996. The Alliance is made up of Litton Avondale
    Industries (LAI), Bath Iron Works (BIW), Raytheon and Intergraph.
    Detail design is being accomplished in an Integrated Product and
    Process Design team environment. Principal location is in New Orleans,
    LA, with work also accomplished in San Diego, CA and Bath, ME. Under an
    internal industry agreement, every third ship will be constructed at
    BIW. BIW is completing a new facility to support construction of DDGs
    and LPD-17.
        LPD-17 is a quantum step in warfighting capability. Principal
    characteristics include:
        Length: 684 ft.; Beam: 105 ft. (PANAMAX); Displacement: 25K tons;
    Propulsion: Diesel; Vehicle square: 25K sq. ft. (net); Cargo cube: 36K
    cu. ft.; Troops: 720 (net); LCAC: 2.
        The enhanced self-defense and C\4\I suite make LPD-17 a survivable
    platform capable of the full range of mission requirements. Although
    not flag configured, the robust communications capability fully
    supports split ARG operations.
        There has been significant consideration and investment in total
    ownership cost reduction for the LPD-17 program. Investment in items,
    which also contribute to mission performance, included the replacement
    of the 25mm chain gun with the MK 46 30mm gun system and the Advanced
    Integrated Mast replacing the traditional stick mast. Further, design
    for ownership concentration has led to unprecedented Navy/Marine Corps
    user input during the design process. To enhance the quality of life,
    the design includes sit-up berths and modernization of the food service
    system.
    LHA(R)
        The LHA Replacement, LHA(R), is planned to replace the current LHAs
    that reach the end of their service life beginning in fiscal year 2011.
    The Mission Needs Statement was validated by the Navy and the JROC on 5
    Mar 2001. The LHA(R) program's next step is Milestone ``A''. Once
    achieved, the Flag level Analysis of Alternatives (AoA) will commence.
    The AoA will determine the type of ship required to conduct Navy and
    Marine Corps missions in the 21st century. The decision will be between
    an LHD-8, a modification to the LHD class or a new ship design.
    Acquisition of the first LHA(R) is planned for fiscal year 2008 and
    delivery is anticipated in the fiscal year 2014/2015 time frame.
    LCAC SLEP
        The Landing Craft, Air Cushion (LCAC) is the primary platform for
    high speed, heavy lift, over-the-horizon transport of troops and
    materiel from ship to shore. The LCAC was designed to carry the M60
    main battle tank, but is capable of transporting the M1A1 main battle
    tank equipped with a mine-clearing plow. The LCAC, the MV-22, and the
    AAAV comprise the Marine Corps Amphibious Triad, which will provide the
    air, and surface lift requirements of the Amphibious Assault Echelon.
    The LCAC will be critical to the successful implementation of
    Operational Maneuver From The Sea (OMFTS) and Ship To Objective
    Maneuver (STOM). The Service Life Extension Program (SLEP) is composed
    of two phases: Phase I accelerates installation of command, control,
    communications, computer, and navigation (C\4\N) upgrades. Phase II
    replaces the buoyancy box and installs all other SLEP changes, such as
    the machinery/skirt upgrade. The SLEP is planned for 74 craft.
    LCU Replacement
        The LCU(X) acquisition program will support the development and
    procurement of a technologically advanced heavy lift utility landing
    craft to complement the high speed, over-the-beach, and ship-to-shore
    amphibious lift of the future. The LCU(X) will replace an aging Landing
    Craft Utility (LCU) force of 26 to 38 years old, enhance current heavy
    lift capability, and complement the LCACs during littoral and over-the-
    horizon amphibious operations. The Mission Area Analysis (MAA) is
    complete, the Mission Needs Statement (MNS) is signed, and Milestone
    ``A'' decision to conduct concept studies was granted on 28 November
    2000.
    Naval Mine Warfare
        Our ``Organic Mine Warfare'' initiative is to decrease response
    time to commence the Mine Countermeasures (MCM) campaign and expand the
    overall MCM capability of the Navy. This ``Organic Mine Warfare''
    initiative will provide MCM systems that have been integrated, both
    physically and doctrinally, into the Navy Joint Task Forces. It will
    offer the Joint Task Force a Carrier Battle Group/Amphibious Readiness
    Group compatible MCM capability that will bring a ``see and avoidance''
    and, when necessary, a limited mine neutralization capability. Organic
    MCM will complement our dedicated MCM Forces.
        Organic MCM capability will be provided to the Battle Group via a
    ``system of systems'' approach that will include air, surface and
    subsurface components. These systems include:
    Airborne Component
        The airborne component of organic MCM will consist of five systems
    operated from the MH-60S helicopter. These airborne systems are:

             The Airborne Laser Mine Detection System (ALMDS) and
            the Rapid Airborne Mine Clearance System (RAMICS) which will
            counter near surface mines. ALMDS will utilize laser
            technologies to detect near surface, surface, and floating
            mines. RAMICS, an Advanced Technology Demonstration program,
            has now completed its second year with the successful
            demonstration of the super-cavitating projectile's lethality
            against selected live mines below the surface of the water.
             The AN/AQS-20X Advanced Minehunting Sonar and the
            Airborne Mine Neutralization System (AMNS), which will counter
            deeper moored mines and bottom mines. The AQS-20X, which
            consists of five different sensors integrated into a towed
            body, will provide a significant improvement over today's
            system because it will accomplish in a single pass of the
            helicopter what today takes multiple passes. The AMNS will be
            operated from within the helicopter to destroy or neutralize
            mines.
             The Organic Airborne and Surface Influence Sweep
            (OASIS), which is being developed to support shallow water mine
            clearance in advance of amphibious operations.

        Surface Component:

             The Remote Minehunting System (RMS) is being developed
            to deploy from surface combatants and operate remotely over-
            the-horizon. Current efforts focus on integrating the airborne
            minehunting sonar, the AN/AQS-20X, into the systems and
            integrating the entire system into selected DDG-51 Flight IIA
            surface ships (DDG-91 and follow-on hulls).

        Subsurface Component:

             The Near Term Mine Reconnaissance System (NMRS), an
            Unmanned Underwater Vehicle (UUV) launched from a submarine for
            clandestine reconnaissance of mine fields, was delivered to the
            fleet this past year as a ``stop gap'' capability. This was an
            important first step in providing the fleet with an organic
            subsurface mine warfare (MIW) capability while the Long Term
            Mine Reconnaissance System (LMRS) is under development. The
            LMRS development contract was awarded in fiscal year 2000 and
            the system was re-designated as the AN/BLQ-11 Mine
            Reconnaissance System (MRS). The MRS is planned for delivery to
            the fleet in fiscal year 2003.
    Unmanned Aerial Vehicles (UAV)
        Based on an approved Operational Requirements Document (ORD), the
    competitive development program for a VTOL Tactical UAV, the VTUAV, is
    planned to replace the Pioneer Unmanned Aerial Vehicle (UAV) in the
    Navy and Marine Corps. As VTUAV systems are fielded, Pioneers will be
    replaced.
        The VTUAV's speed, endurance, and payload capacity, combined with
    its ability to takeoff and land on all air-capable naval platforms and
    from austere ground sites ashore, will provide the Naval Services with
    a robust, multi-purpose, marinized unmanned platform. With its embedded
    Tactical Control System (TCS) software, the VTUAV ground control
    station (GCS) will provide a revolutionary capability to command and
    control all DOD tactical UAVs and interface with a multitude of C\4\I
    systems.
    Surface Warfare
        Current Navy near- and long-term investment programs are on track
    to meet emerging threats, maintain force levels, and reduce life cycle
    maintenance cost. Open Architecture and Common Command and Decision
    (C&D) enable future warfighting upgrades to be introduced in a cost
    effective manner while reducing life cycle maintenance. With an initial
    research and development (R&D) investment in this technology,
    warfighting upgrades can be introduced faster and at a reduced cost due
    to a contracted development effort and schedule. Transitional
    Technology introduces new warfighting capabilities to the fleet in
    support of national strategy, evolving missions (missile defense, land
    attack), while pacing the threat. Cruiser Conversion sustains force
    structure, deploys new warfighting capabilities in the most cost
    effective manner. Smartship technologies will decrease the workload for
    the sailor resulting in reduced manning levels and life cycle
    maintenance costs for the fleet. While these investment strategies are
    on schedule, additional funding will speed program development and
    introduction of these technologies into the fleet.
    Submarine Warfare
        Funding of Submarine Warfare procurement programs has increased by
    approximately 24 percent from fiscal year 2001 to fiscal year 2002
    (President's Budget 2001 figures). The increase is due largely to:

              (1) fiscal year 2002 includes satellite control network (SCN)
            funding for two nuclear-powered attack submarine (SSN)
            refueling overhauls vice one in fiscal year 2001.
              (2) fiscal year 2002 includes a significant increase in
            Weapons Procurement, Navy (WPN) for Trident D5 Missile Life
            Extension efforts ($144M in fiscal year 2002 vice $33M in
            fiscal year 2001).
              (3) fiscal year 2002 is the first year of Tactical Tomahawk
            procurement.

        Funding of Submarine Warfare related RDTEN funding has decreased by
    approximately 17 percent from fiscal year 2001 to fiscal year 2002
    primarily due to the continuing reduction in Virginia-class RDTEN
    requirements. (Fiscal year 2001--$212M, fiscal year 2002--$159M).
    Aviation Warfare
        While maintaining our sailors' and marines' quality of life, we
    strive to attain and sustain fully modern, credible, aviation warfare
    capabilities that provide combat-ready naval forces that can influence
    directly and decisively events throughout the spectrum of operations in
    peacetime, crisis, and war. Across the spectrum from humanitarian
    operations and engagement, to theater contingency and sustained combat,
    our sailors and marines stand ready to influence, directly and
    decisively, events ashore from the sea.
        In the last decade, the rate at which Naval Expeditionary forces
    were called upon to respond to crises increased from less than six per
    year to nearly once every 3 weeks. Since December 1998, we have had
    seven Battle Groups and Carrier Air Wings engaged in combat. U.S.S.
    Enterprise and U.S.S. Carl Vinson teamed to provide the preponderance
    of striking power during the 4 days of Operation Desert Fox in Iraq.
    They, along with Theodore Roosevelt, Constellation, Kitty Hawk, John F.
    Kennedy and currently John C. Stennis Battle Groups, have steadfastly
    enforced the no-fly zone in Iraq through Operation Southern Watch.
    Finally, Theodore Roosevelt Battle Group and embarked Carrier Air Wing
    EIGHT, along with land-based Maritime Patrol and Reconnaissance
    Aircraft, expeditionary EA-6B Prowler squadrons, Marine F/A-18D Hornet
    squadrons, AV-8B Harriers from Kearsarge Amphibious Ready Group and
    helicopters from Kearsarge and Inchon Mine Countermeasures Squadron,
    combined to fly over 3,000 combat sorties as part of the air campaign
    in Kosovo. Roosevelt Battle Group and Carrier Air Wing EIGHT were
    engaged in combat just 9 days after completing air wing Carrier
    Qualifications (CQ) off the Virginia capes and less than 24 hours after
    entering the 6th fleet area of responsibility.
        Our remarkable success in these operations validates the
    requirement for sustained, unconstrained and forward Naval
    Expeditionary forces. The lion's share of the credit rests with the
    sailors and marines who serve with distinction and honor-meeting the
    challenge of increased operations tempo despite the effects of a
    prolonged draw down of personnel and equipment. As we focus on taking
    care of our people and protecting and sustaining readiness to meet
    today's commitments, we have difficult choices to make in order to
    balance these against the modernization and recapitalization efforts
    necessary to ensure Naval Aviation and Naval Expeditionary forces
    remain capable of meeting the Nation's security requirements into the
    21st century and beyond.
    Carrier-based Tactical Aircraft
        The F/A-18E/F Super Hornet remains our number one warfighting
    priority. The F/A-18E/F Super Hornet has completed Operational
    Evaluation testing and received an ``Operationally Suitable and
    Operationally Effective'' evaluation from Commander, Operational Test
    and Evaluation Force, and achieved all of its Key Performance
    Parameters (KPP). The Navy's full rate production decision was
    concluded in March 2000 and a multi-year procurement contract agreement
    was signed in June 2000 for the production of 222 aircraft from fiscal
    year 2000 though fiscal year 2004. The multi-year procurement will save
    over $700M compared with single year procurement. The Navy's inventory
    objective is 548 aircraft based on the 1997 Quadrennial Defense Review.
    The aircraft incorporates up to a 40 percent range improvement over the
    F/A-18C in certain flight regimes while at the same time doubling the
    weapons load when configured for close air support missions. A reduced
    radar cross section, coupled with robust countermeasures and new-
    generation combat-proven precision standoff weapons, will also result
    in the Super Hornet being more survivable than current strike-fighters.
    The establishment of VFA-122, the Super Hornet Fleet Replacement
    Squadron, and the successful completion of Operational Evaluation are
    significant steps toward the F/A-18E/F's introduction to the fleet and
    first operational deployment scheduled for 2002.
        To ensure Super Hornet remains a 1st class warfighter we are
    committed to a package of advanced capabilities designed to outpace the
    threat in the 21st century. These programs include the Advanced
    Electronically Scanned Array (AESA) radar, Advanced Targeting Forward
    Looking InfraRed (ATFLIR), Shared Reconnaissance Pod (SHARP),
    Integrated Defense Electronic Counter-Measures (IDECM) system, and the
    Joint Helmet Mounted Cueing System (JHMCS) and associated AIM-9X air-
    to-air missile.
        The EA-6B is American's sole airborne support jammer. The
    tremendous demand for the Prowler's unique capabilities to support the
    air campaign in Kosovo, in addition to meeting other on-going CINC
    requirements, highlights the continued importance of airborne
    Electronic attack. Currently our EA-6B fleet is being modified to a
    common configuration and equipped with new, improved jamming pods. The
    Prowler will begin receiving the new Improved Capability III (ICAP III)
    upgrade in the FYDP. ICAP III provides a significant improvement to the
    EA-6B's receivers, which in turn will enhance jamming performance. It
    also includes increased battle space connectivity critical to Network-
    Centric Operations. The Navy is also leading a 2-year joint Analysis of
    Alternatives to determine the appropriate follow-on to the EA-6B
    platform.
        The E-2C Hawkeye performs critical airborne command and control for
    our expeditionary forces. E-2C missions include early warning of
    approaching enemy air and surface units through area surveillance,
    intercept, search and rescue coordination, communications relay and
    strike/air traffic control. PB-01 includes $321M for five aircraft,
    while the E-2C multi-year program is expected to save a total of $204M.
    Programs to modernize the E-2C include the Radar Modernization Program
    (RMP) and Cooperative Engagement Capability (CEC). RMP offers
    significantly improved capability against small and overland targets,
    while incorporation of airborne CEC in the E-2 will provide a
    revolutionary improvement in our ability to detect, track and engage
    targets in concert with CEC-capable surface combatants.
        Our program for the next generation of aircraft carriers, known as
    CVNX, relies on a three-stage evolutionary strategy to a new class of
    carrier for the future. CVN-77, the final Nimitz-class carrier, will
    feature a new combat system and integrated island. CVNX-1 will have a
    completely redesigned power plant, electrical distribution systems and
    the Electro-Magnetic Aircraft Launch System (EMALS). CVNX-2 will
    complete the evolution, combining innovations from both of the previous
    two carriers. In each step, we plan to achieve incremental reductions
    in total ownership costs and manpower requirements, culminating in
    CVNX-2 in a total reduction of 1,200 to 1,500 billets and a 20 to 30
    percent reduction in total ownership costs.
    Maritime Patrol and Reconnaissance
        The P-3C Orion and EP-3E Aries aircraft comprise the Navy's
    Maritime Patrol and Reconnaissance (MPR) force. These aircraft begin
    reaching the end of service life (due to fatigue) in the fiscal year
    2003 and without corrective action approximately 24 P-3s will reach 100
    percent fatigue life by 2007. Based on current predictions of fatigue
    life expended, in fiscal year 2010, the inventory of P-3Cs will be
    reduced by 59 aircraft, and the inventory of EP-3Es will be reduced to
    8 aircraft unless steps are taken to sustain the inventory.
        Multi-mission Maritime Aircraft (MMA) is planned to be the
    permanent solution to sustaining the MPR inventory through the middle
    of the 21st century. MMA received a successful acquisition Milestone 0
    (MS 0) in April 2000 and entered the concept exploration phase in July
    2000. Development and procurement costs are currently estimated to be
    as high as $7 billion and $32 billion respectively if a new design
    aircraft is chosen as MMA or as low as $2 billion and $12 billion if
    the P-3 remanufacture is chosen. Other potential alternatives fall
    between these two extremes. These costs and performance requirements
    are being reexamined as part of the acquisition process in an Analysis
    of Alternatives (AoA) scheduled to complete this year. The Navy's
    intent is to use the results of this AoA to assist in the acquisition
    of an MMA in the 2010-2012 timeframe.
        Beginning in fiscal year 1999, a Service Life Assessment Program
    (SLAP) was undertaken using engineering analysis and actual reaction
    frame fatigue measurements to identify components and structural
    elements that are vulnerable to fatigue. SLAP will provide the
    analytical and empirical information required to accurately determine
    P-3 fatigue life. Special Structural Inspections (SSIs) and repairs
    will be based on SLAP results and will be depot-level events required
    for all P-3s exceeding 100 percent fatigue life expended (FLE).
    Aircraft under this inspection and repair plan should be able to attain
    130 percent FLE, thereby sustaining the operational MPR force until MMA
    is fully operational.
    Helicopters
        Our Helicopter Master Plan (HMP) is the linchpin of a modern, total
    force solution to increase fleet capability and lethality in the
    littorals. The neck-down of our helicopter force from seven type/model/
    series to two, the MH-60 Sierra (formerly CH-60S) and the MH-60 Romeo
    (formerly SH-60R), will greatly expand warfighting capability while
    significantly educing costs.
        The HMP was originally developed from studies initiated by Office
    of the Chief of Naval Operations (OPNAV) and Naval Air Systems Command
    (NAVAIR) in the early 1990s and has been revalidated by Integrated
    Warfare Assessment studies. The HMP changes through an iterative
    process and continues to evolve in response to fleet requirements and
    budgetary challenges. Capitalizing on the efficiencies of singular
    maintenance, logistics, and training pipelines, the HMP satisfies the
    needs of both our Active and Reserve Forces.
        Both helicopters have met significant milestones. The MH-60R will
    extend and increase the capabilities of the surface combatant in all
    mission areas. This Battle Group asset, optimized for littoral
    operations with its advanced multi-mode radar, an active dipping low
    frequency sonar system, and Hellfire/Forward Looking Infrared (FLIR)
    system, will provide significant warfighting enhancements over the
    current force of SH-60Bs and our carrier-based SH-60Fs.
        The MH-60S will be introduced in fiscal year 2002 and accelerate
    the retirement of aging CH-46D helicopters by approximately 28 months.
    The MH-60S will fill myriad multi-mission helicopter requirements,
    performing passenger/mail/cargo transport, vertical replenishment,
    Search and Rescue, and Combat Search and Rescue in the years ahead. In
    addition, it completed Phases I and II of it Airborne Mine Counter-
    Measures (AMCM) Proof of Concept testing and has demonstrated the
    ability to perform all required AMCM mission profiles.
        In addition to modernizing the naval helicopter force, the HMP
    expands the total Navy warfighting capability and assumes warfighting
    missions (e.g., as the S-3 retires from service), providing an increase
    in deployed operational flexibility and battle group combat power. It
    showcases the MH-60S and the MH-60R as tactical assets able to perform
    the full spectrum of helicopter missions including Antisubmarine
    Warfare, Anti-Surface Warfare, Combat Search and Rescue, logistics, and
    organic Airborne Mine Countermeasures.
    Summary
        America's global security interests, recent world events and on-
    going operation in the Arabian Gulf and Balkans are validating both our
    past decisions with regard to the right aircraft, weapons and
    personnel, as well as our commitment to sustaining the readiness of our
    forces, which now routinely deploy in harm's way. Forward presence,
    maritime dominance and decisive landward power projection in the
    littorals require aircraft and weapons systems capable of responding
    rapidly to a wide range of mission in an increasingly complex and
    demanding threat environment.
        While Naval Aviation has an aging aircraft population, there are
    significant programs planned and in place to ensure that our forces
    provide the most advanced and lethal combination of assets forward
    deployed. The most expedient means of obtaining this capability with
    the lowest resultant life cycle cost would be to modernize the force
    with new aircraft. This option is not possible within the total
    obligation authority of the Navy at this time. Through the plans
    presented, the Navy is in the process of modernizing its current
    platforms and reducing the number of type/model/series aircraft to
    reduce its operations and support costs. The end result of these
    efforts will be to provide the most cost effective force possible
    within the budget submitted.

                                  DD 21 DELAY

        2A. Senator Kennedy. General Nyland and Admiral McGinn, I realize
    that this is not a shipbuilding hearing. Nevertheless, I do not feel
    that we can let this opportunity go by without noting that the Navy has
    again delayed the DD 21 contract award. This subcommittee has taken a
    strong position in support of meeting Marine Corps fire support
    requirements. At previous hearings, Marine Corps witnesses have
    testified that the only approach that will meet their naval surface
    fire support requirements would be the capability planned for the
    advanced gun system on the DD 21. General Nyland, is that still the
    position of the Marine Corps?
        General Nyland. Yes, this is still the position of the Marine
    Corps. Near-term programs such as the 5,,/62 gun, Extended Range Gun
    Munition (ERGM), and the Land Attack Standard Missile (LASM) will
    provide an enhanced Naval Surface Fire Support (NSFS) capability, but
    will not meet all of the range and lethality requirements for
    supporting the Marine Air Ground Task Force (MAGTF) in expeditionary
    operations. In the far-term, the 155mm Advanced Gun System (AGS), with
    a family of precision-guided and ballistic ammunition, and an advanced
    land attack missile, with a family of general use and specialty
    warheads, will meet these requirements. The capabilities provided by
    the DD 21 and its associated systems remain vital to realizing the full
    potential of Expeditionary Maneuver Warfare (EMW) and the conduct of
    expeditionary operations and sustained operations ashore in a fluid,
    non-linear battlespace.

        2B. Senator Kennedy. Admiral McGinn, is there some other
    alternative that the Department would propose for meeting the fire
    support requirement?
        Admiral McGinn. The Navy has a robust plan to develop a family of
    weapon systems capable of meeting Marine Corps requirements for fire
    support. DD 21 is the first ship designed from the keel up with a mind
    toward fully meeting these requirements and the Navy is fully committed
    to building DD 21. The capability of her 155mm Advanced Gun System and
    Advanced Land Attack Missile will make her the most capable fire
    support ship ever built.
        In the near term we are developing the Extended Range Guided
    Munition (ERGM) and the Land Attack Standard Missile (LASM) to provide
    an initial fire support capability in our current AEGIS fleet of
    destroyers and cruisers.
        The combination of near-term solutions with ERGM and LASM and the
    development of DD 21 will satisfy Marine Corps requirements for fire
    support.

        2C. Senator Kennedy. Admiral McGinn, are you confident that the
    Navy will still be able to conduct the necessary development activities
    to permit starting construction of the lead ship in fiscal year 2005?
        Admiral McGinn. The Navy's decision to hold the DD 21 downselect in
    abeyance pending completion of the Pentagon's strategic review is
    expected to impact the program schedule in relation to the length of
    the delay. In order to minimize the impact of that decision, the Navy
    extended the DD 21 Agreement Phase II period of performance to continue
    development of key technologies, such as the Advanced Gun System,
    Integrated Power System, shared apertures, software, manning reduction
    initiatives, modeling and simulation, and radar suite development. By
    continuing development of the most critical technologies for DD 21 the
    Navy believes that it will mitigate the effect upon the ship schedule.
    The Navy will conduct a further assessment of the program schedule upon
    award of the Phase III contract.

                                   ERGM DELAY

        3A. Senator Kennedy. Admiral Kelly, last year the Navy was
    projecting that the Extended Range Guided Munition, or ERGM program,
    would achieve initial operational capability (IOC) in fiscal year 2004,
    a slip of some 2 years from the original goal. This year, as I
    understand it, you are projecting that ERGM will achieve IOC in fiscal
    year 2005. I know the ERGM program has been an important part of your
    plans for improving fire support capability, but we seem to be
    experiencing continuing delays in the program.
        I understand that you are considering an alternative, called the
    autonomous naval support round, or ANSR to mitigate some of the risk in
    the ERGM program.
        How confident are you that the ERGM contractor team can solve these
    problems?
        Admiral Kelly. Raytheon Missile Systems is the prime contractor
    developing ERGM. Since Raytheon moved the ERGM program from Lewisville,
    TX to Tucson, AZ, they have established an impressive record on the
    ERGM program. They assigned a new project manager who assembled a
    comprehensive plan to identify and quickly resolve technical and
    programmatic challenges. Additionally, they worked extensively with our
    own talented munitions experts at the Naval Surface Warfare Center,
    Dahlgren Division to overcome technical challenges.
        On January 31, 2001, the government and contractor team executed a
    very successful pre-production ERGM round test flight. This
    incorporated Global Positioning System and Inertial Navigation System
    (GPS/INS) guidance. This test achieved all primary and most secondary
    objectives. This test was instrumental in Navy decision to continue the
    ERGM program for satisfying near-term fire support requirement.
        Navy is confident that the contractor team will solve remaining
    technical challenges and field ERGM in 2005.

        3B. Senator Kennedy. Admiral Kelly, how do you believe that the
    ANSR program could help mitigate the risk you face?
        Admiral Kelly. ANSR provides an alternative concept for a gun-
    fired, precision-guided munition. It relies on a different type of
    advanced technology for guidance, rocket motor, and warhead. ANSR
    features a unitary warhead whereas ERGM features 72 submunitions for
    its warhead.
        Both ERGM and the ANSR concept have development risk. They rely on
    different technologies and provide different capabilities. ERGM has
    completed a demonstration and is well along in Engineering and
    Manufacturing Development (E&MD). The ANSR demonstration cost is
    estimated to be $15 million before commencement of E&MD. ANSR will not
    reduce risk in the ERGM program.
        The Navy fully supports the demonstration of alternative
    capabilities to meet USMC fire support requirements. There are several
    Advanced Technology Demonstrations including Barrage Round, Forward Air
    Support Munition, and Best Buy that are risk mitigating for advanced
    gun-fired concepts.

        3C. Senator Kennedy. Admiral Kelly, what, if anything, do the
    continuing ERGM problems tell us about the risk for fielding the
    projectile for the advanced gun system on time?
        Admiral Kelly. Under OSD guidance, Army and Navy are working on
    commonality initiatives for our three, main, precision-guided, gun-
    fired munitions: ERGM, 155mm Long Range Land Attack Projectile (LRLAP)
    for the Advanced Gun System, and Army's XM982 Excalibur 155mm artillery
    round. Due to planned Initial Operational Capability schedules of these
    rounds, ERGM will be in service first. As such, ERGM is the prime risk
    mitigator for the two following 155mm rounds. The problems solved in
    the ERGM program will help provide solutions for follow on 155mm
    rounds. All three programs require a gun-hardened guidance section.
    LRLAP will have a rocket motor like ERGM.
        All major components of the ERGM round were proven in gun fired
    testing at 12,000 times the force of gravity, which is required for
    operational capability. On January 31, 2001, we conducted the first
    ERGM test flight of an all-up-round. We are on track for solving the
    remaining challenges inherent in any round with these capabilities.
        By solving these problems in the ERGM program, we have confidence
    that we will mitigate risks associated with follow on systems.

                                TOMAHAWK PROGRAM

        4A. Senator Kennedy. Admiral Kelly, myself, and others were
    concerned that expenditures rates in Kosovo and other operations might
    be causing us to draw down inventories too low, waiting on the new
    Tactical Tomahawk. Previously, Admiral Lautenbacher said that we should
    not expect to see shortages of Tomahawk missiles ``in the foreseeable
    future.'' He did remind us of the continuing issue of having the right
    number and types of Tomahawk missiles in each of the three deployment
    theaters. I believe we have attempted to deal with the latter issue
    last year with additional remanufacturing of older versions of the
    missile and accelerated missile overhauls.
        Since last year, there have been some additional delays in the
    Tactical Tomahawk program.
        Could you describe what has happened to the program since last
    year?
        Admiral Kelly. In January 2001, Raytheon notified the Navy that the
    aft body castings for the qualification and flight test missiles were
    being incorrectly manufactured. This, in addition to delays receiving
    hardware for qualification testing, engine integration issues and
    underestimating automatic test equipment capacity requirements, caused
    a delay for initial testing by 6 months. The delay also resulted in an
    adjustment of the Initial Operational Capability (IOC) from fiscal year
    2003 into fiscal year 2004.
        Raytheon continues to make significant progress in the development
    program. Rocket motor development and qualification is complete, the
    engine design is complete and is in qualification testing, and the
    first Tactical Tomahawk flight test will occur in early 2002. The
    Tactical Tomahawk program continues to meet or exceed all performance
    requirements.

        4B. Senator Kennedy. Admiral Kelly, is the Navy considering
    remanufacture of older versions of the missile to make up for this
    delay?
        Admiral Kelly. Remanufacture of older missiles is not required
    based solely on the Tactical Tomahawk (TACTOM) schedule delay.
    Additionally, the Navy is not currently considering the remanufacture
    of older versions of the Tomahawk missile for the following reasons:

             Remanufacture of Tomahawk Anti-Ship Missiles (TASM) to
            the TLAM Block III configuration is not cost effective
            (estimated $1.4M per missile plus non-recurring.) These
            missiles would not be available to the fleet before fiscal year
            2004, the same time Tactical Tomahawk will start delivery. If
            allotted funds--buy more TACTOM instead.
             Approximately 300 TLAM Block II missiles are available
            for remanufacture to the Block III configuration. If ordered in
            fiscal year 2002, delivery of these missiles would begin in
            fiscal year 2004, the same time Tactical Tomahawk will start
            delivery.
             Current plans are to retire Block III missiles
            beginning in 2012.

        Early and continuing delivery of remanufactured missiles funded in
    the fiscal year 1999 emergency supplemental have helped alleviate
    pressure on the Tomahawk inventory.

                     P-3 MODERNIZATION/EP-3 FORCE REDUCTION

        5A. Senator Kennedy. Admiral McCabe, I believe that we need to
    address the question of the P-3 community force structure. The P-3
    forces that operated in Kosovo acquitted themselves very well, and
    demonstrated the attractiveness of the Anti-Surface Warfare Improvement
    Program, or AIP. We are all now much more familiar with the EP-3 and
    the Surveillance missions that aircraft supports.
        Unfortunately, many of the P-3 and EP-3 aircraft will be reaching
    the end of their service lives in the next few years. Over the past
    decade, there does not appear to have been a substantial commitment to
    supporting the resources required to keep these aircraft forces
    modernized.
        I do not know exactly what Secretary Rumsfeld's strategy review may
    portend, but I find it hard to believe that the Navy can afford to get
    out of the maritime patrol aircraft business. If the Navy does not take
    action soon, I fear that this may happen.
        Is there a real commitment within the Navy to maintain P-3 force
    structure?
        Admiral McCabe. There is a real commitment within the Navy to
    maintain the capability the P-3s provide warfighters.

        5B. Senator Kennedy. Admiral McCabe, why should the subcommittee
    not be alarmed by the prospect that the Navy will be forced to cut P-3
    forces structure further?
        Admiral McCabe. Navy and OSD continue to analyze a variety of
    options to fill requirements currently filled by P-3 and EP-3 aircraft.
    The options include not only manned aircraft (i.e., Multi-mission
    Maritime Aircraft (MMA)) but also innovative ways to provide part of
    the capability the CINCs need that do not require manned aircraft such
    as unmanned aerial vehicles. The analyses suggest that a manned
    aircraft is an essential element of filling the void created if P-3s
    and EP-3s are not replaced soon.
        The Navy and OSD have examined both extending service life and
    remanufacturing the airframes as part of the Analysis of Alternatives.
    Preliminary results point to new procurement as a more economical
    solution than remanufacture of legacy airframes. As a result, the
    Secretary of the Navy targeted the 2010-2012 timeframe for MMA initial
    operating capability and realigned funds previously programmed for SLEP
    to MMA.
        Both the MMA and promising adjunct systems are to be further
    examined next year as a follow-on effort to the work already completed.
    As this work matures over the next several years, manpower and force
    structure studies will help define the future force structure for
    Maritime Patrol and Reconnaissance forces.
        As P-3s reach the end of their fatigue life, the Navy plans to
    inspect each airframe and perform repairs. The Navy currently estimates
    that these Structurally Significant Inspections (SSIs) will be adequate
    to extend the service life 600 flight hours or 1 year, whichever occurs
    first. The Navy estimates that as many as six SSIs can be performed
    before the airframe must be retired. This will help bridge the
    capability gap until MMA attains IOC and any UAV solutions can be
    implemented.
        The Navy does not anticipate any force structure cuts like those
    experienced in the recent past. It will look to changes in future force
    structure based on both MMA and other innovative ways (e.g., UAVs) to
    sustain and improve the capability provided by P-3s today.

                  MARINE CORPS HELICOPTER PROGRAM COST GROWTH

        6. Senator Kennedy. General Nyland, we understand that the program
    to upgrade the Marine Corps' utility helicopter and attack helicopter
    fleets has been experiencing cost growth. It is not clear whether this
    is just the engineering and manufacturing development (EMD) portion of
    the program, or whether this may translate into higher recurring
    procurement costs. This contractor is also one of the prime contractors
    for the V-22 program.
        Can you describe what is the extent of the cost or schedule
    problems in this program?
        Can you provide an assessment of what impact the delay in the V-22
    program will have on the utility and attack helicopter upgrade program?
        General Nyland. Although we do not anticipate any impact on the
    production and delivery schedule in the H-1 upgrade program, we are
    concerned with the cost increases forecasted due to the reduction of V-
    22 procurement and the prorating of a fixed overhead cost. If planned
    procurement of the V-22 were to drop to 11 aircraft per year in fiscal
    year 2001 through fiscal year 2003, the projected cost increase for the
    AH-1Z and UH-1Y would total $25.2M.

                           RAMIFICATION OF V-22 DELAY

        7. Senator Kennedy. General Nyland, it is my understanding that
    considerable planning and reorganization went into the training and
    support of MV-22 training squadrons and future operational units. These
    steps included reassignment of pilots, mechanics, administrative, and
    supply support personnel from other units, particularly CH-46E
    helicopter units, to the MV-22 program.
        If the panel's recommendations are accepted and MV-22 production is
    slowed to a minimum sustaining level, what impact will that have on
    force structure within the Marine Corps aviation community?
        General Nyland. The slowing of MV-22 production and procurement
    will have no impact on the force structure of Marine Corps aviation
    communities. The force structure associated with the MV-22 is designed
    to be a one-for-one replacement for the force structure of the CH-46E
    and CH-53D. Delays in transitioning from the CH-46E or CH-53D to the
    MV-22 will affect force structure by merely delaying personnel
    transitions to the MV-22. As the MV-22 program experiences delays, we
    will manage the force structure and personnel accordingly.

                       FIXING V-22 AIRCRAFT ALREADY BUILT

        8. Senator Kennedy. General Nyland, one recommendation of the Panel
    to Review the V-22 Program is to keep the production lines open by
    producing MV-22s at the minimum sustaining level. Currently, eight
    aircraft have already been produced and are now awaiting retrofits yet
    to be defined.
        What does the Marine Corps plan to do with these aircraft?
        What can you tell us about the plan to retrofit aircraft that will
    have already been produced before all the fixes have been identified?
        General Nyland. The MV-22s assigned to the V-22 Fleet Replacement
    Squadron, VMMT-204 will remain in place, under the operational control
    of the squadron.
        Once the on-going design and technical review activities are
    completed, the program office will develop and disseminate a list of
    Engineering Change Proposals (ECPs) to ensure aircraft already
    delivered to the fleet are outfitted with the most recent improvements.
    Modification teams will deploy to Marine Corps Air Station (MCAS) New
    River to conduct the ECP work and ensure fleet aircraft are in
    compliance with, and in the same configuration as, the newest aircraft
    delivered from the factory. In addition, on going efforts for
    verification of publications and other related maintenance activities
    will be undertaken.
                                     ______

                Questions Submitted by Senator Mary L. Landrieu

                                  FORCE LEVELS

        9A. Senator Landrieu. Admiral McGinn, I was struck by a line in
    your opening statement. You said that, to paraphrase ``while numbers
    matter, the number is less important than the capability inherent in
    those numbers.'' Obviously this is a source of much debate. Back in the
    1970s there was a debate over ``hi-mix/low-mix'' ships and the Navy
    ultimately chose to build both--embodied today in the Spruance-class
    destroyers and Perry-class frigates. While I agree with the long-
    standing American tradition of quality over quantity, that is true only
    to a point. Should the number of hulls in our Navy get too small, we
    simply will not be able to meet all peacetime presence commitments nor
    even be able to take advantage of all the advantages of network-centric
    warfare--it doesn't work too well if you only have one or two nodes!
    Given those thoughts, I am led to conclude that current shipbuilding
    plans in the Future Years' Defense Program (FYDP) are putting our Navy
    into an ever-tightening death spiral which will ultimately stabilize at
    a Navy which is completely incapable of meeting peace or wartime
    requirements. That's why I'm such a big supporter of our shipbuilding
    programs and believe we need to be buying more than what the FYDP calls
    for, not less as we have historically done over the last few years.
        Do you agree that there is a number below which the Navy cannot
    drop? If so, what is it?
        Admiral McGinn. Yes, I agree that there are a minimum number of
    ships the Navy must maintain in order to meet our peacetime and wartime
    missions. However, I cannot provide a minimum number at this time. As
    we proceed through the current QDR and the Defense Department's
    strategic review of our force structure requirements, the number is
    likely to fluctuate. When the reviews conclude in approximately 60 to
    90 days we should have a better idea of what the future force should
    be. Ultimately, the size of our force will depend on how we apply the
    lessons from the past few years and transformational technologies that
    make our ships more capable and responsive to our anticipated missions
    in an evolving national security strategy.

