    [Senate Hearing 109-827]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 109-827, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR

                                      2007
    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2766

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2007 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

                                   __________

                           MARCH 29; APRIL 4, 6, 2006

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                        JOHN WARNER, Virginia, Chairman

    JOHN McCAIN, Arizona                 CARL LEVIN, Michigan
    JAMES M. INHOFE, Oklahoma            EDWARD M. KENNEDY, Massachusetts
    PAT ROBERTS, Kansas                  ROBERT C. BYRD, West Virginia
    JEFF SESSIONS, Alabama               JOSEPH I. LIEBERMAN, Connecticut
    SUSAN M. COLLINS, Maine              JACK REED, Rhode Island
    JOHN ENSIGN, Nevada                  DANIEL K. AKAKA, Hawaii
    JAMES M. TALENT, Missouri            BILL NELSON, Florida
    SAXBY CHAMBLISS, Georgia             E. BENJAMIN NELSON, Nebraska
    LINDSEY O. GRAHAM, South Carolina    MARK DAYTON, Minnesota
    ELIZABETH DOLE, North Carolina       EVAN BAYH, Indiana
    JOHN CORNYN, Texas                   HILLARY RODHAM CLINTON, New York
    JOHN THUNE, South Dakota

                        Charles S. Abell, Staff Director

                 Richard D. DeBobes, Democratic Staff Director

                                     ______

                            Subcommittee on Seapower

                      JAMES M. TALENT, Missouri, Chairman

    JOHN McCAIN, Arizona                 EDWARD M. KENNEDY, Massachusetts
    SUSAN M. COLLINS, Maine              JOSEPH I. LIEBERMAN, Connecticut
    SAXBY CHAMBLISS, Georgia             JACK REED, Rhode Island

                                      (ii)

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
           Navy/Marine Corps Force Structure and Future Capabilities
                                 march 29, 2006

                                                                       Page
    Crenshaw, VADM Lewis W., Jr., USN, Deputy Chief of Naval
      Operations for Resources, Requirements, and Assessments........     4
    Gardner, Lt. Gen. Emerson N., Jr., USMC, Deputy Commandant of the
      Marine Corps for Programs and Resources........................    11
    Mattis, Lt. Gen. James N., USMC, Deputy Commandant of the Marine
      Corps for Combat Development and Integration...................    23

                   Posture of the U.S. Transportation Command
                                 april 4, 2006

    Schwartz, Gen. Norton A., USAF, Commander, U.S. Transportation
      Command........................................................    59
    McNabb, Gen. Duncan J., USAF, Commander, Air Mobility Command....    74

                               Navy Shipbuilding
                                 april 6, 2006

    Etter, Dr. Delores M., Assistant Secretary of the Navy for
      Research, Development, and Acquisition.........................    99
    Edwards, RADM Mark J., USN, Director of Warfare Integration, N8F,
      Office of the Chief of Naval Operations........................   112
    Bloor, Damien, Principal Consultant, First Marine International
      Limited, United Kingdom........................................   136
    Schank, John F., RAND Corporation................................   138

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                           WEDNESDAY, MARCH 29, 2006

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

           NAVY/MARINE CORPS FORCE STRUCTURE AND FUTURE CAPABILITIES

        The subcommittee met, pursuant to notice, at 3:35 p.m. in
    room SR-232A, Russell Senate Office Building, Senator James M.
    Talent (chairman of the subcommittee) presiding.
        Committee members present: Senators Talent, Kennedy, and
    Reed.
        Majority staff members present: Ambrose R. Hock,
    professional staff member; Stanley R. O'Connor, Jr.,
    professional staff member; and Sean G. Stackley, professional
    staff member.
        Minority staff members present: Daniel J. Cox, Jr.,
    professional staff member; and Creighton Greene, professional
    staff member.
        Staff assistants present: Micah H. Harris and Benjamin L.
    Rubin.
        Committee members' assistants present: Lindsey R. Neas,
    assistant to Senator Talent; Mieke Y. Eoyang, assistant to
    Senator Kennedy; and Neil Campbell, assistant to Senator Reed.

         OPENING STATEMENT OF SENATOR JAMES M. TALENT, CHAIRMAN

        Senator Talent. Welcome to everybody. The subcommittee
    meets today to receive testimony on the Navy and Marine Corps
    force structure and future capabilities in review of the
    National Defense Authorization Request for Fiscal Year 2007. We
    are pleased to have with us today Lieutenant General Emerson
    Gardner, who is the Deputy Commandant for Programs and
    Resources; Lieutenant General James Mattis, the Deputy
    Commandant for Combat Development and Integration; Vice Admiral
    Lewis Crenshaw, who is the Deputy Chief of Naval Operations for
    Resources, Requirements, and Assessments; and Rear Admiral Mark
    Edwards, who is the Director for Warfare Integration. Welcome,
    gentlemen. Thank you for taking the time to be with us today.
    More importantly, thank you for your outstanding leadership and
    service to the country at a very crucial time.
        These are challenging times as our Nation fights the global
    war on terror. The men and women under your leadership have
    distinguished themselves by their dedication to duty and their
    personal sacrifice. It's a privilege for me to say how deeply
    proud we are of our sailors and marines at their posts all over
    the world. It is not possible to express the full depth of our
    gratitude for their service and their families' sacrifice, and
    we just jointly hope you will take that back to them when you
    speak with them.
        The purpose of today's hearing is to discuss the Navy and
    Marine Corps capabilities and force structure planned in this
    year's and future years' budgets. Our first priority must be to
    meet the demands current operations in Iraq and Afghanistan are
    placing on our forces. At the same time, we cannot lose sight
    of the fact that half of our fleet is underway on any given
    day, performing peacekeeping and humanitarian operations around
    the world and providing a level of security made possible only
    through global presence. As we size and shape the future force,
    we must retain our ability to sustain the current operations
    tempo while adding to our current capabilities in order to meet
    emerging threats to our national security.
        The subcommittee is interested in your current direction
    regarding fleet operating concepts, your assessment of new
    capabilities, and your insights regarding the risks and
    challenges you must closely manage in developing the
    capabilities of the future fleet. In particular, we're
    interested in understanding the capabilities currently
    envisioned for Seapower 21 and your efforts to employ these
    capabilities through the Fleet Response Plan. We look for an
    update on both the Marine Corps lift requirements and the
    seabase concept. We're interested in your performance
    assessment of the MV-22 Osprey and the Expeditionary Fighting
    Vehicle programs as they approach full rate production. As
    well, we look for an update on the requirements for key
    programs at critical stages in their developments such as
    DD(X), the Littoral Combat Ship (LCS), the Multi-mission
    Maritime Aircraft, and the Heavy-Lift Helicopter.
        Of particular interest, 1 year ago, this subcommittee
    expressed heightened concern with a course the fleet was on--in
    fact, is on regarding the steady decline in ship numbers and
    the associated implications regarding the capability that comes
    with numbers. The ability to maintain forward presence, the
    ability to respond in time of crisis, the stress placed on
    operating forces, their hardware, and the decline in our
    strategic industrial base. With today's Navy at its smallest
    size in decades, 281 ships, we concur with the Chief of Naval
    Operation's (CNO) conclusion that it is as small as it can get,
    and we are encouraged by his response to our concerns. The 313-
    ship Navy described in the report to Congress on the future
    naval force promises to turn around trends of the past 15 years
    and defines a clear requirements baseline for planning,
    budgeting, and execution by the Navy and the industrial base.
        The CNO has been careful to describe his plan as a balanced
    solution addressing the competing elements of warfighting
    requirements, affordability, and the preservation of critical
    industrial base capabilities, and we support this approach.
    However, it's important that we understand the underlying
    assumptions, the things that have to occur in order to support
    the Navy's analysis. Additionally, and perhaps most
    importantly, when we discuss the plan in the context of mission
    performance, we need to arrive at a common understanding of the
    risks that are inherent to the plan and prudent action that
    would help further mitigate those risks.
        Again, gentlemen, thank you for joining us today. We're all
    looking forward to your testimony, and I'm happy to recognize
    Senator Kennedy for such remarks as he may wish to make.

                 STATEMENT OF SENATOR EDWARD M. KENNEDY

        Senator Kennedy. Thank you very much, Mr. Chairman, and I
    thank our panel for being here. I want to mention to our
    friends in the Marines just a program that Matthew Caulfield
    has worked up; we call it Helmets to Hardhats. We know that
    those are returning from Iraq and Afghanistan, and many of
    those have been out to sea. They have three times the
    unemployment, and this is a very creative program that they're
    working with the building trades. I've seen it. More than 180
    service men and women that served in Iraq and in Afghanistan
    are involved in the program. Two hundred and fifty are on deck
    to come into it. So, it is interesting.
        Not only do we have an example of people that are at the
    cutting edge in terms of wearing the uniform of the country,
    but also strongly committed to trying to make sure that we're
    going to meet our responsibilities to these young people
    afterwards. I just wanted to mention and commend that.
        The buzzer has buzzed, Mr. Chairman. I'm just going to
    mention the areas that I would like to see if we can't have
    some of the questions answered. This is on the uparmoring of
    the Humvees and the adequacy of the funding for those programs
    and what will be the impact if the funding is not forthcoming
    in 2006 for 2007.
        I'm interested in fire support systems and the DD(X) land
    attack destroyer. We have a change in the number of ships. We
    intend to buy only seven ships rather than the larger number of
    DD(X). There's a difference in the number of rounds being
    fired--the fire support requirements. What's the reaction of
    the marines on this? How are they going to compensate for it?
    We haven't seen it a great deal in terms of additional tactical
    air.
        The seabasing, interested in the costs of that program.
    Perhaps we'll get a chance to talk a little later about how
    this is going to work in rough weather, how that is going to
    take place. Also, we ought to find out in that--since some of
    these requirements we want to find out what the needs and the
    cost would be.
        Also, I've been interested--I think, as our Navy and
    Marines know in terms of the mine warfare capability, the
    problems we have, I understand, in remote mine hunting systems,
    we have ships that are involved in that, but they're slow in
    getting to the places where they're supposed to get. How are we
    balancing on this? We have been interested in this issue for
    some period of time, and we want to try and make sure that
    we're doing all that we should.
        So, these are areas that we would be interested in. I also
    know we had the P-3 replacements, and I'd be interested in
    getting into where we thought we were going with those issues.
    There are a couple of others, but I know the bell has rung on
    this. These are the primary areas that I hoped that we would be
    able to get to with the panel, and if we're having a series of
    votes, as I guess we are, Mr. Chairman.
        Senator Talent. I thank the Senator for his comments. Why
    don't we see if Admiral Crenshaw, if you couldn't give us your
    statement before we have to go vote because we have two in a
    row, so at least we can get at the end of the first one and
    then pick the second one up and then come right back.

    STATEMENT OF VADM LEWIS W. CRENSHAW, JR., USN, DEPUTY CHIEF OF
     NAVAL OPERATIONS FOR RESOURCES, REQUIREMENTS, AND ASSESSMENTS

        Admiral Crenshaw. Mr. Chairman, Senator, and distinguished
    members, it's a privilege for me as the Navy's lead Resource,
    Requirements, and Assessments Officer to appear before you
    today to discuss the Navy and Marine Corps capabilities and
    force structures recently submitted in the President's budget.
    I'm joined by Admiral Mark Edwards to my right and of course,
    my colleagues, General Jim Mattis and General Emerson Gardner.
    We have provided written statements, and ask that you make
    those a part of the record. I am excited about this budget
    because it is the basis from which we implement the findings
    completed by the Quadrennial Defense Review (QDR) which
    includes fundings for the first eight maritime preposition
    future ships and implements some new and emerging mission sets
    such as riverine warfare, the Naval Expeditionary Combat
    Command, and maritime domain awareness.
        Additionally, this budget implements the CNO's priorities
    of sustaining combat readiness, developing 21st century
    leaders, and finally, building a fleet for the future, upon
    which this hearing is focused.
        Over the last year, we have employed a capabilities-based
    approach to calculate the size and composition of the future
    force required to meet the expected joint force demands. The
    analysis concluded that a fleet of about 313 ships is the force
    that's necessary to meet these demands with acceptable risk.
    This budget is a stepping stone to realizing that fleet.
        As the 30-year shipbuilding plan evolves over the next
    year, it will produce an investment plan that is both
    executable and affordable based on balancing several factors:
    the naval force operational capabilities, risk, and the ability
    of the shipbuilding industrial base to execute the plan.
    Implementing this plan will be a challenge, but I believe it is
    achievable. It's essential that we control the cost of the
    ships that we build in order to maintain stability. To do this,
    we have instituted a series of boards at the highest levels of
    Navy leadership to come to grips with the steps necessary to
    control these costs. Rightsizing capabilities and adhering to
    cost and production schedules and common hull forms, common
    electronics, and open architecture software are all things that
    allow us to control costs. Determining the right size of the
    force has not stopped at the 313 ships. Right now, we're
    conducting a detailed review of naval aviation just as we did
    with shipbuilding.
        Additionally, we continue to bring the Navy's longstanding
    tradition as a seabased force to the 21st century as a joint
    concept. The ongoing seabasing joint integration capability
    assessment being led by the Joint Staff and our own
    complementary Navy and Marine Corps seabasing capability study,
    both expected to be completed later this year, will be two of
    the stars that we steer by as we bring this seabasing concept
    into the 21st century and the joint arena. These studies
    combined with the 313-ship plan and balanced between fiscal
    reality and measured risk will form the roadmap for the future
    naval force. We believe it is a capable force, and the
    requirements are stable and affordable.
        I look forward to the future, your continued strong
    support, and thank you for your remarks today, and thank you
    for your consideration, and we're ready to answer questions.
        [The joint prepared statement of Admiral Crenshaw and
    Admiral Edwards follows:]
    Joint Prepared Statement by VADM Lewis W. Crenshaw, Jr., USN, and RADM
                              Mark J. Edwards, USN
                                  introduction
        Mr. Chairman and distinguished members of the Seapower
    Subcommittee, thank you for this opportunity to appear before you to
    discuss the Navy and Marine Corps capabilities and force structure
    requirements outlined in the 2007 President's budget.
    Current Operations
        We are a Nation at war. Today your Navy is postured worldwide,
    fighting the war on terror, deterring aggression by would-be foes,
    preserving freedom of the seas, and promoting peace and security. While
    numbers vary with daily operations, as of 20 March 2006, 129 ships are
    underway (46 percent) of which 92 (33 percent) are forward deployed.
    Navy has 5,244 Reserves currently mobilized.
        There are over 10,000 sailors serving ashore throughout the Central
    Command area of responsibility including more than 3,800 in Iraq, and
    an additional 2,600 in Kuwait, that includes SEALs, Seabees, military
    policemen, explosive ordnance disposal, medical, intelligence, and
    civil affairs support personnel. Navy carrier and expeditionary strike
    groups continue to deploy in support of the global war on terrorism and
    conduct combat operations in Iraq and Afghanistan, along with
    humanitarian assistance/disaster relief missions such as tsunami relief
    and Pakistani earthquake.
        At the same time, our Nation took advantage of the immediate access
    provided by naval forces to bring time-critical assistance to Hurricane
    Katrina and Rita victims in the Gulf Coast States. Twenty-three ships
    provided command and control, evacuation, and humanitarian support to
    military and civilian personnel in affected regions. Additionally, 104
    Naval aircraft flew 1,103 sorties in support of search and rescue and
    other humanitarian assistance missions. These efforts resulted in the
    safe evacuation of 8,518 personnel and the rescue of an additional
    1,582 people isolated by the disasters. In the weeks that followed,
    naval relief efforts provided a total of approximately 2.5 million
    pounds of food and water to people most severely affected by the
    disaster.
    Sailors
        The men and women of the United States Navy--Active, Reserve, and
    civilian, are the lifeblood and heart of the Service. They are the
    best, most talented, and capable team of professionals the Nation has
    ever assembled. Navy Active strength totals 356,258 and Reserves have
    72,022 total. Our sailors believe in what they are doing and they are
    performing superbly in very challenging circumstances. From Iraq and
    Afghanistan to our humanitarian relief efforts, I am very proud of what
    they are doing to win the war and support our Nation and friends in
    time of need. They are smarter and better trained than at any time in
    our history. Your continued and generous support of our sailors has
    provided a force second to none in the world.
        The fiscal year 2007 budget request maximizes our Nation's return
    on its investment by positioning us to meet today's challenges--from
    peacekeeping/stability operations to global war on terrorism operations
    and small-scale contingencies--and by transforming the force for future
    challenges.
    Future Navy Force Structure
        The Navy of the future must be capabilities-based and threat-
    oriented. The United States needs an agile, adaptable, persistent,
    lethal, surge-ready force. The Navy must seek to identify the proper
    strategic balance of capabilities to ensure we have the agility, speed,
    flexibility, and lethality to respond to any threat from any adversary,
    whether that threat is conventional or asymmetric in nature. Through
    agility and persistence, our Navy and Marine Corps team must be poised
    to fight irregular warfare against a ``thinking enemy,'' able to act
    immediately against a fleeting target. The challenge is to
    simultaneously ``set the conditions'' for a major combat operation
    (MCO) while continuing to fight the global war on terrorism, with the
    understanding that the capabilities required for the global war on
    terrorism cannot necessarily be assumed to be a lesser-included case of
    an MCO. Our force must be the right mix of capabilities that balances
    persistence and agility with power and speed in order to fight the
    global war on terrorism while being prepared to win an MCO. To do so,
    it must be properly postured in terms of greater operational
    availability from platforms that are much more capable as a
    distributed, networked force. While the fabric of our fighting force
    will still be the power and speed needed to seize the initiative and
    swiftly defeat any regional threat, FORCEnet's pervasive awareness via
    command, control, communication, computers, intelligence, surveillance,
    and reconnaissance (C\4\ISR) will enable us to achieve essential
    effects with less mass. Because of its access from the sea, the Navy
    and Marine Corps are focusing significant effort and analysis in
    support of joint combat power projection by leveraging the maneuver
    space of the oceans through Seabasing.
    Seabasing--A National Capability
        The Naval Power 21 vision defines the capabilities that the 21st
    century Navy and Marine Corps team will deliver. Our overarching
    transformational operating concept is Seabasing; a national capability,
    for projecting and sustaining naval power and joint forces that assures
    joint access by leveraging the operational maneuver of sovereign,
    distributed, and networked forces operating globally from the sea.
    Seabasing unifies our capabilities for projecting offensive power,
    defensive power, command and control, mobility, and sustainment around
    the world. It will enable commanders to generate high tempo operational
    maneuver by making use of the sea as a means of gaining and maintaining
    advantage.
        Seabasing represents a complex capability, a system-of-systems able
    to move at will. Seabasing, enabled by joint integrated and operational
    concepts, is the employment of ships and vessels with organic strike
    fires (including naval surface fires support to the Marine Corps) and
    defensive shields of sensors and weapons, strike and transport
    aircraft, communications, and logistics. We will use the sea as
    maneuver space to create uncertainty for adversaries and protect the
    joint force while receiving, staging, and integrating scalable forces,
    at sea, that are capable of a broad range of missions. Its inherent
    freedom of movement, appropriate scalability, and sustainable
    persistent power provides full spectrum capabilities, from support of
    theater engagement strategies, to rapid response to natural or man made
    disasters, to military combat operations from raids, to swift defeat of
    enemies, to scale of major combat and decisive operations. The seabased
    Navy will be distributed, netted, immediately employable, and rapidly
    deployable, greatly increasing its operational availability through
    innovative concepts such as, the Fleet Response Plan (FRP) and Sea
    Swap. At the same time, innovative transformational platforms under
    development such as MPF(F), LHA(R), and High-Speed Connectors, will be
    instrumental to the seabase.
        The FRP is the maintenance, training, and operational framework
    through which the Navy meets global combatant commander demand signals
    for traditional (e.g., global war on terrorism, major combat
    operations, humanitarian assistance/disaster relief, shaping and
    stability operations, counter piracy, etc.) and emerging mission sets
    (e.g., riverine warfare, Navy Expeditionary Combat Command, medical
    outreach). The FRP is mission-driven, capabilities-based, and provides
    the right readiness at the right time (within fiscal constraints). It
    enables responsive and dependable forward presence. With the FRP we can
    deploy a more agile, flexible, and scalable naval force capable of
    surging quickly to deal with unexpected threats, humanitarian
    disasters, and contingency operations. Sea Swap is an initiative
    designed to keep a single hull continuously deployed in a given
    theater, replacing the entire crew at 6-month intervals. The primary
    objective is to effectively and efficiently increase forward naval
    presence without increasing operating cost.
        The Navy's Naval Surface Fires Support (NSFS) program was initiated
    as part of a larger strategy to meet U.S. Marine Corps (USMC) stated
    requirements for expeditionary maneuver warfare. However, NSFS will
    support all joint maneuver forces ashore at extended ranges and will
    provide responsive and persistent fire support for all other
    operations. The NSFS program will continue to be relatively affordable
    since fewer rounds will be required to achieve the desired effects on
    most targets due to greatly enhanced accuracy, precision, and
    lethality. Current program needs to meet NSFS requirements for the near
    term are being met by the MK 45 Mod 4 5/62 gun, Naval Fires Control
    System, Extended Range Munitions, and a Supporting Arms Coordination
    Center (Automated) (SACC(A)). Mid-term requirements will be met by
    DD(X) and associated NSFS programs, 155-mm Advanced Gun System, and
    Long Range Land Attack Projectile. Finally, the long term requirements
    may be met by Electromagnetic Rail Gun System and Multi-Purpose
    Loitering Missile. The programs of record that we have today in our
    NSFS plan will be able to provide persistent fire support at longer
    ranges with better accuracy than the battleships were ever able to
    provide.
    Seapower 21
        We developed the Sea Power 21 vision in support of our National
    Military Strategy. The objective of Sea Power 21 is to ensure this
    Nation possesses credible combat capability on scene to promote
    regional stability, to deter aggression throughout the world, to assure
    the access of joint forces and to fight and win should deterrence fail.
    Sea Power 21 guides the Navy's transformation from a threat--based
    platform centric structure to a capabilities-based, fully integrated
    force. The pillars of Sea Power 21--Sea Strike, Sea Shield, and
    Seabasing--are integrated by FORCEnet. Sea Power 21 is structured by
    four pillars:

