[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.]

                                 
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