        9B. Senator Landrieu. Admiral McGinn, given what is happening with
    DD 21, should we be buying more DDGs, LPDs and perhaps an additional
    LHD to carry us over until it comes online?
        Admiral McGinn. The DD 21 program of record remains unchanged; the
    lead DD 21 is programmed in fiscal year 2005 and three follow ships are
    programmed in fiscal year 2007. The Navy has held completion of the DD
    21 source selection in abeyance, until results are known from the
    Secretary of Defense's Strategic Review, the Quadrennial Defense Review
    and OSD's study of future shipbuilding programs. Any impact of the
    reviews on the DD 21 program of record cannot be assessed until results
    of the reviews are known.
        The overall rate at which Navy is currently building ships, which
    averages six and a half ships per year, will not produce the numbers of
    ships needed to sustain the present fleet size. Furthermore, at this
    rate, we are producing ships below economic rates and do not provide
    incentives to modernize the shipbuilding industry. On the order of nine
    ships and roughly an additional $3B per year are required to maintain
    our current force structure to meet present and future missions.

        9C. Senator Landrieu. Admiral McGinn, just as in the 1970s, should
    we not buy a mixture of highly-capable and less-capable ships, perhaps
    by building a mix of DD 21s and streetfighters? Why or why not?
        Admiral McGinn. While a combination of highly capable and less
    capable ships may increase Navy's overall battle force numbers, they
    may not represent the most efficient force. More important than numbers
    is the warfighting capability that the combined force delivers.
    Ultimately, the size and makeup of our future surface force will depend
    on our national security strategy, evolving mission capabilities, and
    emerging transformational technologies. As our strategic direction
    becomes better defined through the ongoing Quadrennial Defense Review
    (QDR) and the Defense Department strategic review we will have a better
    idea of what the future battle force mix should be.

        9D. Senator Landrieu. Admiral McGinn, what is your best estimate
    for the required ship build rates on major Navy SCN programs to
    maintain the industrial base if that rate was guaranteed for the next 5
    or 10 years? What is that estimate based on?
        Admiral McGinn. ``Report on Naval Vessel Force Structure
    Requirements'' sent to Congress by the Secretary of Defense in June of
    2000 details the Navy's overall shipbuilding plan to maintain its force
    structure and the industrial base.
        In accordance with the recent DDG-51 Program Industrial Base Study
    update forwarded to Congress in November 2000, the DDG-51 Program and
    its associated shipyards, Bath Iron Works and Ingalls Shipbuilding,
    require a stable procurement rate of three DDGs per year plus
    additional workload to maintain the surface combatant industrial base.
    For a surface combatant procurement rate of three ships per year,
    Ingalls and Bath can likely book the additional work required to
    maintain a stable workforce.
        The lack of new submarine construction during the 1990s resulted in
    the loss of competition at the prime contractor level and degradation
    of competition at the subcontractor level as many vendors left the
    market. The current production rate of one submarine per year, split
    between General Dynamics Electric Boat and Newport News Shipbuilding
    cooperating in a teaming agreement, is adequate to sustain the critical
    nuclear submarine industrial base. However, this minimal build rate has
    significantly increased submarine cost.
        The aircraft carrier industrial base is sustained at its present
    level by procurement of an aircraft carrier every 4 to 5 years.

                MULTI-YEAR PURCHASING OR ADVANCE APPROPRIATIONS

        10. Senator Landrieu. Admiral McGinn and General Nyland, I must
    confess that, when I first came to Washington, I was shocked at how the
    Federal Government makes big purchases. Most state governments and, I
    would venture to say, all businesses do this in a completely different
    way and would go bankrupt if they do what the Federal Government does.
    In today's tight fiscal environment, we owe it to the taxpayers of
    America to get the most value for every dollar we invest in defense. I
    personally believe that through something like multi-year procurement
    or advance appropriations we could save big dollars in major weapons
    system purchases by providing some needed stability to the defense
    contractors. It seems to me that we should treat the acquisition of big
    ticket items, like warships the same way a business finances its
    capital programs, that is, on a cash outlay basis.
        Do you agree with my assessment? If so, what new way of doing
    business could Congress implement to allow you to maximize each defense
    dollar spent?
        What pros and cons do you see to the various approaches I mentioned
    above?

        Admiral McGinn. The primary concern of the Department is being able
    to increase the building rate to nine ships per year to maintain
    currently approved force structure over the long term. While we would
    prefer the traditional full funding approach, we believe this concern
    to be so fundamentally important, it warrants innovative financing
    techniques.
        With respect to legislation, we believe that no special legislation
    is required to finance shipbuilding with advance appropriations as it
    is already Congressional practice to finance programs with this
    mechanism.
    Advantages
             Increased Number of Ship Starts. Advance
            appropriations free up budget authority to enable the
            Department of the Navy to increase the number of ship starts in
            the near term. For instance, a ship that costs $900 million
            could have $300 million appropriated in the first year and the
            remaining $600 million provided by advance appropriations over
            the next 2 years. This leaves $600 million of headroom
            available in the first fiscal year of the appropriation to fund
            two additional ship starts of an equal cost.
             Industry Confidence. Because advance appropriations
            provide the full value of the ship, the shipbuilder has
            confidence in the commitment of the government to procure the
            ship, even though the funds are appropriated over several
            years.
             More Efficient Industrial Base. A firm commitment to
            build more ships provides stability to the industrial base,
            allowing shipbuilders to maximize use of Economic Order
            Quantity procurements, re-capitalize their infrastructure and
            efficiently plan their work force loading.
    Disadvantages
             Long Term Commitment. Advance appropriations require
            long term commitment to the shipbuilding plan. Failure to
            sustain adequate funding to the SCN account will cause
            disruption to ships already in construction, which will lead to
            increased costs and the inability to put new ships under
            contract. Even with advance appropriations, zero real program
            growth will not sustain the nine ships per year needed to
            maintain currently approved force structure. Less than zero
            real program growth would jeopardize putting new ships under
            contract or potentially other Navy programs.
             Loss of Flexibility. Emergent force structure
            requirements driven by new threats or technology opportunities
            will be more difficult to respond to, by putting different ship
            types under contract, due to legacy funding commitments.
             Increased Exposure to Taxes/Rescissions. In the past
            when taxes/rescissions are levied on shipbuilding programs,
            individual ships are only affected in 1 fiscal year. With
            appropriations provided over several years, individual ships
            can be impacted by general rescissions in each year funds are
            appropriated.

        General Nyland. Yes. The Marine Corps purchases items, such as the
    Advanced Amphibious Assault Vehicle, using both advanced procurement
    and multi-year procurement contracts. We rely on the Navy to procure
    warships and other ships that support our amphibious lift, Naval
    Surface Fire Support (NSFS) and Maritime Prepositioning Force (MPF)
    requirements. Generally speaking, the Marine Corps supports the Navy's
    fiscal strategy for the acquisition of warships and believes that it
    would be inappropriate for us to address the pros and cons for the
    procurement of these ``big ticket items.''

                                     LPD-17

        11A. Senator Landrieu. General Whitlow, it is my understanding
    that, in order to provide flexible response and assured access, our
    plans require the capability to rapidly deploy the equivalent of three
    Marine Expeditionary Brigades in amphibious shipping. I also understand
    that we are currently well below this requirement.
        What is the current lift capability and what are the implications
    of this shortfall?
        General Whitlow. Amphibious lift is measured using the five ``lift
    finger prints'': Troops, Cargo, Vehicles, Aircraft, and Landing Craft
    Air Cushion (LCAC). The critical lift short fall of the required 3.0
    Marine Expeditionary Brigade Assault Echelons (MEB AE) lift (fiscally
    constrained to 2.5 MEB AE) is in vehicle lift capacity. With the
    current 38 active and 1 NRF amphibious ships, the Navy's capability has
    been reduced to 2.1 MEB vehicle lift. The implications of this
    shortfall is that the Navy has to rely on the Amphibious Lift
    Enhancement Program (ALEP), which is 5 decommissioned LKAs and 4
    decommissioned LSTs in deep reduced operating status. If required,
    these ships would take a minimum of 6 months to reactivate.

        11B. Senator Landrieu. General Whitlow, to what extent does
    procurement of the LPD-17 class of ships address this shortfall?
        General Whitlow. Upon delivery of the 12th LPD-17 in the fiscal
    year 2010/2011 time frame, the Navy, with 12 LHA/LHDs, 12 LPD-17 and 12
    LSD-41/49 class amphibious ships will have the required capability of
    embarking and employing 2.5 MEB (fiscally constrained) lift for troops
    and vehicles as well as meet the 3.0 MEB requirement for Cargo,
    Aircraft and Landing Craft Air Cushion (LCAC). The 12 LPD-17s enable
    the Navy to achieve this required fiscally constrained capability
    without the use of the ALEP ships.

        11C. Senator Landrieu. General Whitlow, what are the implications
    of delaying acquisition of the LPD-17 class of ships?
        General Whitlow. Depending on the delay in acquisition, the
    immediate impact is the requirement to sustain at least six of the LPD-
    4 class ships (commissioned 1965-1971) at significant expense, as well
    as potential increases in industry/SCN costs associated with
    lengthening the LPD-17 program. An additional impact includes the delay
    associated with achieving the fiscally required 2.5 MEB AE lift
    (without use of ALEP).
        Lastly but just as important is the indirect impact on
    reenlistment/retention of sailors and marines due the relatively poor
    quality of life conditions existent on the LPD-4 class ships.

                                SSGN CONVERSION

        12. Senator Landrieu. Admiral Engelhardt, there are some in and
    outside of government who believe we should take advantage of the
    Trident submarines the Navy will be forced to decommission when we drop
    to START II Treaty levels. They maintain we should not throw that
    significant capital investment away but rather maximize its use for a
    modest cost by converting those boats to cruise missiles submarines or
    SSGNs.
        Do you believe this should be done? Why or why not?
        Admiral Engelhardt. Yes. The Navy should convert the four Trident
    submarines to SSGNs. For a modest cost, the country would get four very
    capable platforms which would be available for 20 years after
    conversion. The converted ships would provide the warfighting
    commanders in chiefs with covert, high volume cruise missile strike
    capability and the ability to clandestinely deploy large numbers of
    Special Forces personnel for extended time periods. With its high
    operational availability, SSGN is a force multiplier allowing Battle
    Group Commanders flexibility to utilize ships and submarines in the
    Battle group to cover other essential tasks such surveillance, missile
    defense, and engagement with our allies. Additionally, these ships will
    be instrumental in future innovation in transformational payloads,
    weapon systems and vehicles for joint experimentation. Finally, the
    concept has low technical risk, leverages existing Trident logistic
    support and the costs are well known.

                       THEATER BALLISTIC MISSILE DEFENSE

        13A. Senator Landrieu. Admiral McGinn and Admiral Kelly, while
    there is great debate about National Missile Defense in the country and
    Congress today, I believe everyone agrees on the need for an effective
    Theater Ballistic Missile Defense or TBMD. The Navy Theater-Wide
    program is on the cusp of becoming an operational capability of our
    Navy and, when deployed, will permit the United States to protect not
    only our own forces and those of our allies, but also the civilian
    populations of countries threatened by theater ballistic missile
    attack.
        Will the current number of Navy ships and Vertical Launch System
    (VLS) cells enable the Navy to adequately meet wartime requirements
    while also picking up this new mission? If not, how many additional
    hulls or VLS cells do you believe are necessary?
        Admiral McGinn and Admiral Kelly. The current Defense Planning
    Guidance based on the 1997 Quadrennial Defense Review states Navy needs
    to maintain a 116 ship surface combatant force. Recent studies indicate
    that we may need more surface combatants to meet regional wartime
    requirements in the 2008 to 2015 timeframe. For crisis response our
    existing destroyers and modernized cruisers will be adequate to provide
    theater missile defenses in concert with other naval missions such as
    land attack, USW and force defense. If the Navy is assigned a wider
    role in missile defense, additional force structure may eventually be
    required. The current QDR analysis will help determine future wartime
    requirements.

        13B. Senator Landrieu. Admiral McGinn and Admiral Kelly, what are
    the implications to the Cruiser Conversion Program?
        Admiral McGinn and Admiral Kelly. The Cruiser Conversion program is
    essential to rapidly deploying TBMD at sea. We need the advanced
    computers and improved Q-70 consoles to implement the computer programs
    necessary for missile defense.
                                     ______

                  Questions Submitted by Senator Jean Carnahan

                    F/A-18E/F TO F/A-18C PART COMPATIBILITY

        14. Senator Carnahan. Admiral McGinn and Admiral McCabe, I
    understand that the Navy's F-14 program is over three decades old. The
    Navy is now procuring more F/A-18E/Fs to replace these older generation
    aircraft. These airplanes will join the F/A-18Cs on our Navy's aircraft
    carriers.
        Admirals, can you speak to the importance of establishing a Navy
    airfleet that is composed of airplanes that have common components and
    training characteristics?
        Admiral McGinn and Admiral McCabe. The Navy is committed to
    maximizing commonality in aircraft components. This approach lowers
    operations and support costs, decreases training requirements and
    allows the Navy to achieve economic order quantity goals.
        In the case of F/A-18E/F, the Navy designed the aircraft with
    airframe commonality of 70 percent and avionics that are approximately
    90 percent common with F/A-18C/D. This commonality extends to the
    existing support equipment, and reduces our overhead to provide
    training to aircrew and maintenance personnel.
        Further, one should consider that the carrier is transitioning from
    a tactical aircraft (TACAIR) composition that is 33 percent F/A-18 to
    one that will be 72 percent F/A-18. The commonality is not only
    internal to the F/A-18 community but also overall to the TACAIR
    community where the advantages of supporting fewer types of aircraft
    can be realized.

                 FLEXIBILITY IN NAVAL PROCUREMENT OF F/A-18E/FS

        15. Senator Carnahan. Admiral McGinn and Admiral McCabe, due to
    inflation and minor modifications mandated by the Pentagon, the Navy
    has stated that it will have to reduce the number of Super Hornets
    procured this year. On April 30, the Navy announced that it will change
    the procurement schedule of F/A-18E/F aircraft from 42 to 39.
        Because of the significance of this program, do you anticipate room
    in future budgets to make up for the loss in the Navy's procurement of
    additional F/A-18s?
        Admiral McGinn and Admiral McCabe. The Navy has a requirement for
    548 F/A-18E/F aircraft. Last year the Navy entered into a multi-year
    contract for the production of 222 aircraft through fiscal year 2004.
    This contract provided flexibility to increase or decrease aircraft
    quantity (+/-6 aircraft) in years fiscal year 2001 through fiscal year
    2004 to meet emergent requirements. Unfortunately, current economic
    price adjustments and other unforeseen costs required the Navy to
    decrease procurement by three aircraft this year. If funds become
    available, the Navy intends to procure these three aircraft in order to
    remove costly legacy aircraft from the inventory and increase our
    combat capabilities.

                      JOINT STRIKE FIGHTER AND THE F/A-18

        16. Senator Carnahan. Admiral McGinn and Admiral McCabe, the Joint
    Strike Fighter is another program scheduled to join the F/A-18s this
    decade.
        How will this fighter's capabilities complement the mission of the
    F/A-18s?
        Admiral McGinn and Admiral McCabe.

             USN requirements are based on a balanced approach of
            increased firepower and survivability of F/A-18E/F and advanced
            stealth of CV JSF
             USN requires F/A-18E/F to replace aging inventory NOW
            (F-14, S-3 & older models of F/A-18)
             2002 Carrier Air Wing (CVW)

                     F/A-18E/F is catalyst in providing the
                    enabling blow

                             Strike early and deep: high value,
                            C\4\I, weapons of mass destruction (WMD)
                            targets, infrastructure
                             Attrite and dominate enemy air

                     F/A-18C leverages with SEAD, standoff weapons
                    and high value asset protection (HVAP)

                             As threat diminishes, F/A-18C
                            penetrates closer (more survivable)

             2012 CVW--Threat has increased, CVW capability paces
            threat

                     CV JSF is catalyst in providing the enabling
                    blow

                             Day one strike against highly defended
                            targets/advanced surface-to-air missiles
                            (SAMs), and WMDs
                             Internal weapons bays (JSAM, JSOW &
                            AMRAAM)
                             Supersonic delivery of precision
                            weapons increases standoff ranges (IOC +3
                            years)

                     F/A-18E/F leverages carrying brunt of SEAD,
                    standoff weapons and high value unit protection

                             As threat diminishes, F/A-18E
                            penetrates closer (more survivable)
                             F/A-18E/F brings high payload capacity
                            to the battle

             CV JSF brings:

                     Stealth--improved survivability, access and
                    lethality

                             Signature management and auto-routing
                            denies pop-up threat
                             Low observable and suppression enable
                            access to highly defended targets
                             Access by legacy aircraft limited by
                            advanced SAMs

                     600nm range with internal ordnance minimizing
                    tanking and support aircraft requirements
                     Increased avionics

                             Open architecture
                             AESA Radar--self-protection/electronic
                            attack and reduced signature
                             Distributed Electro-Optical/Infrared
                            (EO/IR)

                                     ``Through the floor and
                                    wings'' technology
                                     Passive detection of targets/
                                    threats

                             Sensor fusion of multi-source tactical
                            displays
                             Helmet mounted visor display--no HUD

                     Lower Life Cycle Costs (LCC)

                             17 percent savings in Operations &
                            Sustainment (O&S) costs over F/A-18C aircraft
                             3 CV JSF variant commonality in
                            airframe, avionics and propulsion reduce LCC
                             Commonality in logistics support
                            systems and training offer significant savings,
                            reducing overall LCC
                             Projected 30-45 percent reduction in
                            LCC over legacy aircraft

                     Prognostic Health Management (PHM) monitors
                    aircraft systems for wear and tear and impending
                    failure in order to prevent mishaps

        17. Senator Carnahan. General Nyland, please discuss the key
    benefits of fielding the Joint Strike Fighter by three of the Services.
    How will fielding this next-generation aircraft enhance inter-
    operability throughout the U.S. Armed Services in combat operations?
        General Nyland. JSF's unique synergy of stealth, interoperability,
    range, payload, advanced sensors, and access to off-board information
    will bring unmatched lethality and survivability to the battlefields of
    the future. Commonality across the family of JSF variants is the key to
    the program's affordability. All of the variants will share a common
    avionics architecture, a common fuselage, and a common core propulsion
    system--greatly reducing the manufacturing/procurement costs. The
    joint, common-aircraft approach central to the JSF program avoids three
    parallel development programs for Service-unique aircraft, saving $15B
    in R&D costs over the next decade. Furthermore, commonality in
    logistics and training support systems offer significant additional
    savings and contribute to an overall reduction in total life cycle cost
    of 30-45 percent compared to legacy aircraft, a savings of $110B in
    operating and support costs over 30 years.
                                     ______

                  Questions Submitted by Senator Jeff Sessions

                              SURFACE FIRE SUPPORT

        18. Senator Sessions. General Whitlow and Admiral Kelly, what is
    your assessment of the Navy's plan to provide the fire support from the
    sea for Marine Corps Operations vis-a-vis the Marine Corps requirements
    included in the June 1999 General Rhodes letter to the Chief of Naval
    Operations?
        General Whitlow and Admiral Kelly. The Navy's two-phased approach
    to meeting Operational Maneuver From the Sea (OMFTS) Naval Surface Fire
    Support (NSFS) requirements is a viable one. From both the Navy and
    Marine Corps perspectives, OMFTS concepts have placed an increasing
    emphasis on the need for capable NSFS assets. We realize that sea-based
    NSFS will be required to support joint operations, and integrate with
    expeditionary forces (whether Marine, Army, or other) operating over an
    extended littoral battlespace.
        Near- and mid-term initiatives to meet NSFS requirements include:
    improving existing 5,, guns, developing an extended range guided
    munition, introduction of a land attack missile (to include a Tactical
    Tomahawk cruise missile), and integration of C\4\I systems to support
    NSFS. Long-term initiatives include the introduction of the DD 21
    surface combatant (with the Advanced Gun System), and the Advanced Land
    Attack Missile.
        It is clear that our fire support roadmap needs to lead us to
    capable systems that provide the range, accuracy, lethality, and
    responsiveness necessary to support maneuver forces, from ship to
    objective and beyond. Furthermore, our naval fires must be sustaining
    and possess the volume to achieve objectives ashore. To place an
    emphasis upon Naval Surface Fire Support (NSFS) during expeditionary
    operations means to shape the battlespace through the destruction,
    harassment, interdiction, and suppression of hostile forces.

                     SUBMARINE OPERATIONS IN THE LITTORALS

        19. Senator Sessions. Admiral Engelhardt, although operations in
    the littorals are not new for submarines, the focus on submarines
    operating as part of a battle group in the littorals is evolving. What
    is being done to address the challenges in submarine weapon and combat
    system development to make them more effective operating against
    littoral threats and as part of a battle group operating in the
    littorals?
        Admiral Engelhardt. In both the weapons and combat system cases,
    the Navy has made decisions to leverage the commercial development of
    commercial off-the-shelf technology (COTS) processing, based on the
    successes experienced in the Acoustic Rapid COTS Insertion (ARCI)
    program, in order to enable a more rapid delivery of effective
    capability. In the case of the ADCAP torpedo, the development and
    fielding of the ADCAP Mod 6 has greatly improved its intrinsic
    processing power. This has allowed the weapon to host more robust
    detection and tracking algorithms, and has laid the foundation for
    continuous improvement and implementation of future tactical software
    developments. This capability promotes ongoing efforts in the torpedo
    research and development community, which is largely centered on
    increased effectiveness to counter the wide range of threats likely to
    be encountered in the difficult littoral environment. In addition to
    this increased processing power, the Mod 6 improvement has also
    significantly reduced the noise signature of the torpedo itself,
    supporting the development of more effective tactics to counter
    steadily increasing threat capabilities. The follow-on modernization
    effort, the ADCAP Mod 7, named the Common Broadband Acoustic Sonar
    System (CBASS), will further increase the effectiveness of the ADCAP
    torpedo in shallow water.
        The new generation Combat Control System (CCS), the CCS MK  Block
    1C ECP-4, also leverages the lessons learned from the ARCI program and
    will introduce a completely COTS-based CCS, which will be able to host
    software capability improvements delivered as often as annually using
    the ARCI-developed Advanced Processor Build, or APB process. This next
    generation CCS, which will begin delivery in fiscal year 2002, provides
    an improved Tactical Tomahawk (TACTOM) capability along with
    significant improvements in TLAM reliability and engagement planning.
    New algorithms will improve the submarine's ability to determine
    submerged contact solutions and manage complex surface contact
    situations. CBASS functionality will be delivered via a subsequent APB
    to support the CBASS IOC.
        The submarine force is also engaged in an effort to improve
    information management. This allows our submarines to maintain the
    highest possible degree of tactical control in the high contact-density
    littoral environment. Improvements in sensors (visual, electronic,
    acoustic), processing, and data distribution all contribute to enhanced
    information management. To provide the connectivity for shared
    situational awareness through the Common Tactical Picture, the
    submarine force has two major communications modernization efforts in
    progress: the submarine Wideband Command, Control, Communications,
    Computers and Intelligence (C\4\I) Modernization Plan (WMP) and the
    submarine Narrowband C\4\I Modernization Plan (NMP). Although these two
    efforts differ in the space-based assets they utilize, they are common
    in their approach in that they transition all submarine communications
    from inefficient low-bandwidth legacy satellite information exchange
    services (IXS) to modern, high-bandwidth, commercial-standards-based
    Internet Protocol (IP) services.

                         SURF-ZONE MINE COUNTERMEASURES

        20. Senator Sessions. General Whitlow, last year, your predecessor
    testified that the greatest mine warfare challenge was detection and
    clearing of mines from the very shallow water to the surf zone. He
    further stated that programs to get the people and marine mammals out
    of the minefield ``have great promise, and will be ready to transition
    to demonstration and validation in fiscal year 2001.''
        What is the status of Navy and Marine Corps very shallow water and
    surf zone mine countermeasures programs, and what is the operational
    impact of the present programs versus future programs?
        General Whitlow. The Navy has the responsibility for mine
    countermeasures (MCM) in the Very Shallow Water (VSW) (40,-10, water
    depth) and Surf Zone (10,-0, water depth) regions; the Marine Corps has
    the responsibility for MCM from the High Water Mark (HWM) inland.
    However, the Marine Corps' programs will not be discussed in this
    response. Each region and resources currently available to conduct MCM
    will be discussed separately.
        In the near-term (for the next 10, possibly 15 years), the Navy
    must rely on Sea, Air and Land (SEAL) Specialists from Navy Special
    Warfare (NSW) and divers/mammals from the VSW Detachment to clear
    mines/obstacles in the Very Shallow Water and Surf Zone regions. We
    will not be able to remove the man and/or mammal from the minefield
    until far-term systems can be developed, tested, and subsequently
    fielded.
        Regarding the Very Shallow Water region, in 1998 the Navy and
    Marine Corps initiated a concentrated effort to address long-standing
    VSWM Countermeasures deficiencies highlighted during Operation Desert
    Storm. A dedicated VSW MCM detachment was established. It was manned
    with Navy SEALs, Navy Explosive Ordnance Disposal technicians and
    Marine Corps Reconnaissance combat swimmers. The Detachment is
    chartered with rapidly responding to emergent contingencies worldwide
    and to act as a ``warfighting laboratory'' for evaluating and assessing
    the operational utility of the latest promising VSW MCM technologies.
        The Detachment has three primary components: the diver, marine
    mammal, and unmanned underwater vehicle platoons. While the Detachment
    has developed effective tactics and techniques, the most effective
    capability still relies on divers and dolphins for performance of this
    complex mission. It remains our intent to migrate this mission to
    unmanned underwater vehicles (UUV).
        With the establishment of the Detachment, the Navy resourced a
    focused acquisition program to field equipment to enable divers and
    dolphins to safely and effectively conduct minefield mapping and
    clearance in the very shallow water region. Diver and marine mammal
    system developments have significantly improved our capabilities.
        First, a low magnetic and acoustic signature Underwater Breathing
    Apparatus was fielded which gives the VSW diver adequate time to
    conduct minefield-mapping operations. This dive rig was based on a
    commercial off the shelf design with some system modifications. This
    acquisition strategy permitted fielding of this tool within 24 months
    of program initiation.
        Second, a marine mammal system achieved a preliminary operational
    capability in January of 2000 allowing for rapid, low visible minefield
    mapping. The performance of the marine mammal system enables relatively
    high speed/high confidence minefield mapping, including detection and
    classification of partially to fully buried mines.
        Third, an integrated underwater navigation and sonar system is
    nearing acquisition program completion and is scheduled for delivery by
    September of 2001. This visual display tool will allow the diver to
    conduct precise minefield mapping including high confidence standoff
    mine classification.
        While great strides have been made in enhancing diver and dolphin
    systems since the early 1990s, several areas of the mission continue to
    challenge us. Specifically, mine neutralization remains a hazard to the
    very shallow water divers and dolphins. A very limited capability
    exists but only in highly permissive, low sea state and ocean floor
    migration environments. The lack of man-portable, command actuation
    capabilities limits tactical options available in trying to neutralize
    the VSW mine threat at a precise point in time without compromising
    intended landing points against hostile shorelines. Also, lane marking
    of areas cleared continues to be an area of operational challenge.
        While order of magnitude improvements in capability have been
    realized by fielding three VSW MCM in just over 3 years, the ultimate
    goal remains to remove these man-in-the-loop systems as technology
    matures. The Office of Naval Research has invested $120M in Future
    Naval Capabilities research to ``push'' these and related technologies.
        In the fiscal year 2001 Navy budget, the Navy has programmed
    funding to begin acquisition of small, affordable UUVs to conduct
    minefield mapping. This acquisition program started in October 2000,
    and VSW MCM detachment personnel are currently operating prototype
    vehicles. Leveraging the ongoing technology development and
    demonstration efforts from the Office of Naval Research enables actual
    hardware to be in the operator's hands relatively early in the
    acquisition process. This facilitates effective requirement definition
    and ultimately a highly balanced and effective acquisition process. The
    detachment is currently operating their prototype unmanned vehicles,
    and an initial operating capability is scheduled for fiscal year 2005.
    A funded project will be initiated in October 2002 to add mine
    identification capabilities to the small unmanned underwater vehicle.
    To improve safety and effectiveness in other operations involving
    hazards to personnel, the Navy is also investigating the utility of
    expanding the use of small unmanned underwater vehicles to broader
    areas of undersea search and survey.
        The Surf Zone is certainly the most difficult region of waterspace
    being addressed in the Navy's efforts to produce an ``end-to-end'' MCM
    capability, from deep water to dry land.
        The goal for the far-term is to develop an in-stride mine clearance
    capability for the surf and beach zones to enable Operational Maneuver
    From the Sea (Expeditionary Maneuver Warfare) and Ship to Objective
    Maneuver. Teaming with the Office of Naval Research, industry, academia
    and Navy laboratories, the Navy is continuing to develop potential
    unmanned airborne and underwater sensors (to improve our capability to
    locate minefields) and weapons systems (to neutralize the mines they
    find).
        Regarding future surf zone systems, the Office of Naval Research
    (ONR) is presently conducting an evaluation of three potential
    breaching (kill mechanism) solutions to the surf zone mine threat.
    These potential solutions are aircraft or naval surface fire ship
    based:

             Aircraft (Carrier) based:

                     HYDRA-7 (Lockheed-Martin)--reactive high
                    velocity darts (for mines) or explosively driven
                    impactors (for obstacles) delivered by Wind-Corrected
                    Tactical Munitions Dispenser (WC-TMD)
                     Mine/Obstacle Defeat System (Boeing)--
                    penetrator darts (for mines) or continuous rod warheads
                    (for obstacles) delivered by Joint Direct Attack
                    Munition (JDAM)

             Ship (Destroyer) based

                     5,, Best Buy Projectile (SAIC)--chemical/
                    reactive darts (for mines) and continuous rod warheads
                    (for obstacles) delivered by variants of the 5,, Best
                    Buy projectile

        After the Concept & Technology Development phase ends in fiscal
    year 2003, a determination will be made regarding which potential far-
    term system will transition to an acquisition program. With current
    available data, it is expected that a far-term breaching system will be
    fielded to the fleet as early as 2010, with a more realistic time frame
    of 2015.
        Though the surf zone is the most challenging mine warfare
    environment, I am confident we will develop the systems and the tactics
    to minimize its impact on our ability to maneuver and the danger it
    poses to the lives of our marines and sailors.

                       COOPERATIVE ENGAGEMENT CAPABILITY

        21. Senator Sessions. Admiral Kelly, your quarterly reports have
    indicated Cooperative Engagement Capability (CEC) is making progress,
    and has a solid test plan with sufficient resources. However, it is not
    clear what technical hurdles still remain and the Navy's plan for
    implementing the CEC into deploying battle groups.
        Would you explain to the subcommittee the Navy's evaluation of the
    scope of the remaining technical issues with the Cooperative Engagement
    Capability equipment and software, and include a brief update on the
    program status?
        Admiral Kelly. CEC OPEVAL was conducted in May 2001. Official
    results are not expected until August 2001. However, based on
    performance in previous underway tests to date, positive results are
    expected. Our focus now is to rapidly deploy this proven capability in
    as many Carrier Battle Groups (CVBGs) and Amphibious Readiness Groups
    (ARGs) as we can afford. At the same time we will finish E-2C Hawkeye
    2000 computer program development and testing and begin to add TBMD
    functionality in the next versions of the CEC programs.

        22. Senator Sessions. Admiral Kelly, do you have sufficient funding
    to complete the scheduled fiscal year 2001 CEC testing?
        Admiral Kelly. Yes. Testing of CEC will occur beyond fiscal year
    2001. CEC test plans support test requirements within current budget
    guidelines. They are focused on follow-on testing for the E-2C and
    improved carrier/amphibious ship combat system (SSDS Mk 2)
    configurations.

          MINE WARFARE DEDICATION FORCES ABILITY TO RESPOND TO CRISIS

        23. Senator Sessions. General Whitlow, the U.S.S. Inchon, is over
    33 years old and it has been reported that it takes a major maintenance
    effort to get underway even when the schedule is known well in advance.
    In addition, the mine hunting ships, MHCs, are reported to have lower
    than planned propulsion engine availability, and CINC TRANSCOM
    testified that there is not enough strategic lift capability to
    transport the mine hunting ships.
        What are the operational impacts of the readiness of the U.S.S.
    Inchon and the MHC ships, what is your assessment of your ability to
    provide crisis response, and what is your plan to correct the
    deficiencies?
        General Whitlow. Certainly Inchon's operational availability is
    troubling. At 33 years, Inchon has long exceeded her original design
    life and is nearing end of service life. Further, the investment
    required to properly maintain and modernize such an aging special
    purpose ship is significant. Accordingly, we the Navy and Marine Corps
    Team are at a decision point to determine how best to proceed with this
    issue. For this reason we began a Mission Area Analysis (MAA) Study
    this spring to determine if there is a need for a follow-on MCM
    Command, Control and Support Ship or its capabilities. This study will
    identify the requirement for sea borne command and control in support
    of the currently programmed MCM force. If there is a requirement for an
    MCS or its functions, solutions should be cost effective, technically
    feasible and provide the necessary operational utility to support a
    balanced MCM force.
        To answer the second part of your question, the MHC-51-class
    Coastal Minehunter Isotta-Frachini (I/F) propulsion engine reliability
    is far less than desired. The Navy's experience with the main
    propulsion and the diesel generator engine selected for the MCM-1 and
    MHC-51 Class ships has been problematic since ship construction.
    Exaggerating the poor reliability and deficient durability of the I/F
    engine, is the movement in the past decade of Navy SMCM ships from a
    ``garrison'' disposition, to a force compliment of forward deployed
    ships and CONUS-based ships that routinely deploy. Accordingly, the
    Navy has engaged the I/F original equipment manufacturer (OEM) to
    improve its internal QA and continues to incorporate incremental
    improvements to the I/F engine as part of the fleet Modernization
    Program (FMP). This said, the I/F's operational availability (Ao)
    remains at an unacceptable level and thus any significant increase in
    the SMCM engine Ao will require either a major product improvement
    program to the older technology I/F, or a replacement OEM engine.
    Accordingly, recognizing that significant technological improvements in
    high speed marine diesel performance, reliability and durability have
    been realized since the original engine selection for the MCM-1/MHC-51-
    class ships, the Navy embarked on a Business Case Analysis (BCA) study.
    This BCA will provide the cost/benefit analysis and technical
    feasibility of replacing the existing IF with a different OEM, or a
    major product improvement to achieve the current diesel industry
    standard Ao.

                           SUFRACE SHIP SELF-DEFENSE

        24A. Senator Sessions. Admiral Kelly, surface ship self-defense has
    been a particular focus of Congress for a number of years. This
    subcommittee has initiated additional funding for ship self-defense
    programs in the past including the missile decoy, NULKA, and the Block
    1B Close-in Weapons Systems upgrade.
        What is your assessment of the present ship self-defense
    capabilities and programs, and have you adjusted any programs as a
    result of the attack on the U.S.S. Cole?
        Admiral Kelly. The Navy remains capable against today's threats and
    the procurement of new and upgraded systems will ensure ship self-
    defense capability continues to pace the threat. Specifically, in
    fiscal year 2001 additional R&D funds were used to complete NULKA's
    integration with the Advanced Integrated Electronic Warfare System
    (AIEWS), and to develop a detailed infrared (IR) payload deployment
    system. Additional funding also facilitated at sea tactical testing and
    procured 17 more NULKA rounds, for a total of 99 for the year. This
    produced cost savings of $25K per round. In addition, funds were added
    the Phalanx Close-In Weapon System (CIWS). This additional money is
    projected to procure CIWS Block IB upgrade kits. These upgraded weapon
    systems are able to engage the most demanding anti-ship cruise missiles
    in the world today. Additionally, these systems provide anti-terrorism
    force protection capability as they are highly effective against small,
    fast boats and low, slow aircraft. These capabilities demonstrate the
    Navy's commitment to fielding advanced multi-function weapon systems to
    stay ahead of today's threat.
        Since the U.S.S. Cole bombing, the Navy has reprioritized the
    fiscal year 2002 budget to bolster anti-terrorism force protection.
    Some of the measures include an adjustment to the Inter-Deployment
    Training Cycle to expand an already aggressive force protection/anti-
    terrorism training package. This is being accomplished through both
    training and procurement. The fleet has incorporated realistic anti-
    terrorism/force protection scenarios into its training regime. Drills
    are being run routinely and a unit's reaction to various threats
    evaluated continuously throughout the Inter-Deployment Training Cycle
    (IDTC) and during scheduled deployments. In addition, the Navy has
    procured several anti-terrorism/force protection systems to include new
    harbor patrol craft, communications equipment, and Waterside Security
    Systems to provide in depth defense to ships pierside in their
    homeports. Finally, base security has been enhanced through both
    training and procurement to protect government property and personnel.
        The Navy will continue to examine and invest in state-of-the-art
    security and force protection systems. Additionally, the Navy will
    continue to examine and re-evaluate operational doctrine and training
    to identify strengths and/or additional requirements to strengthen our
    current force protection and security posture.

        24B. Senator Sessions. Admiral Kelly, will the AIEWS program
    significantly improve the ship self-defense capability of surface
    ships?
        Admiral Kelly. AIEWS will provide added protection that directly
    contributes to the Navy's AAW Capstone Requirements Document. It
    specifically complies with Defense Planning Guidance Requirement to
    sustain capability against traditional and non-traditional threats.
    AIEWS is essential for defeating mid- and long-term anti-ship cruise
    missile threats as described in National Intelligence Estimates. A
    classified brief on specifics can be provided, but essentially, the
    active increment (Inc) 2 version of AIEWS combined with NULKA will be
    an essential element to defeat all known near- and far-term threats.

        24C. Senator Sessions. If so, what is your plan to field the
    system?
        Admiral Kelly. AIEWS provides the only soft kill capability against
    mid- and far-term anti-ship cruise missiles. A classified brief on
    specifics can be provided. Fleet introduction is on track for fiscal
    year 2004. The current fleet introduction schedule is fiscally
    constrained. The system will be installed on CGs during conversion,
    DDGs, LPD-17s, CVNs and DD 21.