              Sea Strike is the projection of precise and persistent
            offensive power. It leverages persistence, precision, stealth,
            and new force packaging concepts to increase operational tempo
            and reach. It includes strikes by air, missiles, and long-range
            gunfires.
              Sea Shield is the projection of layered defensive power. It
            seeks maritime superiority to assure access, and to project
            defense overland. seabasing is the projection of operational
            independence. It provides the Joint Force Commander the ability
            to exploit expeditionary maneuver warfare, and the capability
            to retain command and control and logistics at mobile, secure
            locations at sea.
              FORCEnet is the means by which the power of sensors,
            networks, weapons, warriors, and platforms are harnessed in a
            networked combat force.

        This networked force will provide the strategic agility and
    persistence necessary to prevail in the continuing global war on
    terrorism, as well as the speed and overwhelming power to seize the
    initiative and swiftly defeat any regional peer competitor in MCO.
    Extending FORCEnet to our allies and partners in the form of
    multinational information sharing networks will represent an
    unprecedented level of interoperability for both global war on
    terrorism and MCO. The immeasurable advantage of this effort is the
    effective association of a ``1,000-ship Navy'' built from our own core
    capabilities combined with the coordinated efforts of our allies and
    partners in today's challenging global environment.
    Fiscal Year 2006 Quadrennial Defense Review (QDR 06)
        The fiscal and temporal realities associated with the design and
    development of modern, sophisticated weapons systems requires a
    significantly different approach to procurement and operation of our
    forces and resources. It is this dynamic that is propelling the Navy
    forward in the transformational arena. As recognized in the Quadrennial
    Defense Review, the size and capabilities of our force are driven by
    the challenges we will face. The capacity of the force is determined by
    its global posture in peacetime and the requirement to respond from
    this posture, as well as to surge, in crisis. In the case of our Navy,
    it is based upon the need for a ubiquitous but carefully tailored
    maritime presence that can provide the President and our allies with
    strategic options in support of dynamic security requirements. QDR 06
    developed guidance to achieve the national defense and national
    military strategies and shaping the future force to improve
    capabilities and expand capacity to address four priorities:

             Defeat Terrorist Extremists
             Defending the Homeland in Depth
             Shaping the Choices of Countries at Strategic Crossroads
             Preventing Hostile State and Non-state Actors from Acquiring
            or Using Weapons of Mass Destruction

        QDR 06 sets a 20-year course for the Department of Defense and
    provides an opportunity to continue to reshape the U.S. Armed Forces to
    meet current and emerging security responsibilities. The QDR 06
    construct places new emphasis on the unique operational demands
    associated with homeland defense and the global war on terrorism,
    shifts focus from optimizing for conflicts in two particular regions to
    building a portfolio of capabilities with global reach and serves as a
    bridge from today's threat-based force to a future capabilities-based
    transformational force.
    Force Structure
        Force structure requirements were developed and validated through
    detailed joint campaign and mission level analysis, optimized through
    innovative sourcing initiatives (FRP, Sea Swap, forward posturing) that
    increase platform operational availability, and balanced with
    shipbuilding industrial base requirements. This force structure was
    developed using a capabilities-based approach measured against the
    anticipated threats for the fiscal year 2020 timeframe.
        The future Navy will remain seabased, with global speed and
    persistence provided by forward deployed forces, supplemented by
    rapidly deployable forces through the FRP. To maximize return on
    investment, the Navy that fights the global war on terrorism and
    executes maritime security operations will be complementary to the Navy
    required to fight and win in any MCO. This capabilities-based, threat-
    oriented Navy can be disaggregated and distributed world wide to
    support combatant commander global war on terrorism demands. The
    resulting distributed and netted force, working in conjunction with our
    joint and maritime partners, will provide both actionable intelligence
    through persistent, maritime domain awareness, and the ability to take
    action where and when a threat is identified. The same force can be
    rapidly aggregated to provide the strength needed to defeat any
    potential adversary in an MCO. The warships represented by this
    shipbuilding plan, along with the naval aircraft programmed in fiscal
    year 2007 President's budget, will sustain operations in forward areas
    longer, be able to respond more quickly to emerging contingencies, and
    generate more sorties and simultaneous attacks against greater numbers
    of multiple targets and with greater effect than our current fleet.
        Employing a capabilities-based approach to calculate the size and
    composition of the future force required to meet expected joint force
    demands in peace and in the most stressing construct of the Defense
    Planning Guidance, along with detailed assessments of risk associated
    with affordability and instabilities in the industrial base, the
    analysis concluded that a fleet of about 313 ships is the minimum force
    necessary to meet all the demands, and to pace the most advanced
    technological challengers well into the future, with an acceptable
    level of risk.
        Our force structure strategy is balanced between new construction
    and modernization for ships, and recapitalization and sustainment for
    aircraft. It is critical to our strategy for us to have vigorous
    modernization and sustainment programs to achieve the expected service
    life of our ships and aircraft in the face of rapidly escalating global
    threats using advanced technologies. Modernization and sustainment gets
    the most out of our capital investments.
        During the last year, the Chief of Naval Operations established a
    focused effort to clearly define naval force structure requirements.
    The Navy recently submitted to Congress its 2007 Annual Long Range Plan
    for Construction of Naval Vessels. This plan begins our movement toward
    a more balanced force that meets the future national security
    requirements outlined in QDR 06 with acceptable risk and is designed to
    replenish the fleet, while stabilizing workload and funding
    requirements. As this 30 year shipbuilding plan evolves over the next
    year, it will produce an investment plan that is both executable and
    affordable based on balancing several factors: naval force operational
    capability; risk; and, the ability of the shipbuilding industrial base
    to execute the plan. This year the Chief of Naval Operations continues
    to define naval force structure requirements with a detailed review of
    naval aviation, in the same manner as the shipbuilding force structure
    requirements were established. This effort will define a naval aviation
    force structure which will meet the requirements outlined in QDR 06
    with acceptable risk, is balanced with the 313 ship-plan, and
    stabilizes the industrial base.
    Shipbuilding (30-Year Naval Force Size)
        The 30-year shipbuilding plan and the resulting ship inventory, as
    outlined in the fiscal year 2007 Annual Long-Range Plan for
    Construction of Naval Vessels, represent the baseline as reflected in
    the 2007 President's Budget submission. There will be subsequent
    studies and analysis that will continue to balance affordability with
    capability and industrial base capacity. As part of the program
    objective memorandum development process, the Navy will be exploring
    alternative approaches to attaining the future force structure and ship
    mix while retaining the necessary capabilities for joint force
    operations. Overall, this plan reflects the Navy's commitment to
    stabilize the demand signal to the industrial base while still
    achieving the appropriate balance of affordability and capability in
    all ship classes. Also, although there is risk with this plan, and not
    a lot of excess capacity to accommodate the unforeseen, we believe the
    risk is both moderate and manageable. Areas of special interest
    include:

        Carriers
        Eleven aircraft carriers and their associated air wings are
    sufficient to ensure our ability to provide coverage in any foreseeable
    contingency and do so with meaningful, persistent combat power. While
    the Navy requirement for carriers remains a minimum of 11 operational
    vessels, past delays in beginning the nuclear powered aircraft carrier
    (CVN)-21 program will result in the Navy having only 10 operational
    carriers in fiscal year 2013 and fiscal year 2014. This anomaly will
    require operational management of the remaining carrier fleet to
    mitigate the impact of this shortfall in carrier force level.
        Attack Submarines
        Despite the fact that the total SSN numbers drop below 48 between
    2020 and 2033, our fast attack submarines will provide the necessary
    presence throughout their respective areas of operation and will be
    sufficient to sustain the minimum required deployed presence needed for
    major combat operations. Navy is pursuing a number of cost reduction
    initiatives intended to lower SSN 774 acquisition costs to $2.0 billion
    (fiscal year 2005 dollars) at a stable build rate of two-per-year
    commencing with fiscal year 2012 as cited in QDR 06.
        Expeditionary
        Our expeditionary capability provides the joint forcible entry
    capacity necessary to support the seabase as a lodgment point for joint
    operations but represents an acceptable decrease in Marine
    expeditionary brigade lift capacity. Myriad tactical, surveillance and
    reconnaissance, heavy lift, and support aircraft, as well as a variety
    of support ships, provide the Navy with sufficient capacity in each
    mission area.
        A stable shipbuilding industry is essential to sustain minimum
    employment levels and retain critical skills to meet our requirements
    for an affordable and capable force structure. We must align the
    industrial base for long-term force development through advanced
    procurement and incentivized cost savings. We must build ships more
    efficiently, cost effectively, and quickly. To do this, we are
    committed to help provide stability in the shipbuilding plan and
    rigorously control requirements. Costs and production schedules must be
    kept within contractual limits. Industry must be viewed as a trusted
    partner while we provide a stable baseline upon which to plan.
        The Navy continues to analyze operational requirements, ship
    designs and costs, acquisition plans and tools, and industrial base
    capacity to further improve its shipbuilding plan. Full funding and
    support for execution of this plan is crucial to transforming the U.S.
    Navy to a force tuned to the 21st century and its evolving
    requirements.
    2007 President's Budget Shipbuilding Programs
        There has been considerable activity within shipbuilding over the
    last year. Currently, there are 37 naval ships under construction in
    the United States: 1 CVN, 13 DDGs, 1 LHD, 4 LPDs, 9 T-AKEs , 2 Littoral
    Combat Ships (LCS) and 7 Virginia class submarines. Three additional
    LPDs have ongoing contract negotiations. In 2005 the Department
    delivered the lead ship for our newest class of amphibious transport
    dock ships, U.S.S. San Antonio, (LPD 17), initiating a new era of
    amphibious assault capabilities that are aligned to the littoral
    regions. In January 2006, the Navy commissioned LPD 17. The Navy also
    commissioned three DDGs in calendar year 2005. We laid the keel for the
    eighth ship of the LHD class and the second Lewis & Clark Auxiliary Dry
    Cargo & Ammunition ship (T-AKE), launched the lead ship T-AKE and
    commenced construction of the seventh Virginia  class submarine. The
    Navy completed the engineered refueling overhaul (ERO) and conversion
    of the U.S.S. Ohio (SSGN 726), the first SSGN, and redelivered the
    submarine to the fleet in December 2005. In March 2005, we also
    completed the refueling complex overhaul (RCOH) of CVN 69.
        Fiscal year 2007 will see the Navy's previous research and
    development efforts begin to bear fruit. The first increment of
    procurement of the two lead-DD(X) destroyers has been requested.
    Follow-on LCSs are programmed that will accelerate the Navy's
    capability to defeat anti-access threats close to shore. Transformation
    is most apparent in fiscal year 2007 where new construction increases
    to seven ships from the four in the President's fiscal year 2006 budget
    request. The total number of new ships procured over the Future Years
    Defense Program (FYDP) is 51, averaging 10 ships per year including
    DD(X), CG(X), LCS, T-AKE, Virginia class SSN, CVN 21, MPF(F), LPD 17,
    Joint High Speed Vessel, and LHA(R). Our fiscal year 2007 budget
    request calls for construction of seven ships: two DD(X) destroyers,
    one Virginia class submarine, one Lewis & Clark (T-AKE) class Auxiliary
    Dry Cargo & Ammunition ship, the LHA 6 Amphibious Assault Ship, and two
    LCS. In addition, we have requested funding for advance procurement of
    the 10th and 11th Virginia class submarines, advance procurement of
    long lead material for the 9th San Antonio class Amphibious Transport
    Dock ship, advance procurement for CVN 21 construction, the second
    increment of CVN 70 RCOH funding, advance procurement for CVN 71 RCOH,
    ERO of an SSBN, funding for Ticonderoga class cruiser and Arleigh Burke
    class destroyer modernization, and the service life extension for six
    Landing Craft Air Cushion vessels.
    2007 President's Budget Naval Aviation Programs
        The fiscal year 2007 President's budget procurement plan stresses
    recapitalization and achieves significant advances in critical
    warfighting capability while continuing the transition from a
    ``platform-centric'' approach. Fiscal year 2007 President's budget
    improved critical warfighting capability while lowering operation and
    support cost. Fiscal year 2007 President's budget lays out $63.0
    billion in aircraft procurement, Navy 1-4 for the procurement of 1,135
    aircraft in the FYDP (fiscal years 2007-2011). There is $8.0 billion
    for 165 aircraft in fiscal year 2007.
        The fiscal year 2007 President's budget produces financial
    efficiencies through tactical air integration, Active-Reserve
    integration, and Helo ConOps. These programs along with the pursuit of
    multi-year procurement contracts for MH-60S, MH-60R, and MV-22 will
    continue to produce efficiencies that aid in divestment from legacy
    airframes and consolidation of facilities.
        Fiscal year 2007 will see the procurement of 109 Department of the
    Navy (DON) Joint Strike Fighter (JSF) aircraft in the FYDP. Marine
    Corps initial operating capability (IOC) remains fiscal year 2012 while
    Air Force and Navy IOCs remain fiscal year 2013. In fiscal year 2007
    the F/A-18E/F program will be in its third year of procuring 210
    aircraft through a multi-year procurement buy, and remains on cost and
    ahead of schedule. The Multi-Mission Maritime Aircraft (MMA) program
    will procure the first P-8A in fiscal year 2010 with an eye towards
    transitioning the MPRA community between fiscal years 2013 and 2019.
    The procurement strategy for UH-1Y aircraft is now new-build aircraft
    versus remanufacture. This eliminates the need to remove aircraft from
    Operation Iraqi Freedom/Operation Enduring Freedom for remanufacture.
    USMC Heavy Lift Replacement (HLR/CH-53K) program is fully funded for
    fiscal year 2015 IOC.
        Fiscal year 2007 President's budget plans for $24.7 billion FYDP
    with $6.3 billion in fiscal year 2007 for naval aviation research and
    development. These funds ensure future naval aviation transformation
    and recapitalization. Broad Area Maritime Surveillance (BAMS) Unmanned
    Aircraft System (UAS) is funded for technical risk reduction activities
    and milestone B documentation preparation through fiscal year 2007; IOC
    is planned for fiscal year 2013. E-2D is currently in system design and
    development with milestone C in fiscal year 2009 and IOC in fiscal year
    2011. Fire Scout is currently in engineering and manufacturing
    development (EMD). Fiscal year 2007 President's budget implements and
    funds a strategy that retires Navy EA-6Bs and replaces them with EA-
    18G.
    Future Maritime Patrol
        The aging P-3C fleet continues to provide critical broad area
    maritime and littoral anti-submarine warfare (ASW), anti-surface
    warfare, and intelligence, surveillance and reconnaissance (ISR). P-8A
    MMA will provide P-3 replacement, but P-3C sustainment measures are
    needed until MMA reaches full operational capability (FOC) in fiscal
    year 2019. The 2007 President's budget funds P-3C airframe sustainment
    measures which include inspections and pre-emptive repair or
    replacement of critical structural components to extend aircraft
    service life. The sustainment program will sustain the P-3 until MMA
    FOC. MMA achieved milestone B in May 2004 and entered system
    development and demonstration (SDD) in June 2004. Boeing was awarded a
    $3.9 billion contract to design the aircraft, integrate subsystems, and
    build up to seven test aircraft. System requirements review, system
    functional review, and preliminary design review have been completed,
    and MMA has entered the detailed design phase. Milestone C is planned
    for fiscal year 2010 and IOC in fiscal year 2013. The MMA program has
    executed on time and on budget.
    Unmanned Aircraft System
        The DON is developing, acquiring, and fielding UAS technologies as
    a key transformational initiative supporting knowledge and information
    superiority, persistent surveillance, and time sensitive operations.
    Investments are being made in future UAS capabilities while maintaining
    current war supporting capabilities such as Marine Corps' legacy
    Pioneer UAS. ISR capabilities addressing improved battlespace
    management, situational awareness, and persistence are the primary
    development focus to support the warfighter. The Vertical Takeoff and
    Landing UAV (VTUAV) system-Fire Scout is in test and development and
    will reach IOC in fiscal year 2008, providing support for core LCS
    mission areas. Two Global Hawk maritime demonstrators will be delivered
    in 2006 and will support fleet experiments and concept of operations
    development for the BAMS UAS to be fielded in fiscal year 2013. Dragon
    Eye, a lightweight, manportable, modular system designed to give the
    small unit leader a reconnaissance and surveillance capability to see
    over the next hill or building has been fielded in the Marine Corps.
    Finally, the Navy is supporting an unmanned combat aircraft system
    program to develop a carrier based UAS system that provides ISR and
    operates in the same battlespace as carrier strike aircraft.
    Interoperability continues to be a key element in the development of
    our UASs. The Tactical Control System (TCS) is a standards-based,
    interoperable, open system architecture solution that includes
    implementation of The North Atlantic Treaty Organization (NATO)
    Standardization Agreement (STANAG) 4586. TCS and NATO STANAG 4586
    represent the foundation for our UAV interoperability. In addition,
    applicable DON UAS will comply with Congressional direction regarding
    use of Tactical Common Data Link (TCDL). The VTUAV system will IOC with
    TCDL, and the Pioneer program is funded to retrofit to meet this
    requirement.
        Army announced Lockheed-Martin ACS contract termination 12 January
    2006. The fiscal year 2007 President's budget sustains EP-3 until a
    replacement capability is fielded. Army and Navy, in coordination with
    Air Force, are co-leading an Office of the Secretary of Defense-
    directed ISR gap analysis study.
                                    summary
        Our mission remains bringing the fight to our enemies. The
    increasing dependence of our world on the seas, coupled with growing
    uncertainty of other nations' ability or desire to ensure access in a
    future conflict, will continue to drive the need for Naval forces and
    the capability to project decisive joint power by access through the
    seas. The increased emphasis on the littorals and the global nature of
    the terrorist threat will demand the ability to strike where and when
    required, with the maritime domain serving as the key enabler for U.S.
    military forces.
        Accordingly, we will execute the global war on terrorism while
    transforming for the future fight. We will continue to refine our
    operational concepts and appropriate technology investments to deliver
    the kind of dominant military power from the sea envisioned in Sea
    Power 21. We will continue to pursue the operational concepts for
    seabasing persistent combat power, even as we invest in technology and
    systems to enable naval vessels to deliver decisive combat power in
    every tactical and operational dimension. We look forward to a future
    that continues the strong partnership with Congress that has brought
    the Navy many successes today. We thank you for your consideration.

        Senator Talent. Thank you, Admiral. We probably have a
    couple of minutes left, and I think I won't cut it too fine.
    Senator, I think we'll adjourn the hearing, go over and vote,
    and then come on back. We want to welcome the students who are
    with us today. If you can stick around until the questions,
    that's when the fun really starts. So, I'll recess the hearing,
    and then we'll go over and vote. [Recess.]
        All right, thank you for your patience. We have another
    vote coming up in a few minutes, and Senator Kennedy agreed I
    would come back and continue with the statements, and he will
    try to come back. He has a conference committee he has to
    attend, but if he can't, and to the extent I don't cover his
    questions, we will just submit his for the record. Thank you,
    Admiral Crenshaw, for your testimony. General Gardner, I have
    you next on the list. We appreciate your being here.

      STATEMENT OF LT. GEN. EMERSON N. GARDNER, JR., USMC, DEPUTY
       COMMANDANT OF THE MARINE CORPS FOR PROGRAMS AND RESOURCES

        General Gardner. Mr. Chairman, thank you for this
    opportunity to appear before you today. As the Marine Corps'
    Deputy Commandant for Programs and Resources, I am responsible
    for creating a budget request that provides necessary funding
    to develop our future capability needs. Our fiscal year 2007
    budget request enables your Marine Corps to respond to current
    national demands even as we aggressively transform our forces
    to prepare for the uncertainties of the future.
        However, our baseline modernization and transformation
    accounts cannot bear the unfunded costs associated with
    sustaining the global war on terror, which is why the
    administration is requesting funds in the fiscal year 2006
    supplemental to fund our cost of war operations and to address
    our need to reset our forces. Our fiscal year 2007 budget and
    our fiscal year 2006 supplemental request work together to
    sustain readiness while providing opportunity for investment
    and resetting continued modernization of the Corps. On behalf
    of all the marines, I thank the committee for your continued
    support and look forward to answering your questions.
        [The joint prepared statement of General Gardner and
    General Mattis follows:]
    Joint Prepared Statement by Lt. Gen. Emerson N. Gardner, USMC, and Lt.
                           Gen. James N. Mattis, USMC
        Chairman Talent, Senator Kennedy, distinguished members of the
    subcommittee, thank you for the opportunity to appear before you to
    discuss Marine Corps maritime and aviation requirements. Your Marine
    Corps is entering the fifth year of what has been aptly termed The Long
    War and because of the support received from Congress, Marines continue
    to demonstrate that they are an expeditionary force in readiness--Most
    Ready When the Nation is Least Ready. Scalable, flexible, and adaptable
    for peacetime crises and always innovative for future challenges, your
    Corps' number one priority is fighting and winning battles.
        On behalf of all marines, we thank the committee for your continued
    support and commitment to the readiness of your Marine Corps.
                    creating stability in an unstable world
        We remain the Nation's premier expeditionary combat force-in-
    readiness. We are primarily a naval force whose strength is our ability
    to access denied areas from great distances. We project Marine forces
    from land or seabases for operations as part of a joint or combined
    force. We provide defense of the homeland by operating from forward
    deployed locations throughout the world. We sustain our deployed forces
    for extended periods of time.
        We fight across the spectrum of conflict. However, we believe that
    our future will be characterized by irregular wars. The enemy we are
    fighting today is different than those in our recent past. He is a
    transnational actor with no allegiance to sovereign nations or respect
    for conventional rules of war. To address this threat, we focus on
    warfighting excellence in everything we do. A guiding principle of our
    Corps is that we fight as combined-arms teams, seamlessly integrating
    our ground, aviation, and logistics forces adapted to the complexities
    of irregular war. We exploit the speed, flexibility, and agility
    inherent in our combined-arms approach to defeat irregular,
    traditional, and emerging threats to our Nation's security.
        Every marine is a rifleman and a warrior--our link to the past and
    a highly relevant key to the future. We train and educate our marines
    to think independently and act maturely and aggressively, with speed
    and initiative, and to exploit the advantages of cultural
    understanding. We thrive in the chaotic and unpredictable environments
    in which our forces are employed. We are committed to providing
    relevant, sustainable, and sturdy forces to the joint task force
    commanders. Marines are intensely devoted to each other and the defense
    of our Nation.
                        quadrennial defense review (qdr)
        The 2006 QDR report highlights that seabasing and flexible options
    for expeditionary maneuver are not only relevant; they are critical to
    our strategic goals. The QDR defines achieving global freedom of action
    as one of the four key objectives in the National Defense Strategy. To
    increase our Nation's freedom of action, we need to focus on the
    following four areas: operational readiness, global reach, building
    partnership capacity, and strengthening alliances. Seabasing plays a
    significant role in all four of these areas, but makes its greatest
    contributions in enhancing global reach. The QDR specifically calls for
    more flexible basing and indirect operational approaches. With its
    characterization of today's security environment as an era of
    uncertainty and surprise, marked by a shift from static defense and
    garrison forces to mobile expeditionary operations, the QDR suggests
    more emphasis be placed on agility of response rather than speed of
    response. It seeks tailored deterrence by shifting from responding
    after a crisis starts (reactive) to preventive action so that problems
    do not become crises (proactive). This requires an agile and integrated
    joint force that is more rapidly deployable and more capable against a
    wider range of threats. Lastly, the QDR highlights the need to develop
    the capability ``to deploy rapidly, assemble, command, project,
    reconstitute, and re-employ joint combat power from all domains to
    facilitate assured access.'' If we as a Nation desire to assure we can
    gain access at a time and place of our choosing, it is imperative that
    we continue to invest in and further advance our Nation's seabasing
    capabilities to achieve global freedom of action. There is no better
    way to reassure our friends around the world while confronting our
    enemies with a compelling threat.
                        seabasing--a national capability
        America's ability to use international seas and waterways, as both
    maneuver space and an operating base unconstrained by foreign veto,
    allows our naval forces to project combat power into the littoral
    regions. The littorals contain more than half the world's population
    and more than 75 percent of its major urban areas. Highly mobile and
    ready for combat, our forward-deployed expeditionary forces are
    critical instruments of U.S. diplomacy and central components of joint
    military force packages designed to quickly contain a crisis or defeat
    an emerging threat. The Navy and Marine Corps team can project
    unmatched amphibious forcible-entry capabilities and provide a
    persistent combat capability from a mobile seabase, thus reducing the
    U.S. logistical ``footprint'' ashore. By exploiting our Nation's
    premier asymmetric advantage--command of the sea--the Navy and Marine
    Corps can loiter over the horizon and project, protect, and sustain
    integrated joint warfighting capabilities, provide muscular yet agile
    support for the Commander in Chief's diplomatic efforts, and ensure
    operational independence for combatant commanders across the full
    spectrum of warfare.
        Today and tomorrow, a most visible element of assurance to allies
    and deterrence to foes will be naval forward presence, including
    capabilities of Marine Expeditionary Units (Special Operations Capable)
    (MEU(SOC)) embarked, protected, and sustained by Expeditionary Strike
    Group (ESG) ships. These units provide the combatant commanders with
    forward-deployed adaptive units that can conduct a variety of quick
    reaction, seabased, crisis-response options against traditional
    challenges or against irregular foes. To appreciate our Nation's
    ability to maintain global presence, we only need to reflect back 23
    years. From Beirut to Biloxi, our Nation has responded with amphibious
    forces to 76 global events ranging from humanitarian relief to combat
    operations, each of which provides an excellent example of our current
    capabilities.

        The current force-sizing construct requires the capability to
    respond to two swiftly defeat the efforts (SDTE)--each of which
    requiring a Marine Expeditionary Brigade (MEB) size force. One of these
    crises may become a decisively defeat campaign, bringing our most
    powerful force to bear, the Marine Expeditionary Force (MEF), for
    highly-capable, lethal, mobile, and sustained operations. This requires
    30 operational available amphibious warships (10 of which must be large
    deck amphibious ships capable of supporting the aviation combat element
    of the assault echelon).
        The future Seabasing effort will allow more efficiency in the
    generation of our expeditionary brigades, enabling the forces to flow
    directly from home bases to the forward, on-scene, Seabasing ships,
    while leveraging the Sea Shield force protection for off-shore, less
    vulnerable operating bases. As a crisis builds, one to two forward
    deployed MEUs serve as the ``leading edge'' of the MEB, conducting
    advanced force and limited objective, initial entry/response efforts,
    while the remainder of the strike power of the MEB is assembled on
    scene as part of the Maritime Preposition Force (Future) (MPF(F))
    Seabasing echelon. As ``proof of concept,'' our Nation's strength and
    capability to operate in an anti-access environment was tested during
    Operation Enduring Freedom (OEF). The war against the Taliban and al
    Qaeda in Afghanistan provided a harsh dose of reality for those who
    assumed traditional threats and the availability of friendly,
    convenient land bases to project airpower and land forces.