                      SUBMARINE COMMUNICATIONS CAPABILITY

        25A. Senator Sessions. Admiral Engelhardt, submarines are the
    ultimate stealth platform. Submariners are masters of covert
    operations. To a submariner, quiet operations means survival. However,
    Admiral Bowman wrote in the Spring 1999 issue of Undersea Warfare that
    one of the challenges of the 21st century is for submariners to ``get
    connected.'' In addition, Admiral Fages testified before this
    subcommittee that near-real time communications capabilities is
    critical for submarines to send and receive vital information.
        What efforts do you have in progress to improve the communications
    capabilities of submarines and at what rate will you be installing
    those capabilities?
        Admiral Engelhardt. The submarine force has two major
    communications modernization efforts in progress: the submarine
    Wideband C\4\I Modernization Plan (WMP) and the submarine Narrowband
    C\4\I Modernization Plan (NMP). Although these two efforts differ in
    the space-based assets they utilize, they are common in their approach
    to transition all submarine communications from inefficient low-
    bandwidth legacy satellite information exchange service (IXS) to modern
    high-bandwidth commercial standards based Internet Protocol (IP)
    services.
        The submarine Wideband C\4\I Modernization Plan (WMP) synchronizes
    the procurement and installation of the Submarine High Data Rate
    (SubHDR) antenna and below decks extremely high frequency (EHF) medium
    data rate (MDR) terminals with space-based assets (i.e., Milstar II and
    GBS). In addition to EHF MDR and GBS capability, the SubHDR system will
    provide SHF capability.
        EHF MDR provides the submarine the covert, high-bandwidth
    communications critical to success as a stealth platform in support of
    IT21 Battlegroup deployments.
        Wideband C\4\I capability is currently fitted on six SSNs and is
    being fielded at the rate of two SSNs per deploying battlegroup
    (nominally 10 SSNs per year) with all SSNs having this capability in
    early fiscal year 2006.
        The Narrowband Modernization Plan (NMP) utilizes UHF satellite
    communications (SATCOM) to provide submarines access to unclassified
    (NIPRNET) and classified (SIPRNET) internet protocol (IP) services,
    although at a significantly lower data rate than that available through
    the wideband services. Currently, over 20 SSNs have been fitted with
    this capability, and the program plan in place will have all submarines
    fitted with this capability by the end of calendar year 2003.

        25B. Senator Sessions. Admiral Englehardt, are there any key
    communications capabilities that are available but not fully fielded
    that reduce the risk to submariners operating in the littorals?
        Admiral Engelhardt. Yes, specifically EHF and improvements to
    communications at speed and depth capability that are currently under
    development.
        EHF communications provides the submarine covert two-way
    communications important to maintaining a stealth posture while
    operating in the littorals. Currently 35 SSNs have been outfitted with
    this capability. The remaining 20 SSNs are programmed to receive this
    capability as part of the Wideband Modernization Plan (WMP) between now
    and early fiscal year 2006.
        There are currently two major improvements under development that
    will dramatically enhance the submarine's ability to communicate while
    operating submerged in the littorals. The first of these is a
    development effort called on-hull ELF designed to provide the submarine
    with a hull-mounted antenna that will access the communications
    services provided by extremely low frequency. This technology is still
    under development and has significant challenges to overcome, the
    current program plan supports fielding this capability in the fiscal
    year 2007 timeframe.
        The second is a joint Office of Naval Research (ONR)/Defense
    Advanced Research Projects Agency (DARPA) sponsored development effort
    called the multi-element buoyant cable antenna (MBCA). The MBCA is a
    towed communications array that when deployed is flush with the oceans
    surface. The MBCA technology will provide the submarine with two-way
    UHF communications while operating submerged without the need to raise
    a mast above the ocean's surface and risking counter-detection.

                  SUBMARINE INFORMATION PROCESSING CAPABILITY

        26. Senator Sessions. Admiral Engelhardt, the submarine community
    has taken the lead in rapidly inserting improved computing capability
    into their detection and processing systems.
        Are there operational results that would support continuing the
    acoustic rapid commercial off-the-shelf (COTS) insertion programs and
    do you have plans to expand the program to include other systems?
        Admiral Engelhardt. Based on compelling operational performance,
    the Navy has capitalized the successes experienced in the Acoustic
    Rapid COTS Insertion/Advanced Processor Build (ARCI/APB) program, to
    leverage commercial development of COTS processing to enable more
    timely delivery of effective capability across the spectrum of
    submarine electronics. Examples of these real-world ARCI/APB mission
    successes are available from us upon request.
        A key example of our commitment to implement the ARCI/APB process
    is the Combat Control System (CCS), MK 2 Block 1C ECP-4, which will
    introduce a completely COTS-based CCS beginning in fiscal year 2002.
    This upgrade will host software capability improvements, similar to
    ARCI that will be delivered as often as annually using the ARCI-
    developed Advanced Processor Build (APB) process.
        There are two critical issues here:

              (i) Information processing capacity. Littoral waters present
            an overwhelming volume of data to the operator; high contact
            densities operating in close proximity, complex acoustic
            environments, high volume communications and RF spectrum
            emissions. Processing this data provides important and
            revealing information of tactical value as well as serving to
            ensure the safety of our ships operating in these areas.
              (ii) Information management capability. Submarines, like
            other ships, employ several systems to collect data. Processing
            that data into useful information and providing it in near-real
            time to systems, not just onboard but offboard, to the
            battlegroup or to the shore-based analyst, is a force
            multiplier.

        The success of the ARCI program and the APB process to consistently
    deliver capability improvements as well as developing and sharing
    knowledge across all platforms has convinced us of the value of the
    process. We have shared our business plan with both the surface and air
    communities and continue to assist them in developing a similar
    process.

                            MARINE CORPS HELICOPTERS

        27. Senator Sessions. General Nyland, it is clear that vertical
    lift, or rotary wing requirements play a critical role in support of
    USMC operational concepts. While a lot of attention has focused on
    issues associated with the V-22 program, the committee is also aware of
    the ongoing 4BN/4BW program that will upgrade and extend the life of
    existing UH-1 utility helicopters and AH-1 attack helicopters.
        First, please explain how requirements for vertical lift are
    balanced  between the V-22 and the H-46; Second, why is it necessary
    for the Marine Corps to maintain UH-1 and AH-1 aircraft when the Army
    is in the process of retiring these same aircraft, and wouldn't it make
    sense to promote common platforms across the services since they will
    operate in a joint environment?
        What is the status of the 4BN/4BW program for the UH-1 helicopter
    and please include comments on recent press reports of cost growth/
    overruns?
        General Nyland. The Marine Corps has looked closely at inter-
    service commonality (procuring a marinized version of the Army's AH-64
    and the Navy's MH-60) vice intra-service commonality (procuring the
    common to each other AH-1Z and UH-1Y) and determined that the H-1
    Upgrade Program is the most cost effective option that meets the
    operational requirement and fits the existing table of organization (T/
    O) of the Marine Light Attack Helicopter Squadrons (HMLAs).
        While other aircraft mix options meet the Marine Corps' operational
    requirements, the increased cost to procure, maintain and the manpower
    to operate other, uncommon aircraft (e.g. CH-60, AH-64) over the life
    of the program is not a cost-effective alternative for the Marine
    Corps. Additionally, the larger logistics footprint, increased spares
    requirement and especially the increased manpower requirements that
    result from mixed platforms was determined to be unaffordable. Fielding
    two disparate types of aircraft vice two variants of a common aircraft
    will have a negative impact on the Marine Corps' ability to train the
    required number of personnel, deploy aboard amphibious ships and move
    aircraft via strategic airlift.
        The operational and logistical flexibility offered by the 85
    percent commonality between the UH-1Y and the AH-1Z will pay incredible
    dividends for the future combat capability of the Marine Corps. When
    combined with the fact that repeated independent analyses has shown
    this option will save the Department of the Navy procurement and
    operating & support cost over all other options, the H-1 Upgrade
    Program remains the clear choice for the United States Marine Corps.
    The H-1 program will sustain the Marine Corps utility and light attack
    helicopters until the 2015 timeframe giving the Joint Rotorcraft
    Development Strategic Studies Group (JRDSSG) time to identify, develop,
    and field a suitable ``joint'' replacement aircraft.
    Status of the H-1 Program
        The H-1 Upgrades Program will yield the U.S. Marine Corps' next-
    generation attack and utility helicopters, the AH-1Z and the UH-1Y. AH-
    1Z aircraft #1 (Z#1) is the first engineering and manufacturing
    development (EMD) flight test article. Since its first flight on 7
    December 2000, Z#1 has flown over 100 flight hours and logged more than
    250 total rotor turn hours. Testing to date has focused on handling
    qualities, loads, and vibrations in various flight and ground test
    configurations (with varying centers of gravity and gross weights). Z#1
    has already flown beyond the aircraft envelope airspeed and maneuvering
    limits of the currently fielded AH-1W and UH-1N helicopters. Overall,
    Z#1 has demonstrated flight characteristics better than predicted in
    the engineering models and has achieved all these parameters with the
    stability and control augmentation system (SCAS) both on and off. Z#1
    was successfully moved to NAS Patuxent River, MD, via C-5, in an air
    transportability demonstration on 31 March 2001. Z#1 returned to flight
    operations at NAS Patuxent River on 3 May 2001.
        The rest of the EMD flight test aircraft, AH-1Z #2 and #3, UH-1Y #1
    and #2, are production representative and will be configured with
    digital, 1553 compatible glass cockpits as part of their Integrated
    Avionics Suite (IAS). UH-1Y aircraft #1 (Y#1) transferred to the BHTI
    Flight Test Research Facility, Arlington, TX, on 17 June 2001.
    Electrical power was applied for the first time on 26 June 2001 marking
    the beginning of the IAS Functional Test. Y#1 is scheduled for ground
    runs beginning in October 2001 and for its first flight in December
    2001. The remaining three EMD test aircraft are now in the final stages
    of manufacturing and assembly. These aircraft will transfer from Bell
    Helicopter Textron Inc. (BHTI) final assembly to flight test later this
    year. The H-1 Upgrade flight test program operational evaluation
    (OPEVAL) will be complete in 2004 and AH-1Zs/UH-1Ys will begin arriving
    in the operational fleet by 2005.
    Cost growth
        The program reported a cost overrun in October 2000. A program
    deviation report was submitted in January 2001. Funding to the proposed
    new baseline was provided by fiscal year 2002 PBD-113, which realigned
    $189.7M from APN-1 into RDT&E, slipping low rate initial production
    (LRIP) 1 year to fiscal year 2003. However, LRIP quantities were
    increased from 20 to 28, thus preserving the fleet's initial
    operational capability in fiscal year 2006. The new OTB was placed on
    contract on 26 January 2001.

                          LAND ATTACK STANDARD MISSILE

        28A. Senator Sessions. Admiral Kelly, the Navy is currently
    developing a Land Attack Standard Missile (LASM). The General
    Accounting Office report, ``Improved Littoral Warfighting Capabilities
    Needed,'' stated the unit cost of LASM is estimated to be $400,000
    versus the previously estimated cost of $275,000.
        Does the Navy agree with the GAO estimate of the unit cost, if not,
    then what is the updated estimated unit cost of LASM?
        Admiral Kelly. The unit cost goal for LASM, based on fiscal year
    1997 dollars, is $275,000. This price was based on procuring 125
    missiles per year but did not include a then undefined requirement to
    add a Selective Availability Anti-Spoofing Module in the Global
    Positioning System receiver. The GAO report estimated the cost at
    $400,000 based on the current Navy budget for procurement that does not
    buy 125 missiles per year. Additionally, the LASM cost estimating model
    will not be finalized until after Critical Design Review scheduled for
    later this calendar year. The Navy is confident that given sufficient
    procurement dollars and quantities, we will achieve the objective of
    $275,000.

        28B. Senator Sessions. If the Navy estimate of unit cost has risen,
    what impact will that have on the total number LASM that will be
    funded, both in terms of time to fund and total number funded?
        Admiral Kelly. Our unit cost estimate for LASM has not risen. The
    Operational Requirements Document requires achievement of a unit cost
    of $275,000 at a missile procurement rate of 125 missiles per year.
    This cost does not incorporate the Selective Availability Anti-Spoofing
    Module in the Global Positioning System receiver. Costing for that
    option is not complete.
        Our procurement objective for LASM remains 800 missiles. Navy
    intends to procure these as rapidly as funding permits.

        28C. Senator Sessions. Are there submarine plans to expand their
    land attack capability to include other weapons in addition to
    Tomahawk?
        Admiral Kelly. The Submarine Force is procuring alongside the
    Surface Force, a Tactical Tomahawk (TacTom) arsenal. We continue
    investment through our Subtech programs into future strategic concepts
    and warfighting systems.
        Our submarines will expand land attack capability in parallel with
    Joint Warfare doctrine and weapons development. Our Subtech
    organization identified that development of a universal weapons
    encapsulation design for submarine launchers provides submarines with a
    reliable engineering method for deploying premier joint service land
    attack weapons forward with stealth and surprise. Submarine
    architecture is ready for more striking weapons in addition to our
    programmed TLAM and TacToms.
        The Advanced Land Attack Missile (ALAM), Army/Navy Tactical Missile
    (TACMS), and supersonic missile design weapons are examples of the
    combat capabilities that we are considering.

        28D. Senator Sessions. What was the total Navy investment by
    warfare area in the NTACMS program and will the investment leverage
    Navy future land attack systems? If so, how?
        Admiral Kelly. The Navy invested $24 million in the ATACMS program
    from 1994 to 2000. $14 million was used to conduct a demonstration
    flight of the ATACMS Block I missile. Additional money was spent
    determining and improving the ATACMS capability in a Navy version and
    as part of the ALAM analysis of alternatives. ATACMS was not selected
    due to the relatively high cost and insensitivity of propellants and
    warheads. In 1999, Navy requested Congress authorize the termination of
    the NTACMS program and realign the remaining $11.3 million to the Land
    Attack Standard Missile (LASM) effort. $7.4 million was approved for
    LASM pre-Engineering and Manufacturing Development effort for LASM.
    This request also included funding for the Advanced Land Attack Missile
    Analysis of Alternatives (AoA). The AoA is completed, and the report is
    in review.

        28E. Senator Sessions. Is the Navy pursuing programs which would
    give the LASM the capability to kill moving targets? If so, what is the
    estimate of how much Navy investment would be required to include this
    additional capability of LASM?
        Admiral Kelly. Yes. On May 4, 2001, RADM Rodney Rempt, N76, sent a
    letter to Director, Force Development, Office of the Deputy Chief of
    Staff (Army) for Programs (DAPR-FDZ) and Deputy, Systems Management and
    Horizontal Technology Integration (SAAL-ZS) discussing a possible
    demonstration of the Brilliant Anti-Armor (BAT) submunition in the Land
    Attack Standard Missile (LASM). On June 5, 2001, RADM Kelly, N76B, sent
    a letter to Program Executive Offices for Surface Strike and Theater
    Surface Combatants (PEO(S) and PEO(TSC)) requesting development of a
    cost and schedule for conducting the Search and Destroy Armament
    (SADARM) demonstration and/or BAT. The Navy expects to make a decision
    on this demonstration by August 2001.

        29. Senator Sessions. General Nyland, will Navy and Marine Corps
    plans for mine warfare capabilities enable timely access for
    operations?
        General Nyland. Eventually, yes. The objective is unencumbered
    maneuver in the littorals; making mines and obstacles merely a
    nuisance. This is a very difficult undertaking for which there is no
    single answer; therefore, a system of systems approach is required. The
    operational environment is divided into four regions: deep water (200
    ft. and deeper), shallow water (200-40 ft.), very shallow water (40-10
    ft.) and, finally, from the beginning of the surf zone (10 ft.) through
    the beach exit zone. The Navy is responsible for the area from the deep
    water to the landward limit of the Landing Craft Air Cushion (LCAC)
    Landing Zone (CLZ) along seashores, and farther inland where waters are
    navigable from the sea. The Navy has been working to develop and field
    capabilities for the deep and shallow water, and an organic capability
    for the Carrier Battle Group which should reach initial operational
    capability in 2005. In very shallow water, we currently have an
    extremely limited capability with the Very Shallow Water Detachment
    (VSW Det). This capability is made up of Navy SEALs, Explosive Ordnance
    Disposal and reconnaissance marines. The VSW Detachment's capability
    has the potential to improve with the transition of several Office of
    Naval Research (ONR) initiatives to advanced research and development
    during the 2002-2005 timeframe. In the region from the surf zone
    through the Beach Exit Zone (BEZ) we are severely challenged. The
    Marine Corps and the Navy are actively engaged with the ONR to address
    this challenge.

        30. Senator Sessions. Admiral McGinn, our challenge is to review
    the development and procurement of programs to ensure our forces are
    adequately equipped for future operations. The most common parameters
    to use in this type of review are the projected requirements for future
    capabilities versus the program cost and performance indicators.
    Although it is easiest to make evaluations from the perspective of the
    individual program or its specific warfare area, future operations
    require us to broaden our perspective to include joint and coalition,
    as well as, cross-warfare specialty operations.
        The following is a key question which will assist us in our program
    reviews and evaluations:
        What is the Navy's plan for ensuring P-3 and SH-60 aircraft
    capabilities and availability?
        Admiral McGinn. P-3 capability sustainment. The Navy and OSD have
    been analyzing alternatives for sustaining the capability the P-3
    provides since July 2000. Preliminary results of that Analysis of
    Alternatives point to a manned aircraft (i.e., Multi-mission Maritime
    Aircraft (MMA)) as an essential element of the solution. The analysis
    also pointed away from service life extensions (either a complete
    remanufacture or an interim Service Life Extension Program (SLEP)). An
    interim SLEP offers no improvements in operating and support (O&S) cost
    or availability while the remanufacture option that provides limited
    improvements in O&S is estimated to cost nearly as much as a new
    aircraft. As a result, the Secretary of the Navy targeted the 2010-2012
    timeframe for MMA initial operating capability and realigned funds
    previously programmed for SLEP to MMA.
        In addition to manned aircraft, Unmanned Aerial Vehicles (UAV) like
    Global Hawk are being examined as candidates to perform some or all
    missions currently performed by P-3s. That analysis is currently
    planned to complete this fall and is very promising but carries a
    significant resource requirement in addition to MMA.
        As P-3s reach the end of their fatigue life, the Navy plans to
    inspect each airframe and perform repairs. The Navy currently estimates
    that these Structurally Significant Inspections (SSIs) will be adequate
    to extend the service life 600 flight hours or 1 year, whichever occurs
    first. The Navy estimates that as many as six SSIs can be performed
    before the airframe must be retired. This will help bridge the
    capability gap until MMA attains IOC and any UAV solutions can be
    implemented.
        SH-60 capability sustainment. The Navy and OSD have been analyzing
    alternatives for sustaining the capability that the H-60 series naval
    helicopter provides. SH-60B/SH-60F parts obsolescence and aircraft
    fatigue life are currently being studied.
        As SH-60Bs reach the end of their fatigue life, the Navy plans to
    inspect each airframe and perform repairs as required. The Navy
    currently plans to extend the service life of these airframes from
    10,000 to 12,000 hours. At current usage, this effectively postpones
    retirement by approximately 4 years, with the first SH-60B retiring in
    the fiscal year 2005 timeframe.
        The capabilities programmed for the SH-60R remains valid for the
    sustainment of Maritime Antisubmarine Warfare and Anti-Surface Warfare
    dominance. However, a cost analysis of the acquisition strategy of the
    SH-60R pointed away from a complete remanufacture as was previously
    planned. The remanufacture option provided limited improvements in O&S
    and cost nearly as much as a new aircraft. As a result, the Navy's
    Acquisition Executive has approved a ``build new'' acquisition
    strategy.

        31. Senator Sessions. Is the Marine Corps' plan for
    recapitalization and modernization adequate to support the tempo and
    nature of expected operations?
        General Nyland. The Marine Corps has recapitalization and
    modernization plans in place that will adequately support the tempo and
    nature of expected operations. We have a viable plan to field the new
    and improved equipment we require in order to support our mission,
    however, I am concerned about the slow pace of our modernization
    efforts. While our Nation's current strategy and force structure may
    change, it is clear that a sustained increase in resources is required
    to yield the operational strength, flexibility, and resilience we
    envision in both the short and the long-term.
        As described in my testimony, the Marine Corps expects the future
    to be ``a time of great uncertainty and instability.'' The capstone
    concept of Expeditionary Maneuver Warfare (EMW) prepares the Corps to
    meet the challenges and opportunities of a rapidly changing world by
    setting an ``axis of advance'' for future enhancements. The
    recapitalization and modernization efforts are aligned with EMW and
    when implemented, will bolster our ability to apply the emerging
    principles of modern warfare--speed, stealth, precision, and
    sustainment.
        Our recapitalization and modernization plan relies on the
    synergistic convergence of many programs, to include the MV-22 Osprey
    tilt-rotor aircraft, Advance Amphibious Assault Vehicle (AAAV), Joint
    Strike Fighter (JSF), Medium Tactical Vehicle Replacement (MTVR),
    Logistic Vehicle Systems Replacement (LVSR), Lightweight 155mm Howitzer
    (LW155), and the San Antonio-class Dock Landing Ship (LPD-17). These
    programs will enhance the Corps' firepower, mobility, mission
    flexibility, and are integral to the concept of power projection. The
    Marine Corps has carefully plotted a course for the future. If our
    currently planned programs are properly funded, we will see a
    convergence of transformation and modernization capabilities in our
    Marine Air Ground Task Forces (MAGTFs) starting in 2008 that will
    revolutionize our expeditionary capabilities.
        To accelerate the modernization programs required to maintain the
    technological advantage we currently enjoy on the battlefield, reduce
    our operating costs, and allow marines to spend more time doing what
    the American public expects of them--train and deploy in defense of our
    vital national interests; the Marine Corps requires an additional $1.8
    to $2.0 billion sustained for the next 8 to 10 years. The fiscal year
    2002 requirement has been reduced to approximately $1.4 billion as a
    result of increases provided by the administration during wrap-up of
    the fiscal year 2002 Amended President's Budget. With your consistent
    support we can achieve our goals and provide our Nation with a Marine
    Corps that will be well on the road to dramatically transformed
    expeditionary capabilities.

        32. Senator Sessions. General Nyland, are there adequate
    capabilities to support joint and coalition operations, as well as,
    operations among diverse Navy and Marine Corps units?
        General Nyland. The Marine Corps, as a matter of course, is always
    transitioning for the future. The recent publication of Marine Corps
    Strategy 21 (MCS 21) and the impending publication of our capstone
    operational concept, Expeditionary Maneuver Warfare, outline the
    capabilities that the Marine Corps will need to maintain our
    operational edge in the future.
        MCS 21 states, ``With our experience in coordinating the
    multidimensional elements of our air-ground task forces and our close
    relationship with the Navy, Marines instinctively understand the need
    for and the logic and synergy behind, joint and multinational
    operations . . . and, as part of or leading a joint or multinational
    force, defeat our Nation's adversaries.'' The Marine Corps has
    capabilities today to enable our scalable air-ground task forces to
    support joint and coalition operations, as well as, operations among
    diverse Navy and Marine Corps units. Further, it has identified and is
    investing in the capabilities necessary to continue our ability to do
    this in the future. Critical to our efforts in obtaining these
    capabilities is the support of this committee.

        33. Senator Sessions. Admiral McGinn, are there adequate
    capabilities to support joint and coalition operations, as well as,
    operations among diverse Navy and Marine Corps units?
        Admiral McGinn. We have made tremendous strides in continuing to
    improve the Navy--Marine Corps ability to fully conduct joint and
    coalition operations with our sister Services and allied nations. Each
    new program that is under consideration for fielding is put under the
    microscope for its ability to operate in a joint environment.
    Considerations of full spectrum interoperability, communications
    networks, bandwidth, common support systems, maintenance, etc. are all
    considered prior to proceeding with a new acquisition program. These
    joint and coalition interfaces are further validated and proven through
    an extensive experimentation and wargaming regime--including recent
    Fleet Battle Experiments, U.S. Naval exercises (RIMPAC), and Global
    Wargames to name just a few. Our aggressive Navy/Air Force Warfighter
    talks vet not only programs and equipment, but more importantly
    tactics, techniques and procedures for joint operations.

                                   LASM/ALAM

        34. Senator Sessions. Admiral McGinn, what is the status of the
    Navy's plan to provide land attack weapons in support of joint
    operations?
        Admiral McGinn. Navy is developing capabilities in a two phased
    approach to meet Naval Surface Fire Support and Naval Surface Strike
    mission requirements in support of joint operations. Navy focused its
    near- and far-term development of these capabilities largely on Marine
    Corps requirements. These requirements were stipulated in a letter
    signed by Lieutenant General Rhodes, Commanding General, Marine Corps
    Combat Development Command. This letter clearly identified criteria for
    meeting USMC warfighting requirements. The Commandant of the Marine
    Corps supports Navy's plan to execute this two phased approach of near-
    and far-term capabilities to support Marine Corps Requirements. Navy
    recognizes that these capabilities are not exclusively for the use of
    the Marine Corps. Because of the increased firepower, responsiveness,
    accuracy, lethality, and power projection capability, Navy will be a
    significant contributor to any future conflict.
        A very critical command and control system we are developing in the
    near-term, the Naval Fires Control System (NFCS), will be the mission
    planning system used for all land attack missions. As part of NFCS
    development, we are working with the Army to incorporate our weapon
    system parameters into Army's Advanced Field Artillery Tactical Data
    System (AFATDS). AFATDS is the battlefield command and control system
    that will be used by both Marine Corps and Army to seamlessly control
    designation and coordination of fire support targets. NFCS and AFATDS
    will have full digital connectivity and ability to pass target
    requirements between weapon platforms, regardless of service.
        The Navy is developing Extended Range Guided Munition (ERGM) as the
    near-term gun-fired fire support weapon. ERGM is a GPS/INS-guided,
    rocket-assisted, 5,, projectile fired from the 5,,/62 Mk 45 Mod 4 gun.
    ERGM will achieve an objective range of 63nm with lethality, accuracy,
    and responsiveness commensurate with Marine Corps needs in the near-
    term, fiscal year 2005.
        Land Attack Standard Missile (LASM), which has a range of 150nm,
    meets all USMC requirements in accuracy, lethality and responsiveness
    for 57 percent of the DD 21 NSFS target set. LASM will field in fiscal
    year 2004. To fully meet Marine Corps Land Attack Missile requirements
    for Naval Surface Fire Support (NSFS), given a finite budget, Navy
    plans to develop the Advanced Land Attack Missile (ALAM) capability
    providing required range, lethality, accuracy, and responsiveness for
    the full DD 21 target set. ALAM will be fielded coincident with DD 21.
        Our far-term approach is to develop a more robust set of NSFS
    weapon systems for DD 21. These systems include Advanced Gun System
    (AGS) with associated Long Range Land Attack Projectile (LRLAP) (which
    has a range of 100nm) and Advanced Land Attack Missile (planned range
    of 200-300nm).
        Fielding of our near-term capabilities is critical to development
    of the Command and Control (C\2\); tactics, techniques, and procedures
    (TTP); and Concept of Operations necessary to execute the land attack
    mission in a joint warfighting environment. Our capabilities emerging
    with our far-term strategy will benefit from the development of the
    C\2\ and TTP pioneered with our near-term solution.
                                     ______

                    Questions Submitted by Senator Bob Smith

        35. Senator Smith. Admiral McGinn, it is my understanding that the
    Navy is trying to replace its current minesweeping helicopter, the MH-
    53E. The primary reason that the Navy is looking for a replacement is
    because the MH-53E is simply too expensive to operate--some maintenance
    estimates run as high as 44 hours of maintenance for every hour the MH-
    53E is in the air. It appears, however, that the Navy has focused
    solely on the H-60 helicopter as the only replacement platform without
    considering other helicopters. I am concerned because, despite the
    Navy's and the manufacturer's best efforts, it appears that the H-60
    will be unable to perform the required role of minesweeper no matter
    what modifications are made to the aircraft.
        Has the Navy considered the possibility of using other existing
    rotary wing aircraft, besides the MH-60, to replace the MH-53E? If not,
    why not?
        Admiral McGinn. The Navy's Helicopter Master Plan to reduce the
    number of existing helicopter models from eight down to two (SH-60R and
    MH-60S) type-models will realize significant maintenance, training and
    supportability savings while providing increased capability in a
    variety of required warfare disciplines, including Airborne Mine
    Countermeasures (AMCM). The introduction of an AMCM-capable MH-60S will
    correct a current capability shortfall by providing the carrier battle
    group (CVBG) and the amphibious ready group (ARG) an organic airborne
    mine countermeasures (OAMCM) defense against the threat of sea-mines.
        The Navy is confident that the MH-60S will meet all required OAMCM
    key performance parameters contained in the CNO-approved AMCM
    Helicopter Operational Requirements Document (ORD). This confidence is
    based upon the successful results of a recently completed series of
    AMCM mission suitability flight tests conducted on the prototype YCH-
    60. The AMCM suitability tests comprised three distinct phases: Phase I
    & II flight testing, completed between Oct. 1999-Jan. 2000, validated
    the structural and flight safety limits of the MH-60S helicopter to
    perform the AMCM tow mission. In August 2000, ASN (RDA) approved
    initial production of AMCM modified MH-60S helicopters based upon the
    positive results of the Phase I & II AMCM suitability flight testing.
    Final Phase III flight testing, completed in October 2000, demonstrated
    successful employment of the next generation AN/AQS-20 towed underwater
    minehunting sonar system from the YCH-60 down to operational depths and
    speeds required in the AN/AQS-20 ORD.
        It is also important to note that only two (AN/AQS-20 and Organic
    Airborne Surface and Influence System (OASIS)) of the five next
    generation OAMCM sensors systems currently in development will be towed
    by the MH-60S helicopter. The remaining three OAMCM systems (Rapid
    Airborne Mine Clearance System (RAMICS), Airborne Laser Mine Detection
    System (ALMDS), and Airborne Mine Neutralization System (AMNS)) are
    non-tow systems that are mounted directly to the helicopter airframe.
    These three systems will be employed in a manner similar to current H-
    60 operational flight envelopes.
        Finally, a determination regarding the retirement date of the MH-
    53E as the Navy's dedicated AMCM or heavy-lift helicopter platform has
    not been made. The OAMCM capability provided by the MH-60S is not a
    replacement for the dedicated MCM mission or dedicated mine
    countermeasures forces, but rather a needed expansion of an operational
    capability to counter an existing threat. Dedicated MCM forces,
    including the MH-53E, are required to support current CINC warfighting
    OPLANS. The Navy is currently evaluating the requirement to maintain a
    dedicated MH-53E based AMCM and heavy-lift capability beyond 2010.

        36. Senator Smith. Admiral McGinn, a number of military and
    government sources have emphasized the need for training with live
    ordnance. While I understand the value of ``hands on'' training before
    we send our service members in harm's way, no one has explained, in
    quantifiable terms, the value associated with training with and
    handling live ordnance.
        Why is it necessary to train with live ordnance and maintain such
    facilities as Vieques?
        Admiral McGinn. Beyond the psychological value/realistic training
    quality of using live ordnance (``train as you will fight'' issue),
    other benefits accrue in the entire weapon delivery chain, from ship
    weapons magazine to ordnance on target. As an example, for Naval
    aviation training purposes, Aviation Ordnance men are required to
    adhere to strict radiation emissions standards and other weapon
    handling safety requirements. They must properly wire the weapon fuses
    and fins and precisely dial in fuse settings according to a load plan
    that is usually submitted in a time-constrained environment. These fuse
    settings are determined by the strike planner or weaponeer--
    occasionally an intelligence officer, usually the aircrew (pilot or
    other crewmember) who will drop the weapon. During the aircrew's pre-
    flight inspection, they must determine whether the settings relayed to
    the ordnance handlers via the load plan were correctly set in the
    weapon and fuse, and that the fuse and bomb fin wiring will allow the
    weapons panel switches in the aircraft to cause the desired post-
    delivery effect on the weapon. For the airborne training portion and
    actual employment, the pilot must fly very precise parameters to ensure
    that the bomb safely separates from the aircraft before arming, and
    that it has sufficient time after arming to detonate as desired (either
    on impact or at a pre-determined height above the ground, depending on
    the type of fuse, and the settings discussed above). Surface Ship and
    Submarine Ordnance have similar requirements that are not tested in an
    end-to-end manner when inert ordnance is substituted for live ordnance.
        In the shipboard environment where the gun crew must deliver
    ordnance to a precise point in support of forces ashore, it is critical
    that all aspects of the fire support team be coordinated during
    training scenarios. The use of live-fire ranges provides the only
    scenario approaching real world operations that allows the complete
    decision chain from the marine issuing a call-for-fire to the ship
    firing their weapon. Currently, our fire support weapons are centered
    on the 5,,/54 Mk 45 Mod 1&2 gun. The range of current projectiles is
    well within the visual horizon, where the firing ship and supported
    ground unit can see each other and yet the necessity to conduct live-
    fire training events with this system is vitally important. In the very
    near-term, we will field weapon systems that are capable of ranges
    exceeding the visual horizon. The issues surrounding the safe
    application of this fire support are even more complex than the systems
    we have now. Live-fire ranges are the only method that gives the entire
    firing team the opportunity to ``train as we fight.''
        ``Blue Bomb Mentality'' (Inert ordnance is usually painted blue) is
    a condition where the entire team--weapon magazine to target area
    delivery--may get complacent by working exclusively with inert weapons.
    None of the above mentioned risk reduction/reliability improvement
    procedures are employed with inert bombs, for example--no hazard of
    bomb detonation from emissions radiation, no fuses or wires for the
    ordnance handlers to set, no pre-launch inspections other than to check
    the physical presence and security of the bomb on the aircraft/weapon
    in its launcher, and no detonation, regardless of how precise or
    imprecise the delivery profile. In the excitement and pressure of
    actual combat operations, failure to properly conduct these live
    ordnance procedures--usually due to a lack of training and familiarity
    with actual ordnance--has been cited in most incidents of weapons
    reliability/mission failures and ordnance related mishaps.
        In the excitement and pressure of actual combat operations, failure
    to properly conduct live ordnance procedures--usually due to a lack of
    training and familiarity with actual ordnance--has been cited in the
    most incidents of weapons reliability/mission failures and ordnance
    related mishaps.
        Combined arms, live-fire training exercises on Vieques provides the
    Expeditionary Battle Force a ``full dress rehearsal'' of all of its
    components functioning as one force--one team. Live-fire training
    enables the battle force commander to refine their tactics, techniques,
    and procedures (TTP). It allows them to exercise synchronization of
    weapons delivery with ground force movement and conduct final quality
    assurance checks at all levels of the battle group under conditions as
    near to combat as possible. The benefits of this type training are
    immeasurable for all members and units of the force; providing
    realistic training and evaluation of a successful ground maneuver
    supported by naval fires and close air support and the learning points
    that could preclude fratricide. Facilities such as Vieques provide U.S.
    deploying forces critical and unique opportunities to conduct full
    scale planning and execution of combat operations, (e.g., amphibious
    assaults supported by naval battle group air and surface fires in a
    single location). The distracters inherent in this complex combat
    environment can be overwhelming. Actual live-fire practice forces the
    weapons delivery chain to break non-live-fire training habits that are
    essential to successful individual/unit combat performance. (e.g.,
    operating arming switchology for the first time, adhering to
    appropriate safety procedures, fighting the tendency to watch for
    weapon launch/light-off and detonation) while being potentially
    targeted by enemy weapons fire is an unrealistic expectation.
    Consequently, Vieques training alternatives for forward deploying
    forces are inferior, nonrealistic, and piecemeal.
        The Vieques training range provided optimal live ordnance training
    prior to the agreement with the Government of Puerto Rico to use only
    inert ordnance. Vieques offers the most tactically realistic air-to-
    ground training for Navy airwings, naval surface fire support and
    integrated combat training for the Navy and Marine Corps forces at the
    present time.
                                     ______

                  Questions Submitted by Senator Susan Collins

                                     DD 21

        37A. Senator Collins. Admiral McGinn, during the hearing, Navy and
    Marine Corps witnesses stated that: (1) Naval Surface Fire Support
    (NSFS) will be a key requirement for Naval and Marine Corps operations
    in the future; (2) the 155mm Advanced Gun System (AGS) would provide
    the sustained fire support the Marine Corps requires; and (3) DD 21 is
    the only platform that the AGS will be equipped/deployed on.
        Given those statements, is there an immediate requirement for
    fielding DD 21?
        Admiral McGinn. Yes. DD 21 will be critical to the Navy's ability
    to satisfy U.S. Marine Corps requirements for Naval Surface Fire
    Support (NSFS) in support of Operational Maneuver From the Sea OMFTS)
    and Ship to Objective Maneuver. Current systems lack the range,
    accuracy, responsiveness, and lethality to support USMC requirements.
        In order to meet Marine Corps requirements for naval surface fires,
    the Navy is developing a more robust set of NSFS weapon systems for
    installation on DD 21. These weapon systems include the 155mm Advanced
    Gun System (AGS) and the Advanced Land Attack Missile (ALAM), which is
    in the concept definition phase. The 155mm gun with ``fully automated''
    ammunition handling system and a family of munitions/propelling charges
    will achieve ranges of up to 100 nautical miles. AGS will provide high
    rate-of-fire (approximately 12 rounds per minute) with a magazine
    capacity sufficient in size to meet Marine Corps' NSFS requirements for
    Operational Maneuver From the Sea. These capabilities will allow DD 21
    to deliver ordnance affordably and at substantially greater ranges
    inland against the enemy.

        37B. Senator Collins. Further, what are the other valid Navy and
    Marine Corps requirements/missions that DD 21 is expected to fill?
        Admiral McGinn. The general mission of the DD 21 as defined in the
    Mission Needs Statement (MNS) is ``to provide independent forward
    presence and operate as an integral part of joint and allied maritime
    expeditionary warfare operations.'' More specifically, the mission is
    to carry the war to the enemy through offensive operations: (a) by
    being able to launch and support precision strike weapons and to
    provide firepower support for amphibious and other ground forces, and
    (b) by protection of friendly forces from enemy attack through the
    establishment and maintenance of battlespace dominance against theater
    missile, air, surface and sub-surface threats.
        The DD 21 Concept of Operations, the DD 21 Design Reference
    Mission, and the 2000 Surface Combatant Force Level Study (SCFLS), all
    require the ship to perform a number of missions as a multi-mission
    surface combatant focused on land attack and maritime expeditionary
    warfare in support of Theater and Joint Force Commanders, capable of
    conducting independent operations in all environments. These missions
    consist of an ability to contribute to the following:

             Land Attack (Precision Strike, Interdiction, Naval
            Surface Fire Support)
             Maritime Expeditionary Warfare (Local Area Defense,
            Antisubmarine Warfare (ASW))
             Forward Presence and Deterrence
             Operations Other Than War (OOTW)

        Specific roles assigned to the DD 21 in the Concept of Operations,
    Design Reference Mission, and Surface Combatant Force Level Study
    include:

             Land Attack engagements;
             Air Warfare
             Antisubmarine Warfare (ASW)
             Mine Warfare (MIW) employing In-stride Mine Avoidance
            system
             Support of Special Operations Force (SOF) forces
             Small boat engagements
             Underway Replenishment (UNREP)
             Vertical Replenishment (VERTREP)
             Helicopter/Unmanned Aerial Vehicle (UAV) operations

        38. Senator Collins. Admiral McGinn, although a program should not
    live or die based on its use of leap-ahead technologies, it is apparent
    by reviewing public information made available by the DD 21 industry
    teams that both designs include leap-ahead technologies for the
    program. Can you describe for the committee what leap-ahead
    technologies the Navy intends to pursue in DD 21?
        Admiral McGinn. DD 21 will bring many unique capabilities to the
    fleet including the following:

             Land attack warfare: DD 21 will field the 155mm
            Advanced Gun System (AGS), which has the range and lethality to
            meet USMC/JROC requirements for gunfire support for forces
            ashore. The 155mm gun with a ``fully automated'' ammunition
            handling system and a family of munitions/propelling charges
            will achieve ranges of up to 100 nautical miles. AGS will
            provide high rate-of-fire (approximately 12 rounds per minute)
            with a magazine capacity sufficient in size to meet USMC
            operational requirements.
             Integrated Power System (IPS)/Electric Drive: DD 21
            will have all-electric architecture that provides electric
            power to the total ship (propulsion and ship service) with an
            integrated plant. Benefits include reduced operating costs,
            improved warfighting capability, and architectural flexibility.
             Optimized Manning through Automation: Use of
            initiatives, such as advanced system automation, robotics,
            human-centered design methods, and changes in Navy personnel
            policies will allow DD 21 to meet mission requirements with a
            significantly reduced crew size of 95-150 sailors while
            improving the sailor's quality of service.
             Affordability: DD 21's streamlined acquisition
            approach seeks maximum design innovation and flexibility, and
            significant cost savings through the use of advanced commercial
            technologies and non-developmental items. By requiring the
            program to achieve a procurement cost objective of $750 million
            (fiscal year 1996 dollars) for the fifth DD 21 at each
            shipyard, and to support an operating cost objective of $2,700
            per operating hour, the Navy has contractually established the
            ability to hold down cost while maximizing warfighting
            capability.
             New Radar Suite (Multi-Function Radar (MFR)/Volume
            Search Radar (VSR)): MFR provides DD 21 and other applicable
            surface combatants with affordable, high performance radar for
            ship self-defense. The MFR will achieve a level of force
            protection that greatly enhances ship defense capability
            against all threats envisioned in the littoral environment. VSR
            provides DD 21 and other applicable surface ships with an
            affordable, high performance air search radar. Both MFR and VSR
            will dramatically reduce manning and life-cycle costs
            associated with multiple systems that perform these functions
            today.
             Survivability: DD 21 will lead the Navy in the
            development of system and protection concepts that reduce
            vulnerability to conventional weapons and peacetime accidents
            under reduced manning conditions. Development areas include
            damage control computer-based systems that provide rapid
            systems restoration, fire protection devices that improve
            probability of survival with a reduced crew ship, and ship
            protection concepts that reduce magazine and commercial
            equipment vulnerability.
             Stealth: DD 21's design will reduce the acoustic,
            magnetic, infrared and radar cross section signatures compared
            to the DDG-51 class and make the ship less susceptible to mine
            and cruise missile attack in the littoral environment.

                           NAVAL SURFACE FIRE SUPPORT

        39. Senator Collins. Admiral McGinn and General Nyland, the Navy
    has in recent years turned its attention toward influence ashore in the
    littorals, with the intent to provide Naval Surface Fire Support for
    the Marine Corps and Army. The need for fire support has been
    articulated in a letter from General Rhodes, the Commanding General of
    the Marine Corps Combat Development Command, to the Chief of Naval
    Operations dated June 16, 1999. Additionally, a recent GAO report dated
    May 2001 entitled ``Improved Littoral Warfighting Capabilities
    Needed'', states that currently we are greatly lacking in the area of
    fire support and have a need to meet this requirement today.
        Can you confirm this need/requirement? Furthermore, can you
    elaborate on which weapons and programs are in the works to meet this
    vital defense requirement? I also ask how, and on what platforms, these
    weapons/capabilities will be deployed?
        Further, if DD 21 is mentioned as the platform, which I suspect it
    will be, Admiral/General, in what ways do you see DD 21 as Naval
    Surface Fire Support enabler for the naval fleet of the future?
        Admiral McGinn. Yes, I do confirm this need/requirement. We realize
    that sea-based Naval Surface Fire Support (NSFS) will be required to
    support joint operations, and integrate with expeditionary forces
    (whether Marine, Army, or other) operating over an extended littoral
    battlespace. In order to meet requirements for Naval Surface Fires in
    support of Operational Maneuver From the Sea/Ship to Objective
    Maneuver, the Navy is developing a variety of weapon systems that
    provide the required range, lethality, accuracy, and responsiveness.
    Near-term initiatives include improving existing 5,, guns, developing
    an extended range guided munition, developing a land attack missile,
    leveraging/integrating C\4\I systems to support NSFS and assessing
    advanced gun technology. The MK 45 Mod 4, 5,,/62 caliber gun mount is a
    modification of the existing MK 45 Mod 2 medium caliber, 5,,/54 naval
    gun. This modification will allow the gun to support longer range
    engagements. The first gun has been installed aboard U.S.S. Winston S.
    Churchill (DDG-81). She completed her A/B trials in July 2000. The gun
    has been installed aboard DDGs-81-86 and 88 as of May 2001. This gun
    system will IOC in fiscal year 2002. This gun system is funded for
    installation in DDGs-81-107. It will also be back fit on the CGs a,
    part of the cruiser conversion program and is a potential backfit to
    DDGs-51-80. The Extended Range Guided Munition (ERGM) deployed from the
    5,,/62 caliber gun system has an objective range of 63 nautical miles.
    Support to ground combat operations takes a significant step forward
    with the introduction of the ERGM with its enhanced capabilities of
    greater accuracy, greater coverage, and better control. The Land Attack
    Standard Missile (LASM), which is a modification of the Navy's SM-2
    area air defense weapon, will provide responsive fire support out to
    150 nautical miles. Although LASM would normally be employed to provide
    deep supporting fires, it can also be considered for use against high
    payoff or immediate threat targets in close proximity to friendly
    forces. LASM will be deployed from Aegis cruisers and destroyers. We
    are also acquiring a new generation Tactical Tomahawk cruise missile
    capable of attacking strategic, operational, and tactical targets.
        Our long-term approach is to develop a more robust set of NSFS
    weapon systems for installation in DD 21. These weapon systems include
    the Advanced Gun System (AGS), which will fire a 155mm ERGM to an
    objective range of 100nm. Another system is the Advanced Land Attack
    Missile (ALAM) which is in the concept development phase and will have
    an objective range out to 300nm. These capabilities are being developed
    to meet all NSFS requirements for Operational Maneuver From the Sea/
    Ship to Objective Maneuver and will allow our combatants to remain
    over-the-horizon and still deliver ordnance at substantially greater
    ranges inland against the enemy.
        DD 21 will have the capacity to carry the variety and volume of
    offensive, precise firepower that will enable our United States Marine
    Corps and light mobile United States Army forces to complete their
    littoral missions. These systems include the Land Attack Standard
    Missile (LASM), Tactical Tomahawk Cruise Missile (TACTOM), the Advanced
    Gun System (AGS) firing the Long Range Land Attack Projectiles (LRLAP)
    to distances of 100 miles, and will have the growth potential to
    include the Advanced Land Attack Missile (ALAM) and other emerging
    technologies. DD 21's ability to deploy a high volume of precision
    guided munitions will provide Joint Force Commanders with significantly
    improved ranges, accuracy, volume, firing rates and response times
    compared to the current generation of Naval Surface Fire Support (NSFS)
    systems.
        General Nyland. The Marine Corps requirements for naval surface
    fire support, as stated in General Rhodes' June 1999 letter, remain
    valid. Recognizing this, the Navy has developed a two-phased approach
    for meeting these requirements.
        In the near-term, the Navy has several programs that are intended
    to provide an enhanced NSFS capability to meet immediate needs. Key
    programs in the near-term include the 5,,/62 gun, the Naval Fires
    Control System, the Land Attack Standard Missile, and the Extended
    Range Guided Munition. While these programs will not fully meet the
    Marine Corps' NSFS requirements regarding weapons range and lethality,
    they will provide a significant improvement over the current
    capability.
        These enhanced Land Attack Warfare capabilities will be deployed
    aboard two separate classes of ships. Beginning with DDG-81 (DDG-51-
    class destroyer), all new construction of DDGs will include the 5,,/62
    gun which is capable of firing the Extended Range Guided Munition.
    Additionally, these ships will be either back- or forward-fitted with
    the Naval Fires Control System and Land Attack Missile Fire Control,
    which will enable a direct interface with the Marine Corps' Advanced
    Field Artillery Tactical Data System and provide the software necessary
    to fire the Land Attack Standard Missile. These capabilities will also
    be installed aboard a number of CG-47-class ships that have been
    designated to receive Land Attack upgrades via the Cruiser Conversion
    Program.
        In the far-term, the Navy plans to fully meet the Marine Corps NSFS
    requirements with the DD 21 Zumwalt-class destroyer, which will be
    armed with two 155mm Advanced Gun System turreted guns and the Advanced
    Land Attack Missile.
        DD 21 will become the NSFS enabler for the naval fleet of the
    future in several aspects. The 155mm Advanced Gun System is being
    developed specifically for the DD 21, with possible application for
    follow-on ships such as the CG 21. With an expected total magazine
    capacity of 1500 Long Range Land Attack Projectiles, the DD 21 will
    provide a level of sustained, long-range, precision fires that will not
    be possible with the DDG-51 or CG-47 classes of ships. In comparison,
    the maximum capacities of these classes of ships in terms of extended
    range munitions represent 15.3 percent and 17.8 percent of the DD 21
    magazine capacity. With a family of precision-guided and ballistic
    ammunition for the Advanced Gun System, and a family of general use and
    specialty warheads for the Advanced Land Attack Missile, the Navy's DD
    21 will fully meet the Marine Corps range and lethality requirements
    for NSFS.
        The DD 21 will also deploy a Multi-Function Radar that will be
    capable of detecting the fires of the enemy's shore-based artillery,
    rockets and mortars and extrapolating the position of the firing unit
    with a degree of accuracy that will enable the ship to conduct counter-
    battery fires in support of forces maneuvering both on land and at sea.
    This capability is critical for ensuring the freedom of maneuver of
    expeditionary forces.

        40. Senator Collins. General Nyland and General Whitlow, Naval
    Surface Fire Support (NSFS) is key to Marine operations. General
    Rhodes, in his letter to the Chief of Naval Operations in June 1999,
    states that the Marine Corps requires all NSFS weapons systems be
    easily sustainable via underway replenishment. The availability of
    friendly ports to conduct such difficult operations as reloading VLS
    launchers cannot be counted upon in a highly uncertain future.
    Generals, if this is true, that all NSFS weapons systems will be easily
    sustainable via underway replenishment, will it be a requirement for DD
    21?
        General Whitlow. The DD 21 Operational Requirements Document (ORD)
    includes a requirement for underway replenishment. DD 21's capabilities
    with regards to specific weapons systems will be dependent upon the
    winning design.
        Currently, surface ships possess the capability to replenish gun
    systems at sea. Some existing surface combatants have the ability to
    replenish Standard Missile at sea. No existing surface ships are
    capable of replenishing Tomahawk missiles at sea.
        General Nyland. The Operational Requirements Document for DD 21
    states, ``DD 21 will have the capabilities and facilities which support
    mission execution, including: . . . replenishment at sea.'' The manner
    in which the requirement will be satisfied, and to what extent, will be
    contained within the proposals submitted by the competing design teams.
        Currently, the process for selection of a design team has been
    suspended pending the completion of the on-going defense reviews. Until
    the down-select process resumes, and after the best-and-final-offers
    from the industry teams are reviewed, we will not know the manner or
    extent to which this requirement will be met.

                                  P-3 AIRCRAFT

        41A. Senator Collins. Currently the P-3 aircraft is an integral
    part of our current war plans, as the primary patrol, reconnaissance
    and surveillance aircraft. As you are aware, however, the average age
    of the P-3 platform is roughly 25 years old. While aircraft avionics
    upgrades have kept the plane relevant and viable in today's threat
    environment, the airframe itself is reaching the end of its useful
    service life. I am aware that an ongoing service life assessment
    program is studying the airframe fatigue life issue and that there is,
    currently, an ongoing Analysis of Alternatives underway to look at the
    Multi-mission Maritime Aircraft (MMA) as a follow-on to the P-3
    program. That fact that the CINCs rely on the P-3 to perform their
    roles and mission on a daily basis clearly means that we need to, in
    the near-term, look in to the MMA program and/or actively pursue
    options to extend the service life of the current airframe.
        Admiral McCabe, what are your thoughts on the MMA program as a
    follow-on contender for the Navy patrol and reconnaissance missions?
        Admiral McCabe. The Navy and OSD have been analyzing alternatives
    for sustaining the capability the P-3 provides since July 2000.
    Preliminary results of that Analysis of Alternatives point to a manned
    aircraft (i.e., Multi-mission Maritime Aircraft (MMA)) as an essential
    element of the solution. The analysis also pointed away from service
    life extensions (either a complete remanufacture or an interim Service
    Life Extension Program (SLEP)). An interim SLEP offers no improvements
    in operating and support (O&S) cost or availability while the
    remanufacture option that provides limited improvements in O&S is
    estimated to cost nearly as much as a new aircraft. As a result, the
    Secretary of the Navy targeted the 2010-2012 timeframe for MMA initial
    operating capability and realigned funds previously programmed for SLEP
    to MMA. He also emphasized the potential of leveraging off commercial
    derivatives for MMA. We are enthusiastic that we can address O&S cost
    issues while improving availability and modernizing many of the
    subsystems.

        41B. Senator Collins. Admiral McGinn, do you agree that the
    Department needs to actively pursue and apply resources in the near-
    term to ensure that we can continue the P-3 reconnaissance operations
    without impacting readiness, as these aging aircraft reach the end of
    their useful service life?
        Admiral McGinn. I agree that the Department needs to pursue a
    variety of ways to pursue and apply resources to sustain and improve
    the capability P-3s provide.
        In the near-term, we will inspect airframes to postpone retirements
    as long as possible. As P-3s reach the end of their fatigue life, the
    Navy plans to inspect each airframe and perform repairs. The Navy
    currently estimates that these Structurally Significant Inspections
    (SSIs) will be adequate to extend the service life 600 flight hours or
    1 year, whichever occurs first. The Navy estimates that as many as six
    SSIs can be performed before the airframe must be retired. This will
    help bridge the capability gap until MMA attains IOC and any UAV
    solutions can be implemented.
        In addition to manned aircraft, Unmanned Aerial Vehicles (UAV) like
    Global Hawk are being examined as candidates to perform some or all
    missions currently performed by P-3s. That analysis is currently
    planned to complete this.

                           LPD-17 SEALIFT CAPABILITY

        42. Senator Collins. General Whitlow, it is my understanding that
    in order to provide flexible response and assured access, our military
    plans require the capability to rapidly deploy the equivalent of 3.0
    Marine Expeditionary Brigades (MEB), which was first documented in the
    1990 Department of the Navy Lift 2 Study. It is also my understanding
    that each year since, the Defense Planning Guidance has directed the
    Navy to budget for 2.5 MEB lift requirement.
        This says to me that we have been budgeting for an inherent short
    fall for this amphibious lift capability.
        What is the current lift capability and what are the operational
    implications of this shortfall? To what extent does the procurement and
    the construction of LPD-17 address the shortfall in lift?
        General Whitlow. Amphibious lift is measured using the five ``lift
    finger prints'': Troops, Cargo, Vehicles, Aircraft, and Landing Craft
    Air Cushion (LCAC). The critical lift short fall in the required 3.0
    Marine Expeditionary Brigade Assault Echelons (MEB AE) lift (fiscally
    constrained to 2.5 MEB AE) is in vehicle lift capacity. With the
    current 38 active and 1 Naval Reserve Force (NRF) amphibious ships, the
    Navy's capability has been reduced to 2.1 MEB AE in vehicle lift. The
    implications of this shortfall is that the Navy has to rely on the
    Amphibious Lift Enhancement Program (ALEP), which is five
    decommissioned LKAs and four decommissioned LSTs in deep reduced
    operating status. If required, these ships would take a minimum of 6
    months to reactivate.
        Upon delivery of the 12th LPD-17 in the fiscal year 2010/11 time
    frame, the Navy, with 12 LHA/LHDs, 12 LPD-17 and 12 LSD-41/49 class
    amphibious ships will have the required capability of embarking and
    employing 2.5 MEB (fiscally constrained) lift for Troops and Vehicles
    as well as meet the 3.0 MEB requirement for Cargo, Aircraft and Landing
    Craft Air Cushion (LCAC). The 12 LPD-17s enable the Navy to achieve
    this required fiscally constrained capability without the use of the
    ALEP ships.

       LEAP-AHEAD TECHNOLOGIES/CURRENT NAVY, FUTURE NAVY, NAVY AFTER NEXT

        43. Senator Collins. Admiral McGinn and General Nyland, leap-ahead
    technologies seem to be the phrase du jour, however, everyone seems to
    define leap-ahead technologies differently.
        First, would you define for us what a leap-ahead technology is?
        Second, would you describe for the committee key initiatives and/or
    programs in your respective areas that would qualify as leap-ahead
    programs and or initiatives?
        Admiral McGinn. Leap-ahead technology is more revolutionary than
    evolutionary. It leap-frogs evolutionary steps and rapidly creates new
    capability. When implemented, the technology causes sudden changes in
    capability by breaking the paradigm of the old technology.
        The following are a few examples of key initiatives that qualify as
    leap-ahead technologies:

             Advanced Multifunctional RF Concept (AMRFC). When
            successfully demonstrated, AMRFC will provide truly
            multifunctional RF systems capable of conducting surveillance,
            targeting, communications, electronic warfare and other RF
            functions simultaneously from the same aperture and some of
            these functions in the same beam. This technology will
            drastically lower the RF cross section signature of our ships;
            greatly reduce life cycle costs due to upgrades, operators and
            maintenance personnel, and logistics costs; and improve the
            performance of our combat platforms.
             Wide bandgap semiconductors (e.g., silicon carbide and
            gallium nitride). These semiconductors are characterized by
            their intrinsic ability to operate at much higher temperatures.
            We have already demonstrated ten times higher microwave power
            output than present semiconductors.
             Ultra-dense, Ultra-fast, Non-volatile Digital Memory.
            This technology exploits Giant Magnetoresistance in a very
            unique manner wherein it is combined with nanolithography. It
            is expected that the entire computer memory will reside in the
            same package as the CPU, but require but 4 percent of the CPU
            power.

                     Environmentally Adaptive Sonars. Early
                    demonstrations of these methods show improvement
                    factors of three in sonar system performance for legacy
                    sonar systems using only new software approaches.
                    Combining these new approaches with new sonars and
                    other environmental inputs can yield another
                    improvement factor of three to four in performance
                    under many circumstances, particularly in shallow water
                    for bottomed targets.
                     Hypersonic Weapons. At an average speed of
                    Mach 6, a hypersonic weapon will travel 500 miles in
                    less than 10 minutes. A treaty compliant weapon
                    launched from the sea (ship or submarine) could carry
                    packages for surveillance and targeting as well as sub-
                    munitions to address time critical targets.
                    Alternatively, its kinetic energy could be used against
                    hardened buried targets at long range in a heavily
                    defended environment.
                     Multi-mission Directed Energy Weapon. A
                    directed energy weapon sends an intense electromagnetic
                    beam at a target. At low powers these devices can be
                    used for force protection and anti-personnel, at higher
                    powers for electronic warfare, at still higher powers
                    they can destroy sensors and radomes, and at very high
                    powers structural damage will be induced for missile
                    defense. In the long-term, the free electron laser will
                    be capable of providing the wavelength diversity and
                    the high power to perform missions across this
                    spectrum.
                     Advanced Materials. Ultralight materials with
                    periodic open-celled architectures offer revolutionary
                    solutions to a variety of naval problems.
                    Multifunctional in nature, these open-celled materials
                    provide structural capability with only minimum weight,
                    they can include IR signal suppression, embedded
                    antennas and sensors, blast protection, integral
                    rechargeable batteries, etc.

        General Nyland. Leap-ahead or transformational technologies are
    linked to scientific and technologic capabilities. Truly
    transformational technologies result from new scientific and
    technological breakthroughs that allow us to perform in radically
    different ways. A technology is only transformational if it is either
    completely new, or an exponential increase in current technologic
    capability. Marginal increases in technology do not necessarily result
    in transformation, they represent modernization. Modernization is the
    result of evolutionary changes in technology, while transformation
    results from revolutionary changes.
        Examples of transformation programs intended to achieve fundamental
    advances in capabilities by exploiting leap-ahead technologies are
    tilt-rotor technology as represented by the V-22 Osprey, the Advanced
    Amphibious Assault Vehicle, the Joint Strike Fighter, Naval Precision
    Fires, and Integrated Logistics Capabilities. Most of our programs are
    modernization programs that represent more modest efforts to yield
    incremental improvements to our equipment systems such as the KC-130J,
    Lightweight 155mm Howitzer, High Mobility Artillery Rocket System,
    Medium Tactical Vehicle Replacement, and amphibious shipping. There are
    two reasons for this; first, transformational programs are inherently
    expensive, second, the Marine Corps knows who we are, and where we are
    going, we do not see a need to radically transform ourselves. We do
    have a need to modernize our material.
        Looking ahead, the programs we have planned will, with your
    support, begin to converge in our operating forces in 2008. In the not
    distant future, the Advanced Amphibious Assault Vehicle, V-22 Osprey,
    Joint Strike Fighter, KC-130J, Lightweight 155, High Mobility Artillery
    Rocket System, Medium Tactical Vehicle Replacement, Naval Surface Fire
    Support, amphibious shipping, and a number of other smaller programs
    will together dramatically transform our expeditionary capabilities.
    These systems promise to embody speed, stealth, precision, and
    sustainment as well as afford us modern agility, mobility, and
    lethality. But, we cannot stop here. We must work together with the
    Navy and our defense industrial base to exploit other opportunities to
    advance our capabilities in the future.

        44. Senator Collins. Admiral McGinn, conceptually the Navy has
    recently focused on the concepts of the current Navy, the next Navy,
    and the Navy after next. While these concepts are intriguing, what
    efforts or concepts by technology or warfighting activity can you
    describe to the committee as the progression for each of these Navies?
        Admiral McGinn. We are pursuing the following technologies to
    deliver to the current, next, and after next Naval Forces:
    Current Naval Forces
        Virtual At Sea Training. The future of the Atlantic Fleet naval
    surface fire support live training range is uncertain. Consequently,
    alternative methods must be developed to train and qualify gunfire
    teams, conduct close air support training and qualification, and test
    and evaluate emerging gun/missile systems. We recently demonstrated
    that several of these fleet requirements could be met by a portable
    system that integrates virtual battlespace technologies with techniques
    for spotting the fall of shot with acoustics. A mid-July demonstration
    showed that gunfire could be scored by hydrophone arrays and
    effectively controlled by a Marine Corps spotter using a virtual
    target. An advanced, fleet ready version is planned for deployment by
    Spring 2003.
        Tactical Atmospheric Modeling Simulation/Real Time (TAMS/RT). TAMS/
    RT is a portable weather forecast system that provides timely and
    flexible data assimilation support. The biggest impact of TAMS/RT is
    expected to be in the areas of enhanced mission planning for Tomahawk
    and chemical/biological defense planning where meteorological effects
    are crucial to mission success.
        Littoral Remote Sensing. This capability uses overhead sensing
    assets to collect data which are then compared to models to locate land
    mines and obstacles; identify bathymetry, topography, beach defenses,
    beach trafficability, and potential mine danger areas; and possibly
    find broaching water mines.
        Interactive multi-sensor analysis trainer (IMAT). Under the IMAT
    program scientific visualization techniques have been applied to sonar
    training, yielding dramatic improvements in performance levels.
    Research on team training methods has yielded large improvements in
    tactical decision-making performance for Aegis anti-air warfare teams,
    and this training has been widely implemented in the fleet.
        Distributed Collaborative Planning Environment. The research goal
    is to be able to collaborate across any set of users and any set of
    computing environments for the purpose of making faster and better
    decisions.
        Nano-scale Coatings for Wear Resistance. New capabilities to create
    homogeneous nanometer scale structure in coatings will significantly
    reduce total ownership cost of naval machinery/components. These nano-
    scale coatings provide durability of the wear surface without the
    increased brittleness that normally accompanies improved wear
    resistance. Currently they're being developed and used in reduction
    gear, antenna doors, bow plane actuators, and eventually will be on
    every machinery/component than can be coated.
    Next Naval Forces
        Rapid Airborne Mine Clearance System (RAMICS). RAMICS will provide
    a joint force commander with an organic, in-stride capability to
    rapidly target and destroy near-surface mines with minimum risk to
    personnel and equipment.
        Multistatic Active ASW. The Multistatic ASW technology includes the
    development of coherent offboard sources for use by the surface ship,
    submarine, air, and surveillance communities together with multistatic
    processing and predictive algorithms that will be robust in littoral
    areas.
        Mine Countermeasure Autonomous Underwater Vehicles (AUVs). Advanced
    technology AUVs will enable the tactical commander to clandestinely
    reconnoiter and neutralize mines in littoral areas without having to
    expose divers or mammals.
        Environmentally-derived Electrical Energy. Genetically engineered
    and laboratory-evolved microbes and enzymes will revolutionize
    electrical energy harvesting from the environment, as well as the
    synthesis of critical materials, affording novel capabilities.
        Broad Spectrum Stochastic Sensors for Chemicals and Biologicals.
    This revolutionary technology utilizes a single genetically engineered
    biomolecule (channel or protein receptor) as a detector element. The
    output is a digitized bar code that classifies and quantifies, at the
    maximum theoretical speed, all chemicals (metal ions, anions, organics,
    chemical agents) and biologicals (proteins, viruses and biological
    agents, including future threat agents) encountered in civilian and
    military indoor/outdoor environments and on the battlefield. This
    technology will provide a new generation of sensors for enhanced
    battlespace awareness, force protection, and supporting autonomous
    operation missions such as maritime reconnaissance and undersea search
    and survey.
        Training R&D. Human Systems research will bring together virtual
    reality and artificially intelligent coaching to provide trainers for
    surface ship handling as well as Marine expeditionary vehicles,
    including the AAAV (advanced amphibious assault vehicle), LCAC (landing
    craft air cushioned) and the V-22 Osprey. Computer-based training will
    be providing distributed training via the web anytime and anywhere it
    is needed.
    After Next Naval Forces
        Electromagnetic Launch and Recovery of Aircraft. Replacing steam
    catapults with electric machinery will enable launch and recovery of
    all types of conventional takeoff aircraft of all sizes. This system
    will significantly modify/reduce the dynamic loading of the aircraft
    during the acceleration and deceleration cycles, and significantly
    reduce the volume, weight, and maintenance associated with current
    aircraft launch and recovery systems.
        All Electric Warship (Reconfigurable). All electric warships
    provide not only benefits in operating fuel efficiencies, but also
    enable new capabilities such as speed-of-light weapons and ship
    reconfiguration. Ship level synergy of smart sensor and intelligent
    component technologies will produce a significant improvement in ship
    survivability, thus enhancing the fight-through capability of naval
    warfighting platforms.
        Full Automation of Computer Generated Forces. New theories of human
    cognition and perception are currently being extended to create
    computerized entities that behave realistically and are cognitively
    competent, unpredictable and challenging. This advance will provide the
    Navy and Marine Corps with a first-time capability for realistic
    anytime, anywhere, on-demand simulation-based training, and will enable
    a 90 percent reduction in simulation manning requirements.
        DNA Vaccines. DNA vaccine technology has the potential to
    revolutionize the development and fielding of vaccines against a wide
    range of operationally relevant diseases and biological warfare
    threats. They can be rapidly and easily designed, produced and tested,
    are inexpensive to manufacture, and will not require refrigeration. The
    first DNA vaccine against malaria has been proved effective in initial
    clinical trials.

                            MARINE CORPS--V-22/LCAC

        45. Senator Collins. General Nyland, I understand that the V-22
    aircraft, at present, is not fitted with a defensive gun system. Could
    you tell us whether funds have been appropriated for this purpose, and
    would you elaborate on what plans have been made to date for the
    development of a defensive gun system? In your response, please also
    address the overall cost impact of retrofitting the platform with a
    defense gun system.
        Could you also explain to the committee what the current lift
    helicopters, CH-46 and the CH-53, use as a defense gun system?
        General Nyland. Yes, funds have been appropriated for a defensive
    weapon. The V-22 Defensive Weapon System was opened for bid offers
    during mid-fiscal year 2000. General Dynamics Armament System's GAU-19,
    a three-barrel .50 caliber Gatling gun, was selected as the core
    weapon. The core weapon makes up a portion of the overall defensive
    weapon system. The system was bid and proposed as a electronically
    targeted and fired weapon with full integration into the V-22 cockpit.
    This integration included full interface with the Forward Looking
    Infrared Radar, the pilot's Night Vision Devices (goggles), and the
    pilot's helmet cueing system. The original proposal was rejected due to
    the dramatically higher-than-expected or projected integration costs
    for new installation and retrofit.
        At this time, HQMC, USAF/SOCOM and fleet users are reviewing
    alternative Defensive Weapon Systems. A defensive weapon capability
    will be selected and incorporated on the aircraft once current reviews
    of alternatives are complete. The reviews will include overall cost of
    both installation and retrofitting each system.
        The CH-46 and CH-53 use the GAU-15/A (XM-218) 50 caliber machine
    gun. The XM-218 is a World War II era, crew-served, recoil-operated,
    belt-fed, air-cooled, percussion-fired weapon, with a rate of fire of
    750 rounds per minute. The gun system consists of the GAU-15/A 50 cal.
    machine gun, a pintle mount assembly, brass collection bag, and
    ammunition can bracket assembly. The pintle mount assembly is attached
    at personnel or cargo doors or windows of the aircraft. The ammunition
    can bracket holds a single 100 round can of linked 50 cal. percussion
    primed ammunition. A disintegrating metallic link-belt is used to feed
    the ammunition into the weapon. Additional cans of ammunition are
    carried inside the aircraft to allow for rapid reloading. The XM-218 is
    a man-on-gun weapon designed to provide medium-range defensive and
    suppressive fires and has no precision engagement capabilities.

        46. Senator Collins. General Nyland, you mention in your testimony
    that the Landing Craft, Air Cushion (LCAC) Service Life Extension
    Program (SLEP) will ensure that LCACs continue to provide over-the-
    horizon logistical support long past their current 15 to 20 year
    service life, and that the LCAC is a vital leg of your tactical
    mobility triad with the MV-22 Osprey and the Advanced Amphibious
    Assault Vehicle (AAAV). Could you, or one of the other witnesses, let
    us know if you plan to keep the LCAC as part of your triad, and if so,
    is that program already written into out-years to ensure that it will
    remain a part of your triad?
        General Nyland. The LCAC will continue to be a vital leg of our
    mobility triad providing high-speed, over-the-horizon surface assault
    ship-to-shore movements of troops and equipment. The LCAC delivers the
    bulk of the rolling stock and combat equipment needed to generate the
    rapid build-up of combat power ashore. The speed, range and beach
    access afforded by the LCAC make it a key asset in executing maneuver
    warfare from the sea. The LCAC SLEP program will extend the hull life
    of the craft by at least 20 years and install a state of the art
    Command, Control, Communication, Computer and Navigation (C4N) suite.
    LCAC SLEP will fulfill Marine Corps lift requirements and ensure its
    viability into the future.

                    SMART SHIP/OPTIMIZED MANNING INITIATIVES

        47. Senator Collins. Admiral Kelly, the April 30 Defense Daily had
    a lengthy article on the Navy's future plans for so-called Smart Ship
    technologies. One statement that troubled me in that article noted
    that: ``As of now, there is little funding available to support the
    installation of Smart Ship aboard the Navy's Arleigh Burke-class (DDG-
    51) destroyers. Some destroyers will receive elements of the Smart Ship
    Systems but not the entire suite.''
        I know there have been significant issues involved in the Smart
    Ship program, but I also realize the importance of bringing appropriate
    technology to bear that can increase automation, response time,
    warfighting capability, and allow smaller crews to safely and
    effectively operate these front-line combatants. I fully support that
    objective. Please comment on the budget and implementation plans for
    bringing such technologies to the DDG class, and for doing so in a
    fully integrated, not a stove-piped manner, so as to ensure that the
    desired capability gains are achieved and crew sizes can be safely and
    confidently reduced. I would hate to see us invest in these
    technologies and not be able to reap the reduced manning and
    supportability benefits that should go along with these investments.
        Admiral Kelly. Our recent success in operationally deploying Smart
    Ship advanced capabilities on CG-47 Aegis Cruisers has provided the
    groundwork for applying similar capabilities on the DDG-51 Arleigh
    Burke-class. Current funding (PB01) allows the procurement of one DDG-
    51 ship set in fiscal year 2002 for the Land Based Engineering Site
    (LBES) and one ship set in fiscal year 2004. The LBES unit will be
    fielded with the Flight IIA DDG baseline to examine the engineering of
    the Smart Ship suite, and support risk reduction and interoperability
    initiatives. The Navy has already initiated the fielding of the Smart
    Ship elements in new construction. Current planning will permit DDG-90
    to have the full Smart Ship Phase 1 capability baseline. Phase 1
    introduces all the capabilities with their functionalities on board,
    but not a completely integrated system. These stand-alone capabilities
    will support reduced workload initiatives and reduced manning but not
    to the full extent as will Phase 2. Phase 2 will be to develop an open
    architecture that includes the multi-function workstation capability as
    currently configured on the CG-47 Smart Ships. A Navy/Industry Joint
    Product Team has been working together to explore how rapidly and
    safely, the Navy can insert Cruiser Smart Ship like architecture to the
    Arleigh Burke-class.

                           SURFACE WARFARE RESOURCES

        48. Senator Collins. Admiral McGinn, in Lieutenant General Nyland's
    testimony, he stated that the Marine Corps requires an increase of
    approximately $1.8 to $2.0 billion per year sustained for the next 8 to
    10 years in order to meet tomorrow's challenges and to maintain the
    ``expeditionary force in readiness'' our Nation requires.
        Could you tell us what funding the Navy requires in its programs to
    achieve this level of readiness for its naval forces? I realize of
    course, that as Lieutenant General Nyland points out, any estimated
    shortfall you cite today may change as a result of Secretary Rumsfeld's
    Strategic Review.
        Admiral McGinn. The CNO has stated our fiscal year 2002 shortfalls
    of approximately $12.4 billion that accounts for forces and their
    support and readiness requirements. Reviewing this across the FYDP
    (fiscal year 2002-2007) without specific knowledge of possible changes
    dictated from the Secretary of Defense's Strategic Review, that amount
    could reach approximately $60-$61 billion based on current estimated
    budgets.

        [Whereupon, at 3:58 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2002

                                  ----------

                             TUESDAY, JULY 31, 2001

                                   U.S. Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.

                           NAVY SHIPBUILDING PROGRAMS

        The subcommittee met, pursuant to notice, at 2:35 p.m. in
    room SR-222, Russell Senate Office Building, Senator Edward M.
    Kennedy (chairman of the subcommittee) presiding.
        Committee members present: Senators Kennedy, Reed,
    Sessions, and Collins.
        Majority staff member present: Creighton Greene,
    professional staff member.
        Minority staff members present: Gary M. Hall, professional
    staff member and Thomas L. MacKenzie, professional staff
    member.
        Staff assistants present: Thomas C. Moore and Jennifer L.
    Naccari.
        Committee members' assistants present: Menda S. Fife,
    assistant to Senator Kennedy; Elizabeth King, assistant to
    Senator Reed; Ryan Carey, assistant to Senator Smith; and
    Kristine Fauser, assistant to Senator Collins.

        OPENING STATEMENT OF SENATOR EDWARD M. KENNEDY, CHAIRMAN

        Senator Kennedy. We will come to order. Senator Sessions is
    expected here momentarily. I know he always likes to listen to
    my pearls of wisdom, but I think on this occasion we will move
    ahead with the hearing. We are voting at 3:00 and have other
    votes that will interrupt the work of the subcommittee, so we
    will get started.
        The subcommittee meets this afternoon to discuss the Navy
    shipbuilding programs to meet the future operational
    requirements of the Navy and the Marine Corps. We will hear
    from two witnesses: John Young, Assistant Secretary of the Navy
    for Research, Development, and Acquisition; and Adm. William
    Fallon, Vice Chief of Naval Operations.
        This is Secretary Young's first appearance before the
    subcommittee. He is certainly no stranger to many of us. I
    commend him for his years of distinguished service on the
    Senate Defense Appropriations Subcommittee, and it is a
    privilege to welcome him here before the subcommittee today.
        We also welcome Admiral Fallon, who has testified
    effectively before this subcommittee in the past. It is good to
    have him back again.
        The focus of today's hearing is on modernization of the
    Navy's fleet. It is essential to understand the relationship of
    the shipbuilding program to the Navy's plans for force
    structure and readiness. Today's investments in Navy
    modernization will help determine tomorrow's readiness. Without
    adequate readiness in the future, we could have forces without
    adequate capabilities to carry out their mission.
        The Secretary of Defense is currently conducting a broad
    strategy review on the needs of national security in the years
    ahead. We look forward to receiving his recommendations.
    Clearly, we must continue to have strong naval forces to
    protect our interests overseas. Changes will be needed, but it
    is essential to ensure that we do not lose the very real
    advantages that our Navy and Marine Corps so skillfully
    provide.
        We will discuss a number of issues and programs with our
    witnesses today and consider the attack submarine programs and
    force levels, including the option of converting the Trident
    ballistic missile submarines to submarines that carry cruise
    missiles. We will consider aircraft carrier modernization,
    including the Navy's evolutionary development of new
    capabilities and technologies to increase future strength and
    reduce demands on our personnel. We will consider surface
    combatants, including the DDG-51, Aegis destroyers, and the
    delay in awarding the contract for the winning team to develop
    the next generation of combatants, DD 21 land attack destroyer.
        We will consider the amphibious ships, including the delays
    and cost increase in the LPD-17 amphibious transport dock
    program, and the budget request to continue incremental funding
    for the LHD-8 amphibious assault ship. These are all important
    issues. I look forward to the testimony of our witnesses and to
    working with them to achieve the great goals that we share.
        It is always a pleasure to work with Senator Sessions on
    these issues, and we will hear from him in just a moment. I
    recognize Senator Collins at this time.