        In the early phases of OEF, two forward-deployed MEUs and
    associated amphibious shipping formed Task Force 58 and projected the
    first major U.S. ``conventional'' combat units into Afghanistan--more
    than 350 miles from its seabase of amphibious shipping. Yet, their
    operations were far from traditional or conventional in tone. We
    believe recent experiences, such as Turkey's prohibition of passage for
    the 4th Infantry Division to open a northern front in the early stages
    of Operation Iraqi Freedom (OIF), are compelling insights for how
    operations must be conducted in the future. When negotiating for the
    4th Infantry Division to transit Turkey, the U.S. offered to pay a
    multi-billion dollar option for a one time passage when this funding
    could have been applied to our Nation's future warfighting investments
    such as MPF(F). In the globalized world and information age, ``all
    politics are local'' remains a constant theme but now has strategic
    implications. Our naval forces, operations off-shore, are more relevant
    now than ever before, when even friendly nations may deny U.S. forces
    land basing and transit due to their own sovereign interests.
                             distributed operations
        The attributes of sea power are extremely useful to the combatant
    commanders. However, this operational capability must also be matched
    by increased tactical capabilities that enhance the effectiveness of
    our ``boots on ground'' to enable operational maneuver and to create
    stability, especially in irregular and counterinsurgency operations
    where decisive combat has shifted to ground combat against irregular
    forces. After a quarter century of unwavering commitment to our
    maneuver warfare philosophy, marines are harvesting a generation of
    junior officers and noncommissioned officers who are better prepared to
    assume much greater authority and responsibility than traditionally
    expected at the small-unit level. As an additive tactic and
    complementary capability to our Seabasing concept, distributed
    operations describes an operating approach that will create an
    advantage over an adversary through the deliberate use of wider
    dispersion and coordinated, interdependent, tactical actions enabled by
    enhanced communications, increased access to joint fire support, as
    well as by enhanced combat capabilities at the small-unit level. The
    essence of this concept lies in enhanced small units gained through
    taking advantage of our high quality, combat experienced marines and
    the incorporation of emerging technologies which will support them.
        Once implemented, a networked Marine Air-Ground Task Force
    operating in a distributed operations manner will disperse, mass, and
    disperse again to exploit opportunities the enemy offers. The
    integration of new doctrine, force structure, training, equipment,
    personnel policies, and leader development initiatives will afford our
    tactical and operational commanders a significantly enhanced weapon in
    the increasingly sophisticated global war on terror.
        marine corps maritime lift and naval surface fires requirements
        In order to support Joint Forcible Entry Operations (JFEO), the
    Marine Corps shipbuilding requirement is two amphibious MEB Assault
    Echelons (AE) plus two (MPF(F)) MEBs (or equivalent as indicated
    below).

              30 operationally available amphibious ships, of which 10
            must be operationally available big-deck aviation-capable ships
            to support two MEB AE.

                      Note: operationally available--minimum amount of
                    ships required to conduct the mission. Planning factors
                    will account for ship maintenance cycles.
                      Minimum of 9 LPD-17s within the LPD program to
                    mitigate risk incurred by limiting each MEB AE to 15
                    amphibious ships.

                              Both discrete and volumetric analyses have
                            been conducted to load the ``2015 MEB AE'' on
                            amphibious ships. Seventeen ships (five LHD,
                            five LPD-17, five LSD-41, two LSD-49) are
                            required, however, the Marine Corps has
                            accepted risk with a 7-percent reduction in MEB
                            equipment by self limiting to 15 ships per MEB
                            AE.
                              Limiting the LPD-17 production line to nine
                            ships places the Marine Corps at grave/
                            significant risk by further decrementing the
                            MEB equipment for the assault echelon.

              2 MPF(F) MEB squadrons or one MPF(F) squadron plus two
            legacy Maritime Pre-position Ship (MPS) squadrons.

                      MPF(F) squadron will consist of 14 ships with two
                    types using proven amphibious hull designs: 1 LHD, 2
                    LHA(R), 3 T-AKE, 3 large, medium speed, roll-on/roll-
                    off (LMSR), 3 Mobile Landing Platform ships, and 2
                    legacy ``dense-pack'' maritime prepositioning ships.
                      We are not ready to commit MPF(F) to forcible entry
                    in the assault echelon without further experimentation
                    in the following areas:

                              Civilians (merchant marines) manning MPF(F)
                            and associated legal implications.

                              Survivability, preposition loading, and
                            continued on-load/off-load experiments, etc.

              Naval Surface Fire Support (NSFS) that meets the Marine
            Corps requirement of ``24/7,'' all weather, long range naval
            surface fires in support of amphibious operations from the sea
            with continuous striking power and volume of fires out to a
            range of 63 nautical miles (threshold) to 110 nautical miles
            (objective) from ships at sea.
              LHA/LHD recapitalization plan.
              Recapitalization plan for LSD line to bridge from last LPD
            to first LSD replacement (must account for LHA(R) design of not
            having a well deck).

              We have lost a total of 27 aircraft in support of OIF/OEF/
            Horn of Africa (HOA) operations. Until last fall (28 Sep 05--
            MV-22 full rate production decision), we have not had a ``hot''
            manufacturing line from which to replace these losses because
            we are in the midst of recapitalizing our legacy fleet.
              With only one active production line for our existing
            rotary-wing aircraft, addressing near-term inventory shortfalls
            for this generational war requires revisiting the production
            ramp-up rates for the procurement of the MV-22, KC-130J
            (procure multi-year), H1Y/Z aircraft and staying on track with
            the development of the CH53K.
              F-35B (JSF)--preserve Initial Operational Capability (IOC)
            date of fiscal year 2012 in order to replace legacy aircraft
            operating beyond the Expected Service Life (ESL).
     fiscal year 2007 and future years defense programs--modernization and
                                 transformation
        While we continue to focus our efforts on sustaining the current
    requirements for global war on terror, we must not sacrifice our
    modernization and transformation initiatives in the process. Our
    modernization and transformation accounts can no longer bear the
    unfunded costs associated with sustaining the global war on terror,
    which is why the administration is requesting funds in the fiscal year
    2006 supplemental to continue addressing the resetting of our forces.
    Our modernization and transformation initiatives must plan for the
    procurement of replacement equipment that will enable our Corps to be
    ready for future conflicts and contingencies.
        The readiness of our Corps remains dependent on our ability to
    continue to attract and enlist young men and women dedicated to the
    preservation of freedom and to service to our great Nation. We will
    continue to inspire, train, and equip them for success. Our fiscal year
    2007 budget and our fiscal year 2006 supplemental request work together
    to address our essential operational and maintenance requirements to
    sustain our readiness, while providing opportunity for investment in
    the resetting and continued modernization of our Corps. We will
    dedicate these resources to the destruction of our enemies and
    stability for our friends and thank you for this support. Your
    unwavering support is deeply appreciated.
        specific responses to the subcommittee's request for information
        For the purpose of this statement, we have emphasized Marine Corps
    maritime lift, naval surface fires support, and aviation requirements.
    Additionally, we have provided Enclosure (1) for the responses to the
    subcommittee's specific request for information.
                                   conclusion
        Your marines are fully dedicated to serving and protecting this
    Nation. Their bravery, sacrifice, and commitment to warfighting
    excellence are well known to you. We recognize we have an essential
    mission, and that we have the solid backing of the American people. The
    Marine Corps fully understands that our greatest contribution to the
    Nation is our high-level of readiness across the spectrum of conflict.
    We see Seabasing as a national capability that regional combatant
    commanders can immediately apply to emerging threats transcending all
    levels of warfare. No longer will we need to rely on critical airfields
    and seaports in the initial phases of conflict. On behalf of all
    marines, we thank the committee for your continued support that has
    made us more effective in the fight, saved lives, and will allow us to
    protect this great Nation in an uncertain future.

        Senator Talent. That was expeditious. Thank you. You'll
    never, however, be able to serve in the Senate if you can't
    talk longer than that. [Laughter].
        General Mattis, would you care to go next, please?

    STATEMENT OF LT. GEN. JAMES N. MATTIS, USMC, DEPUTY COMMANDANT
       OF THE MARINE CORPS FOR COMBAT DEVELOPMENT AND INTEGRATION

        General Mattis. Mr. Chairman, General Gardner's and my
    written statement has been submitted, and I ask that it be
    accepted for the record. The Marine Corps is heavily committed
    to this war having taken over 6,000 killed and wounded in
    action since 2001. While we remain fully engaged in this fight,
    we're also adapting and modernizing for future fights in this
    long war. From adaptive concepts to innovative training and the
    incorporation of focused technologies, we're transforming our
    Corps even while maintaining near-term readiness from seabasing
    to distributed operations. We're posturing the Corps for its
    role from forcible entry to irregular warfare against an
    elusive foe.
        Thanks to our extremely hard-working recruiters and your
    support, we continue to enlist high-quality young men and women
    into our ranks, and we are retaining our combat veterans at
    extremely high levels. With your continued support, we will
    ensure our marines remain an elite force fully prepared for
    tomorrow's challenges.
        Programs such as the MV-22 tiltrotor, the fighting
    amphibious ships of the LPD-17 class, the expeditionary
    fighting vehicles, the KC-130J, CH-53K, and others form the
    composite of capabilities that carry our troops against the
    enemy. Alongside our shipmates in the Navy, we marines are
    confident of our future capabilities. With 30 operationally-
    available amphibious ships, 10 of which need to be large-deck
    amphibs, the advent of the Maritime Prepositioning Force of the
    future squadrons and associated programs, we will be prepared
    for the next fight. I thank you for your strong support over
    this last year and look forward to your questions, sir.
        Senator Talent. Thank you.
        Admiral Edwards.
        Admiral Edwards. Sir, as the Director of Warfare
    Integration, I work for Admiral Crenshaw, and his statement is
    one and the same as mine.
        Senator Talent. Tremendous. I appreciate your comments and
    your summing them up. I guess I will go right to my questions.
        Admiral Crenshaw and Admiral Edwards, the Navy's report to
    Congress, which outlined the plan for a 313-ship Navy,
    emphasizes the importance--really the critical nature of budget
    stability and concludes that we're going to need at least $13.5
    billion per year in the shipbuilding and conversion, Navy (SCN)
    accounts, at least on an average in order to be able to sustain
    that number of ships. Now, I completely agree about the
    criticality of budget stability. I hope we can do it for $13.5
    billion. But that is an ambitious figure. You know that the
    Congressional Budget Office (CBO) has estimated we're going to
    need more than that. We're at $8.7 billion now, which means
    just to get to the $13.5 billion figure, we need an almost $5
    billion increase in the SCN account. What are the Navy's
    designs or plans for fencing the necessary funding in the
    future? Where are you going to get it from?
        Admiral Crenshaw. Senator, that is a great question. People
    ask me that all the time in and out of the Navy.
        Senator Talent. To the extent that you can't give
    specifics, how confident are you that you can get it, and what,
    at least, is your general thinking about where you're going to
    go for it?
        Admiral Crenshaw. Yes, sir. I think to kind of simplify the
    things, our basic strategy here is based on number one, as you
    mentioned, being specific about the requirement, which is about
    the 313 number that Admiral Mullen has produced and then being
    constant on our demand on that requirement. In other words, not
    changing the numbers around. One of the things that causes
    ships to cost more money, quite frankly, is when we move them
    around. We have not been very good about that in the past as we
    moved the ships around. If you move ships from one year to the
    next, it always costs more. Sometimes I want to move it back,
    and then it costs me even more money, and it's almost like lost
    cost. So, we realize we really have to stabilize the
    requirement and then stabilize what we have in the plan to buy.
    We worked very hard to do that in the 2007 budget so that we
    didn't change from one year to the next. We're going to
    continue our commitment to not changing those numbers because
    we sometimes are our own worst enemy as we change. So, one part
    of our strategy to make this affordable is to control the cost,
    number one, by being consistent in our stating of the
    requirement and what we've put in the budget, and then the next
    piece of this is to control the cost of the things that we buy.
        I have put into place several mechanisms in the Navy
    organization to begin to take a very close look at what things
    drive the cost of ships. Many times, well-meaning people who
    are wanting to put the most capability they can all the time in
    these ships turn out inadvertently adding cost that we probably
    didn't need to add. We have put a structure in place through
    the ships' characteristics board that Admiral Edwards is going
    to chair for me. Then myself as the resources and requirements
    review board chairman to actually look at these things,
    understand the cost drivers, and then make sure that we control
    the growth of requirements in those things and figure out
    things we can do to produce those ships cheaper. In the case
    of, for instance, the Virginia class submarine, I've invested
    around $160 million or so in cost reduction-type things to
    drive the cost out of those ships. Looking at the cost of a
    DD(X), we have invested money, and I've looked at things we can
    do to drive the cost out of that ship and deliver at cost
    targets. So, we've set some very challenging cost targets for
    ourselves, but we have some really smart and hard-working
    people and some good models that will now help us to control
    the cost there.
        One thing I might add, on the CBO study, while it does
    postulate there's a large amount of money, I think it's around
    $19 billion or so--a lot of that number is driven by some
    assumptions that were made in the out-years on what we're going
    to do to recapitalize the SSBN force and recapitalize the DDG
    force as they reach the end of their service life. In the near-
    years, we're not that far off. So, our challenge is to control
    the cost and then do what we can in the near-years or the far-
    years to keep the cost of those things from growing out of
    control.
        Senator Talent. It's reasonable to believe that, with a
    sustained effort, you can hold these costs down. A lot of that
    is going to be culture change, which is going to have to start
    at the top. Admiral Edwards, you're going to have to be
    committed on the requirements side. I certainly don't want to
    keep you from going into that, but the $13.5 billion assumes
    you can do all of those things. If you can't do all those
    things, the number goes up. Look, I'm not going to ask you to
    say this program, this program, this program I'm going to take
    out in order to be able to fund that, but do you have a
    confidence level that you can get there by fencing off dollars
    from your current budget? How much would your confidence level
    grow if we could increase the top line above what you expect,
    and the Navy could get a piece of that?
        Admiral Crenshaw. Sir, I think two parts to that. Number
    one, yes, if I get more money on the top line, my confidence
    would grow in that area. Having a number for us to shoot for,
    in my opinion, is better than not having a number and let it
    drift. So I have a number and I have a goal, and part of my
    financial strategy now, if I know what that is, there are other
    things that drive my cost in the Navy, and the way that I sort
    of parse out the budget, in macro terms, is it depends on a
    couple of things happening in order to have that $13.4 billion
    average: One is I have to continue to very carefully manage the
    manpower cost associated with the Navy--one of our most
    expensive assets, but also our greatest asset. So part of the
    strategy is to continue to do what we need to do to control the
    growth in the manpower accounts. Some of that is putting
    technology in the ships. Some of that is working smarter. Some
    of that is doing some military-civilian transfers where it
    makes sense to do so. Some of that is looking very closely at
    our shore requirements. I can tell you exactly how many ships
    or how many sailors I need to man a ship at sea. I'm not quite
    so certain if you ask me about an air station or a naval base
    exactly, and I'm working on coming at that.
        Senator Talent. Let me interrupt and ask you about that. I
    was going to ask about Sea Swap anyway. Now that we have been
    working with it for a few years, is it working? Because
    critical to holding down your personnel costs, I assume, is
    you're going to continue Sea Swap--maybe even try and expand
    it. Digress for a minute and tell the subcommittee, is it
    working? What are the long-term impacts in terms of wear and
    tear on the ships? Crew morale? Are there any negatives you see
    emerging that might impair your ability to continue it to this
    degree or expand it? Digress for just a minute and cover that.
        Admiral Crenshaw. I think Admiral Edwards, as the surface
    warfare lead, also will have some very definite comments on
    this. In our second round of experimentation with Sea Swap, we
    learned a lot. Sea Swap, although we call it that, is not
    necessarily a new concept for us. We've done that for a long
    time in our submarine force and in some of the other forces. In
    our mine warfare force, we've been doing that for a long time,
    but we haven't done it on the ships that have large crews, and
    we're learning a lot, and I think I will keep it at that and
    let Admiral Edwards answer.
        Admiral Edwards. Sir, we have an experimentation that's
    going to happen on the east coast. It's going to continue the
    Sea Swap experiment and has the metrics embedded in it that
    we're going to need in order to make some decisions on where to
    go. Clearly, on the destroyer-class ship type, the DDGs, the
    FFG, or the LCS, the smaller combatants, Sea Swap is definitely
    doable. There are some challenges there, but we can get the
    crew there. We know what the issues are. On the larger
    amphibious platforms, for example, the jury is out on that. We
    will have to be very careful how we proceed on that, and we
    have not done the experimentation and sea trials we need to do
    to see all of the ins and outs of being able to make that
    happen. LCS is a ship that's going to have approximately 75
    crewmembers onboard. We are going to swap the crews on that
    ship, and the first two ships have four crews that have been
    assigned already. So that is going to be a force multiplier
    with that particular ship.
        Senator Talent. The crew morale is holding up?
        Admiral Edwards. Everybody is leery when something new
    comes in. The crew morale at the end of the day with the
    experiments we have done was overall good. The material
    condition of the ships were satisfactory, and the experiments
    we have done to date would say that the crew swap can be
    performed on DDGs and DD-type ships.
        Senator Talent. Okay, Sea Swap I think we've pretty much
    covered. Admiral Clark was pretty good at getting money out of
    the personnel side, and I don't know how much there is left--
    how much gold is left in that mine, in that vein for you to
    get--but going back for just a minute and then finishing your
    discussion of your confidence level in getting to the $13.5
    billion.
        Admiral Crenshaw. We talked about controlling the manpower
    costs. The other piece that I think is critical is when we
    talked about controlling the cost of the things we buy and
    keeping a lid on what exactly we need to buy there and buy what
    we need, not necessarily what we want. The third piece that I
    kind of look at and worry about is controlling my operations
    and maintenance (O&M) costs, making sure we're getting the best
    value for the dollar there as well because if you look at a
    display of the major budget categories--the manpower, the O&M
    costs, the research and development (R&D) costs, and
    procurement cost, everything is relatively flat and under
    control. The R&D accounts are going down as we are now shifting
    that investment from R&D of new things to buying the new
    things. So there is no money there.
        So to the extent that the money is in procurement, it
    requires me to do those other things. The O&M piece is very
    important to me as well. Now, some of that I don't have control
    over. As fuel prices go up, I just have to deal with what
    happens. But we have done a very good job, I think, over the
    last couple of years, particularly in the naval aviation
    enterprise, of beginning to run the business part of the Navy,
    if you will, the back shop, as an enterprise and looking at the
    Commander of Naval Air Forces, Admiral Zortman, and Admiral
    Massenburg is his Air Systems Commander, and Admiral Kilcline,
    who works for me as his resource guy, and looking at this in
    terms of a business and how we go about doing the maintenance
    and how we go about providing things.
        The naval aviation enterprise has found some significant
    savings in the things that they have done. There are several
    anecdotes about how they have gone from producing at one
    facility--maybe 5 engines a month with 3 shifts to producing 20
    engines a month on a single shift because of putting into place
    good business practices. I'm very encouraged with what the
    aviation enterprise has done. We also are beginning to do the
    same thing in our surface and our subsurface enterprises. I
    also think in terms of the Expeditionary Combat Command that we
    have talked about in this 2007 budget as also being a new
    emerging enterprise that pushes things and combat capability
    out the door for us.
        So, to sum up, controlling the cost of the things that we
    want to buy, controlling my manpower costs by a variety of
    techniques, trying to be innovative and efficient in how I'm
    doing the business part for the O&M piece of that are all
    things that will allow me to meet that target. The money is in
    the budget for me to do that. I just have to keep it from
    eroding for the things we talked about.
        Senator Talent. I don't know that I would have the same
    confidence level you do, that you have just described $5
    billion worth of additions to SCN. It's a crucial time for the
    Navy, for all of us to be very direct with each other----
        Admiral Crenshaw. Yes, sir.
        Senator Talent.--and I have concerns along those lines. I
    hope you're not counting on savings that involve perhaps key
    policy disputes between the Navy and Congress. In other words,
    there may be some savings you're looking at where you know that
    from past experience, that Congress might disagree about the
    appropriateness of that action. If there's a bank of those
    you're looking at, I would caution you to be careful--not
    because we can't be convinced, but just because you can't be
    certain that we will be convinced. I take what you said before,
    your confidence level would be substantially increased if we
    could get the top line up and you could get a piece of it. Is
    that a fair statement?
        Admiral Crenshaw. Yes, sir.
        Senator Talent. I have 2 minutes left in the vote.
    Fortunately, Senator Reed has voted already and is willing to
    take the hearing over and ask his questions while I go vote so
    I appreciate that.
        Senator Reed [presiding]. Mr. Chairman, if I run out of
    questions, I'll just put it in a slight recess for a while.
    Thank you, gentlemen, for your testimony and your service.
    Admiral Crenshaw, the QDR talks about repositioning naval
    forces in the Pacific, and it says consistent with the global
    shift to trade and transport and essentially calls for six
    operational and sustainable carriers together with 60 percent
    of our submarines. Just in terms of sort of strategic concepts,
    trade and transports usually imply surface activity, aircraft
    carriers and submarines, stealth air support, the kinetics of
    the battlefield. Is this justified simply because trade and
    transportation patterns are changing in the Pacific, or is it
    something else?
        Admiral Crenshaw. Good question, sir. Number one, we are a
    maritime nation. Most of the things that we consume around here
    generally come by sea, and the things we sell go by sea and so,
    for that reason alone, it's good for us to focus in that area.
        It is an emerging powerhouse economically, but one of the
    things strategically and maybe operationally that sometimes
    escapes people in the Pacific area and the western area is the
    tyranny of distance. It's a long way to go anywhere over there.
    I've been a Mediterranean sailor most of my career. From the
    time we left port, in about 10 days or so, we were crossing
    through the Strait of Gibraltar. Within 2 weeks, we would be
    operating in the Mediterranean theater. If you look at the
    Pacific, it takes me a month from the west coast to get to
    anyplace where it's important to be, and it takes me another
    month to get back. So the tyranny of distance here is such that
    wisely positioning those forces allows them to not only be
    there to protect the trade and commerce that we have, but it
    allows them to be positioned with the type of speed we need in
    case something happens in that neck of the woods. So by having
    forces over there, we begin to take some of the edge off of the
    tyranny of distance, if you will.
        It is a risk-reduction maneuver on our part because we know
    we have trouble sailing people from the east coast. It takes a
    long time to get them over to that theater of operations. So,
    it is an important area to us. Those areas of the world are
    less stable right now. So that is another reason why we are
    moving over in that direction, sir.
        Senator Reed. One of the concerns that several of my
    colleagues and I have is with the production rate of
    submarines. We're building one Virginia class submarine per
    year up to fiscal year 2012, at which time we're scheduled to
    go to two-a-year production. That has been a threshold that
    keeps slipping and slipping away it seems. But with this
    projected build rate, anticipated inactivations of submarines,
    and scheduled maintenance, the SSN inventory will dip below the
    minimum 48 to fulfill mission requirements from 2013 to 2035 to
    as low as 40 submarines. At the time, Navy officials today, I
    think, would acknowledge that our submarine force of over 50
    fast-attack submarines is unable to perform many of the
    missions. As I go out, and as my colleagues go out and talk to
    combatant commanders, when you ask them what do they really
    need, what more do they need of, they say we need more
    submarine platforms for intelligence, surveillance, and
    reconnaissance and for many other capabilities. How is the Navy
    going to deal with the shortfall come 2013 and 2035 if we don't
    get the two-per-year production quickly?
        Admiral Crenshaw. The submarine numbers are an interesting
    dynamic, Senator. I had a couple of tours in the Pentagon, and
    it's been interesting for me to see how we have evolved our
    thinking on this. When we undertook the 313 plan, the CNO
    challenged us to take a broad look at all of the things and all
    of the good work that has been done over the years from all of
    the people in the Department and outside of the Department and
    studies like the CBO study. We did so specifically as we looked
    at the submarine force structure. The number 48 was kind of a
    sweet spot when you took all of these together for us to meet
    what we considered to be the minimal acceptable requirement
    which is about having, on any given day, about 10 submarines
    out doing things, and the 48 number gives us that.
        We looked at the availability of the submarines as we began
    to build the Virginia class and there's an interesting dynamic
    here. One of the things that's the real strength about this
    great submarine, is that it is unmatched in the world. It is
    one of our asymmetric strengths. By the way, sometimes you hear
    about the enemy having asymmetry. We too, have asymmetry, and
    our submarine force is one of those. The capability that we
    have built into that ship, particularly from the
    maintainability standpoint, is such that that ship will not be
    required to be refueled, making it more available than the 688
    class was. The 688 class has spent about 40 percent of its time
    doing various maintenance things and refuelings. The same
    figure for the Virginia class will be 10 percent. So, that
    alone will mitigate some of that 48 number.
        There are also some things that we can do in terms of our
    concept of operations (CONOPs) on how we actually employ the
    surge of those submarines and have them available at certain
    key times when we need them as well as some of the initiatives
    that we have done in forward basing some of these submarines--
    once again, getting back to that tyranny of distance thing. So
    we will drop below but there are some mitigating things we can
    do in terms of reduced maintenance. We will need to do some
    CONOPs and managing that force more closely than we normally
    would. Although we manage it pretty closely, we will have to
    spend more time on the maintenance cycles and how we do that.
    So, we will drop below that number. That is true, and we will
    come back and get to that number.
        Senator Reed. Again, just to clarify for my own information
    and the committee's, after a lot of deliberation with a range
    of numbers, the Navy essentially said well, 48 is the optimal
    number of submarines, and there's a lot of debate whether it's
    actually sort of a range. It could be 52, but we will go down
    in certain periods of 2013 to 2035 to 40 operational
    submarines, and I'm not that good at mathematics, but that's 8
    submarines out of 48 that aren't there. That's a pretty big
    chunk. That is not one or two, and I think it is raising the
    risk factor, frankly, and I think we do have to get to two-a-
    year much faster than we are doing. Another aspect of this
    argument I would like you to comment upon is that one of the
    pressures we see is the expense of these individual one-a-year
    submarines--over $2 billion, but it's hard to get the
    contractors down to $2 billion if they're only building one a
    year. Is that something that the Navy is prepared to bring up
    also, the notion of being able to get the price down by going
    quicker to a two-a-year build?
        Admiral Crenshaw. I think in the near-term, getting to a
    two-a-year build will probably not significantly decrease the
    cost. What will, I think, deliver more cost savings are the
    investments that I have made in this budget--over, I think,
    about $170 million or so in reducing the costs of the
    submarines. There is no doubt that when we get to two a year,
    there will be some benefits realized from driving the costs
    down, and that is part of our cost-target calculations as we
    look at that. So, submarines are interesting. The advance
    procurement lines have to be laid in to buy the reactor plant,
    and some of the very specific high-end items--reduction gearing
    and those kinds of things early on.
        In order to do that, we would need significant investments
    this year to start doing that any earlier. With the CNO, we
    struggle with this, trying to look at balance with all of the
    warfare areas we have to deal with. Going to two a year in
    fiscal year 2012 was a commitment we made. We have to get
    there. We have to do that. I have put the money in to drive the
    costs out, and I am continuing to look at any and all ideas I
    can to reduce the cost of those things.
        Senator Reed. Let me ask a final question before I turn to
    the Marine Corps, your colleagues. I know Senator Lieberman and
    others, Senator Dodd and myself, are interested in the follow-
    on and new design, and I wonder if you could just comment upon
    where we are on the new design.
        Admiral Crenshaw. I mentioned the asymmetry that we have in
    areas, and certainly our submarine design capabilities that we
    have are one of those asymmetric advantages that we in the
    United States enjoy. In my opinion, they're a national
    treasure. There is nobody like them, and this is a serious
    issue we have to deal with. We have a RAND study going on right
    now that is going to help us work our way through that. I think
    there are two pieces of this--there is the submarine design
    part, and then there is the nuclear engineering part. We can
    mitigate some of the nuclear engineering things by some of the
    things we're doing with the aircraft carriers, but the
    submarine design part is something that we have to deal with,
    and we're working hard at that. I talked to Admiral Munns about
    that and Admiral Walsh--he was my resource sponsor that does
    that sort of thing regularly on things that we're looking at
    working with the industry and working with Congress. But my
    opinion is they are a national asset we're going to have to
    figure out how to protect. They're not only important to the
    Navy, they're important to the Nation, and we're going to have
    to figure out how to deal with that.
        Senator Reed. Thank you very much. General Gardner, your
    marines are doing a fabulous job across the globe, particularly
    in Iraq and Afghanistan. I've had the occasion to go visit
    them. What is their readiness status given the fact that
    they're being exercised very vigorously in this global war on
    terror and the conflict in Afghanistan and Iraq? Do you have
    any units that are C-3 or below?
        General Gardner. Can you say that again?
        Senator Reed. Do you have any units that are C-2, C-3?
        General Gardner. Sir, the units in Iraq are at the highest
    level of readiness, and we are pulling out all the stops to
    ensure that that stays the same in terms of our logistic
    support procedures and satisfying any urgent need requirements
    that they have. We have taken risks in our homestation forces
    and in some of our preposition stocks, as you are aware, to
    maintain that readiness forward, and we are using our
    supplemental funding request to backfill that bathtub of
    readiness that has developed, if you will. We call that reset
    the force. We assessed where we were with how deep was that
    bathtub. We picked a point in time, October 1, and we felt our
    estimate was based on about $11.7 billion that we needed to
    backfill that bathtub of readiness and to recapitalize those
    assets that have been so heavily used in theater. That's our
    estimate of where we are, but I would say the readiness of the
    troops in theater is where it needs to be and is at the highest
    levels.
        Senator Reed. Does the supplemental represent a complete
    filling up of that bathtub, that $11.7 billion?
        General Gardner. The $11.7 billion represents all that we
    know--our estimate, as of October 1. It is a very detailed
    estimate which we based on some pretty detailed analysis of
    about 300 individual table of allowance material numbers, but
    there are some limitations on how fast we can execute that.
    Most of those limitations come from the size of the industrial
    base, but we're confident we could execute that amount of money
    in about 2 years' time. With what Congress gave us in the title
    IX bridge supplemental, what we have requested in the 2006
    supplemental that's over here on the Hill now we think we'll
    have about $5.1 billion towards that $11.7 billion. We will be
    looking for another $6.6 billion next year. Could I use some of
    that $6.6 in additional money this year? Yes, we could. We
    believe that we could spend about another $1.4 billion this
    year. We could execute that amount, but that's probably the
    extent of the amount of procurement we could actually execute
    in 2006.
        Senator Reed. Thank you, General Gardner. General Mattis,
    end strength numbers, I know the commandant has spoken about
    this, and one wrinkle is the creation of the 2,600 marines, the
    Marine Special Operations Command (MARSOC). My understanding is
    that essentially the Corps has sort of taken that out of your
    hide currently because there is not an increase in end
    strength. Any comment on that and just the overall end strength
    situation?
        General Mattis. Thank you, Senator. The 2,600 marines we
    took out, some of the missions went with them. In other words,
    some of these marines were on amphib ships when they deployed
    before. They will still be there. Their chain of command shifts
    slightly so that we have this special operations capability out
    there for the commander of Special Operations Command. Some of
    them are additive. We have a review group going on right now
    looking at which ones we need to restore. For example, do we
    need to bring some more signals intelligence marines on Active-
    Duty or enlist more? I think we could move some over with this
    group, reconnaissance marines, some very highly-skilled
    marines. We should have a report out on this by June.
        The 5,000 end strength that basically the Hill has given us
    over the last several years, we can't thank you enough for
    them. They have been great against the enemy. You've resourced
    us sufficiently to recruit and train and equip them, and we're
    looking right now at whether we have to keep at that number,
    which we think we do for the current fight. But can we go down
    to 175,000 and have a fully capable Marine Corps and still take
    care of MARSOC and these new things that came up? I think we
    can give you a very definitive answer by June. Right now, with
    what you're doing, you're keeping us balanced where we want to
    be. We probably don't want to go higher than that right now
    because it would take an extraordinary effort on the part of
    our recruiters to maintain the high quality standards we're
    insisting on maintaining for reasons you're fully aware of.
        Senator Reed. Thank you, sir. Thank you, Mr. Chairman.
        Senator Talent [presiding]. Thank you, Senator. I fully
    agree with the point you made regarding the submarine fleet,
    and I would just say that unless we can get to two a year more
    quickly, I don't think we can maintain 48, and I'm not sure 48
    is enough. I see the list of the 313-ship Navy, and I put
    question marks next to two things--the 48 attack submarines and
    the 81 surface combatants. Now, depending upon how flexible LCS
    is, it's not a surface combatant, but maybe it can pick up some
    of those requirements, but they are certainly not going to be
    able to use them as submarines. We know that. So, I would
    concur in Senator Reed's questions on that front.
        General Gardner and General Mattis, I am very interested in
    the distributed operations concept. I'm intrigued by it. I
    wonder if you would give me an overview of how it's going to
    affect future force structure requirements as well as Marine
    doctrine and expeditionary force capabilities. Then, if you
    would tell me how you're planning to fund it. I know you're
    funding out in the fiscal year 2006 supplemental, but what are
    your plans for funding it after we discontinue the
    supplementals? Just share your thoughts on distributed
    operations.
        General Mattis. Sir, if I could take the first whack at
    this as far as the requirement that we see and why we turn to
    this. As you are aware, back in the 1990s, our former
    commandant, Krulak, came up with the three block war. There
    were many of us who doubted that he was right, but we divested
    ourselves of self propelled artillery. We didn't buy the F-18 E
    and F and decided to wait for the JSF. There were a number of
    things going on that were based on a different view of how war
    was developing. Part of that was could we distribute marines
    more widely, not just geographically across the battle space,
    but with skills distributed differently within those ranks that
    would allow us to move against the enemy using modern
    communications and joint fires to mitigate the risks that are
    obvious to all of us.
        The experiments have been going on. They have been very
    encouraging and we just had a test unit that deployed as part
    of its battalion to Afghanistan, and we had a very stressful
    situation where a unit came under heavy attack. We were losing
    people, killed and wounded, and this unit was able to use the
    skills and the equipment they were given to reverse a very
    difficult situation. The experiment basically continued when we
    went into Afghanistan with a data collector observing what was
    going on.
        We have British Royal Marine and Australian noncommissioned
    officers (NCOs) as a part of this to take advantage of the
    skills that they brought from various operations overseas. What
    we're finding is that the combination of very high recruiting
    standards for the last 20 years and the intense combat
    operations have given us one of the most capable NCO corps
    we've ever seen in the Marine Corps' history, and we're known
    for some pretty strong NCOs.
        Right now, distributed operations is going to be an
    additive capability to allow us to aggregate those marines,
    distribute them, and bring them back together. The bottom line
    is using various platforms--MV-22s and Expeditionary Fighting
    Vehicles--we'll be able to move them in ways that will confront
    the enemy with some very menacing dilemmas. I think it would be
    better if I turned over the funding of this capability to
    General Gardner.
        General Gardner. Sir, I would say there are two aspects to
    the funding of this concept, and it is a concept, and that is
    the material aspects. We're pushing capabilities down to a
    lower level as far as command and control capabilities, weapon
    systems, and it comes to around $19 million per battalion. We
    intend to outfit all 35 Active and Reserve battalions. Another
    point I would like to emphasize is that we're distributing this
    capability throughout the entire Marine Corps.
        The other major expense would be the training aspects.
    We're putting a great deal of emphasis on training in the
    Marine Corps, and it is principally successful because of that
    training.
        So both of these costs are being paid for in supplementals
    as you stated, and we have most of those costs in the 2006
    supplemental and what we do not, we have in the 2007 bridge
    supplemental, which you also have before you. But it's not just
    the material aspects of what we're actually giving those
    marines and those units, but it is also the training facilities
    and the O&M costs necessary to conduct that training. Those
    costs are also necessary to support this concept.
        Senator Talent. Do you think you can fund it through the
    supplementals?
        General Gardner. Initially, we would like to get up on the
    step with the supplementals. We can do that, and then we will
    need to finance those to conduct that training in the ongoing