                   STATEMENT OF SENATOR SUSAN COLLINS

        Senator Collins. Thank you very much, Mr. Chairman. I have
    a statement that I would like to submit for the record and I
    would like to make a few comments.
        I am very concerned that in recent years the U.S. Navy has
    shrunk from a fleet of 594 ships back in 1987 to approximately
    315 ships today. During this same period, ship deployments have
    increased by more than 300 percent. Navy officials have
    repeatedly warned that the fleet is stretched perilously thin,
    and needs to be increased to at least 360 ships to meet present
    mission requirements.
        At the present rate of investment, our Navy will continue
    to shrink. The current shipbuilding rate of six ships per year
    has not dipped this low since 1932. If we do nothing to alter
    this rate, our fleet will atrophy significantly by 2010 and
    shrink to fewer than 200 ships by 2030.
        With the fleet totalling just half of the size of the
    ideal, it is easy to see why the Navy's ability to achieve its
    mission, a mission vital to our Nation's defense and security,
    would be severely hindered. I look forward to working with the
    chairman, the ranking member, and other members of this
    subcommittee to ensure that we do provide a fleet of the size
    necessary to meet our current mission requirements.
        Thank you, Mr. Chairman.
        [The statement of Senator Collins follows:]

                  Prepared Statement by Senator Susan Collins

        Thank you Mr. Chairman. Seapower is among the most essential
    components of our national security posture and an important part of
    ensuring the U.S. meets our global commitments. For more than two
    centuries, our naval forces have provided immediate access, combat
    power, and are presently moving toward truly network-centric
    operations, which will use information technology to link together Navy
    ships, aircraft, and shore installations improving U.S. naval
    capabilities. These capabilities and the fact that two-thirds of the
    world's surface is covered by ocean make a compelling case for robust
    naval forces.
        In recent years, however, the U.S. Navy has shrunk from a fleet of
    594 ships in 1987, to approximately 315 ships today. During this same
    period, ship deployments have increased more than 300 percent. Navy
    officials have repeatedly warned that the fleet is stretched perilously
    thin and needs to be increased to at least 360 ships to meet its
    present mission requirements.
        These factors, coupled with the changing threats to America's
    national security, demand that we recapitalize our Navy. President Bush
    and his administration have identified such a transformation as one of
    its major defense policy goals. As we in Congress work with the Bush
    administration to reshape our military, I will continue to encourage
    the replenishment of our naval fleet as the cornerstone of this
    transformation. Here's why:
        At the present rate of investment, our Navy will continue to
    shrink. The current shipbuilding rate of six ships per year has not
    dipped this low since 1933. If we do nothing to alter this rate, our
    fleet will atrophy significantly by 2010 and shrink to fewer than 200
    ships by 2030.
        With a fleet totaling just half the size of the ideal, it's easy to
    see why the Navy's ability to achieve its mission--a mission vital to
    our Nation's defense and security--would be severely hindered. Our
    naval forces allow us an edge in conflict and in extending humanitarian
    assistance because of the Navy's ability to freely transit anywhere
    around the globe. We cannot afford to concede this edge.
        As I have stated before, numbers do matter. The number of ships
    under construction 10 years ago was 110, while only 37 ships are under
    construction today--this is a 66 percent decline in ship construction.
    Furthermore, while the number of ships authorized to be built 10 years
    ago was 15, today the budget request before us authorizes a mere six
    ships for the third consecutive year. In recent years, we have been
    consistently underfunding the naval shipbuilding and research and
    development accounts; the future force is at risk.
        I am convinced there will be a need for even greater reliance on
    our naval forces as joint operations emerge as a primary focus of
    future operations. For these reasons, and many others, I share the
    Navy's view that we must recapitalize our fleet to ensure that America
    retains her maritime power in the 21st century. As we recapitalize our
    fleet, we must make prudent, long-term investments by supplying our
    fleet with the most technologically advanced capabilities available.
    The DD 21 stealth destroyer, the DDG-51 Aegis Destroyer, and the LPD-17
    amphibious ship all represent exciting technological leaps in
    capability and innovation that will help America's Navy remain strong
    throughout the 21st century. One of our most immediate challenges,
    however, is to lay out a plan to bridge the gap between the current
    production of the DDG-51 Aegis class destroyers and the next generation
    destroyer, DD 21.
        The Zumwalt class land attack destroyer, or DD 21, will be
    optimized for joint operations, and will be vital to assure and sustain
    access to areas of U.S. interests overseas. It will do so very
    efficiently, with a target crew size of 95 and other design innovations
    that result in significant life-cycle cost reductions over the current
    destroyer program. The U.S. security strategy to defeat adversaries
    that seek to deny us access to littoral regions of the world will be
    critically dependent on U.S. ships that are harder to target and
    attack, and on weapons systems that can deliver combat power from a
    distance.
        The Navy will gain other important capabilities when LPD-17 sets
    sail in the name of the United States. This class of ship will replace
    with a 12-ship class, capabilities that 41 of the Navy's existing
    amphibious fleet are currently providing, moving them well into the
    21st century.
        Although Secretary Rumsfeld has not yet completed his strategic,
    quadrennial defense review, and other reviews of the Armed Forces, and
    we are therefore uncertain of the conclusions he may reach, we are
    certain of the clear and immediate need to recapitalize our military
    with the latest technology so that we can continue to keep the peace
    and promote prosperity.
        The challenges before us are great. We need to be more innovative
    in our methods of procurement, to meet the needs of our sailors,
    marines, and soldiers in the 21st century. We need to actively pursue
    multiyear procurement, advance appropriations, block buys based on
    economic order quantities, and strategic partnering among the industry
    and the government in the future.
        I look forward to working with each of you in the weeks and months
    ahead to bring the procurement rate to an adequate number that will
    meet the needs of our Nation's security and provide more stability for
    our critical but increasingly fragile naval shipbuilding industrial
    base. I welcome any thoughts or comments you would care to offer the
    subcommittee on these complex issues. Thank you, Mr. Chairman.

        Senator Kennedy. Senator Reed.
        Senator Reed. Mr. Chairman, I would like to associate
    myself with the remarks of the Senator from Maine. I think she
    has adequately described a very serious situation for the Navy
    shipbuilding program, one that we are responsible for in terms
    of reviewing the proposals to ensure that we do as much as we
    can to increase the production and provide the Navy with the
    ships they need, not only to defend America, but to safeguard
    the sailors at sea.
        Thank you.
        Senator Kennedy. Very good. I will just take a moment to
    mention the areas I am going to question you on so that when it
    is my turn, you might have thought a little bit about them.
    There may be some ways in your own presentation that you might
    mention these, and perhaps others can do that as well until
    Senator Sessions gets here, because I think we would like to
    make sure that he has the opportunity to listen to the
    witnesses.
        Secretary Young, I am going to talk about the budget
    request that includes the $800 million in the shipbuilding
    budget for completion of the prior years shipbuilding.
    Secretary England has been quoted as saying he believes strong
    measures need to be taken to avoid a situation where the bulk
    of some future years shipbuilding budget is taken up paying for
    ships that were approved in earlier budgets.
        This is a generic kind of a problem. We know that there are
    probably three or four different ways of payout that we have
    seen over different times, and we are going to be interested in
    hearing the way that you look at that issue.
        On countermine warfare, Admiral Fallon, I remember the
    difficulties the Navy and the Marine Corps encountered with the
    shallow water mines during the Gulf War. Much in the area of
    mine countermeasures has been accomplished since then, yet much
    remains to be done.
        I firmly believe mines continue to present a serious threat
    to our Navy and Marine forces. Senator Cohen and I worked very
    closely together in terms of developing with the Department
    additional focus, attention, and responsibility on mine
    warfare.
        I can remember seeing, when I visited the gulf, the
    helicopters carrying these chain fences up and down the gulf in
    order to sweep the mines through there. I think it is fair to
    say that there is a dramatic difference between the blue water
    challenges that we were facing vis-a-vis the Soviet Union and
    the challenges we face with the littoral states in terms of the
    shallow waters that we are going to be facing in different
    kinds of situations around the world. I am going to ask you
    about the reprogramming of the SABRE shallow water mine system.
        There is enormous interest, as well, about the delay in the
    DD 21 program for reasons other than the obvious one of
    potentially delaying an important capability. A number of the
    technologies need to be matured if the Navy is going to support
    the award of the DD 21 ship construction contract in fiscal
    year 2005.
        In addition, some of the other shipbuilding programs are
    counting on technologies that were to be developed as part of
    the DD 21 effort following the down-select. In this category
    would be the volume search radar that is supposed to be part of
    the CVN-77 combat system, so we are going to be interested in
    getting an update on that issue.
        We have also heard on this committee about missile defense
    issues and the use of the Navy in terms of some of the missile
    defense systems. The administration's draft plans for expanded
    intercontinental ballistic missile defense included looking at
    sea-based defenses. The Navy seems split over the matter, with
    some advocating a greater Navy role in missile defenses other
    than the Navy area defense, the theater-wide defense programs,
    and others. We are concerned about the impact this would have
    on the number of new ships.
        There has been concern expressed here by our Members about
    the number of ships and what this would mean. What are you
    thinking? What are your thoughts about those issues
    particularly with regard to the Pacific?
        Secretary Young, it is clear that the LPD-17 program has
    experienced serious problems in completing the design work
    necessary to keep the production program on schedule. I suppose
    such problems are understandable when the Navy and the
    contractor are tackling such an effort. However, we are
    concerned that there may be some process problems.
        It took a long time for the Navy to inform the subcommittee
    about these difficulties even after these difficulties had been
    reported in the press. The result is that we are in a situation
    where we are being told, ``we have this problem, we are fixing
    it, and we don't have much time.'' We certainly do not have
    much time to look at what could have been done or should have
    been done, or where the responsibility lies to try and address
    it. By letting us know late, it obviously affects our ability
    in similar situations to become involved and hopefully be able
    to have a constructive resolution.
        I am sure Senator Reed is going to have questions about
    conversion issues as well.
        At this point I would like to submit Senator Smith's
    statement for the record.

                    Prepared Statement by Senator Bob Smith

        The Bush administration in April announced its annual arms sales to
    Taiwan, and agreed to provide three diesel submarines, a reversal of
    earlier U.S. policy under the Clinton administration.
        I just want to say for the record that I am strongly supportive of
    this sale--it supports a major ally and major trading partner in the
    Pacific--it supports our Asian defense posture, and it helps to deter
    the threat of conflict between China and Taiwan by bolstering Taiwanese
    defenses.
        Most important, while we are in the 8th year of building less ships
    than we need to be building to keep the current 310 ship force--and in
    a resource-constrained environment--we ought to be looking at ways of
    keeping our shipbuilding base warm. Providing diesel subs to Taiwan
    could help to accomplish that objective. I want to encourage you to
    deliver on this commitment to the Taiwanese and to offer my assistance
    in helping you do so.

        I think we will go ahead, since it is now 2:45, and hear
    from our witnesses. Admiral Fallon, we will hear from you
    first.

     STATEMENT OF ADM. WILLIAM J. FALLON, USN, VICE CHIEF OF NAVAL
                               OPERATIONS

        Admiral Fallon. Thank you. Mr. Chairman, distinguished
    members of the subcommittee, I appreciate the opportunity to
    appear before you today to discuss the Department of the Navy's
    fiscal year 2002 ship programs budget. Just by way of update as
    we sit here this afternoon, we have 101 ships of the fleet that
    are at sea and around the world, forward-deployed, carrying out
    the numerous missions that we ask them to do.
        The Constellation Battle Group is in the Arabian Gulf,
    along with the Boxer ARG and the Eleventh MEU Enterprise Battle
    Group is also in the CENTCOM theater. Kearsage and her marines
    are in the Mediterranean. The cycle of rotational forces
    continues. The Vinson Battle Group is just leaving the west
    coast a couple of days ago, and the Theodore Roosevelt Battle
    Group is in their final training off the east coast now with
    her associated MEU to do their final preps for their upcoming
    deployment. These units are forward-deployed, and about to be
    deployed. They are very well-trained and, we believe, very
    capable of any missions they may be tasked with overseas.
        On the other hand, today, as I am sure you are acutely
    aware, our 317-ship Navy is much-diminished from their size
    just a decade ago. This represents the smallest Navy since
    1933, 40-some percent fewer than just a decade ago. Our
    procurement accounts are insufficient to sustain even the 1997
    QDR force structure requirements, and so we need, by our
    estimates, 8 to 10 ships a year just to sustain the levels we
    have now.
        Instead, we are building a little over six on average, and
    so we are clearly on a down slope that is going to end up,
    without some course correction here, somewhere down in the
    200s. You can pick the end point on the glide slope, and I
    think we are putting our future at serious risk.
        We need about $34 billion a year in acquisition, we
    believe, given the conditions today, to sustain the force that
    we have now. That is about $11 or $12 billion in the
    shipbuilding account just to maintain the QDR levels. Clearly,
    the funding is inadequate. We are frustrated, as I am sure you
    are, at the levels, the small numbers of ships under
    construction, the unused capacity in the shipyards, and the
    resulting higher unit cost for the Navy. So what are we doing
    about it?
        Our fiscal strategy is to fix the most serious problems in
    the 2002 budget, and to that end the CNO and the Department of
    Defense have recently realigned over $7 billion over the FYDP
    from other Navy programs in what we would call current
    readiness. We think this is absolutely and critically
    important, because if we do not give our people today, the men
    and women serving, the tools they need to carry out their
    missions, the adequate training, and the resources to be ready
    today, we put them at risk. We clearly think that is our
    highest priority. We have diverted a lot of money in the
    program to ship maintenance, real property maintenance, and
    ship operations, to assure the people we have today are as
    well-trained, prepared, and equipped as we can do.
        Our strategy then would be to implement a longer-term
    vision, beginning with the 2002 budget after the current round
    of QDR studies and associated panels have concluded their work,
    which we think will be very soon, and then move on. However, an
    awful lot of work remains to be done in the near-term for us to
    really fix the size and shape of the future Navy. I regret that
    I cannot lay out the entire blueprint here of ``A to Z,'' but
    at least I can give you an idea of where I think we are headed.
        I can report that we are, in fact, transforming to meet the
    challenges of the new century. A decade ago we had a blue water
    Navy second to none. Today we face challenges that are
    different from a decade ago, and we are working to invest in
    those technologies, conducting experimentation in certain
    technologies, and acquiring new capabilities, along with
    streamlining our organization in an ongoing effort to increase
    our war-fighting agility and effectiveness.
        This Navy transformation is not a recent trend, but it is
    something that has been ongoing for over a decade. Our Navy, we
    believe, has been successful in transforming itself from a blue
    water focus to one that is capable of operating in the
    littorals. We continue to embrace transformation with things
    like electric drive, innovative manning techniques, and an
    emphasis on sensors and networks. Transformation
    notwithstanding, numbers do matter, and we are concerned with
    the reality that most of our capability today, in fact, resides
    in our ships and aircraft.
        The dilemma we face for 2002 and beyond, is that we will be
    unable to maintain the force structure we have now in terms of
    size. We must have increased procurement, and at some point it
    has to come from some place other than near term readiness. We
    have had pretty much a one-way flow for the last couple of
    years. We need to get that reversed so that we can start
    investing and recapitalizing for the future. I solicit your
    help in giving us the appropriate tools and fiscal resources to
    get into a procurement rate that can sustain the force levels
    that we need both today and tomorrow.
        Thank you very much for your help for our sailors and
    marines. I have a statement that we have jointly submitted for
    the record. I stand ready to answer your questions. Thank you
    very much.
        [The joint statement of Mr. Young and Admiral Fallon
    follows:]
      Joint Prepared Statement of John J. Young, Jr. and Adm. William J.
                                  Fallon, USN

        Mr. Chairman, distinguished members of the subcommittee, thank you
    for this opportunity to appear before you to discuss the Department of
    the Navy's fiscal year 2002 ship programs budget.
        The United States has always been a maritime nation, and our
    mastery of the seas, sustained by forward-deployed U.S. naval forces,
    ensures our access to our economic, political, and security interests
    overseas. Our economic prosperity, now more than ever before, is
    inextricably tied to a global economy that is totally reliant upon
    maritime trade to sustain its growth. The oceans are therefore the
    ``great commons'' of this economy: with public access to all, and so
    used by all. The United States Navy and Marine Corps ultimately
    guarantee this freedom.
        Our mastery of the seas, made possible by the deployed presence of
    a substantial U.S. military force, continues to ensure access to our
    economic, political, and security interests overseas. Today there are
    approximately 48,000 sailors and marines deployed on carrier battle
    groups, amphibious ready groups, and independent deployers such as
    submarines and maritime patrol aircraft. These ``on station'' naval
    forces promote regional stability, deter aggression, and provide the
    capability for timely response in crises.
        If deterrence fails and crisis becomes war, naval forces provide
    significant combat power. Immediately employable naval forces,
    simultaneously controlling the seas while projecting power throughout
    the battlespace, are critical to assuring access for forces arriving
    from outside the theater, and enabling the transformation to a lighter,
    more expeditionary joint force. As the ground-based forces join naval
    forces already operating forward, the result has to be a joint force
    that projects offensive power sufficient to serve our national
    interests. The Navy provides credible combat-ready forces that can sail
    anywhere, anytime, as powerful manifestations of American sovereignty.
        Command of the seas, provided by U.S. sovereign power deployed
    forward, provides a tangible demonstration of our commitment to shared
    interests, and underwrites our political alliances and friendships
    across the globe. It is important to say that we will be there when
    needed to maintain the freedom of these shared global commons, deal
    effectively with shared problems and to respond quickly to acts of
    aggression . . . but, it means even more to be there beforehand.
        Finally, the success of future joint combat operations will require
    us to have immediate and sustained military access wherever and
    whenever it is needed. Command of the seas--which are fully two-thirds
    of the world's surface--provide that global access, which is a
    priceless strategic advantage for our nation.
        We are building upon our tradition of expeditionary operations as
    we transform into ``network-centric'' and ``knowledge-superior''
    services. Knowledge superiority is the achievement of a real-time,
    shared understanding of the battlespace by warriors at all levels of
    command. This will, in turn, facilitate our ability to remain forward
    by providing the means for timely and informed decisions inside any
    adversary's sensor and engagement timelines.
        To support this strategy and our forces, the President's fiscal
    year 2002 budget request increases the amount of research, development,
    and overall procurement investment critical to maintaining our Navy and
    Marine Corps team as the preeminent combat force in the world. We seek
    an agile, flexible force, which can counter both the known and the
    unforeseeable threats to our national security.
        Before discussing our shipbuilding programs, one issue needs to be
    highlighted: the Navy's execution issue of our shipbuilding programs
    currently under contract, known as prior year completion.

                COMPLETION OF PRIOR YEAR SHIPBUILDING CONTRACTS

        The funding required to complete construction of ships currently
    under contract has increased significantly. Shipbuilding and
    conversion, Navy (SCN) funding is already insufficient to finance
    current force structure requirements and prior year completion
    ``bills'' exacerbate the issue. Cost growth on ship construction
    contracts erodes the confidence of Congress in our estimating and
    budgeting process for future procurements.
        Many factors have contributed to the cost growth of current ships
    under contract, including:

             Low rate procurement of vendor material and Government
            furnished equipment,
             Configuration changes,
             Budget reductions/rescissions,
             Unanticipated challenges with the design and
            production of lead ships,
             Unanticipated growth in shipyard labor rates, and
             Inflation and fiscal constraints.

        All of these factors, but particularly fiscal constraints, cause
    the Department to budget procurement programs tightly. The consequences
    of these factors are that any cost growth or budget reduction causes
    immediate execution issues. During times of robust ship construction,
    the Ship Cost Adjustment (SCA) process would allow the Navy and
    Congress to finance programs, which were experiencing difficulty with
    those that were performing well. However, the number of new
    construction ships budgeted each year has decreased from an average of
    about 20 per year in the 1980s to about 8 per year in the 1990s. In
    fiscal year 2000-2002, the number of new starts has remained stable at
    only 6 ships per year.
        To prevent further increases to the prior year completion funding
    shortfall, the Navy is pursuing the following corrective actions:

             Remedy the systemic issues within our control and
            incentivize industry partners to do the same.
             Ensure that estimating and budgetary processes better
            reflect cost risk of factors beyond our control.

        The Navy's amended fiscal year 2002 President's budget requests
    $800 million to address the near-term issue. This prior year budget
    request only addresses funding required to execute the prior year
    programs during fiscal year 2002. The program execution consequences of
    receiving funding below the request are very serious and are not in the
    nation's interest.

                             SHIPBUILDING PROGRAMS

        Our fiscal year 2002 budget request calls for construction of 6
    ships in fiscal year 2002: three DDG-51 destroyers; one Virginia-class
    submarine; one Auxiliary Cargo and Ammunition Ship (T-AKE); and an
    incrementally funded LHD-8. In addition, we have provided funding for
    advance procurement of the fifth and sixth Virginia-class submarines,
    funded advance procurement for the next four ships of the U.S.S. San
    Antonio (LPD-17)-class, funded service life extension for two Landing
    Craft Air Cushion (LCAC) craft, and provided funding for two Los
    Angeles-class submarine engineering refueling overhauls which will also
    receive modernization to enhance combat capability. We have also funded
    the design start and advance procurement effort to convert two Ohio-
    class submarines to SSGNs. These submarines provide transformational
    warfighting capability carrying up to 154 Tomahawk cruise missiles,
    support sustained deployed special operating forces, and sustain our
    submarine force structure.
    Arleigh Burke (DDG-51) Class Destroyer
        The DDG-51 guided missile destroyer program remains the Navy's
    largest surface ship program. The fiscal year 2002 budget request
    includes $2.97 billion for the procurement of three DDG-51 destroyers,
    which represents one additional DDG over last years budget. The
    additional DDG-51 will be awarded as a fiscal year 2001 option as part
    of the first fiscal year 1998-2001 multiyear procurement contract.
    Exercising this option will provide the most affordable DDG-51
    destroyer of all the remaining ships in the class procurement. The
    balance ships are the first funded ships of a new multiyear contract
    scheduled to be awarded by the end of calendar year 2001. Advanced
    procurement funding provided by Congress in fiscal year 2001 for
    Economic Order Quantity buys is being obligated in order to further
    leverage the stability brought to the shipbuilding industrial base and
    increase the savings afforded through the multiyear contracting
    strategy.
        The three Arleigh Burke-class destroyers procured in fiscal year
    2002 will be Flight IIA ships configured with the Baseline 7 Phase I
    Aegis Combat System, which we introduced on the third ship in fiscal
    year 1998. This baseline incorporates new integrated mission capability
    and makes these ships more capable in the littoral than any other
    combatant in the world. The upgrades include the SPY-1D(V) radar
    system, Area Theater Ballistic Missile Defense, Cooperative Engagement
    Capability, the 5"/62 gun, and a Remote Mine Hunting System capability.
    Additionally, the DDG-51 destroyers of the fiscal year 2002 multiyear
    procurement will be forward fit with Baseline 7 of the Mk 41 Vertical
    Launching System, the Tactical Tomahawk Weapons Control System, and the
    ability to accommodate the SH-60R helicopter variant.
    Carrier Construction
        The ninth ship of the Nimitz-class, Ronald Reagan (CVN-76), was
    christened on March 4, 2001, and launched on March 10, 2001. Ship
    delivery is planned for March 2003 at Newport News Shipbuilding.
        The detailed design and construction contract, including
    procurement of the integrated warfare system for CVN-77, was awarded to
    Newport News Shipbuilding on January 26, 2001. CVN-77, the tenth and
    final ship of the Nimitz Class, has a contract delivery date of March
    31, 2008, to replace the U.S.S. Kitty Hawk (CV 63). CVN-77 remains the
    future carriers' transition ship to CVNX. Primary improvements include
    a new integrated warfare system incorporating multi-function and volume
    search radars supported by the next generation ship self-defense
    system. Additionally, an open system information architecture will
    provide improved C\4\ISR performance. These systems will be the
    backbone of a highly capable warfare system suite that will also be
    forward fit to CVNX 1 and CVNX 2. Propulsion plant improvements include
    centralized electric plant controls and integrated propulsion plant
    controls. The fiscal year 2002 budget request includes RDT&E, N funding
    of $36 million to continue the development of the integrated warfare
    system, incorporating critical transition technologies into CVN-77.
    Technology demonstration for this effort will be conducted in the new
    Virginia Advanced Shipbuilding and Carrier Integration Center at
    Newport News Shipbuilding to prove new technologies before installation
    in the ship.
    Virginia (SSN 774)-Class Attack Submarines
        Construction on the Virginia, Texas, and Hawaii is well underway.
    The fiscal year 2002 budget request includes $2.3 billion for the
    fourth ship and advance procurement for the fifth and sixth ships of
    the Virginia-class. The fourth ship is part of the unique single
    contract and construction-teaming plan approved by Congress in 1998.
    This provides a cost effective steady production rate that helps both
    shipbuilders achieve level manning and more economic material buys. The
    Navy is currently planning for the next ``block buy'' of Virginia-class
    submarines. Various contract strategies, including multiyear
    procurement and block buy with Economic Order Quantity material
    purchases are being considered. The Virginia program continues to
    incorporate warfare improvements as a result of past and on-going R&D
    investments. The fiscal year 2002 submarine incorporates Advanced
    Processor Builds for the combat system, which will improve warfighting
    performance and reliability.
        A revised Virginia-class program-funding shortfall was identified
    earlier this year. The shortfall is the result of lean ship production
    and was fully realized as the shipbuilders took delivery on much of the
    ship equipment and material as well as resolved labor disputes. The
    prices of these items were much higher than defense system procurements
    inflation rate indices. Other significant factors to the shortfall
    include design performance, Government furnished equipment cost growth
    and engineering support. The program was no longer able to withstand
    the fiscal pressures and reductions arising since the program was
    priced in 1997.
        The prior year request for fiscal year 2002 covers the immediate
    needs on the first three submarines. The shortfall on the fourth hull
    recognized earlier this year has been fully addressed in the fiscal
    year 2002 budget.
    Seawolf (SSN-21)-Class Attack Submarines
        The Seawolf-class submarine program has delivered the first two
    ships. Substantial progress has been made on the design and
    construction modification to the third and final Seawolf-class
    submarine.
        U.S.S. Seawolf (SSN-21) is now conducting her initial deployment.
    U.S.S. Connecticut (SSN-22) completed successfully arctic operational
    testing. U.S.S. Connecticut is now making preparations for a Tomahawk
    launch test later this year.
        Pre-Commissioning Unit Jimmy Carter (SSN-23) is being modified with
    additional volume to accommodate advanced technology for Naval Special
    Warfare, tactical surveillance, and mine warfare operations. As part of
    the December 1999 contract modification, the base ship contract was
    converted to a Firm Fixed Price contract and is on track for delivery
    in June 2004.
    Strategic Sealift Program
        The strategic sealift program is providing 19 large, medium-speed,
    self-sustaining, roll-on/roll-off ships. These ships provide for
    strategic sealift of Army unit equipment and supplies from the U.S.
    mainland for pre-positioning in the vicinity of potential objective
    areas throughout the world. Four ships have or will be delivered ahead
    of contract schedule by the end of fiscal year 2001; USNS Mendonca,
    USNS Pililaau, USNS Watkins, and USNS Pomeroy. Avondale and National
    Steel & Shipbuilding Company are delivering high quality ships, which
    is a tribute to our industry partners on the sealift program.
    San Antonio (LPD-17) Amphibious Transport Dock Ship
        The San Antonio-class of amphibious transport dock ships represent
    the Navy and Marine Corps future in amphibious warfare, and is one of
    the cornerstones in the Department's strategic plan known as ``Forward
    . . . from the Sea.'' The 12 ships of the San Antonio-class will
    functionally replace four existing classes of amphibious ships. This
    plan will not only modernize our amphibious forces, but will also
    result in significant manpower and life cycle cost savings.
        The fiscal year 2002 budget request includes $421 million for
    advanced procurement efforts for the next four ships of this 12-ship
    program. This funding will stabilize the vendor base and support
    planning and material procurement to commence construction of the next
    two ships in fiscal year 2003, resulting in construction of these ships
    on a fiscal year 2002 schedule. Providing full funding for two LPD-17
    ships in fiscal year 2002 will not further accelerate the schedule for
    LPD-21 and LPD-22, since the procurement of material required for
    construction is already funded. Lead ship construction commenced last
    summer at Avondale. LPD-19 construction commenced this month at Bath
    Iron Works. Subsequent to the fiscal year 2001 budget review, both the
    Navy and industry conducted independent assessments of the design
    progress necessary to support production of the lead ship. These
    reviews identified a projected additional 14-month adjustment (for a
    total of 24 months) to the lead ship, resulting in delivery of the LPD-
    17 in November 2004. We attribute the delay primarily to completion of
    detail design and translation of that design into detailed production
    instructions. The design process is proving more difficult and time-
    consuming than originally estimated; however, this new computer-aided
    design process is yielding a much higher quality product. Production
    schedules for LPD-18 and follow ships have been adjusted to reflect the
    delay to the lead ship and to ensure efficient follow ship construction
    at the respective shipyards.
        One of the goals of the LPD-17 program is to achieve a 20 percent
    cost avoidance in the operating and support costs for this 12-ship
    class. This goal will be achieved through the application of Integrated
    Process and Product Development Teams and development of advanced
    product modeling in the Integrated Product Data Environment. Current
    estimates of operating and support cost avoidance exceed $4 billion on
    the 40-year life cycle of the 12 ship class to date with more
    initiatives expected before completion of the program.
    Auxiliary Cargo and Ammunition Ship (T-AKE)
        The Navy has several supply ships that have been in service for
    over 30 years. Many of them are steam propulsion system ships whose
    service lives will expire in fiscal year 2007. We plan to replace these
    aging Ammunition and Dry Stores Ships (T-AEs and T-AFs) with the T-AKE
    Auxiliary Cargo and Ammunition Ships. The fiscal year 2002 budget
    request includes $371 million in SCN funding for the third ship of this
    12-ship class.
        The Navy awarded Phase I contracts to four shipbuilders in August
    1999 for cargo-system integration studies for the efficient handling of
    material within the ship. Contract award for Phase II, detail design
    and lead ship construction, is imminent as industry is submitting their
    ``best-and-final'' offers for final evaluation. Lead ship delivery is
    scheduled in fiscal year 2005.
    LHD-8 Amphibious Assault ship
        LHD-8 is a gas turbine powered amphibious assault ship based on the
    successful wasp (LHD-1)-class. The gas turbine propulsion with all
    electric auxiliary systems being included in LHD-8 will result in an
    estimated total ownership cost savings of $350 million to $420 million
    for this ship over its 40-year estimated service life. The Navy awarded
    a contract to Litton Ingalls for detail design of the propulsion plant
    in July 2000. Procurement of long lead material and advance
    construction of components as authorized by Congress was awarded in May
    2001. A construction contract award is planned for December 2001. LHD-8
    construction will begin in fiscal year 2002, accounting for one of the
    six new construction ships in the President's budget submission. As
    approved by Congress, the fiscal year 2002 request includes incremental
    funding of $267 million for LHD-8. When coupled with the previous
    appropriations, the fiscal year 2002 request provides 61 percent of the
    total LHD-8 full funding requirement of $1.82 billion.
    Future Ship Construction
        During the last decade, the focus of maritime warfare operations
    has necessarily shifted from open ocean, blue-water, sea-superiority
    roles to execution and support of operations in the littorals.
    Projecting U.S. maritime power from the sea to influence events ashore
    directly and decisively is the essence of the Navy and Marine Corps
    team's contribution to national security.
        In support of this shift in focus, construction of the San Antonio-
    class amphibious transport dock ships and the Virginia-class attack
    submarines, both of which were designed for the post-Cold War era, is
    well underway. Additionally, we are in the midst of designing two more
    platforms, the DD 21 destroyer and the next generation aircraft
    carrier, CVNX. DD 21 will be a multi-mission surface combatant tailored
    for land attack and maritime dominance while the new CVNX-class carrier
    will use an evolutionary process for inserting new technologies to
    enhance war-fighting capability.
    DD 21 Destroyer
        The fiscal year 2002 budget request includes $643 million to
    continue development of the 21st century land attack destroyer. DD 21
    will provide offensive, distributed, and precise firepower at long
    ranges in support of forces ashore. Entering the fleet as our frigates
    and Spruance (DD-963)-class ships retire, DD 21 will sustain required
    surface combatant force levels.
        The Navy has successfully engineered a competitive acquisition
    strategy for DD 21 that effectively employs industry's broad resources,
    expertise, and ingenuity to achieve the requirements of tomorrow's
    fleet. DD 21's acquisition approach seeks maximum design innovation and
    flexibility, minimum cycle time from ship design to delivery, and
    significant cost savings using advanced commercial technologies and
    non-developmental items. Advanced design and construction techniques,
    and an innovative maintenance and support concept will result in
    reductions in procurement and lifecycle operating and support costs,
    including significant manning reductions along with improved quality of
    life for the crew.
        DD 21 and her associated technologies represent the future of the
    surface Navy and DD 21 represents the type of change that the greater
    Navy needs to be an affordable and potent force. DD 21 technologies
    include advanced weaponry to meet 21st century warfighting requirements
    but also includes the automation needed to fight and survive with
    reduced manning, the essential key to reducing lifecycle costs for all
    Navy ships. Examples of these warfighting and affordability
    technologies include:

             155mm Advanced Gun System (AGS), which has the range
            and lethality to meet USMC/JROC requirements for gunfire
            support for forces ashore.
             Integrated Power System (IPS)/Electric Drive: DD 21
            will have all-electric architecture that provides electric
            power to the total ship (propulsion and ship service). Benefits
            include reduced operating costs, improved warfighting
            capability, and architectural flexibility.
             Optimized Manning Through Automation: initiatives,
            such as advanced system automation, robotics, human centered
            design methods, and changes in Navy personnel policies allow
            reduced crew size of 95-150 sailors while improving quality of
            life.
             New Radar Suite (Multi-Function Radar (MFR)/Volume
            Search Radar (VSR)): the radar suite provides DD 21, and other
            applicable surface combatants, with affordable, high
            performance radar for ship self-defense against envisioned
            threats in the littoral environment while reducing manning and
            life-cycle costs compared to multiple systems that perform
            these functions today.
             Survivability: protection concepts that reduce
            vulnerability to conventional weapons and peacetime accidents
            under reduced manning conditions are key technologies required
            for the ship design.
             Stealth: acoustic, magnetic, infrared and radar cross
            section signatures are markedly reduced compared to the DDG-51
            destroyers and make the ship less susceptible to mine and
            cruise missile attack in the littoral environment.

        The President's fiscal year 2002 budget request sustains the
    commitment to the DD 21 program and the power projection mission that
    it represents. The competition, which will determine the contractor
    responsible for the completion of DD 21 system concept design and the
    detailed design and construction of the first four DD 21 land attack
    destroyers, is in source selection. The Navy has temporarily held the
    completion of source selection in abeyance. The decision was made to
    allow time for the Department of the Navy to determine if a change in
    program strategy was warranted based upon the outcome of the ongoing
    defense reviews.
        The Navy remains committed to the objectives and technologies
    associated with DD 21 and is working closely with the Department of
    Defense to expedite results from the defense reviews so that source
    selection may proceed. Until those results are known and the lead ship
    contract award can proceed, work on key DD 21 technology development
    continues under our existing contracts with industry. Fiscal year 2002
    R&D funding is critical for the work on key DD 21 systems technology to
    proceed without impact to the overall program schedule.
    CVNX
        On June 15, 2000, the Under Secretary of Defense (Acquisition,
    Technology, and Logistics) granted Milestone I approval for the Navy to
    proceed with the CVNX program as recommended. The CVNX program will use
    an evolutionary, multi-ship process for inserting new technologies that
    will enhance warfighting, and enable critical features for future
    flexibility.
        CVNX 1 is the next step in the evolution of improved aircraft
    carriers following CVN-77. Specifically, CVNX 1 will build upon the
    CVN-77 design, incorporating an improved nuclear propulsion plant, an
    expanded-capacity and modern electrical generation and distribution
    system, and an electromagnetic aircraft launch system (EMALS). EMALS is
    designed to replace the current labor-intensive and much less flexible
    steam catapult system on carriers today. The new propulsion plant and
    electric generation and distribution systems will provide immediate
    warfighting enhancements, improve survivability, produce significant
    cost and manpower savings, increase quality of life, and provide the
    critical enabler for future technology insertions. In addition, the new
    electrical systems will provide needed increased electrical capacity to
    further improve sortie generation, further reduce total ownership
    costs, and make possible improvements such as EMALS.
        The next step in the evolutionary process will be to focus, in CVNX
    2, on further improvements in flight deck performance, survivability
    enhancements, service life allowance, and continued reduction in total
    ownership costs.
        Following Milestone I, the Navy awarded Newport News Shipbuilding
    the first increment of CVNX 1 design development work. The fiscal year
    2002 President's budget request provides funding required to support
    future CVNX construction in fiscal year 2006.
    JCC (X) Joint Command and Control Ship
        JCC (X) will be the first new afloat command and control capability
    in over 30 years. It will be built around a robust, advanced C\4\ISR
    mission system that can be tailored to meet specific mission
    requirements and can rapidly and affordably incorporate new technology
    necessary to meet the demands of sustained operations at sea. The
    program entered Concept Exploration and Definition in November 1999. An
    Analysis of Alternatives (AoA) completed in July 2001. The Navy is
    evaluating the best course of action based on the analysis presented.
    The Navy plans to replace the four existing command ships with JCC (X)
    platforms beginning in the 2011 timeframe.

                  SHIP MODERNIZATION AND TECHNOLOGY INSERTION

        While building new platforms for the future is a prime priority,
    maintaining and modernizing our current platforms enables them to
    continue to be valuable war-fighting assets in the years ahead while
    concurrently trying to mitigate escalating support costs of aging
    equipment. As technological cycle times are now shorter than platform
    service life, it is fiscally prudent and operationally imperative to
    modernize the force through timely upgrades and technology insertion.
    In support of this priority, we plan to modernize the Ticonderoga Class
    cruisers, conduct planned maintenance and refueling of our Nimitz Class
    aircraft carriers and extend the service life of our air cushion
    landing craft. Our technology insertion efforts include the Smartship
    initiatives and a spectrum of new capabilities for both existing and
    in-development submarines.
    Ticonderoga (CG-47) Cruiser Conversion Plan
        We plan to add new mission capabilities and extend the combat
    system service life of the CG-47 cruisers. The fiscal year 2002 budget
    request includes $177 million in all procurement accounts to continue
    the engineering efforts and procure systems for the first installation,
    which will occur in fiscal year 2005. The upgrade of these ships will
    add new, and enhance existing combat system capabilities for Theater
    Ballistic Missile Defense, Land Attack, Cooperative Engagement
    Capability, and Area Air Defense Commander missions. These new mission
    capabilities will dramatically improve the ability of these warships to
    operate in joint and coalition warfare environments. The program is
    essential to maintaining a mission-relevant force of approximately 116
    surface combatants over the next 20 years.
    Carrier Maintenance and Modernization
        The Navy provides the maintenance and upgrade of our Nimitz-class
    carriers through the Incremental Maintenance Plan (IMP). The IMP
    includes the mid-life Refueling Complex Overhaul (RCOH) industrial
    availability. The RCOH is necessary to achieve the full 50-year service
    life potential of the Nimitz-class. The RCOH provides the repairs and
    modernization necessary for reliable ship operations. It also refuels
    the reactors, supports the Nimitz-class IMP, and implements Total
    Ownership Cost reduction initiatives.
        The U.S.S. Nimitz (CVN-68) RCOH began in May 1998 and delivery was
    delivered in June 2001. The ship will transit to the west coast in Fall
    2001 with a Post Shakedown Availability scheduled for January 2002.
        U.S.S. Dwight D. Eisenhower (CVN-69) RCOH began in May 2001 and
    delivery is expected in April 2004. Our fiscal year 2002 budget request
    of $1,118 million completes the Eisenhower RCOH execution funding
    profile.
        U.S.S. Carl Vinson (CVN-70) is in the first year of the 4-year
    advanced planning and procurement RCOH phase. Our fiscal year 2002
    request of $74 million is in support of its fiscal year 2005 RCOH. This
    investment is vital to the recapitalization of these national assets.
    Landing Craft Air Cushion (LCAC) Service Life Extension Program (SLEP)
        LCAC SLEP continues in fiscal year 2002 through the award of the
    first production contract. LCAC 91, the production-representative SLEP
    craft, was delivered to the Navy in December 2000. LCAC SLEP combines
    major structural improvements with command, control, communications,
    computer, and navigation upgrades, while adding 10 years to the service
    life, extending it to 30 years. In fiscal year 2002, LCAC SLEP is
    funded at $41 million and will extend the service life of two craft.
    The SLEP is planned for 74 craft.
    Smartship
        Our budget request includes $35 million to fund the procurement of
    Smartship upgrades for CG-47 cruisers in fiscal year 2002. Smartship
    technology consists of automation upgrades to the ship's navigation,
    machinery controls, and damage control systems and provides an
    information management network and a condition based maintenance tool
    for machinery. By eliminating mundane tasks through automation and
    allowing the crew to concentrate on high priority items, this
    technology is an enabler for reduced manning. Three Smartship
    installations are complete and feedback from the fleet is unequivocally
    enthusiastic: Smartship is meeting expectations to reduce the workload
    on our sailors. One additional Smartship installations is currently
    underway in fiscal year 2001. However, the Navy has restructured the
    future Smartship installation plan due to the settlement of a dispute
    with the Smartship installation contractor. The Navy plans to continue
    Smartship installations in fiscal year 2002 but at a reduced rate due
    to higher than anticipated cost. The budget includes funding for one
    Ticonderaga-class cruiser installation and procurement of Land Based
    Testing Equipment for future Smartship installations on the early
    flights of DDG-51 destroyers. Our budget request for the DDG-51
    shipbuilding program continues the forward fit installation of
    Smartship technologies in the remaining ships of the class.
    Smart Carrier
        The Smart Carrier project is a similar initiative to reduce
    shipboard workload on our carriers through industry standard process
    reengineering and the insertion of enabling technologies. Like the
    Smartship program, the goal is to enhance the sailors' quality of life
    and lower TOC. Installation of demonstration technologies and
    implementation of business process reengineering has recently completed
    U.S.S. John C. Stennis with promising results to date. Smart Carrier
    funding of $41.4 million in fiscal year 2002 includes the first full
    Smart Carrier installation, along with advanced planning and
    procurement for additional technology insertion.
    Ship Technology Research and Development
        The Navy's science and technology efforts are focused on future
    naval capabilities (FNC), which address many aspects of future
    shipbuilding. In the areas of sensors, weapons, communications, and
    radar, the Navy continues to make progress transitioning methods and
    equipment that allow leap ahead technologies to better fight our ships
    while protecting our sailors and marines. The Navy is also pursuing
    many human systems technologies to make the man machine interface more
    efficient in order to reduce manning on future ships. To better address
    the network centric aspects of future warfighting, the Navy has
    combined two FNC to bring hardware and software communities together in
    a more integrated approach. The most important leap ahead technology
    for the future of naval warfare will be Electric Warship. The Navy is
    standing up a new FNC to address all aspects of Electric Warship to
    include the propulsion, sensors, auxiliaries and weapons.
        The Navy's science and technology program is focused on 12 future
    naval capabilities:

            1. Autonomous Operations
            2. Capable Manpower
            3. Electric Ships and Combat Vehicles
            4. Knowledge Superiority and Assurance
            5. Littoral ASW
            6. Littoral Combat and Power Projection
            7. Missile Defense
            8. Organic MCM
            9. Platform Protection
            10. Time Critical Strike
            11. Total Ownership Cost Reduction
            12. Warfighter Protection

        The largest near-term beneficiaries of the Navy's science and
    technology program are the DD 21 and CVNX programs. Science and
    technology investments in electric drive and integrated electric
    architecture provide the basis for similar ``electric ship'' technology
    insertions in future ship programs. Other examples of technology
    insertions that will benefit future warships include alternative hull
    forms for high-speed combatants and incorporation of integrated and
    federated apertures for improved C\4\I and signatures performance. The
    benefits for the 21st century sailor range from improved automation to
    improved quality of life. The benefits for the 21st century Navy are
    improved life-cycle costs to improved combat performance.
    Submarine Technology
        The Navy continues to pursue a strategy of increasing the
    capabilities of the Virginia-class submarine force through the
    insertion of advanced technology into new construction and follow-on
    ships. The fiscal year 2002 budget request includes $111 million in
    research, development, test, and evaluation (RDT&E) funding for
    advanced submarine technology development emphasizing capability
    improvements in sonar and major electrical/mechanical systems.
    Additionally, the Navy is pursuing research and development in other
    areas of submarine technology that address a spectrum of new
    capabilities for existing submarines, planned construction, and future
    submarine classes. The 8th Virginia-class submarine (fiscal year 2006)
    will receive a new advanced composite sail, which will provide space
    and volume for payloads and sensors. Separate efforts are advancing
    both payloads and sensors under development by two industry consortia
    for bringing revolutionary new capabilities to the submarine force for
    battleforce access, sharing knowledge, projecting stealthy power from
    the littoral. As these technologies mature and prove value for
    submarine enhancement they will be added to Virginia-class submarines.
        Both submarine shipbuilders (Electric Boat and Newport News
    Shipbuilding) are playing important roles by assisting the Department's
    efforts to identify additional technologies for insertion opportunities
    and by identifying design changes that bring a life-cycle cost
    avoidance benefit. Last year the shipbuilders submitted 22 design
    improvements for consideration of which 18 were approved for further
    development and evaluation. Thirty-nine new technologies are being
    developed by the submarine community to provide these new capabilities.
    Additional details of the design improvement will be provided in the
    fiscal year 2001 Design Improvement Report.
        Two industry consortia, representing over 50 industry partners, are
    currently working under a Navy (formerly DARPA) agreement to pursue
    specific areas of future advanced submarine research and development.
    These efforts are a result of the 1998 Defense Science Board study
    recommending revolutionary capability advances to the submarine force
    by harnessing future technologies. Beginning later in fiscal year 2001
    these consortia will begin working on actual prototype demonstrations
    of selected technological concepts in an effort to mature the most
    promising advances for insertion into the submarine force. Fiscal year
    2002 should see a continuation and expansion of these demonstrations to
    further develop technologies needed to provide additional capabilities
    to the submarine fleet by 2020.
    National Shipbuilding Research Program Advanced Shipbuilding Enterprise
            (NSRP ASE) (formerly MARITECH ASE)
        The Navy's National Shipbuilding Research Program Advanced
    Shipbuilding Enterprise (NSRP ASE) builds on previous efforts initiated
    under DARPA's MARITECH program (1993-1998). MARITECH was aimed at
    improving the design and construction processes of U.S. shipyards.
    Productivity improvements achieved under MARITECH have helped stimulate
    commercial business opportunities such as construction of crude
    carriers, cruise ships, and trailer ships at three U.S. shipyards. NSRP
    ASE is an innovative approach in public/private cooperation to jointly
    fund research and development for technologies critical to the Navy's
    ability to reduce shipbuilding, ship repair, and Total Ownership Costs.
    Submarine Force Structure
        The fiscal year 2002 budget requests $116 million to start design
    and advance procurement of material for fiscal year 2004 induction of
    two Ohio-class submarines, U.S.S. Michigan (SSBN-727) and U.S.S.
    Georgia (SSBN-729), for conversion to guided missile submarines
    (SSGNs). Of the total research and development and SCN budget request,
    $106 million provides design and procurement of long lead time
    components for the SSGN and the remaining $10 million SCN request
    provides advance procurement for material for the refueling overhaul.
    When refueled, these ballistic missile submarines will provide an
    additional 21 to 23 years of service each. When converted to guided
    missile submarines (SSGNs), these submarines will fulfill Tomahawk land
    attack missile and Special Operations Forces requirements currently
    being met by attack submarines.
        The fiscal year 2002 budget plans for inactivation of two other
    Ohio-class ballistic missile submarines (SSBNs), U.S.S. Ohio (SSBN-726)
    and U.S.S. Florida (SSBN-728), in fiscal year 2003.
        The fiscal year 2002 budget request also provides funding for
    refueling two Los Angeles-class submarines. The submarines slated for
    refueling are the San Diego-based U.S.S. Houston (SSN-713), scheduled
    for refueling at Puget Sound Naval Shipyard, and the Pearl Harbor-based
    U.S.S. Buffalo (SSN-715) scheduled for refueling at Pearl Harbor Naval
    Shipyard. Submarine Engineered Refueling Overhauls (ERO) are major
    depot level availabilities for Los Angeles- and Ohio-class submarines
    accomplished coincident with the mid-point of submarine life. During
    the ERO, the nuclear reactor is refueled and major ship systems and
    components are refurbished or replaced to enable continued unrestricted
    submarine operations. In addition to maintenance, ship alterations are
    accomplished to ensure the safe and reliable operation of the reactor
    plant, replace obsolete equipment, accomplish safety modifications,
    install environmental modifications mandated by law and to modernize
    the ship to meet mission requirements. Naval shipyards conduct the EROs
    in a nominal 24-month availability.
        The Navy is continuing to evaluate how to best apply submarine
    force structure funds either to support additional SSN refueling
    overhauls or SSBN conversion to SSGN.
    Naval Surface Fire Support
        We are executing a two-phase plan to develop new weapons systems,
    advanced munitions, and a Naval Fires Control System to provide
    improved Naval Surface Fire Support capability. These new developments
    will provide long range, time critical, accurate and lethal fires in
    support of ground forces in amphibious and littoral operations through
    a combination of advanced guns, precision gun ammunition, and precision
    land attack missiles.
        In the first phase, the Navy developed a 5-inch, 62 caliber gun and
    is currently developing the associated Extended Range Guided Munitions
    to engage targets between 41 and 63 nautical miles. These weapons, the
    Naval Fires Control System and a mission planning and execution tool to
    control their use will be installed on 28 Arleigh Burke (DDG-51)-class
    destroyers to be delivered between fiscal years 2001 and 2009, and on
    22 Ticonderoga-class cruisers selected for modernization between fiscal
    years 2005 and 2011. The Navy is also developing a land attack variant
    of the Standard Surface to Air Missile. This Land Attack Standard
    Missile (LASM) program will extend the service life of aging SM-2 Block
    II/III missiles and convert them for use in the land attack mission.
    LASM will carry a MK 125 blast fragmenting, unitary warhead with 76
    pounds of high explosives to ranges of up to 150 nautical miles.
    However, these weapons are not intended, or expected, to satisfy the
    full range of Marine Corps Naval Surface Fire Support requirements.
        The second phase, to be completed by 2020, is intended to fully
    meet Marine Corps requirements. It includes developing a longer range,
    higher volume, larger caliber Advanced Gun System (AGS) and associated
    increased lethality munitions, and a longer range, increased lethality
    Advanced Land Attack Missile for the DD 21 Land Attack Destroyer. The
    Advanced Gun System and associated magazine will be fully automated and
    be able to deliver 12 precision guided munitions per minute to ranges
    up to 100 nautical miles. With the delivery of 32 DD 21s and their
    associated AGS mounts between fiscal years 2010 and 2020, the Navy will
    meet the Marine Corps fire support requirements.
    Shipbuilding Industrial Base
        The Navy, in conjunction with the Maritime Administration, defines
    the primary industrial base for naval shipbuilding as those U.S.
    shipyards capable of designing and building large, oceangoing ships
    over 400 feet in length with a draft of 12 feet or greater. As we began
    expanding the fleet in 1981, there were 22 shipyards actively
    constructing large commercial and Navy ships. Shortly after the
    elimination of the Maritime Administration's construction subsidies for
    commercial ships in the early 1980s, commercial shipbuilding in U.S.
    yards virtually collapsed and a declining shipbuilding industry became
    more dependent on Navy construction.
        Since 1990, the Navy's active fleet and the active Navy
    shipbuilding infrastructure have seen considerable downsizing: from 550
    ships to 316 ships today and from 14 shipyards to six shipyards. During
    the 1980s, the Navy was ordering an average of about 20 ships per year.
    That average fell to about eight ships per year during the 1990s when
    the end of the Cold War drew down our force levels and budgets to the
    levels dictated. As a result of overcapacity, the industry went through
    several restructuring phases during which these key six major shipyards
    were consolidated into three corporations. We view these mergers as
    positive steps toward right-sizing the shipbuilding industrial base.
        Assuming no further infrastructure changes, we expect these
    shipyards to retain their design and construction capabilities for
    producing the submarines, surface combatants, amphibious, and auxiliary
    ships in the Navy shipbuilding plan. However, we are concerned with the
    dwindling engineering industrial base and the resultant impact on new
    Navy designs, such as CVNX and DD 21. While industry has collaborated
    on programs such as the Virginia-class submarine and the San Antonio-
    class amphibious transport dock ship, we must pursue collaboration even
    more vigorously to minimize any impacts on the engineering workforce.
        From a facility perspective, all of the six major private shipyards
    are operating at a fraction of capacity. However, capacity utilization
    levels will need to increase at most yards to achieve future year
    procurement rates projected in the 30-Year Shipbuilding Plan Report to
    Congress submitted in June 2000.
        The 30-Year Shipbuilding Plan Report to Congress provided the
    required shipbuilding procurement rate and ship mix to sustain the
    present fleet size. The fiscal year 2002 budget request provides for
    construction of six ships. While acknowledging that this is the third
    consecutive year that the Navy's budget falls short of the procurement
    rate required to sustain the present force size, the Navy's plan also
    provides advance procurement funding for the next two Virginia-class
    submarines, the next four LPD-17s and design start and advance
    procurement for two SSGNs.
        Procurement rates of 8-10 ships per year are needed to sustain the
    current fleet size over the long term. Continuing to procure six ships
    per year as reflected in the fiscal year 2002 budget will have three
    negative effects. First, it will create a ``bow wave'' of future-
    shipbuilding procurement requirements, for which it will be
    increasingly difficult to allocate scarce procurement account
    resources. Second, it will create additional stress on fleet
    maintenance budgets to sustain the service lives of aging and
    increasingly obsolescent ships to maintain force structure. Third, the
    lower shipbuilding rates of this year's budget and the increased
    shipbuilding rates in future years will create a layoff-hiring cycle
    within the shipbuilding industry, which will result in increased cost
    to the Government for future ship construction. This will exacerbate
    the previously mentioned procurement and maintenance affordability
    problem and causes further stress to the ``top line'' of future Navy
    budgets.
        Our shipbuilding plan is barely adequate to sustain the remaining
    naval shipbuilding industrial base including the suppliers that provide
    supporting equipment and associated engineering services. Our plan
    provides the best available balance between the Department's
    requirements and available resources. The innovative teaming strategy
    approved by Congress for the construction of four Virginia-class
    submarines, advance procurement for the fiscal year 2002 and fiscal
    year 2003 Virginia-class submarines, and the next DDG-51 multiyear
    procurement contract, all highlight acquisition strategies aimed at
    lowering costs, reducing disruptions from hiring and layoff cycles,
    while level loading employment, and encouraging capital investments.
    Our shipbuilding plan maintains the LPD-17 program and the Auxiliary
    Cargo and Ammunition Ship (T-AKE) program that will help the auxiliary
    vessel manufacturers capitalize on past and current program
    efficiencies. These actions constitute the Navy's near-term effort to
    ensure the long-term ability of the shipbuilding industry to support
    our future construction programs.
        The fiscal year 2002 budget request reflects our continued
    commitment in research and development to achieve the performance and
    affordability requirements of the DD 21. The DD 21 acquisition strategy
    focuses the developmental efforts in the two competing shipbuilder's
    engineering staffs, sustaining the workload for that vital component of
    the industrial base. The forecast for the production component of the
    destroyer industrial base is not as encouraging.
        As noted in the November 2000 Report to Congress updating the 1993
    Arleigh Burke Destroyer Industrial Base Study, both of the destroyer
    shipbuilders will have to book unprecedented amounts of additional,
    non-U.S. Navy work in order to maintain their workforces during the
    transition from DDG-51 to DD 21 production. The report assessment was
    based on the shipbuilding profile represented in the fiscal year 2001
    budget submission. However, the cumulative effect of actions taken in
    the fiscal year 2002 budget request including the acceleration of the
    58th DDG-51 destroyer to fiscal year 2002, coupled with congressional
    action on the LPD-17 program in fiscal year 2001 and the Navy's action
    in the President's budget for fiscal year 2002, make the industrial
    base forecast even more challenging than that reflected in the report.
    The acceleration of the 58th DDG-51 to fiscal year 2002 sustains the
    surface combatant industrial base in the near term but exacerbates the
    industrial base situation, documented by the Report, between the end of
    DDG-51 production and beginning of DD 21 production. This situation
    demands the Navy's attention as we complete the rest of our future year
    shipbuilding plan. The risks of the destroyer production transition are
    not confined to the shipbuilding industrial base. Second tier suppliers
    of shipboard equipment used on destroyers and other warships will also
    be affected to varying degrees. These effects could range from higher
    unit costs for associated equipment for other Navy shipbuilding
    programs to a corporate decision to scale back or stop production.
    Neither of these consequences is in the best interest of the Navy nor
    the country. In view of the events that have transpired since the
    submission of the November 2000 Report to Congress updating the 1993
    Arleigh Burke Destroyer Industrial Base Study, the Navy will provide a
    brief update of the report to the four Defense Committees, which
    analyzes the effect of the fiscal year 2002 shipbuilding budget and a
    notional future shipbuilding profile on the surface combatant
    industrial base.

                                    SUMMARY

        We are institutionalizing reforms that make acquisition success a
    common occurrence. We continue to communicate fully and openly with
    Congress, industry, our warfighters, and our acquisition professionals,
    and are doing everything it takes to make sure our sailors and marines
    are provided with the safest, most dependable, and highest performance
    equipment available within fiscal constraints. We appreciate the
    support provided by Congress and look forward to working together with
    this committee toward a secure future for our Nation. Mr. Chairman, the
    Navy and Marine Corps acquisition team is continuing to work very hard
    to build the best shipbuilding acquisition programs that maximize our
    current benefits while buying smart for the future.

        Senator Kennedy. Secretary Young.

     STATEMENT OF HON. JOHN J. YOUNG, JR., ASSISTANT SECRETARY OF
          THE NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION

        Mr. Young. Mr. Chairman and distinguished members of the
    subcommittee, it is an honor and a privilege to appear before
    you to provide my first testimony as the Navy's acquisition
    executive, and to talk with you about the Department of Navy's
    fiscal year 2002 budget request for ship programs.
        Admiral Fallon has spoken about our Navy's continuous
    worldwide presence in the areas of national interest. Our Navy
    and Marine Corps team performs this role as brilliantly in 2001
    as they did during the preceding century. I will be working to
    ensure that the team continues to be provided with the warfare-
    ready ships needed to perform that mission.
        The President's budget request calls for construction of
    six ships in fiscal year 2002. Included is $2.97 billion for
    procurement of three DDG-51 destroyers, one additional DDG over
    last year's budget plan, and half of the total number of ships
    requested. Procurement of these destroyers is essential to
    maintaining not only our force structure, but also the surface
    combatant industrial base.
        Funding is also requested for the fourth Virginia-class
    submarine. The fourth ship is part of the unique, single
    contracting construction teaming plan approved by Congress in
    1998. This provides a cost-effective, steady production rate
    that helps both shipbuilders achieve level manning and more
    economic materiel buys for the class.
        As authorized by Congress, the budget request includes
    incremental funding for a gas turbine-powered variant of the
    Tarawa-class amphibious assault ship. The all-electric design
    of LHD-8 offers an estimated total ownership cost savings of
    $400 million over the 40-year service life of this ship. A
    construction contract award is planned for December 2001 for
    LHD-8.
        The sixth ship in the Navy's 2002 construction plan is
    represented by the $371 million in funding requested for the
    third T-AKE auxiliary dry cargo ship. These ships are urgently
    needed to replace the 30-year-old auxiliaries that are rapidly
    reaching the end of their useful service lives. We are on the
    verge of awarding the contract for design and construction of
    this 12-ship class.
        In addition to the six new construction ships, the fiscal
    year 2002 budget request includes important budget items for
    advanced procurement, funding seven new warships. They include
    $421 million for the next four LPD-17s; funding for long lead
    materiel for the fifth and sixth Virginia-class submarines; the
    first procurement funding request for the CUNX-1; and the first
    new class of aircraft carrier since the Nimitz was authorized
    in 1960s.
        In addition to construction, the Navy has a number of
    significant modernization and conversion programs, design and
    advance procurement requests for materiel conversion to Ohio-
    class submarines, two ballistic missile submarines; U.S.S.
    Dwight D. Eisenhower and U.S.S. Carl Vinson refueling complex
    overhauls; refueling two Los Angeles-class submarines, U.S.S.
    Houston and U.S.S. Buffalo; materiel procurement and
    engineering for the first Ticonderoga-class conversions
    scheduled for fiscal year 2005; and two LCAC service life
    extensions.
        The fiscal year 2002 budget request also includes $643
    million to continue development of the 21st century land attack
    destroyer DD 21. The Navy has temporarily held the completion
    of source selection in abeyance, but remains committed to the
    key objectives and technologies associated with DD 21. Until
    the source selection is completed, work on DD 21 technology
    continues unabated under our existing contracts with industry.
        Fiscal year 2002 research and development funding is
    critical for the work on key DD 21 system technologies. We need
    to have these funds in order to proceed with the program with
    little impact due to the slip in source selection.
        In addition to these programs in construction, conversion,
    and fleet modernization, I must highlight the final feature, as
    the chairman noted, for the request for fiscal year 2002 for
    prior year shipbuilding. The funding required to complete
    construction of ships currently under contract has increased
    significantly, as the Secretary has testified. Many factors,
    detailed to some extent in my written testimony, have
    contributed to the cost growth of these ships. The $800 million
    requested addresses the funding required to execute the prior
    year programs during fiscal year 2002. The program consequences
    of receiving funding below the request are very serious, and
    they will have a dramatic impact on the Navy's ability to
    proceed in 2002.
        Mr. Chairman, I will conclude my remarks with a frank
    observation not unlike that of Admiral Fallon. The fiscal year
    2002 budget request, if approved by Congress, marks the third
    consecutive year for six new construction Navy ships. This is
    an inadequate rate to maintain the present force, as committee
    members have noted.
        The Navy will need additional ships in the future to
    sustain the fleet. I look forward to working with Secretary
    England, Under Secretary of Defense Aldridge, Secretary
    Rumsfeld, and the members of this committee to try and maintain
    our national shipbuilding industrial base and ensure we have a
    fleet appropriate to the future mission.
        Thank you for your help, and I appreciate the opportunity
    to respond to your questions.
        Senator Kennedy. Thank you very much. I recognize Senator
    Sessions.
        Senator Sessions. I would just make a brief comment. I
    thank you, Mr. Chairman, for hosting this subcommittee. It is
    something that is our responsibility to do. We are looking at
    the numbers, my staff and I, and I wish there were more money.
    I wish we could improve the amount of funding for shipbuilding.
        We need to get that number up. I support that, but
    sometimes you wonder. We have a big increase, the biggest
    increase in defense budget in sometime, and I know we set
    priorities of personnel and health, but maybe we need to make
    sure that the shipbuilding program is getting its fair share.
        At this point I would like to submit my statement for the
    record.
        [The prepared statement of Senator Sessions follows:]

                  Prepared Statement by Senator Jeff Sessions

        Article I, Section 8 of the U.S. Constitution gives Congress the
    ``power to . . . provide for the common Defence'' and ``to provide and
    maintain a Navy.'' The framers of the constitution recognized, as we do
    today, that we are a nation dependent on keeping the sea lanes of
    communication open.
        While the microchip, the internet, and satellite communications
    have driven a revolution in communications, transporting goods from one
    nation to another still depends on ships and their freedom to transit
    from one port to another. Navy ships patrol the oceans and littorals of
    the world ensuring freedom of navigation for maritime commerce in a
    global economy. They provide stability that reassures allies, which
    then results in confidence that leads to investment.
        The Navy is ships and the people on those ships which provide a
    visible commitment by the United States. Sailors and marines, capable
    of projecting lethal power, provide the deterrence which enables
    diplomatic and other efforts the opportunity to solve regional issues.
    The Marine Corps and Navy team also create the conditions that ease the
    entry of joint forces, when required, including area defense and secure
    points of debarkation for follow-on forces.
        The requirements for ships are generated and scrutinized first by
    the Navy staff and then by the Joint Requirements Oversight Council.
    Once the requirements are validated, the acquisition community
    establishes a program to design and produce the ships from private
    shipyards. The acquisition strategy and program milestones are approved
    by the Defense Acquisition Board.
        Construction of Navy ships requires some unique skills and
    facilities that have no commercial shipbuilding equivalents. This
    requires the Navy to retain knowledgeable professionals who understand
    the complexity of building combatants and integrating combat systems
    into unique hulls. These professionals must have the ability to
    estimate, negotiate, contract, and manage ship construction programs
    without relying solely on information provided by shipyards.
        The reduction in shipbuilding budgets has led to inefficient
    production levels, a diminishing vendor base, and the consolidation of
    shipyards. There have been instances of directed procurement to
    maintain the industrial base required for national security.
        This subcommittee has gone to great lengths to establish that a $10
    to $12 billion annual shipbuilding investment is required to maintain a
    Navy of about 300 ships. The new national security strategy and
    Department of Defense strategic review will outline the force structure
    required to carry out that new strategy. Congress will then review the
    strategy and implications for Navy ship force structure. No matter what
    the result of the review is, one issue is crystal clear: If 300 or more
    ships are needed, it will require a significant increase to the annual
    shipbuilding investment.
        Representatives of industry testified at our subcommittee hearing
    in April that the industrial base will adjust to build the number of
    ships required by the Navy. They stated that efficiencies in production
    and accurate ship cost estimates will result from a contracting
    commitment for groups of ships with a stable configuration, rather than
    contracting for a single ship with an evolving design.
        Understanding the Navy's ship procurement and ship research and
    development budget request for fiscal year 2002 and the Chief of Naval
    Operation's fiscal year 2002 unfunded requirements pose a challenge for
    this subcommittee due to the short period of time available to review
    the justification materials. That challenge makes this hearing very
    important because it provides the Navy an opportunity to explain and
    justify the budget request.
        I hope our witnesses today can clarify the following questions
    regarding the challenges we face together regarding building quality
    and complex ships:

             What is the process and Navy participation in the
            shipbuilding review that is ongoing by the Office of the
            Secretary of Defense?
             What are the industrial base issues and capability
            tradeoffs associated with the fiscal year 2002 budget request
            and pending ship acquisition contracts?
             What funding alternatives will lower the unit cost of
            ships and are those alternatives included in this budget
            request?
             Does the Navy understand the shipbuilding cost drivers
            and is there a plan to mitigate the impact of those drivers on
            the cost of Navy ships?
             Is the Navy buying the right types of ships for future
            requirements?
             Is the research and development request for future
            ships based on a disciplined requirements process which
            includes the Joint Requirements Oversight Council?
             Are there ways to minimize the reported cost increases
            and schedule delays associated with some Navy ship construction
            programs?

        I join our chairman in welcoming Admiral Fallon, who has testified
    previously before this subcommittee, as a Fleet Commander, and
    Secretary Young, who we congratulate on assuming his new position. We
    look forward to working with both of you on these important issues.

        Thank you, Mr. Chairman.
        Senator Kennedy. Thank you very much, Senator Sessions. If
    we could go to the cost growth on the prior year programs, I
    mentioned to Secretary Young that the budget request includes
    the $800 million for completion of the prior years'
    shipbuilding. Secretary England is quoted as saying he believes
    that strong measures need to be taken in order to avoid a
    situation where the bulk of some future year's shipbuilding
    budget is taken up by the need to finish paying for ships that
    were approved in the earlier budgets. Secretary Young, can you
    assure us, based on your own best estimates at this time, that
    the fiscal year 2002 shipbuilding budget is fully funded?
        Mr. Young. Based on the briefings I received to date, my
    understanding is that as long as we receive $800 million, as
    well as the amounts requested in the budget for the programs I
    outlined in my statement, we have a program the Navy can
    execute in fiscal year 2002.
        Senator Kennedy. How much more will be required to fix all
    of the prior years' shipbuilding programs? Have you made an
    estimate?
        Mr. Young. Yes, sir. We continue to work those numbers. I
    think the current best estimate I can give you would be about
    $1.6 billion, which is foreseen over the course of at least 2
    or 3 years into the future, 2003 and beyond, to be sure we can
    complete the ships we currently have under contract and
    construction.
        Senator Kennedy. Do you have a suggestion that you would
    care to share with the subcommittee about the ways to improve
    the cost and management controls on the shipbuilding
    acquisition process?
        Mr. Young. I will be honest with you. I would like to take
    the opportunity to do my homework a little better. However, in
    DDG-51 we have seen great success with the multiyear
    procurement strategy. I intend to go out and visit the
    shipyards and see if there are smarter ways to do business.
        The Secretary has asked that my office take a very hard
    look at the change orders and that process. Change orders that
    have an impact on cost are likely to be deferred in the future
    until we are confident we have our hands totally around this
    issue and can begin to restrain and reduce the amounts of funds
    that we have to budget for prior year completion.
        Senator Kennedy. You are familiar with the different
    alternative ways that have been suggested and actually have
    been tried, and some were more successful than others in terms
    of the past. There are some logical steps, obviously, when you
    are doing aircraft carriers, given the time that is necessary
    to build those, and the differences also with regard to the
    destroyers, because you are building a number of them over a
    longer period of time. There are different modalities that have
    been tried and tested, and we are very interested on this
    subcommittee in getting your best judgment about the ways to
    proceed.
        We get a lot of advice from a lot of different groups, but
    we are very interested in getting yours as early as possible.
        Admiral Fallon, I remember the difficulties I mentioned and
    the problems with mine warfare. I firmly believe that mines
    continue to present a serious threat both to the Navy and
    Marine Corps forces. Do you agree that the mines continue to
    pose a threat to the naval and marine forces?
        Admiral Fallon. Yes, Senator. This is clearly a serious
    threat, and it is a threat because it is a technology, a lot of
    it, that is available worldwide and is relatively inexpensive
    to acquire. It provides nations that do not have a lot of
    resources with weapons that can be serious impediments to
    successful completion of operations, particularly in the in-
    shore areas. It is incumbent upon us to work this problem as
    hard as we can and to try and make progress.
        I can tell you personally that this has been a very high
    interest of mine. My previous assignment as a fleet commander
    in Norfolk included the responsibility for preparing our forces
    to go overseas and to operate in those littoral areas. We have
    devoted a lot of effort in this particular area over the last
    decade. I think we have a way to go. We have programs in place
    that are working in the area of new technology, and frankly, we
    are waiting to see how these things deliver.
        There is a program we think is adequately funded. We know
    that there are lots of ideas out there. I personally watched
    several of these technologies being implemented. There was the
    advanced concept technology demonstration a couple of years ago
    in which most of those techniques that are being moved toward
    fleet implementation were demonstrated.
        I thought some of them were very innovative, but at the end
    of the day the reality is this: in this business there are no
    magic answers. There is no clean, easy way to do this. It
    requires a tremendous amount of work, because every single
    object that is identified, assuming we can locate the object,
    has to be identified and classified as either a threat or a
    non-threat. It just makes the job very demanding, particularly
    when you add in the realities of working in the in-shore areas.
    So we are moving forward.
        I would also pass on to the subcommittee that it is my
    belief, and the CNOs, that this business of mine warfare needs
    to be thoroughly integrated into every-day operations in the
    fleet, not just delegated. As you are well aware, we have a
    Mine Command headquartered in Ingleside, Texas that is devoted
    to mine warfare. I have an Admiral in charge. He has a fleet of
    ships and aircraft that he works with, and he is focused on
    this issue.
        The bigger challenge for us is to get the attention
    resident in the minds of all of our operational commanders so
    that they are thinking and working this all the time. That has
    been the thrust of our efforts lately.
        Senator Kennedy. I was interested why the Navy was altering
    or redirecting funding on the shallow water assault breaching
    (SABRE) system and distributed explosive technology (DET)
    shallow mine-breaching system when it has no near-term
    alternative to field or accomplish the mission. I understand it
    was done because they have testing problems. Do you want to
    explain, please?
        Admiral Fallon. Yes, sir, Senator. The fleet operators who
    use this system and evaluate its potential and performance
    reported back that the system has a very large footprint which
    must be carried into the surf zone on some vessel, an LCAC,
    primarily. To properly employ the system, the assumption is
    that we need to know precisely where we are, first of all, so
    that the craft going into that area is going to be able to
    survive and not become a victim.
        That was typically an issue with these vessels as they went
    through the demonstrations. The ability to get this vessel at
    the precise point needed to actually launch the lines out to do
    the work was a continuing issue.
        The next issue was that once the system was deployed it was
    kind of a pay your nickel: take your chances on if the job has
    been done and if the system effectively took care of the
    threat. We were sending troops into that lane behind this
    device, and the confidence level was not where the operational
    commanders thought it ought to be.
        So the bottom line is that the system had potential, yet we
    did not think it was the right answer, given the priorities we
    had. The recommendation was to pursue other technologies to try
    and do the job.
        Senator Kennedy. I had heard that the operational testing
    was for some 50 yards lane width on this, and then after they
    had the testing they changed the requirement for that from 50
    yards to 75 yards. Are you familiar with that requirement?
        Admiral Fallon. Senator, I cannot give you the detail down
    to that level. I would be happy to take the question and get
    back to you, though.
        [The information follows:]

        In December 1994, Navy identified the requirement for a 50 yard
    wide amphibious assault lane. The Shallow Water Assault Breaching
    (SABRE) System and Distributed Explosive Technology (DET) were
    developed with this lane width requirement.
        Fleet exercises have highlighted the need for a larger lane to
    accommodate current and future displacement and non-displacement
    landing craft (LCAC, LCU, AAAV). This is due to inherent navigation
    limitations, the extreme dynamics of the surf action zone, and the
    nature of the required operations and tactics. Fleet operational
    experience suggests that a 75 yard wide lane is the minimum assault
    lane width requirement, though this could increase to 100 yards, 150
    yards, or larger. The fleet is currently tasked with validating the
    lane requirement.