    years the O&M cost out there.
        Senator Talent. It's plausible to me that you could at
    least take care of the material costs through the supplemental.
        General Gardner. That is our intent.
        Senator Talent. Admiral Crenshaw, let me go back to one
    more 30,000-foot question with regard to the force structure
    plans in the 313-ship Navy. The report describes that as
    meeting the needs of the national military strategy with an
    acceptable risk while pointing out there are capability gaps.
    What are the capability gaps? What impact do you think they are
    going to have and discuss a little bit how you draw the line
    between acceptable and unacceptable levels of risk.
        Admiral Crenshaw. If I could tackle the risk piece first,
    risk is an interesting discussion. We think about that in a
    couple of dimensions. The first thing is that when we begin to
    talk about risk, we begin to lay out sort of a matrix, if you
    will, of sort of a three-dimensional kind of cube. Put simply,
    the first thing we do is, we think about the possibility of
    something happening. Then we say if that were to happen, what
    would be the consequences. Then we look at it in a time
    dimension too. It may not happen now, but it's going to happen
    in 2020.
        As we look at things, we try to figure out and make some
    judgments on, obviously, if this is something that's not going
    to happen very much, and even if it didn't have a big impact on
    us, we wouldn't look at that too much. That would sort of be
    the last thing we would look at funding. We're also very
    concerned about the things that may not happen very much but
    could have some very catastrophic effects if they did happen.
    So we have to hedge against that, and we have to look at making
    sure that we have accepted only the risk necessary so that if
    that were to happen, the catastrophic event is mitigated, and
    it doesn't happen. There is a middle ground of things that can
    happen and have various levels of effect.
        That said, we kind of look at a matrix like that and then
    try to think about what are things that are just absolutely
    redline things that we can't do without, and we've talked about
    some of those things. One is in the capability area of being
    able to deliver a certain amount of presence, looking across
    the spectrum of how many carriers need to be present at any
    given time and how many submarines need to be present at any
    given time. Then, there is this area where it doesn't happen
    very much, and even if it did, there is not a big impact. There
    isn't a lot of risk there. The big category in the center is
    sort of that measured risk/acceptable risk category. As we
    began to stack those up, we looked at things that are uniquely
    naval, and those are things that only we can bring to the
    fight, and that's a category where we cannot afford to take
    much risk in those missions--undersea warfare being an example,
    if that's ours to do.
        So, I don't want to take much risk in that area because
    nobody is going to do it but me. Then we begin to look at what
    other capabilities are in the joint force where we may be able
    to get some help from our joint partners. Those are areas where
    then we work jointly with the other Services to figure out if
    there are some risks we take in the Navy, depending on some of
    our joint partners. One of those is in the area of some of our
    tactical air forces where we're not the only Service that
    delivers that. That's an area that we can explore in
    coordination with the other Services to make sure that if we're
    going to take some risks there, we have coordinated with the
    other guys to make sure that they're not. So, it's kind of a
    complementary affair there.
        So, I would say those are some of the areas where you might
    be able to find some of those gaps or those areas where there
    is overlap and things that our joint partners do. There may be
    things in the future that we might have to rely on our joint
    partners to provide so that we would divest ourselves totally
    of something. There are other areas where we are complementary
    to them, and we would sort of back away and do that.
        Senator Talent. That's a very logical assessment matrix,
    and what I was thinking of when you were going through it was
    applying that matrix to seabasing. I said this to Admiral Clark
    when he came up with this; is the risk of not having the
    seabasing capabilities worth the cost given the risk as you
    have defined it? Because you have to make certain assumptions
    about our inability to go through certain countries. Other
    Services can do some of the power projection you want to do
    through seabasing. It's an area where you can anticipate
    concerns and maybe use diplomacy, and I have been skeptical. As
    supportive as you all know I am of naval spending and
    shipbuilding, I have wondered whether, in the context of this
    budget environment, this isn't a risk that we should take, not
    having this capability and then trying to prevent a situation
    where we can't go through a country or using some of the other
    Services. I have an ongoing concern about whether this is
    something we ought to be funding.
        Admiral Crenshaw. Seabasing, in my opinion, is one of those
    asymmetric advantages that we enjoy. Nobody can do it like us.
    I think in this uncertain world, as we look forward, our
    ability to get access when and where we want it may not be as
    assured as we've had in the past. General Mattis was certainly
    the beneficiary of that asymmetric capability, of being able to
    provide a seabase from which we didn't have to put a footprint
    ashore. Sometimes, for various reasons, our friends may not
    want us to be ashore, and sometimes it's difficult for us just
    because they don't mind us being there, but they don't want a
    large footprint ashore. So, I think seabasing is one of those
    asymmetric capabilities that is worth the investment here
    because it's something that only we do. It's in that category
    of nobody else can do it but us. Seabasing is not new to us.
    We've been doing seabasing since John Paul Jones was sailing
    around. But sometimes people tend to confuse the term seabase
    with the concept of seabasing.
        So, I would offer up that I think it's a very important
    capability. It's an evolutionary, not a revolutionary
    capability. Those are not my words, those are General Mattis's
    words. He was much smarter than I am to come up with that, but
    it's about not having to put that whole iron mountain of things
    ashore because when we do that, number one, we have to get it
    there, then we have to protect it and it becomes a liability to
    us. Our seabasing vision is that we're able to not have to rely
    on permission or political considerations that we can go where
    we want and project that power. We can first assemble our
    forces at sea with the right equipment without having to go
    through and get people's permission. We can then project those
    forces ashore to do things.
        I will admit we have not been as articulate as we could in
    talking about seabasing from a joint area because it's not only
    Navy and Marines. Those soldiers and airmen that are ashore eat
    the same beans and shoot the same bullets, and those things can
    come from the seabase without having to have a fully-developed
    port infrastructure to support it and without having to have
    anybody's permission. So, this is a tremendous capability for
    us.
        Now, one of the things we tried to do in thinking about
    seabasing is realize that when we come up with something, it
    can't be something that we just don't use. It has to be
    something that is out and about and engaged in the global war
    on terror and doing the missions in those phase-shaping things.
    Many of the seabasing elements we have designed are doing just
    that, taking advantage of successful designs that we already
    know about that are already in production and being able to
    take some of the concepts and do some evaluation of being able
    to selectively offload things instead of just having to unload
    everything at once.
        Now, in our concept, we can now select what we need, pick
    and choose, go to the supermarket and then send ashore those
    elements of support and power we need. So I think it is a great
    asymmetric advantage that only we can do, and we have proven--
    in just the last few years, we've done it many times. I would
    maybe ask General Mattis to comment.
        Senator Talent. General, comment from a marine perspective.
    How substantially does this reduce risk for you? How
    enthusiastic are you about it?
        General Mattis. Sir, we're very enthusiastic. Mr. Chairman,
    although your question is very valid, and we have looked at
    this amongst the officers at the table to make certain this is
    going to really deliver something we need, not something we
    would like to have in a less fiscally-constrained time, the
    point I would make is it's an increasingly anti-access world.
    As best I can determine from open sources, this city offered
    $28 billion of loans and grants to Turkey for a one-time
    passage of one U.S. infantry division, and Turkey, that stood
    by us in Korea, lost billions, and the sanctions against
    Saddam, said no. I think what we are seeing is that all
    politics are local, not just in Chicago.
        When we went, the admiral in 5th Fleet asked me to go into
    Afghanistan, I will tell you that had I not had the seabase,
    the amphib ships, those beautiful Navy greyhulls, we would
    never have opened a naval ground campaign of conventional
    forces in southern Afghanistan. When I went into Islamabad, it
    was still early after September 11. They didn't know if we were
    going to stay the course, and they were eager to hide what we
    were doing. Every night when it got dark, the ships would come
    in against the coast. We would land the marines across the
    coast. We would have Marine KC-130s, Air Force C-17s pick them
    up and fly them in. This is after the assault troops took
    Rhino, the operating base there.
        President Musharraf was betting his political life we were
    going to be victors. At one point, he brought newsmen down to
    the beach and said, ``I told you we're not supporting the
    Americans.'' If they would look closely, they might have seen
    the waves washing the tracks off the beach. That is all they
    would have seen. I think that when you look at the cost of
    this, it's a lot less than the $28 billion we offered Turkey.
    It gives us the use of the sea where the Navy is sovereign and
    nobody can take on the U.S. Navy there. But it does not put the
    second order and third order negative effects of a large U.S.
    footprint ashore in a country that may even be our friend but
    cannot absorb, for local political reasons, some of the
    negative aspects that come with a heavy U.S. footprint. I think
    we're enthusiastic about seabasing. Now, what the seabase looks
    like, we can work on that, sir.
        Senator Talent. On that point, Admiral Edwards, are you
    concerned about whether we have the surface combatant
    capability to protect the seabase given the change, which I
    think I agree with, going to ships that are going to be more
    vulnerable because they are just less capable? It does seem to
    me, though, that that is going to draw away a lot of your
    surface combatant capabilities.
        Admiral Edwards. Absolutely. We have to commit what we
    would call the sea defense portion of the Seapower 21 in order
    to protect the seabase, and that's in the dimension of anti-
    air, which includes ballistic missiles, mine warfare, and
    surface warfare to protect these. But we do that. We do that
    today with the expeditionary strike groups and the other
    amphibious shipping.
        Senator Talent. All right. Now, you were in the middle, and
    I keep making you digress, but that's because your answers are
    so interesting, Admiral Crenshaw. You talked about risk, and I
    also asked you about capability gaps in the future force
    structure plan.
        Admiral Crenshaw. I think the risk, Senator, is in terms of
    capacity. We have a lot of platforms that deliver a lot of
    capability. The question is, do we have the right capacity for
    this, have we anticipated the right stuff? We have the right
    capabilities. As we begin to do the capabilities-based
    approach, we begin to realize that capacity is very important,
    just like capability.
        So I would say we talked about the capacity in the 48
    submarines. If we had more, there would be less risk there. So
    if we had more of that type of capacity, then that would retire
    some of that risk. As you said, there's a range, and there's a
    judgment that we have to make here. Of course, working with you
    and others, hopefully we'll make our case that we have accepted
    the right amount of risk across the board where it was prudent
    to do so, retired risk in certain areas, for instance, in the
    riverine area, where we used to do riverine in Vietnam, and we
    used to have Navy patrol boats going up in the rivers. As we
    looked at the monolithic Soviet Union, that was not necessarily
    a capability that was one that we needed right away. We elected
    to take some risk in that area. Actually, the Marine Corps sort
    of took over that mission for us. Now we have realized, as we
    look at the shaping of our partner nations, as we look at the
    types of threats we're facing in a global war on terror and in
    the long war, this is now a place where we need to reduce risk,
    and we need to make some investment.
        Senator Talent. How important is it for you to fund the
    riverine squadrons through the 2006 supplemental?
        Admiral Crenshaw. The money that is in the supplemental,
    that's requesting the money that we need to outfit the first of
    three squadrons we're going to have in our CONOPs. The first
    thing that this first riverine squadron is going to do next
    year is to relieve the Marine Corps guarding the Haditha Dam
    area. The marines have been doing that, and they have been
    doing it with their riverine forces. So the money that we have
    requested in the supplemental does several things. It allows us
    to outfit that first group that needs to start training very
    soon. It allows us to give them the basic equipment they need.
    It allows us to get the training done. We're going to use the
    Marine Corps facilities at Lejeune and their small boat and
    riverine capability to actually train those forces up. Then
    they will fall in on the boats that are over there right now
    with the marines. Now, that squadron will be over there for a
    period of time, and we'll rotate them out.
        We also have money in the supplemental to request boats so
    that when the second squadron begins, the first rotation comes
    out. Those boats will have been over there a long time. Some of
    them have been ridden hard and put away wet. Some of them have
    been shot. So we're going to need to replace and refurbish
    those, and have equipment back in the States for that second
    group to be able to go over to and fall in on. Then there is
    the third one. So, it's very important to us in the near term
    to be able to relieve the stress on the marines and take over
    that mission, and this is our first step in getting back in
    there. We can't do it all at once, but we're going to take this
    first step, get back in the business and then ramp up from
    there. The supplemental is important for us to get back in the
    business, and I appreciate your support on that.
        Admiral Edwards. Sir, if you look at the lead time for some
    of the equipment that we're going to need to go over there, and
    you back that up to when it will be available, the lead time on
    some of these boats is 12 months. The lead time for the
    training and equipment part is about 9 months before we're
    trained and equipped and get ready to go. So, there is a lag
    time which kind of puts it right into the window of this
    supplemental.
        Senator Talent. We're strongly supportive of the riverine
    concept, and I agree with you. I think you need that money in
    the supplemental. It'd be a significant impact if you had to
    delay that to the regular 2007 budget.
        General Mattis and General Gardner, let's talk about H-1
    for a second. Now, we're covering a lot of ground. I only have
    a couple more. I've been meandering back and forth between my
    questions, and I appreciate your responsiveness. It's my
    understanding that the third low-rate initial production (LRIP)
    you want on H-1 is expected to coincide with the start of
    operational evaluation, which is approximately--well, I guess
    next month. We know that the program has been over budget and
    behind schedule with regard to the first two LRIP lots.
        Given the fact that we have cost issues and that H-1
    delivery is behind schedule, why do you think you need to move
    forward with the third contract at this time? I'm not saying
    that it is not an important program. I'm not saying the
    problems aren't going to be solved, but I just wonder, if we're
    behind schedule on the first two lots, why you want to move
    ahead with the third LRIP contract now.
        General Gardner. Sir, the Marine Corps has no hot
    production lines for its aircraft primarily the CH-46. With the
    full production decision on the V-22, we now have a hot
    production line for that one particular aircraft, but the LRIP
    production that you're talking about for the H-1s is the only
    potential that we have to replace the 17 H-1 aircraft we have
    lost since September 11.
        The aircraft that are over operating in theater are
    operating, in the case of the UH-1, at a margin. When you are
    operating in the high-altitude areas, for example, in the
    Operation Enduring Freedom as they were, it's the high
    altitude, the dust conditions, it is marginal to operate there.
    The Assistant Secretary of the Navy for Research, Development,
    and Acquisition, Dr. Etter, is conducting a study, which is due
    to report out next week, to assess the program and where it is
    with the necessary restructuring. But we stand firm behind our
    requirements to replace these aircraft we have lost in the war,
    and we need the capability that those aircraft bring to the
    fight, the light utility and the light attack. We look to the
    acquisition community to provide those. We have been looking
    for these replacement aircraft for over 3 years now.
        Senator Talent. I understand your commitment to the
    program, and I've certainly lived with and worked in programs
    that have had problems. That happens once in a while, but I'm
    not sure why we need to move ahead with a third when we are
    behind on the first two. Take a minute and update us on I guess
    what I will call the mishap with the MV-22. I know that you
    haven't had time for a full investigation, but tell us where
    you're at, if you would, and if you're drawing any preliminary
    conclusions. We do want to stay in touch with what happened
    there.
        General Gardner. Sir, that incident took place just 2 days
    ago, as you're aware. It was a post-maintenance functional
    check evolution. It was a VMMT204, which is our training
    squadron down in New River. There was some sort of engine
    malfunction, and the result was severe damage to the wing and
    the engine nacelle. It is under investigation.
        Of course, the investigation is focused on the maintenance
    activities that took place that led to the requirement to do
    the functional check as well as the actions of the crew, which
    we always do in this case, and we'll keep the committee
    informed.
        Senator Talent. Okay. I know it's early, I just wanted to
    bring that one up for the record. Let me go back to you,
    Admiral Crenshaw, and also Admiral Edwards, if you want to
    comment on this. One of the assumptions behind the 313-ship
    number is that you'll be able to extend the life of surface
    combatant ships to 35 years.
        Now, you said before, for example, that you're hopeful of
    getting some money out of O&M accounts by reforming the way you
    do that, hopeful of getting some more out of Sea Swap. But it
    seems to me if you're going to try to extend service life to 35
    years and also, with regard to Sea Swap, there is additional
    wear and tear on the ships, that those are pressures to
    increase the O&M budget.
        So maybe you could tell me what your plans are for
    modernization and sustainment, let's say, for the Aegis
    destroyer because I think the first flight of that is going to
    reach its mid-life within the Future Years Defense Program
    (FYDP). How are you going to get to the 35 years. It would be
    great if we could, and I know we stretch a point again at 30,
    but I think historically, you would rather retire them after 20
    or 25 years. So, this is a major leap and a major assumption,
    and maybe you could fill me in on what your plans are for
    getting there.
        Admiral Crenshaw. Yes, sir. This is really in Mark's
    category, but one thing that I think is important to know is we
    have employed some new concepts on how we're doing maintenance.
    Many times, the way we used to do maintenance was take
    everything apart and put it back together again, regardless of
    whether it was broken. So, we have been doing some more things
    on condition-based maintenance to make sure we're fixing the
    right things and having the dollars go to the things that it
    needs to fix. The other piece of this is to get to that service
    life, we need to make sure that we do have a robust investment
    in our modernization program for our cruisers and our DDG
    fleet. We're blessed to have a great DDG fleet. But one of
    these days, it will begin to age too, just like us. We want to
    make sure we have done the right preventive maintenance on it,
    but we have also gone in for a checkup. I just had Lasik
    surgery to get myself back up to speed here, and that's really
    what we need to do to our service combatants.
        Senator Talent. Did you do both eyes?
        Admiral Crenshaw. Yes, sir. So far, I'm doing pretty good.
    I'm in my reading mode here, but that type of investment and
    the investments that we put in the hull systems of that ship
    and the investments that we put into the maintenance--a classic
    example is moving from a steam-driven evaporator to a reverse-
    osmosis evaporator. Going to an all-electric ship and taking
    steam off of those ships are all important things that allow us
    to get to that service life. So, I think I'll let Mark comment
    on that.
        Admiral Edwards. Yes, sir, very quickly. We have a
    modernization program for the Aegis cruisers and for the Aegis
    destroyers. There are two things that enter into that. One is
    the hull, mechanical, and electrical work that you have to do
    to get the ships' estimated service life out to 35 years, which
    it is engineered to do as long as you do some of those
    upgrades. But the reason that we have taken ships out early
    historically is because of the combat systems upgrades that we
    have not done. So, we didn't pace the threat.
        So, the ships became obsolete and then the expense of it at
    the same time to maintain. We have a program for both those
    ships. 2006 is the initial funding for cruisers and we start
    the actual cruiser modernization in 2007. Those that are there
    are fully-funded right now. Then we have funded the hull,
    mechanical, and electrical portion of the DDGs. Then we think
    that we're looking at the fiscal year 2012 time frame to bring
    in the combat systems, which is right about the time that we
    need to pace the threat. So, this program won't happen
    overnight. It will be extended over a number of years, but it
    will be consistent with pacing the threat that we see and that
    the DDGs and the cruisers were built to take on.
        Admiral Crenshaw. If I could just add something, sir. Not
    only in the modernization, but in the things we buy, looking at
    the life-cycle cost of things is very important to us. As we
    have looked at ways to take people out of ships, we have also
    benefitted greatly from the technologies that we need to
    eliminate. For instance, having to go inside of a tank and chip
    paint because it's beginning to get rusty. We have invested
    some money in the R&D of those tanks so that once we buy those
    tanks and they are coated with an advanced coating, we don't
    ever have to go in there again.
        If you look at the LPD-17, although it may be an expensive
    investment upfront, some of the titanium piping we're putting
    in there, that piping will be there. In fact, I think we'll
    probably have the ship gone, and we'll take the pipes out and
    put it in another one, if we're lucky.
        So investments and also looking at life-cycle cost of
    things is going to be very important to us. One of the benefits
    of looking at how to reduce manpower is that we have come
    across some of these technologies as well. So, it's kind of a
    double bang for the buck there.
        Senator Talent. The picture all of this is building to me
    is of a Navy that has innovatively looked at ways to make
    dollars go further, and I congratulate you on that. It has made
    certain assumptions, which are aggressive assumptions. To the
    extent that you're betting on the ability of your people to do
    things, that's a pretty good bet. I agree with you on that.
    Would you agree that it does show the absolute necessity at
    minimum of getting to that average $13.5 billion figure over
    this program?
        Admiral Crenshaw. Absolutely.
        Senator Talent. If we don't have that stable, you can't
    make these modernization investments, and this whole chain of
    reasoning then begins to collapse.
        Admiral Crenshaw. Yes, sir, we have to do that. As you
    mentioned, we're not there yet. We're building up to that, and
    we will get there. Part of being an average is that some years,
    we'll have to be above that. We have to smartly regulate, for
    instance, the procurement of airplanes and make sure we're
    synchronized here. Right now, we're a little out of synch in
    that we're having to procure ships at the same time we're
    having to procure airplanes, and we're working as a part of
    this aircraft study to try to de-synch them, if you will, and
    spread the investment out.
        So, you're absolutely right. It's important to us. To the
    extent that we make these cost caps, that money is there. When
    we don't make one of those, then we're going to have to make
    some serious trades about what capability we can now afford,
    and whether this means that the number is going to suffer. So,
    you are right, sir, but I think we want to be aggressive on
    this and get it right.
        Senator Talent. We want to get it right. Even if we can do
    better than $13.5 billion, we still want to get all of this
    right. The culture is very important, but it certainly would
    reduce that margin of risk in terms of your ability to do all
    these things if you had a little margin of error in terms of
    the top line on the SCN account. That's a fair statement. If we
    could get that above $13.5 billion so that everything didn't
    have to happen the way you are hoping it's going to happen,
    that would certainly be good, wouldn't it?
        Admiral Crenshaw. Yes, sir. But, it's a balance here
    because I still have to worry about the aircraft procurement,
    Navy accounts and the other procurement accounts as well as
    these other ones, so you're right. To the extent that one takes
    pressure off of the others, it increases my chances of success.
        Senator Talent. I'm talking about a top-line increase,
    which we were able to do in the budget resolution anyway. Now,
    we have to work through the appropriations process. This is
    what I say to my colleagues, if we add a little extra money on
    the top line, and it turns out we didn't need to, the downside
    is we spent a little extra money that it turned out we didn't
    need to spend. If we don't spend the money, and it turns out we
    did need to in terms of your risks, the matrix and the balloon
    goes up someplace when we're not as ready as we would have
    liked to be, that downside is very big.
        I think Senator Reed and I were able to get an amendment
    that increased the top line, and a number of us are working to
    just advocate on the basis of that kind of logic with Congress
    rather than make you all just get this exactly on the head of
    the pin where you're trying to land it.
        Let me ask--and I'm about done. I think one more, but
    Senator Kennedy's concern about uparmored Humvees is well-known
    in this committee, and he has been an advocate for it. It looks
    like he is not going to be able to come back, and we'll
    certainly submit his questions for the record. He asked that.
        But let me ask you about uparmored Humvees in the Marines,
    General Gardner and General Mattis, if you want to comment.
    This is the Senator's question. I understand the Marines are
    replacing all the Humvees in Iraq, Afghanistan, and the Horn of
    Africa, which are equipped with a Level II Marine Armor Kit,
    add-on armor, and with factory-produced Level I uparmored
    Humvees. Are all of those uparmored Humvees funded? Are you
    concerned it will take until November of this year to complete
    those replacements, and is there any way to speed up that
    production schedule?
        General Mattis. Mr. Chairman, they're all funded
    completely, all the way through. We should be complete in July
    of this year by summer. Right now, basically we have probably
    90 percent of the troops going outside the wire already in
    them. We are still using the Marine Armor Kits on many of them.
    But I think right now, you're going to see an entirely M1114
    uparmored Humvee fleet in both Afghanistan and Iraq by
    midsummer. So we're in good shape on that. We do want to buy a
    few more for sustainment. We know some are going to get knocked
    out and that sort of thing. So, we have more of them being
    ordered. I think that probably by November we will have the
    sustainment vehicles also in our inventory, but that is where
    we stand right now.
        General Gardner. Yes, sir, and we have worked this out with
    the Army as far as their production capacity industry to share
    these assets because they have an equal need.
        Senator Talent. Now, just one additional point on that. I
    understand there is an additional $596.8 million requirement
    for armored Humvees in addition to those required in Central
    Command and, including the amount funded or requested in the
    2006 supplemental, there is still a $136.7 million unfunded
    requirement. Is that your understanding? How are you planning
    to address that unfunded requirement, and what do you think the
    impact will be if that funding isn't forthcoming in fiscal year
    2006 in the supplementals?
        General Gardner. Sir, our approved acquisition objective is
    approximately 20,000 Humvees, and we had a longstanding Humvee
    program to achieve that objective. We have been able to
    accelerate our Humvee procurement through the supplementals--
    once you take out the attrition, of course. But all the
    uparmored requirements in theater already are funded through
    the supplementals we have already received. Additional money
    that we have requested is to fill out that acquisition
    objective.
        Of course, we want to get the same kind of vehicles back
    home for the troops to train in and to operate when they go
    into theater.
        Then also, the vehicles that we have bought that we have
    put forward in our plan reset the force requirements because we
    are using these vehicles at such a high rate that we need to go
    ahead and buy them in advance. A vehicle that we normally plan
    on lasting something on the order of 14 years is averaging
    about 4. So, as we buy them now and you get the lead time, that
    will be about the time to replace those that are out there. So,
    we definitely need to fund all of these vehicles.
        Senator Talent. We all have to understand that we all want
    the armor on the Humvees, but it's not going to help increase
    the life cycle of the vehicle with that extra armor on it. So,
    we have to be prepared to step up and replace them as needed.
        There are a few other areas I haven't touched on, but I had
    planned the hearing until 5:30 p.m., and I know you gentlemen
    are busy. I appreciate your time very much. I will submit a few
    additional questions for the record, and I know Senator Kennedy
    has many others.
        Thank you for being here. The hearing is adjourned.
        [Questions for the record with answers supplied follow:]
                 Questions Submitted by Senator James M. Talent
                         marine corps lift requirements
        1. Senator Talent. Admiral Crenshaw and General Mattis, the most
    current Navy/Marine Corps lift study dates to the mid-1990s, and
    defines a forcible entry requirement to support three Marine
    Expeditionary Brigades (MEBs)--later reduced to two and a half brigades
    under fiscal constraints. The Navy's program for the past decade has
    called for 36 amphibious ships organized into 12 Amphibious Ready
    Groups/Expeditionary Strike Groups (ESGs) with sufficient warfighting
    capability to conduct forcible entry to provide this lift. Today's plan
    reduces the force to 31 amphibious ships and 9 expeditionary groups.
    Meanwhile, significant changes have occurred to the ships, assault
    craft, force structure, and operating concepts since the last
    definitive lift study. What is the official Navy/Marine Corps lift
    requirement, and how does the Navy's future force structure plan meet
    that requirement?
        Admiral Crenshaw. While the last lift document signed by the
    Secretary of the Navy dates back to the mid-1990s, lift requirements
    have been analyzed continuously, evaluating total lift requirements for
    the expeditionary force in forcible entry, as well as lesser missions
    accomplished by forward presence forces. The maximum requirement for
    forcible entry is 2.0 MEBs. The Marine Corps has stated the ship
    configuration to lift 1.0 MEB is 5 LHD/LHAs, 5 LPDs, and 5 LSDs for a
    total of 15 ships. The current shipbuilding plan will maintain the 27
    ships which meet the 9 ESGs needed for forward presence capability with
    4 ships for additional capacity for global war on terror missions and
    warfighting forcible entry lift. Maritime Prepositioning Force (Future)
    (MPF(F)) ships begin delivery in 2012 and the squadron achieves full
    operational capability by 2018. As the MPF(F) achieves full operational
    capability to lift 1.0 MEB, the amphibious ships will stabilize at an
    inventory of 31 total ships capable of almost 2.0 MEB forcible entry.
    Thus, the current amphibious plus MPF(F) shipbuilding plan meets the
    requirements for forward presence amphibious ships in ESGs and well
    above 2.0 MEBs of total forcible entry lift for major contingencies.
        General Mattis. In order to support joint forcible entry operations
    (JFEO), the Marine Corps shipbuilding requirement is two amphibious MEB
    assault echelons (AE) plus two MPF(F) MEBs.