        Senator Kennedy. I appreciate that. What I had heard is
    that it had met its requirements, but then those changed, and
    so there was a question about whether they complied with the
    second level. The money has been redirected, and I am in favor
    of the program for which it has been redirected. However, I am
    very concerned about taking it out of this fund, and you might
    provide some additional information on it.
        My time is up. Senator Sessions.
        Senator Sessions. Thank you. Admiral Fallon, you mentioned
    the figure, and I did not quite understand what you said. Did
    you say $34 billion on procurement? That is over what period?
    What did you mean by that?
        Admiral Fallon. Senator, we are spending about $24 billion
    right now on procurement. We think we need to be spending $10
    or $12 billion more a year to really be able to adequately
    address modernization.
        Why are we at that number? There are many factors, but the
    bottom line is that our best assessment of where we are today,
    given the fact that we have pretty consistently underfunded for
    various reasons our modernization accounts for quite a few
    years now. We require that amount of money for some sustained
    period to get the nose of this program back up in the air
    again, and that is both shipbuilding and aircraft.
        Senator Sessions. I appreciate that, and I am sure that is
    what we would like to have.
        Secretary Young, the budget is $328 billion this year, is
    that correct? Last year we were at $296 billion, so that
    represents a $32-billion increase, the largest increase in over
    a decade. Why are we having so slow an impact on shipbuilding?
        Mr. Young. I will try to answer your questions as best as I
    can.
        Senator Sessions. I know a lot of this money we put on
    personnel. We mandated it. We felt it was necessary and the
    Defense Department felt it was necessary also, so that took a
    big chunk out of it. But where are we there?
        Mr. Young. The bulk of the increase this year went into the
    defense health program. We have had to continually put
    supplemental funds into the health issues. Also, the military
    pay raise, as well as retirement costs, are going to add every
    year to the bottom line. We cannot avoid those costs. They have
    to be added and funded. They are essentially mandatory.
        There are other shortfalls we dealt with. I do not know if
    the Admiral wanted to speak and address that question also.
        Admiral Fallon. Thank you, Mr. Young.
        Senator, if I could, this was not just a random, let's
    throw some money at something in a year. The idea here, the
    strategy was that in 2001, in which we still have a couple of
    months to go, that we would make every attempt to ensure that
    we did not have significant breakage in the force between now
    and the end of the year. The priority was into funding those
    things that we needed to fix in the near term.
        Frankly, we were going to run out of money very soon in the
    programs, and a lot of personnel accounts, many of which, by
    the way, are a good story, thanks to the tremendous report we
    have received from this committee and from the Members of the
    House. But the plan was to get us through 2001 so that we were
    able to get into the 2002 fiscal arena with an identified
    number that would start getting us out of this continual
    shooting-behind-the-rabbit problem. The idea was that we would
    identify a number in 2002 that would obviate the necessity to
    have another supplemental at the end of that year, and we
    stacked up our priorities, people first.
        We figured even if we had the money to build all the ships
    in the world, if we did not have a force that could man them we
    were pretty much wasting those dollars. We went after
    continuing to rebuild our force and our people to give us a
    foundation. The assumption was that as we got into 2003, we
    could then start moving up the glide slope to get well. But the
    key factor was to fix damage right now, to put ourselves in a
    firm foundation in 2002, and to fix the rest of the people
    programs and the rest of the things, primarily, in the near
    term area, so that we could then get moving in 2003.
        The dilemma right now is, we are not finished with 2001,
    the 2002 bill is on the Hill, and as we deliberate how to get
    into the 2003 and beyond budget, we still have the uncertainty
    of exactly where we will end up at 2002, but that is in fact
    what we did, sir, and that was the thinking.
        Senator Sessions. I am going to have to run to vote, but I
    would just say to you, the marines have some requests, the Air
    Force has some requests, and the Army wants to transform. In
    the course of evaluating the Navy, you are going to have to ask
    yourself what is a realistic expectation of increased
    procurement funds and configure a Navy that is within that
    realistic range.
        I had hoped that we would be in a better position, but
    there are a lot of competing demands out there. I salute
    Secretary Rumsfeld for looking at this thing from top to
    bottom, and maybe in the course of that there can be savings
    achieved and generations leaped. Money can be applied to this
    kind of a program that does not now appear to be available, and
    so all of us are going to have to confront every assumption we
    have had to maintain the quality of the defense force and Navy
    we would like to have and maintain. Like you, I believe at some
    point you have to have a ship to project our power. You simply
    have to have the ship there.
        Excuse me. We are going to have to adjourn for a few
    minutes. We will be right back after this vote. [Recess.]
        Senator Reed. Senator Kennedy advised me to start. Let me
    first thank you all for your testimony.
        Mr. Young and Admiral Fallon, let me raise a question. When
    the Chief of Naval Operations came before us a few weeks ago, I
    asked what plans were being made for the four Trident
    submarines that could potentially be converted. As you well
    know, the first two are now ready. It is a four-boat
    conversion. Two are coming offline later. The decision at that
    point had not been made whether the money would apply to the
    first two or second two.
        I believe the decision has been made to forego the first
    two Trident ships and convert the latter two. Mr. Secretary, is
    that correct? Has the decision been made?
        Mr. Young. My understanding is that the budget now makes
    the assumption that the second two will be in the plan for the
    conversion program. However, there is funding in the budget
    right now for only two submarines, with the earlier subs to be
    decommissioned. I believe there is discussion about whether
    funds might be added in different bills to preserve the choice
    on those two submarines.
        Senator Reed. Admiral Fallon, any elaboration?
        Admiral Fallon. Yes, sir, if I could. The big picture, as I
    see it, with the SSGN, is that it had a lot of potential. Its
    transformational, and it is a different way to approach a
    challenge. It is a way to potentially have an awful lot of fire
    power in a platform that is very covert, and there are all
    kinds of piggyback opportunities here, maybe with SOF. I know
    you are aware of that.
        The dilemma is the funding. The easy part here, to my way
    of thinking, is to put an amount of money in this year or next
    year and to say, ``we like it, we can figure out how to do
    this.'' The challenge that we worry about is the tail. The
    reality of it is that there is nothing but goodness in the idea
    that we take a platform that has a tremendous amount of service
    life left in it and save whatever the initial investment is in
    rebuilding a new vessel.
        We have one that has a lot of years on it, and we have it
    in hand, and with a minimum amount of time and relatively small
    amount of money, we could turn it into something that is a very
    useful platform to do some of these things. However, the
    reality is the cost of planning for that ship includes getting
    all of the money to do the complete conversion, operating the
    ship, buying the weapons, paying for the crew, and then
    planning and doing the upgrades.
        We laid that out from now until the end of the estimated
    service life. It presents a bill that has to be weighed off
    against the other potential uses for those resources. We are in
    a position where, to answer your direct question, as the
    Secretary has already indicated, we are headed right now, given
    the info we know.
        I think it is possible to go back and do the other four at
    this time if the resources were made available, but there are
    several factors. What is the cost of doing that, and what is
    the total bill? Again, there is an optimum way to do it, and
    there are ways that could get the job done with more money at
    some amount of time. But the real dilemma is how do we weigh
    off this need versus the other requirements in making those
    decisions? It is pretty hard.
        I have found that, particularly in this business, the
    questions this subcommittee is interested in have no one-shot
    answers. All of these things have a tail that we have to
    consider. This is the reality of doing business the way we have
    done it in recent years, where we have consistently procured
    things at the less-than-optimum rate.
        I do not think we have a program in the Navy right now that
    is being operated at its most efficient procurement rate. So,
    when you start factoring those things in, the potential for
    those bills gets high, but I think there are some options now.
    We could go several different ways, but right now we are
    leaning toward two and trying to figure out how we can wedge
    that money to take care of it.
        Senator Reed. I think both of your responses point out the
    dilemma we have. What is a transformational ship, potentially,
    moving from a ballistic missile submarine to a conventional
    land attack cruise-missile-firing submarine with special
    operations capacities, able to operate in deep water and
    littoral waters, something I think the strategists are trying
    to drive the Navy in this direction, yet because of the budget
    constraints, we cannot exercise the full four. Again, just to
    understand your response, it seems fairly certain that at least
    the last two will be converted. Does the budget reflect that,
    Admiral or Secretary Young, to a 90-degree certainty, that the
    last two are programmed now to be converted, at least the last
    two?
        Mr. Young. The last two or four?
        Senator Reed. The last two of the four that are coming out
    of the fleet.
        Mr. Young. I may not fully understand the question because
    there are D-5 conversion issues with this. Regarding the
    potential for the early two, there are different strategies
    that are being looked at internally, and I apologize.
        Senator Reed. That is fair, but let me rephrase the
    question. We have identified four Tridents for possible
    conversion. They are coming out in a sequence. Are you saying
    that, based on other factors, the first ship could be
    converted, or the third ship could be converted, or the fourth
    ship, or do we forego the first two? I am just trying to get a
    sense of which ships we are talking about.
        Mr. Young. Again, Senator, there are two right now that the
    budget assumes would be decommissioned and defueled. Those
    could be caught if additional funds were made available,
    although that, as the Admiral accurately highlighted, is a
    near-term resource consideration.
        My understanding is that there are a couple of submarines
    further out that could possibly be caught and converted.
    Likewise, you could decide on the two near-term ones that you
    would refuel them and execute the Trident II D-5 conversions on
    them. There are still some strategy issues that relate back to
    resources on which conversions to do. There is an opportunity,
    I believe, if we miss these two boats, to still get four SSGN
    conversions, if you will, although there are people that are
    certainly very anxious to avoid seeing these two submarines
    just decommissioned and defueled.
        Is that fair, sir?
        Senator Reed. That helps clarify. One final point would
    just be that there is a worst-case possibility that you would
    decommission these two ships and then 1 or 2 years out we would
    have the same dilemma. Where do we get the money for the
    conversion of the remaining Tridents that are coming out of the
    fleet? Is that dilemma still with us? Have we committed in this
    budget to convert two Tridents, and if so, which two? It is
    only an operational question.
        Mr. Young. I do not think the budget commits to two
    additional. It only commits to starting the process for two
    conversions. The option is still being considered almost daily
    within the Department for the other two, including the
    Secretary asking questions about what smart things we can do to
    avoid the commitment to decommission and defuel. He would like
    to see if we can tie these up, if you will, and try to hold
    that option open for as long as possible. We really are working
    this almost on a daily basis.
        Senator Reed. Thank you, Mr. Secretary. Admiral, do you
    have a comment?
        Admiral Fallon. Senator, the only thing I would add is, to
    the best of my knowledge, we have not identified by hulls--I am
    sure people have ideas of what hull numbers would be the likely
    suspects here, but the program of record is for the advance
    procurement to get lined up. I think we still have the
    flexibility to pick and choose which actual hulls, and some
    might be done a little more efficiently than others. If I had a
    vote on this one I would say, we will do it when we can
    identify the ability to pay for the whole program and we do it
    in context.
        There are some 688s out there that with a refueling have
    another potential long service life. As we look at the
    capabilities of the submarine force and what they can do taking
    into account the transformational nature of this thing, we are
    weighing off just how much money to put into the programs,
    which one gives us more bang for the buck and so forth.
        Senator Reed. Thank you. My time has expired but no other
    colleagues have joined me, so I will ask one more question. We
    all understand we have a train wreck ahead. That is probably
    not the right metaphor for sailors, but we have a problem
    looming over the horizon, which is the insufficient number of
    ships in the fleet.
        There are two ways, at least, to approach that. One is to
    build more ships. Another is to go in and make serious
    expenditures to extend the life cycle of existing ships in the
    fleet. I would pose this question to you, Admiral Fallon: What
    is the consideration of extending the life cycle? How much will
    that buy us in lieu of new ship construction? Are we exploring
    all of that potential? Where are we in that mix between
    construction and life cycle extension?
        Admiral Fallon. Senator, thank you. I think this is one
    that lends itself to an analogy of those who spend time in the
    gym with a barbell. In this case the two ends of the barbell
    are first, the current readiness and upkeep of the force, and
    second, modernization and looking to the future. These things
    need to be kept in some kind of balance or the thing is going
    to fall down and come out of your hands.
        I believe you have to make a capital investment in a vessel
    with the expectation that at some point during the life of that
    vessel we are going to undertake those measures to keep her at
    as close to the cutting edge as we can, with the realization
    that the longer we keep the platform in service, the more
    operating and support costs are likely to mount.
        We see this in spades in airplanes, because of the
    environment. But it is clearly applicable to ships, and at some
    point in time we have to be looking to the future and
    recognizing that some new technologies do not lend themselves
    very well to adaptation. It is very apparent today that
    technologies exist which will enable us to do the job, to
    operate vessels at sea, with a much smaller manning factor than
    is required today. But that is not something we can just wave a
    wand and magically make happen.
        Platforms are designed with certain features. It happens to
    be today that some of them have been around for a while, and
    are very manpower-intensive. That is not easy to fix. That is
    why something like DD 21 is so appealing to us, because the
    expectation is that this platform is going to deliver a design
    capability that will be much easier to maintain, so the reality
    is, you have to do both.
        The real dilemma today is that we are actually short-
    sheeting both ends of the equation. We are not investing
    enough, we think, into the upkeep and revitalization of
    existing platforms, and at the same time we are clearly not
    buying enough new ones. So the answer, in short, is that you
    have to do both, and somehow we have to figure out a way to get
    the resources either from within or without to do that.
        Senator Reed. Your forward-planning, I presume, goes at
    least 5 years out, is that accurate?
        Admiral Fallon. Yes, sir.
        Senator Reed. Have you been given specific instructions to
    consider the adaptation to the fleet to missile defense forces,
    other than the current Navy-wide and area-wide systems, such as
    a system that would be part of what is now called a multi-
    layered national missile defense?
        Admiral Fallon. I think it would be fair to say there is no
    specific guidance as yet. Clearly, there is an expectation that
    we are going to look very hard in this area, and we in the Navy
    are going to look and see what role we can play. We think we
    have a lot of footprints in the sand already in this area, a
    lot of experience, and we are trying to put ourselves in a
    position where that experience that we have can be applied to
    whatever programs that are eventually going to come out of
    this. We stand by ready to help in any way we can.
        Senator Reed. I presume, though, any developments along
    those lines would require you to do new construction or
    retrofitting with respect to sensors, radars, launchers, items
    of equipment that are both expensive, and also require the kind
    of design and planning that cannot be done in a weekend.
        Admiral Fallon. That is absolutely right.
        Mr. Young. I think you are absolutely right, and the
    Admiral and I have had discussions about this. Cruiser
    conversion is something the Navy is internally studying. Those
    ships might be good candidates for the radars and the missiles
    that you are talking about. The DD 21s obviously are already
    potential carriers for the Navy area system, and we continue to
    work that. I want to take a second, if I could, just repeat,
    the Navy stands ready to support a missile defense effort.
    However, we do not have guidance to take any particular vectors
    right now.
        Senator Reed. My presumption would be that this is a
    somewhat novel and sophisticated endeavor, so that from the
    time of instructions to the time of just design, it is far from
    construction. You are talking years. You are not talking weeks
    or months.
        Admiral Fallon. This is not weeks and months. This is going
    to require long-term investment. We can already see, at least
    in the vision that, limited as we humans have, we think we see
    a couple of areas that appear to be at least markers on the
    path to the future. One is continued development of radars,
    building on our Aegis-based baseline that is currently in the
    fleet and those under development, to look to the future, and
    then the cooperative engagement capability, which has just
    undergone its OPEVAL, and seems to have tremendous potential
    for linking lots of sensors in the network. We think these are
    pretty valuable markers in our trail to the future.
        We would like to take both of those capabilities and figure
    out a way to pay for them in the cruiser upgrade program for
    those platforms we already have, obviously in DD 21, and hook
    back to the new CVN to have radar in those that is going to be
    able to be not only compatible with these other platforms, but
    something that gives us that capability in the future.
    Obviously, that is still in design.
        Senator Reed. But the wish and hope is not fully funded in
    this budget?
        Admiral Fallon. No. We are going to have to figure out a
    way. We expect that this would be part of the program in DD 21
    and CVN-X, but we will have to figure out a way to put it in
    the cruiser conversion. We have a small down payment in 2002.
    Again, this has a tail that we need to be sure we fund.
        Senator Reed. Thank you, Mr. Secretary, and thank you,
    Admiral. I will recess the hearing until we are joined by other
    colleagues. We stand in recess. [Recess.]
        Let me reconvene the hearing and recognize the Senator from
    Maine for her questions and for as much time as she wants, or
    until Senator Kennedy arrives.
        Senator Collins. Thank you very much, Mr. Chairman.
        Secretary Young and Admiral Fallon, I was pleased to see in
    your statement that you wrote, ``the DD 21 and her associated
    technologies represent the future of the surface Navy, and DD
    21 represents the type of change that the greater Navy needs to
    be an affordable and potent force.'' You probably will not be
    surprised to learn I agree wholeheartedly with those comments.
        Many senators on this subcommittee were very concerned in
    May when the Navy announced its decision to delay the selection
    of a lead shipyard, particularly since the two teams have been
    working so hard and had made so much progress. This came as
    quite a surprise to our shipbuilders who had been working so
    diligently in these partnerships.
        There are now reports that a decision is imminent in the
    Department of Defense to move ahead with the DD 21 destroyer
    program and to move ahead with the down-select. Could you
    comment on the status of moving ahead with the down-selection?
    Secretary Young or Admiral Fallon?
        Mr. Young. I think we are working on a daily basis to
    provide the inputs to OSD on the shipbuilding review and QDR
    process. That was one major factor in delaying the down-select
    decision. We are trying to make sure they have everything they
    need. The Navy is a participant in those discussions and those
    decisions about how the shipbuilding program of the future
    looks.
        Likewise, we are taking the time to make sure that we have
    the DD 21 strategy right. We would like to proceed with source
    selection as soon as we feel like we have the right strategy.
    We know that from Secretary Rumsfeld on down our strategy
    supports the program, so we are moving forward. Whether it
    would be described as imminent, I do not know, but I would say
    the Navy wants to move forward and we are moving forward in the
    program with regard to the systems that would support DD 21.
        We particularly cannot let the volume search radar and
    multifunction radar fall behind schedule. The CVN-77 needs
    those systems. Furthermore, the gun system, the radar, and some
    of the manning concepts that we might be able to retrofit onto
    our existing destroyers, cruisers, and other ships are moving
    forward. We are keeping both teams working on their
    technologies to try to make sure that we do not lose ground
    during this pause in the source selection, which is not a pause
    in the program's technology work.
        Senator Collins. Can you give me any further guidance on
    the time line for making a decision on source selection?
        Mr. Young. Senator, I think I would love to do that. I am
    not sure that I have that answer yet. Whether or not we have to
    wait for a QDR result in September is not clear to me. I am not
    sure we do, but I am also not sure we do not. I will try to get
    you a better comfort level with that answer, but I personally
    cannot offer you a lot more comfort yet until I have some
    discussions and have a firm sense on what OSD wants from the
    Navy as well as what we need to provide them if we have not
    answered all their questions.
        Senator Collins. One of the concerns that I have in regards
    to maintaining a strong shipbuilding industrial base is that we
    need to have a bridge between the DDG-51 Aegis destroyer
    program and the new DD 21 destroyer program, particularly if
    there is any slippage in the schedule or number of ships that
    are projected to be procured under the DD 21 program. Admiral,
    could you comment on the need for a bridge to ensure that we do
    not lose our shipbuilding expertise and our base?
        Admiral Fallon. You have hit the nail on the head in that
    regard, Senator. Clearly, we want the transformational
    capabilities that we see coming in DD 21, but we also, as I
    mentioned earlier, have to have numbers, and we are going to
    try and take whatever steps are required to assure that we have
    those numbers. We are acutely aware of the industrial base
    issue and the need to maintain some continuity with people that
    have those skills to build the ships.
        The answer is that we clearly want to do what you have in
    mind, and depending upon how things work, the outcome and the
    timing of the DD 21, we will take what we think are the
    necessary steps. We will recommend taking those steps that will
    do exactly what you want: keep the expertise moving and
    hopefully do something to get this ship curve moving upwards,
    instead of the glide slope we are on right now.
        Senator Collins. Admiral, in your testimony you also
    commented on some of the advantages of the DD 21. For example,
    potentially you have lower total ownership costs, you have two-
    thirds the operating cost, and one-third of the crew necessary,
    compared to our traditional destroyers. Is it also accurate to
    say the DD 21 is the only platform currently slated to meet the
    Marine Corps' fire support needs with the advanced gun systems
    and the extended range guided munitions?
        Admiral Fallon. We clearly see the potential to do all of
    those things that you mentioned. We would like to see the
    program deliver those kinds of numbers. We believe that this
    program will, in fact, adequately address the Marine
    requirement. It will give them the capability and fire power
    that we do not possess right now, and we think, in fact, it
    will meet their requirements.
        Senator Collins. Thank you, Mr. Chairman.
        Senator Kennedy. This is the point, as well, that I wanted
    to mention in terms of the fire support capability that is in
    the DD 21, which the Marines are counting on. There is a
    certain sense of urgency as to when we will know something
    more. I know that you gave some responses to questions while I
    was absent. Did you indicate when we would have a better idea
    of what the scheduling would be on the decisionmaking?
        Senator Collins. I am waiting to see if the chairman gets a
    more direct answer, which I hope he will. Excuse me for
    interjecting.
        Mr. Young. Mr. Chairman, Senator Collins very effectively
    asked me that question. To summarize, I told her that we are
    somewhat hung up by the QDR and shipbuilding reviews in OSD. We
    are feeding those efforts as rapidly as we can. It is not clear
    to me that we can proceed in advance of the QDR, but it is also
    not clear to me that we cannot, so I do not have a date.
        Senator Kennedy. On that question, whether you need a QDR
    or not, when will you know that? When will you know whether or
    not you need to have the QDR?
        Mr. Young. We will have the QDR. Whether that result would
    have any impact on the DD 21, or whether there is enough
    insight at Secretary Rumsfeld's level that the DD 21 will be a
    winner and be able to proceed as it is formed is not clear at
    this time. However, the Navy is very confident it will be the
    ship of the future, as we have testified.
        Senator Kennedy. I did not do any better than you did,
    Senator Collins. I will continue to press along, because I
    think there are so many important issues that are wrapped up
    not only in the ship, but also in the technologies and in the
    fire power.
        Did you address what action the Navy is taking to ensure
    protecting the schedule on the technology insertions and
    protecting the schedule for the DD 21?
        Mr. Young. Yes, Senator, we talked for a minute about that,
    and I tried to assure the Senator that we are proceeding with
    all of those key technology efforts--the gun system, the radar,
    some of the minimal manning technology concepts, and the
    integrated power system.
        We are proceeding with both teams to make every effort to
    keep the program on track so that when there is a source
    selection we can recover the schedule and move forward. Some of
    those technologies like the MFR and VSR, the radars, are
    essential to CVN-77 and they have to stay on track, because
    they support ships beyond DD 21.
        We are moving forward with all elements of DD 21 with both
    teams, which is why we are spending the money this year. We
    will need the money next year to allow the winning team to pick
    up any lost ground and also pick up on the efforts that they
    have successfully made with this year's money, even in spite of
    the lack of a down-select decision.
        Senator Kennedy. The volume search radar approach was to
    let the DD 21 winning team develop the radar as part of the
    final design. Are there enough funds to mature both designs in
    the absence of a DD 21 decision?
        Mr. Young. I think I can say that through fiscal year 2001
    we have enough funds to proceed with the volume search radar.
    There may be small shortfalls. It is my understanding that the
    carrier design has the provision to accommodate both radars
    until we get that down-select decision. I believe we will
    manage through that issue. Both radars are proceeding with the
    2001 funds. It will be critical to get the 2002 funds in order
    to keep that radar on schedule.
        Senator Kennedy. On the LPD-17 program, I mentioned in my
    opening comments that it has been experiencing serious
    problems. I suppose the problems are understandable since the
    Navy and the contractor are tackling a large effort. However, I
    am concerned there may be some process problems. I am troubled
    it took the Navy so long to inform the subcommittee of the
    nature of the difficulties even after they had been reported in
    the press. Do you have any comment about that?
        Mr. Young. Senator, I share your concerns. That is a
    program I have spent some time on and I intend to spend more
    time on. The Secretary shares those concerns. We have to find a
    comfort level that the LPD-17 is proceeding.
        There are signs of that. The design drawings are 85 percent
    complete. Many of the production drawings that evolved from
    that have resulted in modules being built for the ship and are
    progressing at a 40 percent level, but I also would tell you
    what I have been told, that some of the tougher modules have
    yet to transition from design drawings to production drawings.
        I can offer you that I will keep doing my homework here. I
    will let you know as fast as I can, because the Secretary is
    adamant we need to get this program in hand.
        Senator Kennedy. As I understand, the Navy knew in August
    1999. Even after the repeated attempts by staff to gather
    additional information about the problem, the Navy did not
    provide a briefing until February 11, 2000. The more troubling
    problem is that the team at the contractor was able to hide the
    lack of progress on the LPD design from the Navy, the buyer,
    until the completion of the sale of the shipyard to Ingalls
    Shipbuilding.
        Mr. Young. I do not have the perfect history of that, but I
    do know elements that you may also be aware of. As we try to
    take a different process to design this ship first and make
    sure it is producible, hopefully it will lower the cost from
    previous ships.
        There definitely have been some learning pains in the
    shipyard in taking that new strategy, developing a tool that is
    capable of designing the ship, and then executing that tool in
    the production of the ship. I think there has been some
    weakness in the Navy's metrics for measuring the progress on
    both establishing that design tool and then executing that
    design tool. Those are the areas I am going to try to do some
    homework in to be able to tell you that that ship is coming
    along, hopefully on schedule.
        Senator Kennedy. Secretary Young, you had a reputation of
    being a dogged pursuer of facts and details on the committees
    here, so we will look forward to your digging into those and
    hearing from you.
        Admiral Fallon. Senator, if I could add something on the
    LPD-17, this program is one of particular frustration to me,
    having watched this from outside of Washington, to be where we
    are now with the program, a couple of years behind schedule.
        I probably know as well as most of my fleet brethren how
    critically we need this platform. We need it now, not in design
    stage, but we need the steel being put together. We need it in
    the fleet. If we do not have it, we are going to be faced with
    adding to our current dilemma. We will probably have to keep
    some of our old LPD-4 Austin-class ships around, which are 30-
    years-plus young.
        To do that is going to require an ever-increasing amount of
    operations money to sustain them, just to band-aid them through
    the year. This is a real kick in the head to the fleet, so we
    are stomping up and down, for whatever good it does, to try and
    get to the bottom of what the issues are here so we can get
    moving, because we really need the program, and it is overdue
    now.
        Senator Kennedy. Senator Sessions.
        Senator Sessions. There are 27 Aegis cruisers which range
    in age from 7 to 18 years. There is an opportunity to upgrade a
    number of these to improve their combat capability and
    reliability. Admiral Fallon, I would like your assessment of
    the capabilities and improvements that cruiser conversions
    would provide, and whether or not you consider these
    capabilities as incremental improvements, or as
    transformational capabilities.
        In addition, Secretary Young, I would like for you to
    describe the acquisition strategy, what it is for the cruiser
    conversion program, and if there are efficiencies that could be
    attained in this program.
        Admiral Fallon. Yes, sir, Senator. Cruiser conversion I
    would say, falls into both categories. There are some aspects
    of the proposed plan which would be transformational. I would
    categorize the incorporation of the CEC, the cooperative
    engagement capability, and the area-wide radar improvements in
    this regard.
        There are some others, and one other one I might add is the
    electrification of the auxiliary systems to get rid of a lot of
    old steam-powered stuff and bells and whistles and things that
    have a lot of mechanical moving parts.
        Senator Sessions. Admiral Fallon, on the electric
    conversion, is that proving to be as good as you had hoped? Are
    you confident that is going to be good?
        Admiral Fallon. We have high expectations this technology
    is going to pay off. It is in many places around the world now,
    mostly commercial applications, but we see tremendous potential
    for it, and we are going after it as fast as we can.
        Senator Sessions. Nothing suggests it will not work in the
    long run?
        Admiral Fallon. No, sir, but the reality is, we have to
    take the specific application and put it in the platform, and
    the difficulties usually come in the integration piece. That is
    usually the biggest challenge. It is clear the technology is
    out there and it works.
        The second area, back to the other part of your question,
    is that there are other things that are upgrades I would
    consider in the normal course of the life of a platform that we
    think are necessary. Some of those go to the ability to do
    self-defense, to run the ship more efficiently and more
    effectively, and hopefully reduce some of those operational
    costs as the ships extend their lives. I think this program
    would satisfy itches on both sides of the fence, and that is
    one of the reasons we would clearly like to do it.
        The key thing here is that with those upgrades, we believe
    a platform which is already in the water, already exists, has
    the potential to serve us very well for many years into the
    future. The alternative is to start from scratch and build new
    platforms, and we think we can leverage what we already have,
    so that is why the program is highly attractive.
        Senator Sessions. This cooperative engagement capability
    would provide you substantially increased defense capability
    against a missile attack.
        Admiral Fallon. We see this as a potential stepping stone
    into the missile defense arena, rather than just an envelope
    around an individual platform. Yes, sir.
        Mr. Young. Senator, we talked about this briefly before the
    hearing, so hopefully I have a handle on some of the answers.
    There is a small amount of money in fiscal year 2001 for the
    planning process, roughly $165 million in the fiscal year 2002
    budget for planning and design. Some of the validations the
    Admiral has highlighted regarding the technology pieces we
    would like to put in the cruiser conversion program. We are
    really in the early phases of defining what systems we would
    like to put on the cruiser. Specifically, what systems are
    mature enough, and what systems we need to bring along faster
    so they can catch the ride.
        That strategy is fleshing itself out with what is in the
    fiscal year 2002 budget request. Decisions have to be made
    downstream to your bigger question about acquisition strategy,
    which factors into a competitive strategy, one or multiple
    yards. There also must be consideration, as we have always
    done, about where the ships are homeported and therefore
    whether there is a geographic aspect that ought to be
    considered in awarding the work.
        Those decisions have not been made yet. We are making the
    first-step decisions about what systems we can reasonably put
    on there in terms of theater ballistic missile defense (TBMD),
    force protection, and the electric systems mods, as well as the
    minimal manning concepts. Going back to something Admiral
    Fallon said earlier, we would like to be conscious of bringing
    down the manpower level required for these ships so that our
    operation and maintenance costs for these ships, once we do
    convert them and get them in the fleet, are lower than the
    costs we are currently experiencing.
        Senator Sessions. As you go about it, we are not shooting
    behind the rabbit here in terms of being able to proceed in an
    efficient, steady, cost-effective way, maybe doing some
    advanced procurement for vendors and that sort of thing, to
    save money on those programs. I know when you are short you
    cannot take advantage, sometimes, of cost savings that are
    there, and sometimes we need to think as far ahead and be as
    clever as we possibly can be to take advantage of those cost
    savings.
        Secretary Young, the committee has made an effort in the
    past to save taxpayers' money by continuing to provide funding
    for LHD-8. The funding was directed to be used to maintain the
    skilled worker and vendor base that was established in building
    the seven previous LHDs. In other words, continuing the
    production would have economies that could not be gained by
    stopping production at LHD-7 and then restarting it up a number
    of years later, as the Navy planned in their budget request.
    However, the Navy has been slow to put the ship on contract and
    take advantage of the opportunity enabled it by Congress.
        What are the estimated savings attributed to continuing the
    LHD-production line to build the LHD-8? Has the Navy preserved
    the opportunity to save dollars by maintaining the LHD-skilled
    worker and vendor base, and what is the Navy plan for building
    LHD-8? What impact will that plan have on the total cost, and
    will it be up or not because of the break there?
        Mr. Young. Hopefully I will be able to answer your
    questions, Senator. As I commented earlier, with the decision
    to put gas turbines and electric systems in LHD-8, the Navy
    projects about a $400 million life cycle cost savings for
    moving to that different concept, or different design within
    the ship's power plant.
        Senator Sessions. Are you saying that by delaying----
        Mr. Young. No. I am just commenting on the life cycle cost
    by getting LHD-8 as a new design ship. As a step back, we have
    proceeded under the incremental funding strategy Congress has
    put in place with LHD-8.
        I will have to get back to you for the record regarding
    what funds that has saved, but I think because Congress took
    that step and added those funds, and the Navy proceeded with
    construction under an incremental funding strategy, we have
    saved money on LHD-8.
        The Navy has put the funds in this year to continue, this
    being in fiscal year 2002, that incremental construction
    strategy. We will award the contract for the ship this year,
    which is why you see we have counted the ship in this year's
    ship construction column as one of those six ships. We will
    finish out the ship through that incremental funding strategy.
    I believe that has stabilized the base for the vendor of the
    ship.
        I will get back to you with the cost savings.
        Senator Sessions. I have numbers that have been completed
    as originally contemplated in fiscal year 1999 or 2000. It
    would have been at one point $2 billion, and now it will
    probably be $1.8 billion because of the delays. Are you aware
    of that number?
        Mr. Young. Sir, I apologize, I will have to get back to you
    for the record. At one point, my understanding was there was a
    budgeted number that might have represented a target cost for
    the ship.
        I am not prepared to tell you the precise estimate for the
    ship. The $1.8 billion number certainly looks like what we are
    going to see the ship, but I am not sure that is driven
    dramatically by when we contracted for the ship. It is just the
    reality of what that ship is going to cost, especially with the
    design pieces we had to put in.
        There is a possibility, and I will get back to you, that
    the $1.2 billion number might have been associated with a
    carbon copy of LHD-7, but that goes back to the point that I
    made with you. We have changed this ship design to put in a gas
    turbine and electrical system, and there were some nonrecurring
    costs that are part of that $1.8 billion number to give us a
    ship that has a different design and is more efficient to
    operate.
        [The information referred to follows:]

        By accelerating the LHD-8 from fiscal year 2005 to fiscal year
    2002, the Navy estimated a cost savings of as much as $500 million for
    minimizing the production break between LHD-7 and LHD-8 and averting
    the escalation impact. The Navy has preserved the opportunity to save
    dollars by maintaining the LHD-skilled worker and vendor base. The
    Navy's plan is to build LHD-8 using incremental funding without impact
    to the total cost of the ship.

        Senator Sessions. It is one of the problems that the Chief
    of Naval Operations (CNO), as well as others, have talked to us
    about. In regards to up and down procurement situations in
    which similar lines are shut down and there are going to be
    costs for that, and to the extent to which we can plan
    effectively and work with Congress, we ought to do as much as
    possible. We know we have a ship to complete, and it is a shame
    to add to its cost.
        Senator Kennedy. Senator Collins.
        Senator Collins. Thank you, Mr. Chairman.
        Admiral, General Whitlow testified before this subcommittee
    that the LPD-17 provides the capability to address missions
    that range from humanitarian missions to major theater war with
    forward-deployed forces. He further stated that the importance
    of the LPD-17 program is to provide three Marine expeditionary
    brigades-worth of lift, and that the LPD-17 is one of the most
    important assets that we will procure in the next couple of
    decades.
        From a warfighting capabilities perspective, would you
    elaborate on the need for the LPD-17 program and, in general,
    do you agree with the General's comments?
        Admiral Fallon. Senator, I agree with the General, as I
    mentioned earlier. First of all, there is frustration with the
    fact that this program is so slow in coming on line for all the
    reasons the General mentioned and a couple of others that I
    know from personal experience. The fact is that the ships that
    are in the force right now, great ships and crews that they
    are, are increasingly challenged to meet the requirements that
    we lay on them today.
        They require an awful lot of maintenance and care. They are
    very manpower-intensive, and the sooner that we can get these
    ships retired gracefully and in thanksgiving for their fine
    service, the better off we are going to be.
        The LPD-17 program offers us the potential not only to have
    a new platform, but to incorporate the space in other
    enhancements that the General enumerated and, I think, gives us
    the kind of flexibility we need.
        The reality today is that when our forces forward-deploy,
    we have this idea that we deploy them as an amphibious ready
    group. Typically, there are three ships, occasionally four,
    that go together and do the missions. But what we find
    increasingly in today's world is that when they actually get to
    the forward-deployed areas there is a multitude of tasks that
    await them. They have everything from the low end potential to
    do noncombatant evacuation operations (NEO) to a high-end
    combat situation, and at least as often as not, the ships end
    up being separated.
        With the increased capability that would be inherent in the
    LPD-17, we feel much more comfortable sending these ships out
    on these multi-mission tasks we do today. The operational
    commanders will be standing up and cheering when the day
    arrives that we can finally get these ships in the fleet.
        Senator Collins. Mr. Secretary, I would like to follow up
    on some questions that Senator Sessions raised about
    procurement with you. With your background, you have a special
    appreciation for the difficulties that we are going to face in
    trying to start addressing this very serious shortfall in
    investment in our shipbuilding. It seems to me we need to
    pursue creative and innovative procurement methods. Some of
    them, such as multiyear procurements, have already proven to
    work. We have saved significant sums, and I am often told we
    have been able to procure three ships at the cost of two
    through using multiyear procurements.
        My first question is, do you intend to recommend a
    continuation of multiyear procurements for shipbuilding?
    Second, what is your judgment about the use of advanced
    appropriations to help us start recapitalizing our fleet?
        Mr. Young. Senator, regarding a multiyear procurement, my
    most direct experience here in the Senate is with aircraft
    programs, where it has been extremely effective. The Navy,
    through my discussions with my staff, has highlighted
    substantial savings, as you have, for the DDG-51 multiyear
    procurement program.
        I fully intend to recommend multiyear procurements wherever
    possible. I think we will need the help and assistance of
    Congress. There are instances where we know we will build
    multiple ships. We can do it, I think, as Senator Sessions
    highlighted, more effectively and more efficiently, and with an
    eye toward the manpower needed to build those ships in that
    category.
        I think the Navy is seriously looking at that for fiscal
    year 2003 and possibly sooner. I have had some discussions that
    indicate there may be savings associated with an earlier
    approval to the multiyear authority, just so people can make
    smart purchases. I would like to put all those tools in place.
        Regarding advanced appropriations, I am still doing some
    homework on that. I think it is a mechanism that might level
    the funding if it proves that it has an effectiveness in terms
    of getting hulls started, if there is confidence that the out-
    year budgets will sustain those hulls, and if it does not limit
    the Navy's flexibility excessively in its budget, I am prepared
    to recommend that, but I need to do more homework. However,
    multiyear and some other tools I do feel strongly about. We
    have seen them work, and where they work, we will apply to the
    Navy shipbuilding program, and we will look for more tools,
    because that is my charter from the Secretary.
        Senator Collins. Admiral, did you want to add anything?
        Admiral Fallon. I can only concur with that. The value of
    advanced appropriation is clearly the jump-start capability,
    the idea that we have a commitment to get moving and there is
    something that people can aim for. It seems to me that in all
    this business the key word is predictability. If we can provide
    the industry and everybody else associated with this process an
    expectation that we would be on some kind of glide slope, I
    think a lot of people would be a lot happier and we would
    probably end up with some products instead of just a scramble.
        Senator Collins. Those procurement techniques strike me as
    being a winner for everyone--for the Navy, for the taxpayers,
    and for the shipyards. I hope that is something that this
    committee can work with you and the Appropriations Committee to
    bring about. I want to thank you both for your testimony.
        Thank you, Mr. Chairman.
        Senator Kennedy. Thank you.
        Just on this, Secretary Young, as you heard, many senators
    are interested in trying other funding approaches to buy more
    ships for the same amount of money. The Navy submitted an
    analysis that indicates the advanced appropriation mechanism by
    itself does not result in savings or additional cost. I have
    been informed by my staff in follow-up to questions by Senator
    Sessions that the Navy submitted a cost analysis that shows
    estimates of alternative approaches. That analysis indicated
    that by applying advance appropriations to a notional 10-year
    shipbuilding program for 72 ships that already includes
    multiyear procurement, we would perhaps save $100 million on a
    total expenditure of $97 billion.
        Now, while we should certainly consider any ways of saving
    resources, such a difference would not appear to be significant
    statistically. With just slightly more than one-tenth of 1
    percent, it would not be significant in helping to make up the
    difference between a 300-ship goal and the 241-ship fleet size
    that was implied in last year's 5-year shipbuilding plan.
        I do not know whether you have studied it, and we all are
    interested in what conclusions you have reached.
        Mr. Young. I am familiar with the analysis you highlighted.
    I would agree in terms of that amount of savings might not be
    worth the flexibility loss to the Navy. I would like to have a
    chance to comb through those numbers more carefully and make
    sure I understand all the assumptions behind them. Again, if
    the tool proves effective, I think the Navy would like to use
    it. But there are downsides to it in terms of limited
    flexibility, and that analysis did not suggest it is a strong
    candidate vis-a-vis multiyear, which we know and that analysis
    suggests, is a very strong candidate.
        Senator Kennedy. I agree with that.
        Senator Sessions. Senator Kennedy, I appreciate your asking
    that question, because those were interesting numbers. How do
    you square that with the estimate that you have a 20 percent
    reduction in cost of DD-51 by advanced procurement? Is that
    apples and oranges we are talking about?
        Mr. Young. I think the cost-savings on DDG-51 were because
    of the multiyear contract and not through an advanced
    appropriations process.
        Senator Sessions. So, the report would indicate that we may
    be overestimating the advantages of advanced appropriations,
    but not the multiyear contract?
        Mr. Young. In that particular analysis I think that would
    be a fair conclusion, sir.
        Senator Kennedy. I think we have seen in the purchase of
    the aircraft carrier, too, some different outlay schedules. I
    think we attempted to save $600 million over the last aircraft
    carrier, I am not familiar with the final figure, but this is
    an issue that has been out there. There has been a willingness
    of the committee to take a hard look at it, and I think we need
    to continue to review it.
        It seems to me that in some circumstances, there may be a
    different way of proceeding than you would in purchasing other
    ships. Certain ships, like aircraft carriers, are going to use
    somewhat different systems than are used in others. Obviously,
    because of the contracts and the way those are constructed, you
    might have a different way. I am interested in hearing from
    you.
        Admiral, did you have a response?
        Admiral Fallon. The only thing I might add is that there is
    no magic here. You cannot say, ``do this and we will
    automatically save X percent of money.'' I think the advantages
    are, in my mind, that it offers the potential to jump-start the
    program more than one hull at one time, and that it gives
    people the expectation that once started, we are going to
    follow this through to completion.
        Then we can get back to the business of having some
    predictability in the program. If I were in the industry and I
    knew that we were starting five hulls of a certain type, when I
    went to my suppliers I would think that I would be able to have
    much more confidence in my cost estimates, which I hope would
    feed back into some savings for us.
        But there is no magic here. We are just trying to do
    something to come up with an idea to get started so that we can
    arrest the glide slope we are on right now and start putting
    more hulls into the fleet.
        Senator Kennedy. Secretary Young, the administration's
    draft plans for expanding the intercontinental range ballistic
    missile defense includes looking at the sea-based systems. Navy
    seems split over the matter, some advocating a greater Navy
    role in national missile defense, Navy area defense, and the
    Navy theater-wide defense programs. Others are concerned over
    the impact the new mission would have on the ships available to
    the fleet for the conventional mission.
        I would be interested, both Secretary Young and Admiral
    Fallon, in what your views are on the impact of using the
    Navy's ships for the intercontinental range ballistic missile
    defense. What effect it would have on existing ships for
    existing missions?
        Admiral Fallon. Senator, I will take a shot at that one. I
    think great potential exists in programs that are in the fleet
    right now, and those that are under development add to our
    knowledge base and potentially provide some operational
    components of a missile defense program.
        Simply put, we do not have the answer. We do not have a
    program in the Navy that will solve this problem, but we think
    that the amount of effort that has gone into our missile
    defense in the area and theater aspects to date would be a good
    step into the future. As this program expands, we are ready to
    step up to the plate and provide our experience and knowledge
    to date and stand by to see how we can help solve the bigger
    problem.
        Senator Kennedy. In the short term, how would the Navy
    propose to meet the forward-deployed commitments and assume any
    missions without breaking the OPTEMPO guidelines?
        Admiral Fallon. I do not think there is a magic answer to
    that one. It depends on the system and how it was conceived and
    operationally implemented. One would have to take a look and
    see how we would apply the assets. If there were a desire to
    have a permanent commitment in some area that we do not have
    assets regularly forward-deployed, it would seem to me that
    that would likely entail some need for additional assets. If it
    happens to be an area where we regularly deploy, we could
    probably meet those requirements with existing assets, assuming
    they are modified.
        Senator Kennedy. What are they planning now, as you
    understand, for the next year?
        Admiral Fallon. I believe the plans are not detailed enough
    to allow us to take those and turn them into something that is
    concrete in the deployment schedule.
        Senator Kennedy. All right. I have no further questions.
        Senator Sessions. I just have one line of questions. In
    advanced and multiyear ship procurement the goal is to plan for
    the future to be absolutely rigorous in what we know we have to
    have so that we can procure that in a time frame that best
    serves the taxpayer. Obviously, there is not much margin for
    error in our budget.
        With regard to our future decisions about what ships we
    need, the CNO has established a three-star Admiral position as
    a focal point for determining the Navy warfare requirements.
    The Marine Corps has just announced that they are not using
    Navy ships or Air Force strategic lift, but instead are leasing
    a trimaran to transport marines on an exercise in the Pacific.
        The Chief of Naval Research announced that he was ready to
    go on contract to build one or more ships under a plan of
    transformation and/or force protection. However, the GAO report
    on the Navy transformation concluded, ``the Navy has devoted
    little of its experimentation effort to exploring long-term
    force structure and operational issues such as new ship design
    and concepts.''
        As I look at our immediate future, I see many ship design
    issues that need to be addressed. Frankly, I do not know any of
    the current or planned Navy efforts to collect the type of
    information that will be needed to help the Navy make those
    decisions, yet the Navy is announcing intentions to embark on
    shipbuilding programs.
        Admiral Fallon, the question is are the ships in the budget
    request the right ships for the Navy in the future, including
    amphibious lift? Has the requirement for the ship that the
    press indicates the Chief of Naval Research wants to build been
    vetted through the Navy's new requirements organization? If so,
    how did it compare with future submarine, and unmanned aircraft
    and alternative sensors? Would the Office of Naval Research
    vessel provide the Navy the pressing ship design information it
    would need for designing future ships that might come up?
        Admiral Fallon. Sir, thank you. If I could, let me start
    with the warfare requirements business, with the newly created
    N7. The N7, Adm. Denny McGinn works very closely with all the
    folks you mentioned, both with the marines and General Whitlow
    and his gang in Marine Headquarters, as well as with the Chief
    of Naval Research, Admiral Cohen. In fact, on one of these
    topics that you questioned, the issue of what Admiral Cohen has
    been referring to as littoral combat craft, they had a lengthy
    discussion yesterday involving all the people involved in it.
        Regarding the ships and the appropriateness of the ships we
    have in the plan today to accomplish today's missions, we
    believe that these do represent the best blend of technology
    and capability, as we see the future, given what we have at
    hand, and an ability to put that into a craft that we can put
    to sea to meet the missions.
        The ships that we are building are going to be around for
    quite a while. It takes a long time to design them, and they
    are going to be here for a while, so we attempt to build into
    them the redundancy to be able to handle not only the
    countermissions, but anticipating some change down the road. So
    the answer is succinctly, yes.
        Are we satisfied that we have the answer and think we can
    lock the door and go to sleep for some-time? Absolutely not. We
    are always interested in new ideas. For example, the marines,
    as you indicated, did lease a multi-hulled vessel to bring
    troops to an exercise commitment in the Far East. In fact, we
    were very interested in these craft and we have a plan to use
    one of these craft in an experiment later on this year. We look
    forward to that.
        We also are aware that this is not a magic answer. While
    these ships have aspects such as high speed that are very
    attractive, they have other aspects that are not as attractive
    in terms of their ability to take damage and so forth. I think
    the Chief of Naval Research is absolutely on the right track as
    he examines new ideas in both hull forms, propulsion systems,
    and adapting technologies that are out there to develop and
    experiment.
        These things are not ready, we do not believe, for prime
    time right now, but some of them have an awful lot of promise.
    I think he has the right idea. That is why he has put up some
    money and we have asked for additional moneys to continue the
    research and development effort in these areas, so we can see
    what these capabilities really are, what their shortcomings
    might be, and see how they might be adapted to meet those
    mission tasks we have to perform right now.
        There are a lot of ideas out there.
        Senator Sessions. I agree with that in general, but this
    three-star Admiral position that has been created, will the
    Chief of Naval Research be accountable?
        Admiral Fallon. They work very closely. They are in sync.
    We believe they are in sync, and they both work for the CNO
    through me, and I have them under my sights and keep them to
    the task.
        Senator Sessions. How do you respond to the GAO report that
    says the Navy has devoted little experimentation effort in
    exploring long-term force structure and operational issues such
    as new ship design concepts? Do you think we need to do more
    there?
        Admiral Fallon. I think if we had unlimited resources we
    would be doing something in every corner of the world.
        Senator Sessions. Well, with limited resources, sometimes
    making the decision on design is even more critical.
        Admiral Fallon. I understand, and I am not trying to be
    flippant. We are very interested in new technologies, and
    particularly interested in making sure that we can develop new
    technologies that we think match our missions.
        For example, there are countries that have some very
    interesting stuff under construction, and in a few cases
    actually in existence in their fleet. The missions some of
    these countries have in mind for these vessels are in some
    cases very different than the missions we have to undertake.
        Particularly, I have in mind a couple of nations that have
    highly maneuverable, fast craft that are designed to work in
    in-shore waters in a defensive mode. We are very interested in
    craft that can fit in with our concepts of operation, which is
    to not be defending our shores, but if we have a problem, to be
    able to work in far-away waters. That means we have to get our
    craft there. We have to make sure they can be sustained for
    long periods of time.
        So there are some tradeoffs. Some of these really
    interesting and novel technologies do not have, as we now
    understand it, the kind of legs and endurance and capabilities
    that we envision. That is not a reason for us to throw them
    out, but we want to see and learn all we can, so we are very
    interested. I think we are committed to looking to the future
    and trying to adapt these things.
        Senator Sessions. Thank you. Mr. Chairman.
        Senator Kennedy. It might be interesting sometime, if we
    get the time, to spend an hour or so hearing about those
    different technologies. I will talk to Senator Sessions. There
    never seems to be enough time around here, but I would be
    interested.
        Admiral Fallon. Senator, I would be delighted.
        Senator Kennedy, could I go back on one question you asked
    earlier, the one on the DD 21. It is our desire to continue to
    develop the technologies that we think are going to be inherent
    in this platform, new technologies that will advance us not
    only in our war-fighting capabilities but in our long-term
    maintenance and hopefully crew reduction. One of the aspects of
    that that is really critical as we continue the research and
    development effort, notwithstanding the fact that we have
    delayed the source selection, is that we still think there is a
    critical need to keep the research and development money going
    so that we can this year not have a break in that effort to get
    as much as we can in these areas.
        Senator Kennedy. Thank you very much. It has been a very
    helpful hearing. The subcommittee is adjourned.
        [Questions for the record with answers supplied follow:]

                  Questions Submitted by Senator Mary Landrieu

                             LOW SHIPBUILDING RATE

        1. Senator Landrieu. Secretary Young, earlier this year, we heard
    testimony from the heads of America's major shipyards. Each one of them
    indicated that the single factor which most impacts them and the
    ultimate cost to the taxpayer is stability. The statistics don't lie.
    For a variety of reasons, there has been little to no stability in Navy
    shipbuilding programs for a long time, and sail-away costs have gone up
    as a result. Of even greater concern is the fact that we're not
    building ships at a rate necessary to keep the Navy at a level every
    study in the world says is necessary. Can you describe how you plan to
    get the Navy shipbuilding program back on track?
        Mr. Young. The most significant way that I can affect the Navy's
    shipbuilding program is to control the costs of our existing programs
    and ensure that the budget requests for future programs are adequately
    resourced for the risks presented in a low rate procurement
    shipbuilding environment.
        Many factors contributed to the cost growth of current ships under
    contract, including:

             Low rate procurement of vendor material and Government
            furnished equipment;
             Configuration changes;
             Budget reductions/rescissions;
             Unanticipated challenges with the design and
            production of lead ships;
             Unanticipated growth in shipyard labor rates; and
             Inflation and fiscal constraints.

        All of these factors, but particularly fiscal constraints, cause
    the Department to budget procurement programs tightly. The consequences
    of these factors are that any cost growth or budget reduction causes
    immediate resource execution issues. To prevent further increases to
    the cost of the Navy's future shipbuilding needs and mitigate the
    impact of these cost drivers, the Navy is pursuing the following
    corrective actions:

             Remedy the systemic issues within our control and
            incentivize industry partners to do the same.
             Ensure that estimating and budgetary processes better
            reflect the cost of risk factors beyond our control.

        2. Senator Landrieu. Secretary Young, why doesn't the fiscal year
    2002 budget ask for at least the nine ships necessary to ensure we
    don't fall farther behind?
        Mr. Young. The Navy agrees that procurement rates of 8-10 ships per
    year are needed to sustain the current fleet size over the long-term.
    However, the Navy's ``topline'' budget authority is constrained. The
    fiscal year 2002 request for six ships provided the best balance
    between the Department's competing requirements and available
    resources.

        3. Senator Landrieu. Secretary Young, what is your best estimate
    for the required ship building rates on major Navy SCN programs to
    maintain the industrial base, if that rate were guaranteed for the next
    5 or 10 years? What was your estimate based on?
        Mr. Young. Procurement rates of 8-10 ships per year are needed to
    sustain the current fleet size over the long term. The industrial base
    required to sustain the present fleet size would also be 8-10 ships per
    year. Continuing to procure six ships per year as reflected in the
    fiscal year 2002 budget will have negative effects on fleet force
    structure and the shipbuilding industrial base. Our estimate is based
    on a ship build rate of 8-10 ships per year which is required to
    sustain a fleet size of 316 ships.

                          LPD-17 PROGRAMILLION STATUS

        4. Senator Landrieu. Admiral Fallon, the Department of the Navy is
    constructing 12 replacement amphibious transport docks of the San
    Antonio-class (LPD-17) as the functional replacement for 41 aging ships
    of the LPD-4, LKA-113, LSD-36, and LST-1179 classes. The LPD-17 is
    being acquired by making extensive use of integrated data environment
    and product data model techniques across major shipbuilding companies.
    The lead ship of the class will deliver to the Navy in November 2004.
    What is the status of the LPD-17 program and what is your assessment as
    to Northrop Grumman's ability to maintain the construction schedule?
        Admiral Fallon. Lead ship detail design is approximately 89 percent
    complete. Detail design includes the effort associated with developing
    the 3-D product model. Production design is approximately 65 percent
    complete. Production design includes development of 2-D drawings and
    numerical controlled machining data tapes. Lead ship construction has
    commenced on 98 (of 210 total) units with the focus of construction on
    initial unit fabrication. Overall, production on the lead ship is
    estimated at approximately 6 percent complete.
        The LPD-17 schedule established by the Alliance in February 2001
    revised lead ship delivery to November 2004. Insofar as the Alliance is
    currently completing detail and production design and lead ship
    construction is approximately 6 percent complete, a fair degree of risk
    remains in execution of this schedule. However, given the schedule is
    based on realistic performance projections by the Alliance, the Navy
    assesses the Alliance as well capable of maintaining this construction
    schedule.

        5. Senator Landrieu. Admiral Fallon, do you see any potential for
    additional cost savings through either advance procurement or multiyear
    buys of additional LPD-17 hulls?
        Admiral Fallon. The current LPD-17 program funding profile utilizes
    2 years (increments) of advanced procurement (AP) followed by full
    funding in the year of authorization for each ship. This funding plan
    phases anticipated obligation requirements to build these ships in
    accordance with efficient construction schedules at the respective
    shipyards. For LPD-21 and LPD-22, increment one of AP was appropriated
    in the Fiscal Year 2001 Defense Appropriations Act. The fiscal year
    2002 President's budget requested the second increment of AP funds to
    meet anticipated obligation requirements in fiscal year 2002.
    Additional AP funding (beyond that requested in the fiscal year 2002
    President's budget) would not result in cost savings because any
    additional funds would not require obligation until fiscal year 2003.
    Alternative funding mechanisms such as multiyear procurement can, and
    do, reduce risk and save money on Navy shipbuilding programs. For
    technically mature systems, where the Department has a high degree of
    confidence in contractor performance, stable requirements, and
    sufficient funding, multiyear procurements can produce savings.
    Considering where LPD-17 is in the acquisition process, however,
    multiyear procurement is not considered a viable acquisition strategy.
    The Navy will continue to assess the feasibility of multiyear
    procurement as well as other procurement strategies in determining the
    most cost effective method for procuring future ships.

        6. Senator Landrieu. Admiral Fallon, do you believe any technology
    and capital investments made for the LPD-17 program can be leveraged to
    produce cost savings in the Joint Command and Control Ship (JCC)
    program?
        Admiral Fallon. The JCC(X) program will use lessons learned from
    various commercial and DOD major acquisition programs, including the
    LPD-17, DD 21, CVN(X), and T-AKE, to devise a cost-effective
    acquisition strategy. The Navy is also actively engaging industry for
    innovative ideas based on previous commercial and military shipbuilding
    programs to reduce JCC(X) acquisition and life cycle support costs. We
    will leverage LPD-17 technology and capital investments for JCC(X)
    accordingly.

                  MULTIYEAR PURCHASING AND ADVANCE PROCUREMENT

        7. Senator Landrieu. Secretary Young, when the heads of the
    shipyards testified, they unanimously agreed that multiyear purchasing
    and/or advance procurement could deliver tremendous savings to the
    government. As examples, they mentioned the C-17 program and the gains
    made during construction of the CG-47 Ticonderoga-class of ships. Do
    you believe there are cost savings to be gained through some sort of
    multiyear procurement?
        Mr. Young. Alternative funding mechanisms can, and do, reduce risk
    and save money on Navy shipbuilding programs. For technically mature
    systems, where the Department has a high degree of confidence in
    contractor performance, stable requirements, and sufficient funding,
    multiyear procurements can produce savings. Use of Economic Order
    Quantity procurements for large lots of shipbuilder material and major
    equipment will also generate savings. Use of advanced procurement
    combined with advanced construction funds provides the flexibility to
    accommodate program changes in current year budgets while not tying up
    the total required to fully fund the ship in the first year. This
    strategy needs to reflect the phased construction requirement for
    materials, labor, and government furnished equipment in order to avoid
    construction delay. Evenly funding construction does not appear to
    provide any cost advantage to the government or the contractor due to
    the nature of ship construction.

        8. Senator Landrieu. Secretary Young, what approach do you believe
    would be most effective and does the Department intend to ask Congress
    to authorize it?
        Mr. Young. The funding mechanism of choice will depend on the
    particular program and its level of design maturity and stability.
    Since each program is different, no single method will work for all
    shipbuilding programs. The Navy plans to review the status of each
    program and make specific recommendations to Congress on the
    appropriate funding mechanism to maximize cost savings. The Navy has
    and continues to recommend the use of multiyear procurement (MYP)
    contracting for the DDG-51 class destroyer program. The fiscal year
    1998-2001 MYP has proven very effective in increasing the number of
    hulls purchased for a fixed shipbuilding budget when compared to a
    traditional contract with separately priced options for subsequent ship
    appropriations. With the continued support of Congress, the Navy
    intends to continue this strategy for the fiscal year 2002-2004 DDG-51
    procurement. The Navy is also actively investigating the feasibility of
    a MYP for the Virginia-class submarine program.
                                     ______

                  Questions Submitted by Senator Jeff Sessions

                         SHIP CONSTRUCTION REQUIREMENTS

        9. Senator Sessions. Admiral Fallon, has the requirement for the
    ship, that the press reports indicate that the Chief of Naval Research
    says he wants to build, been vetted through the Navy's new requirements
    organization and, if so, how did it compare with future submarine and
    unmanned aircraft alternative sensors? Would the Office of Naval
    Research vessel provide the Navy the pressing ship design information
    it would need to for making decisions on future ships such as LH(X),
    the future amphibious ship, Maritime Prepositioned Force (future) ships
    which has research funding on the unfunded requirements list, and the
    new oiler which also is on the CNO's unfunded research requirements
    list?
        Admiral Fallon. The requirements for the Littoral Surface Craft-
    Experimental, LSC(X), have not been formally vetted through the Deputy
    Chief of Naval Operations Warfare Requirements and Programs, N7,
    organization. Discussions between the Office of Naval Research (ONR),
    and N7 have been initiated in order to validate the mission
    characteristics of the LSC(X) experimental craft with potential future
    warfighting requirements. The LSC(X) program is not intended to and
    will not provide ship design information for LH(X), MPF(F), or a new
    oiler. The focus of the LSC(X) program is to support future force
    formulation and concept of operations experimentation.

                    IMPACT OF DELAYING THE DD 21 DOWN-SELECT

        10. Senator Sessions. Secretary Young, the Navy was scheduled to
    down select to one DD 21 design last March. After announcing one delay
    to gather additional information, the Navy pulled the plug on
    requesting final offers from the two DD 21 teams. The effect of this
    delay on DD 21, the impact of the delay on other programs, and the plan
    to move forward have never been explained by the Navy. The CNO's
    unfunded requirements list requests an additional $16 million for CVN-
    77 to support a contract signed on January 1, 2001. What is the
    requirement for the $16 million and if the contract were signed on
    January 1, 2001, why wasn't the $16 million included in the fiscal year
    2002 amended budget request?
        Mr. Young. The CVN-77 acquisition strategy being used to procure
    the new Integrated Warfare System (IWS) requires RDT&E funding to plan
    and execute the IWS conceptual design. Notional IWS annual RDT&E
    funding requirements, finalized in the contract awarded to Newport News
    Shipbuilding (NNS) on 26 January 2001, were based on the projected IWS
    work scope, terms, and conditions as known at that time. However, out
    of necessity, final validation of these notional annual funding
    requirements had to be deferred until after NNS came to terms with
    Lockheed Martin, the CVN-77 Electronic Systems Integrator, on 19 March
    2001. In April 2001, NNS advised the Navy that while the total amount
    of contract funding for IWS efforts appeared to be sufficient, $16
    million would need to be pulled forward to fiscal year 2002 in order to
    fully conduct the technical analyses necessary to define system
    alternatives, develop segment requirements documents and software
    development documents, develop interface requirements specifications,
    support system/program reviews, and implement the system engineering
    and specialty engineering processes essential for IWS development. It
    should be noted that this $16 million is not related to any down-select
    delays or other events within the DD 21 program.
        The fiscal year 2002 amended President's budget request contains
    combined future carrier design funding for both the CVN-77 IWS as well
    as CVNX contract design efforts. Due to existing budget constraints
    within both programs, this emergent requirement for the re-phasing of
    $16 million RDT&E, could not be provided within existing resources, and
    was therefore placed on the CNO's fiscal year 2002 unfunded priority
    list.

        11. Senator Sessions. Secretary Young, would $16 million fulfill
    all of the CVN-77 fiscal year 2002 obligations, or is there another
    bill to come?
        Mr. Young. While the CNO's $16 million request is not related to
    the delay of the DD 21 down select, there has been an impact to the
    CVN-77 IWS as a result. The down-select delay has negatively impacted
    development of the Volume Search Radar (VSR) that, together with the
    Multi-Function Radar (MFR), is the cornerstone of the new CVN-77 IWS.
    The design of the VSR is an integral part of the DD 21 competitive
    acquisition strategy, and the competing Blue/Gold DD 21 contractors
    have each proposed different VSR options. The DD 21 down-select delay
    has also delayed VSR down-select, requiring that a CVN-77 island
    contract data package be developed for each proposed VSR solution to
    ensure IWS schedule alignment with the basic ship detailed design and
    construction schedule is maintained until a down-select occurs.
        The CNO's commitment to pursue VSR integration into the CVN-77 IWS
    design requires an additional $15 million in RDT&E funding: $4.3
    million in fiscal year 2001 and $10.7 million in fiscal year 2002. The
    $4.3 million fiscal year 2001 requirement is now being addressed by
    internal Navy reprogramming actions. The $10.7 million fiscal year 2002
    VSR requirement is presently unfunded but has been presented to
    professional staff members during fiscal year 2002 budget hearings as a
    significant outstanding funding issue.

        12. Senator Sessions. Secretary Young, what programs are affected
    by the delay in making the DD 21 down select and please include DD 21
    major sub-systems with the most schedule risk, the additional cost to
    the government due to the delay, and how those programs are affected?
        Mr. Young. The Navy's decision to temporarily hold the DD 21 down-
    select in abeyance pending completion of the Defense strategy reviews
    is expected to impact the program cost and schedule in relation to the
    length of the delay. In order to minimize the impact of that decision,
    the Navy has extended the Phase II contract period of performance to
    continue development of key technologies, such as the Advanced Gun
    System, Integrated Power System, shared apertures, software, manning
    reduction initiatives, and radar suite development. By continuing the
    development of the most critical technologies for DD 21, the Navy
    believes that it will minimize the effect on the ship construction
    schedule.

                      AIRCRAFT CARRIER REFUELING OVERHAUL

        13. Senator Sessions. Secretary Young and Admiral Fallon, the
    amended budget request includes $820.7 million for CVN-69 refueling
    overhaul. That was supposed to be the final increment of $2.2 billion
    funding for the overhaul. However, one of the items on the CNO's list
    of fiscal year 2002 requirements that is not funded in the amended
    budget is $87 million for the CVN-69 refueling overhaul.
        Given that your budget request is supposed to be fully funded for
    the items in the request, why is there an unfunded requirement for the
    CVN-69 overhaul, which states that failure to fund the additional $87
    million ``will result in redelivering a non-mission ready ship?''
    Additionally, what is the cause of the price increase for the overhaul?
        Mr. Young. The $87 million in question can be broken down into two
    segments:
        a. The first part, equaling $30 million, is required to pay for an
    emergent requirement to replace copper service steam piping for hotel
    services. This fleet-wide safety issue came to light near the end of
    contract negotiations, and was subsequently funded through PBD No. 821
    in June 2001. When this funding was obtained, the shortfall amount on
    the fiscal year 2002 CNO's unfunded requirements list should have been
    amended to read $57 million.
        b. The second portion, equaling $57 million, represents the cost of
    work that had to be descoped during contract negotiations that were
    finalized after the fiscal year 2002 budget was submitted. This
    descoped work consists of enhancements to shipboard equipment,
    habitability items, auxiliaries upgrades, outfitting, and furnishings,
    none of which directly impact combat readiness. The most cost-effective
    opportunity to complete the descoped work is during the RCOH. If that
    is not possible due to insufficient funding in the RCOH, the work will
    be transferred to OPN and fleet maintenance accounts for completion
    during the Post Shakedown Availability/Selective Restricted
    Availability (PSA/SRA) or subsequent availabilities. In this instance
    the work would compete for resourcing among other fleet priorities.

                           SHIPBUILDING REPORT REVIEW

        14. Senator Sessions. Secretary Young and Admiral Fallon, the Navy
    is participating in a shipbuilding review directed by the Secretary of
    Defense. The results of the review could have a major impact on the
    requirements for the ships and the recapitalization rate, depending on
    which press report one reads.
        We understand that the results are not available, but it would be
    helpful if you could describe the level of Navy participation, the
    types of results the review will produce, and any assumptions or
    scenarios that are being used which would influence the results.
        Is there a military strategy and supporting set of operational
    concepts that the review is using to develop the force structure, or is
    the group using the 30-year shipbuilding plan as the force structure
    and then determining options for procuring those ships?
        Mr. Young and Admiral Fallon. We will have to refer you to the
    Department of Defense on the details of the shipbuilding review and the
    process used to perform it. However, the Navy supported the OSD-led
    effort with operational and acquisition subject matter experts as
    required. It is the Navy's understanding that the results of the study
    will be incorporated as part of the overall QDR.

          INDUSTRIAL BASE ISSUES AND IMPACT ON THE COST OF NAVY SHIPS

        15. Senator Sessions. Secretary Young, as directed by the Floyd D.
    Spence National Defense Authorization Act for Fiscal Year 2001, the
    Navy submitted an update to the DDG-51 industrial base study.
    Subsequent to submission of the report to Congress, the Navy provided
    an amendment to the report to the GAO, but has not amended their report
    to Congress.
        Please provide, in answer to this question, the amended DDG-51
    industrial base study that includes the same information the Navy
    provided to the GAO.
        Mr. Young. At the request of Senate Armed Service Committee staff,
    the Secretary of the Navy forwarded the additional analysis on the
    Arleigh Burke (DDG-51)-Class Industrial Base Study Report to the four
    congressional defense committees on August 16, 2001.

        16. Senator Sessions. Secretary Young, in addition, what are the
    Navy's basic conclusions regarding the destroyer industrial base and
    how will those conclusions affect the future costs of ships?
        Mr. Young. In the November 2000 report to Congress updating the
    1993 Arleigh Burke Destroyer Industrial Base Study, the Navy concluded
    that both of the destroyer shipbuilders will have to book unprecedented
    amounts of additional, non-U.S. Navy work in order to maintain their
    workforces during the transition from DDG-51 to DD 21 production. The
    report assessment was based on the shipbuilding profile represented in
    the fiscal year 2001 budget submission. However, the cumulative effect
    of actions taken in the fiscal year 2002 budget request including the
    acceleration of the 58th DDG-51 class ship to fiscal year 2002, coupled
    with congressional action on the LPD-17 program in fiscal year 2001 and
    the Navy's action in the fiscal year 2002 President's budget, make the
    industrial base forecast even more challenging than reflected in the
    report.
        If the surface combatant shipbuilding profile analyzed in the
    November 2000 Report to Congress came to fruition, there would be a
    high probability that the unit costs of future surface combatants and
    other ships constructed at those shipyards would increase due to the
    reduced overhead base and inefficiencies caused by low throughput.

        17. Senator Sessions. Secretary Young, one driver of the cost
    increases in ship contracts that have already been signed, is the price
    increase charged by sole source vendors of materials and equipment.
    What type of system does the Navy have to track and then predict the
    impact of the reduced industrial base on the cost of Navy ships,
    including the impact of sole source vendors on the shipyard's
    contracting for materials and equipment?
        Mr. Young. The Navy closely monitors the shipbuilding industry
    workforce and the impact current and projected workload changes have on
    the cost of Navy ships and equipment. The Navy collects monthly
    shipyard employment levels, and uses analytical models to predict
    future employment levels based on Navy ship procurement plans. On
    mature programs, the Navy has an extensive database of historical
    material related to equipment costs at various annual procurement
    rates, which is used to predict future costs. Issues with sole source
    vendors and diminishing manufacturing sources are identified through
    annual surveys and regular communications with prime contractors. When
    a potential vendor problem is identified, the Navy seeks to ensure a
    technically and fiscally feasible solution is obtained.

                              SHIPBUILDING REVIEW

        18. Senator Sessions. Secretary Young, what is the process and Navy
    participation in the shipbuilding review that is ongoing by the Office
    of the Secretary of Defense?
        Mr. Young. I will have to refer you to the Department of Defense on
    the details of the shipbuilding review and the process used to perform
    it. However, the Navy supported the OSD-led effort with operational and
    acquisition subject matter experts as required. It is the Navy's
    understanding that the results of the study will be incorporated as
    part of the overall QDR.

                                INDUSTRIAL BASE

        19. Senator Sessions. Secretary Young, what are the industrial base
    issues and capability tradeoffs associated with the fiscal year 2002
    budget request and pending ship acquisition contracts?
        Mr. Young. Continuing to procure six ships per year as reflected in
    the fiscal year 2002 budget request will have three negative effects.
    First, it will create a ``bow wave'' of future shipbuilding procurement
    requirements, for which it will be increasingly difficult to allocate
    scarce procurement account resources. Second, it will create additional
    stress on fleet maintenance budgets to sustain the service lives of
    aging and increasingly obsolescent ships to maintain force structure.
    Third, the lower shipbuilding rates of this year's budget request and
    the increased shipbuilding rates in future years will create a layoff-
    hiring cycle within the shipbuilding industry which will result in
    increased cost to the Government for future ship construction. This
    will exacerbate the previously mentioned procurement and maintenance
    affordability problem and causes further stress to the ``top line'' of
    future Navy budgets.
        Our shipbuilding plan is adequate to sustain the remaining naval
    shipbuilding industrial base including the suppliers that provide
    supporting equipment and associated engineering services. Our plan
    provides the best available balance between the Department's
    requirements and available resources. The innovative teaming strategy
    approved by Congress for the construction of four Virginia-class
    submarines, advance procurement for the fiscal year 2002 and fiscal
    year 2003 Virginia-class submarines, and the next DDG-51 multiyear
    procurement contract all highlight acquisition strategies aimed at
    lowering costs, reducing disruptions from hiring and layoff cycles
    while level loading employment, and encouraging capital investments.
    Our shipbuilding plan maintains the LPD-17 program and the Auxiliary
    Cargo and Ammunition Ship (T-AKE) program that will help the auxiliary
    vessel manufacturers capitalize on past and current program
    efficiencies. These actions constitute the Navy's near-term effort to
    ensure the long-term ability of the shipbuilding industry to support
    our future construction programs.

        20. Senator Sessions. Secretary Young, what funding alternatives
    will lower the unit cost of ships and are those alternatives included
    in this budget request?
        Mr. Young. The Department of the Navy considered three alternative
    funding mechanisms for use in the fiscal year 2002 budget request:
    Multiyear Procurement (MYP), Economic Order Quantity (EOQ), and
    Advanced Appropriations.
        Both MYP and EOQ cost savings are included in the DDG-51 budget
    request. DDG-51 pricing is based on a six-ship fiscal year 2002-2004
    MYP. Advance procurement (AP) funding in fiscal year 2001 is used to
    achieve shipbuilder material cost savings from EOQ buys. Use of MYP is
    also being considered for the Virginia (SSN-774)-class. However, no MYP
    or EOQ savings are included for the Virginia-class in the fiscal year
    2002 budget request.
        Consistent with OMB circular A-11, the Department of the Navy
    believes advanced appropriations could be used for shipbuilding
    beginning in fiscal year 2002. The Department of the Navy believes such
    a course would be appropriate if it were employed to facilitate the
    cost-effectiveness of the construction and modernization of U.S. naval
    ships and sustain stable and economic shipbuilding rates within the
    U.S. shipbuilding industry. The strengths and weaknesses of using
    advanced appropriations are addressed in detail in the Department of
    the Navy analysis of shipbuilding funding alternatives forwarded to the
    Seapower Subcommittee on 15 June 2001. In summary, the analysis
    concludes that the advanced appropriation funding mechanism by itself
    does not result in savings or in additional costs, and advanced
    appropriation funding is not included in the Department of the Navy
    fiscal year 2002 budget request.

                           SHIPBUILDING COST DRIVERS

        21. Senator Sessions. Secretary Young, does the Navy understand the
    shipbuilding cost drivers and is there a plan to mitigate the impact of
    those drivers on the cost of Navy ships?
        Secretary Young. Many factors have contributed to the cost growth
    of current ships under contract, including:

             Low rate procurement of vendor material and Government
            furnished equipment;
             Configuration changes;
             Budget reductions/rescissions;
             Unanticipated challenges with the design and
            production of lead ships;
             Unanticipated growth in shipyard labor rates; and
             Inflation and fiscal constraints.

        All of these factors, but particularly fiscal constraints, cause
    the Department to budget procurement programs tightly. The consequences
    of these factors are that any cost growth or budget reduction causes
    immediate resource execution issues. To prevent further increases to
    the cost of the Navy's future shipbuilding needs and mitigate the
    impact of these cost drivers, the Navy is pursuing the following
    corrective actions:

             Remedy the systemic issues within our control and
            incentivize industry partners to do the same.
             Ensure that estimating and budgetary processes better
            identify and reflect the cost of risk factors beyond our
            control.

                                  SHIPBUILDING

        22. Senator Sessions. Admiral Fallon, is the Navy buying the right
    types of ships for future requirements?
        Admiral Fallon. Yes, the ships in the budget are the right ones.
    Although insufficient to sustain a 310-ship battle force, the Navy's
    shipbuilding plan provides needed ships and capabilities to the fleet
    while remaining within a constrained topline.

        23. Senator Sessions. Secretary Young, is the research and
    development request for future ships based on a disciplined
    requirements process which includes the Joint Requirements Oversight
    Council?
        Mr. Young. Yes, Navy requests for research and development funds
    required for the development of future ships are based upon
    requirements that are approved by the Joint Requirements Oversight
    Council. The Navy prepares Operational Requirements Documents (ORDs),
    which define the needed capabilities of future ships. ORDs are
    circulated for review and submitted to the Joint Requirements Oversight
    Council for approval. Approved ORDs are required during periodic
    milestone reviews of future ship programs.
                                     ______

                    Question Submitted by Senator Bob Smith

                        PRIOR NOTICE FOR ACCESS TO PORTS

        24. Senator Smith. Admiral Fallon, this is not a shipbuilding
    issue, but a safety issue. A week ago, an article in the Washington
    Times mentioned that Russia is using its commercial fleet to spy on
    sensitive U.S. defense facilities, including our nuclear submarines in
    the pacific north west. It also said a recent maritime agreement signed
    with Russia undercuts our efforts to require advance arrival notice of
    Russian vessels at several militarily sensitive U.S. ports. Can you
    assure me something is being done about this? Have we turned Puget
    Sound into an open port for Russian vessels engaged in espionage?
        Admiral Fallon. There is nothing new about port notification
    requirements in the Puget Sound area of the country. For the last 10
    years, since the break-up of the former Soviet Union, the Russians have
    been allowed access to ports in the Puget Sound area of Washington
    State on the same basis as virtually all other friendly nations which
    visit our 361 ports. (We do not allow nations which support terrorist
    activities access to any U.S. ports.) The requirement is for all
    nations, including Russia, to provide a standard 24-hour advance
    notification of arrival to the Coast Guard Captain of the port. This
    arrangement promotes trade in this vital maritime section of the
    nation. The Department of Defense believes it has appropriate security
    measures in place to protect U.S. forces and interests here. Within the
    last several months, the U.S. Transportation Department has negotiated
    an agreement to facilitate trade with Russia. The Department of Defense
    has concurred in its development and signing. Suffice it to say, we
    believe we have in place appropriate safeguards to protect U.S.
    interests and the security of American military forces in port
    locations.

        [Whereupon, at 4:20 p.m., the subcommittee adjourned.]