             30 operationally available amphibious ships, of which
            10 must be operationally available big-deck aviation-capable
            ships to support the aviation assets of two MEB AE.

                     Note: operationally available--minimum amount
                    of ships required to conduct the mission. Availability
                    factors will account for ship maintenance cycles.
                     Minimum of 10 LPD-17s within the LPD program
                    to mitigate risk incurred by limiting each MEB AE to 15
                    amphibious ships.

                             Both discrete and volumetric analyses
                            have been conducted to load the ``2015 MEB AE''
                            on amphibious ships. 17 ships (5 LHD, 5 LPD-17,
                            5 LSD-41, 5 LSD-49) are required; however, the
                            Marine Corps has accepted risk with a 7-percent
                            reduction in MEB equipment by self limiting to
                            15 ships per MEB AE.

                     2 MPF(F) MEB squadrons or one MPF(F) squadron
                    plus two legacy Maritime Preposition Ship squadrons.

                     MPF(F) squadron will consist of 14 ships with
                    two types using proven amphibious hull designs: 1 LHD,
                    2 LHA(R), 3 T-AKE, 3 large, medium speed roll-on/roll-
                    off (LMSR), 3 Mobile Landing Platform ships, and 2
                    legacy ``densepack'' maritime prepositioning ships.
                     We are not ready to commit MPF(F) to forcible
                    entry in the assault echelon without Sea Shield without
                    further experimentation in the following areas:

                             Civilians (Merchant Mariners) crewing
                            MPF(F) and associated legal implications.
                             Survivability, preposition loading,
                            and continued on-load/off-load experiments,
                            etc.

             Naval Surface Fire Support (NSFS) that meets the
            Marine Corps requirement of ``24/7,'' all weather, long range
            naval surface fires in support of amphibious operations from
            the sea with continuous striking power and volume of fires out
            to a range of 63 nautical miles (Threshold) to 110 nautical
            miles (Objective) from ships at sea.
    Background information in regards to amphibious warships
        Our amphibious warships requirement is derived from a capabilities
    based assessment. Based on the Strategic Planning Guidance and the
    National Defense Strategy, the current force-sizing construct requires
    the capability to respond to two swiftly defeat the efforts (SDTE)--
    each of which requiring a MEB size force. One of these crises may
    become a decisively defeat campaign, bringing our most powerful force,
    the Marine Expeditionary Force (MEF), to bear, for highly capable,
    lethal, mobile and sustained operations. Both discrete and volumetric
    analyses have been conducted to load the ``2015 MEB AE'' on amphibious
    ships. 17 amphibious warships (5 LHD, 5 LPD-17, 5 LSD-41, and 2 LSD-49)
    are required. To keep demand on the Navy to an absolute minimum, we
    have self-limited each MEB AE to 15 ships, accepting a 7-percent loss
    in MEB equipment. The 7 percent loss in MEB equipment will be
    transported via assault follow-on echelon shipping.
        In support of our joint forcible entry operations requirements, we
    assess the Navy's 30 year shipbuilding plan (for amphibious warships)
    as moderate risk trending toward high due to the LPD-17 San Antonio
    class ship production ending at nine ships, and also concerns regarding
    the historical ability to generate operationally available ships. We
    have grave/significant concern with meeting our joint forcible entry
    requirements with fewer than 10 LPD-17 San Antonio class ships. With
    the 10th LPD-17 as one of the 30 operationally available amphibious
    warships, the moderate risk will trend towards low in our Navy's
    ability to carry, launch, and land marines on hostile shores. Vehicle
    stowage, well deck, and aviation support capabilities provided by the
    LPD-17 are critical to joint forcible entry operations and providing
    the required lift for the 2015 MEB. In addition, the LPD-17s are great
    platforms to support the global war on terrorism. Regarding ship
    operational availability, we note that OPNAV Notice 4700
    (Representative Intervals, Durations, Maintenance Cycles, and Repair
    Man-days for DEPOT Level Maintenance Availabilities for USN Ships)
    dated 13 June 2005, reflects that 10-15 percent of ships (by class) are
    operationally unavailable at any time due to scheduled maintenance.
    Therefore, while OPNAV Notice 4700 would suggest that 34 amphibious
    warships are required to maintain 30 operationally available amphibious
    warships, we take seriously the Chief of Naval Operations (CNO)
    commitment to provide the requisite 30 amphibious warships to embark
    sufficient combat power.

        2. Senator Talent. Admiral Crenshaw and General Mattis, what is the
    Department's plan to conduct an updated lift study and define forcible
    entry requirements for the expeditionary force?
        Admiral Crenshaw. The Department of the Navy (DON) Lift II study
    was updated in 2002 from a threat-based requirements study to a
    capabilities-based study that includes future program (Landing Craft
    Air Cushion (LCAC) service life extension program (SLEP), MV-22, Joint
    Strike Fighter (JSF)) for MEB AE lift. The Department currently has no
    plan to further update the DON Lift Study. As we assess current and
    projected operational requirements for AE lift, Navy believes that the
    requirements, as stated pursuant to the DON Lift II report update, have
    not changed.
        General Mattis. Building upon the DON Lift II study, the Navy and
    Marine Corps are jointly conducting a seabasing capabilities study to:

              1. Inform U.S. Navy (USN) and U.S. Marine Corps (USMC) force
            structure and force posture requirements for seabasing based
            upon Program Objective Memorandum (POM) 08 force structure
            decisions, and identify necessary supporting requirements
            through the 2024 timeframe.
              2. Inform USMC and USN POM decisions on force development and
            investment regarding seabasing well beyond the Future Years
            Defense Program (up through the 2024 timeframe).
              3. Integrate joint capabilities and requirements, where
            applicable, identified in the seabasing joint integrating
            concept (JIC) capabilities-based assessment process.

        This study will be conducted within the context of OA-06, the
    seabasing JIC, and other related studies/concepts, and will be based
    initially on a designated force structure and posture for amphibious
    and prepositioning ships through 2024. After analysis of the baseline
    force structure and posture, the study will explore alternative force
    postures, concepts of operations (CONOPs), and other possible solutions
    to address the gaps or excesses, within the constraints of the baseline
    force structure.
        Based on the Strategic Planning Guidance and the National Defense
    Strategy, the current force-sizing construct requires the capability to
    respond to two SDTE; each of which requires a MEB size force. One of
    these crises may become a decisively defeat campaign, bringing our most
    powerful force, the MEF, to bear, for highly capable, lethal, mobile,
    and sustained operations.
        Using the above as the requirement, the seabasing capabilities
    study will generate the shipping mix required.

                                   seabasing
        3. Senator Talent. Admiral Crenshaw and General Mattis, the seabase
    has long been an element of the Navy's SeaPower 21 vision, but new
    capabilities associated with seabasing have lacked sufficient
    definition to gain traction in the budget. In the course of the past
    year, the concepts for the MPF(F) ships that contribute to the seabase
    have changed significantly, emerging in this Future Years Defense Plan
    (FYDP) as a centerpiece of the future force.
        Previous concerns have been raised regarding vulnerabilities of the
    seabase. Crewing concepts (military or civilian), stand-off distances
    from hostile shores, warfighting capabilities of the seabase ships, and
    the makeup of escorting ships are all factors in the calculus for
    ensuring protection of the large force of marines and their equipment
    deploying from the seabase. Will you please provide the current concept
    of operations for the seabase, the current concepts for the unique
    capabilities of the seabase, and how these capabilities will be
    employed and safeguarded in a hostile environment?
        Admiral Crenshaw. When a regional combatant commander needs
    seabased forces, naval presence forces are gathered to provide early
    response and battle-space shaping. Forward deployed carrier strike
    groups (CSGs) and expeditionary strike groups (ESGs) provide early sea
    strike and sea shield capabilities to establish maritime domain
    security. Joint and coalition forces, working with naval strike forces,
    begin shaping the land battlespace and attrite hostile defensive forces
    and eliminate air, cruise missile, and surface craft threats to the
    seabase. Sea shield forces gather to eliminate the mine and submarine
    threats to the seabase. In parallel, additional sea strike and sea
    shield forces surge to the operational area to increase capabilities.
    Forces flow to prepositioned assets to activate additional seabase
    platforms like the MPF(F).
        Once the joint shaping is completed and maritime domain superiority
    is established, Marine and Army forces can conduct joint forcible entry
    operations (JFEO) through the seabase to establish a land lodgement and
    complete decisive land actions. Seabase ships, protected by naval and
    joint assets, establish and maintain continuing logistics support for
    forces both ashore and in the seabase.
        The seabase is an operational collection of capabilities, including
    those in CSGs, ESGs, MPF(F) squadrons, Army prepositioned ships, and
    logistic support ships. The capabilities of CSGs and ESGs exist today
    and are well understood. The new seabase concept is significantly
    enhanced by the assault and sustainment capabilities inherent in the
    MPF(F) ships, and the logistic throughput capabilities of next
    generation connector platforms like the Joint High Speed Vessels.
        MPF(F), along with strategic airlift, allow significant forces to
    rapidly close the seabase operational area and complete arrival and
    assembly operations afloat. Assault forces are quickly readied for
    operations, due to the selective offload capability of MPF(F) ships,
    and initial air and surface assault waves are prepared for landing and
    subsequent operations ashore. The design of the MPF(F) squadron allows
    initial surface assault waves to be accommodated on three of the 14
    seabase ships (the 3 Mobile Landing Platforms (MLPs)) reducing the size
    of the force protection requirements for MPF(F) ships in the inner sea
    operations area. Remaining seabase ships remain in a more secure, but
    still defended outer sea echelon area.
        Once the initial landings are complete and operations ashore
    commence, the logistics storage and throughput capabilities of the
    MPF(F) squadron allow a continuous logistics supply chain to be
    maintained from theater sources to and through the seabase to all joint
    forces afloat and ashore.
        The inherent sea shield capabilities resident with the ESG and CSG
    forces provide an initial force protection capability. Joint and
    coalition forces join with naval strike assets to degrade the hostile
    force capabilities, and attrite threats to the seabase. Additional sea
    shield and sea strike forces surge to the area of operations to augment
    the early arriving forces and establish air and sea superiority
    necessary to allow penetration of forcible entry forces, including MEBs
    and Army combat brigades.
        The new naval sea shield platforms, including Littoral Combat Ships
    (LCS) with anti-surface warfare, anti-submarine warfare (ASW), and mine
    warfare capabilities; along with current and planned cruiser-destroyer
    and submarine force capabilities in anti-air warfare and ASW are
    sufficient to reduce or eliminate the threats to less robust seabase
    ships that arrive to enable the new seabasing capabilities.
        The MPF(F) squadron is composed of six different types of seabased
    ships. By design, many of these ships do not need to approach the
    hostile shore, but can remain in a protected outer sea echelon area to
    accomplish their mission. Navy analysis of overall sea shield
    capabilities indicates protection for the four to six MPF(F) ships that
    may need to close to an inner sea operations area overmatches any
    residual threat after the battlespace preparations are completed.
        General Mattis. The current concept for seabasing is resident in
    the 2005 Seabasing Joint Intergrating Concept (JIC) version 1.0.
    Additional detailed seabasing concepts of operations covering major
    combat operations, counterinsurgency operations, and humanitarian
    assistance/disaster relief operations are available in the classified
    annex to the seabasing HC. Seabasing offers the Joint Force Commander
    with a national capability of at sea arrival and assembly, selective
    offload of tailored capabilities, seabased sustainment of the Marine
    Air Ground Task Force (MAGTF) ashore, and the reconstitution and
    deployment of the MAGTF for follow-on missions. The seabase will
    provide significant operational advantages in high threat, austere,
    anti-access environments and offer the Joint Force Commander the
    greatest flexibility in conducting the full range of military
    operations.
        From the onset of a crisis through the completion of stabilization
    operations, seabasing offers commanders additional options to close,
    assemble, employ, and sustain joint forces. Seabasing provides the
    flexibility to rapidly and effectively build and integrate joint
    capabilities with minimal or no access to nearby land bases. It enables
    joint force access and enhances power projection by complementing
    existing basing. When the political situation restricts or denies
    basing, overflight, or U.S. presence, seabasing leverages forward
    presence to provide early availability of joint combat power to exploit
    unpredictable points of entry, even in austere environments. Exploiting
    opportunities created by maritime superiority and the sovereign freedom
    of operating from international waters, seabasing allows commanders to
    expand the joint maneuver space seaward. Through the protection
    provided by maneuvering platforms under a defensive shield, seabasing
    provides the opportunity to retain support functions (e. g.
    sustainment, fire support, medical, maintenance) at sea and reduces the
    need for the build-up of a large vulnerable support infrastructure
    ashore, particularly during the early stages of combat operations.
        The foundation of seabasing is the seabase, an inherently
    maneuverable, scalable aggregation of distributed, networked platforms
    and organizations, capable of receiving deploying forces and supporting
    the employment of those forces. The capacity and capability of the
    seabase could increase over time as more platforms arrive in the
    operating area.
        Joint forces rapidly close by a combination of means to the
    seabase, or locations in the objective area, where they organize for
    operations. These forces then project combat power ashore from the
    seabase. The seabase continues to support those forces during
    operations ashore.
        Joint forces deploy directly from global locations to the seabase
    using high-speed inter- and intra-theater connectors (air/surface)
    where they join forward-deployed and prepositioned assets. Some
    deploying forces could link up with seabase platforms while enroute to
    the objective area. The joint forces assemble and organize at the
    seabase. Combinations of surface and air connector systems transfer
    assets among the platforms of the seabase as the force organizes for
    its mission.
        seabased and global assets perform integrated force protection. The
    seabased portion of that protection is provided by assets organic to
    the seabase. These forces include surface combatants, submarines,
    aircraft, and air and missile defenses as well as assets organic to
    forces assembling at the seabase.
        Forces maneuver from the seabase to operational depths ashore using
    a combination of air and surface means in austere environments.
    Depending on the situation, forces may continue to operate from the
    seabase, operating ashore only long enough to perform specific missions
    before returning to the seabase. As forces flow ashore, additional
    forces may deploy to the seabase as part of a continuous build-up of
    combat power. Seabasing operations may open additional early entry
    points for rapid continued build-up of forces ashore.
        Throughout a campaign, seabasing provides persistent joint
    logistics to ensure continuous sustainment of select forces afloat and
    ashore. Seabasing capabilities that support projection and sustainment
    of joint combat power can also be used to recover, reconstitute, and
    redeploy select joint forces for further employment.

        4. Senator Talent. Admiral Crenshaw and General Mattis, what are
    the principal risks you must retire, or new technologies and
    capabilities which must be developed, in order to operate from the
    seabase?
        Admiral Crenshaw. The sea offers security and sovereign freedom of
    action for our Nation's forces. Our ability to operate from a seabase
    and to project and sustain operational forces from over the horizon
    contributes greatly to national security. However, seabase operations
    present unique technological challenges that must be fully addressed
    before our Nation can maximize our seabasing capabilities. Specific
    risk areas that must be addressed are: at-sea transfer of heavy cargo,
    advanced cargo handling systems, in-transit visibility/total asset
    visibility, en route collaborative planning and virtual rehearsal,
    automated warehousing, and selective offload. A number of our programs
    of record have made significant progress in researching and developing
    these technologies. Inroads have been laid with skin-to-skin ship
    operations, landing platform technologies, and advanced cargo handling.
        The sea, influenced by geographic location, season, and weather, is
    a challenging environment. Sea states will vary and remain
    unpredictable, necessitating our ability to operate in a range of
    conditions. Our ships must be capable of skin-to-skin operations
    through sea state 4, permitting large-scale receipt and transfer of
    personnel, equipment, and supplies. This enables assembly of
    operationally significant forces at the seabase supporting a joint
    operational area, without reliance on land bases.
        A principal risk to operating from the seabase is transferring
    personnel, cargo, and equipment in a challenging maritime environment.
    Skin-to-skin transfer, to include ramp systems, ship motion mitigation,
    crane pendulation control, and fendering systems, is a key enabler to
    personnel, cargo, and equipment transfer and requires system validation
    through sea state 4.
        Another risk associated with seabase operations is selective
    offload, which includes our ability to efficiently stow, select,
    retrieve, and issue equipment and supplies from various ships at sea.
    Systems are being developed to improve handling, stowage, selectivity,
    and throughput of cargo onboard ship. Automation, such as the Automated
    Stowage and Retrieval System, will improve selective offload and
    assembly operations and has promise to decrease deployment and
    sustainment timelines.
        We are making tremendous progress with evolving technological
    challenges. Our research and development (R&D) programs are on track
    and continue to fully support scheduled programs. For example, within
    the MPF(F) program, we are developing and validating systems and
    procedures to enable these technologies on these platforms. Tests were
    conducted in fiscal year 2005 to demonstrate skin-to-skin capabilities
    between an LMSR and a float-on/float-off ship as a surrogate for the
    MLP. Skin-to-skin operations were successfully conducted in sea
    conditions up to sea state 3. LCAC and other surface craft were able to
    interface with the MLP surrogate in sea state 3 conditions. Fiscal year
    2006 testing will incorporate our lessons learned in fiscal year 2005,
    as we continue to mitigate these collective risks, while we explore new
    systems that permit skin-to-skin transfer and operations in
    progressively higher sea states.
        General Mattis. Our great Navy has been conducting elements of
    seabasing since the founding of our Nation. Seabasing is not a
    revolutionary concept but rather an evolutionary concept. Tomorrow's
    MPF(F) offers the Joint Force Commander a national capability of at-sea
    arrival and assembly, selective offload of tailored capabilities,
    seabased sustainment of the MAGTF ashore, and the reconstitution and
    deployment of the MAGTF for follow-on missions. MPF(F) will provide
    significant operational advantages in high threat, austere, anti-access
    environments and offer the Joint Force Commander the greatest
    flexibility in conducting the full range of military operations. In
    order to fully implement seabasing in support of joint forcible entry
    operations, the following risk areas require further development and
    experimentation:

             Layered sea shield force protection
             Amphibious command and control (C2) platforms,
            process, and command relationships
             Sufficient ``intra'' and ``inter'' high speed sea lift
             Technology advancement in
             Sea state 3 to 4 ramp development for vehicle transfer
             Motion mitigation systems to reduce ship movement
             Motion mitigation for cargo handling operations (gyro-
            stabilized cranes)
             Fendering technologies; including dynamic positioning
            systems
             Personnel transfer systems
             Automated storage and retrieval systems
             Continued investment in assault connectors
            (Expeditionary Fighting Vehicle (EFV), LCAC(X), etc.)

        Lesson's learned from the prior years' experiments with platforms,
    such as the LMSR and the float-on/float-off vessels, are used in the
    development process. The efforts to date have been extremely
    encouraging in that the seabasing concept as supported by MPF(F)
    appears technically feasible. Much of the effort will leverage existing
    technology (such as a float-on/float-off vessel), but use it in
    innovative ways.

        5. Senator Talent. Admiral Crenshaw and General Mattis, how do you
    rank this capability amongst competing priorities; recognizing that the
    increasingly significant investment in the seabase comes to some extent
    at the expense of allowing gaps to form in submarine, surface
    combatant, and expeditionary strike capabilities?
        Admiral Crenshaw. The future Navy will remain seabased, with global
    speed and persistence provided by forward deployed forces, supplemented
    by rapidly deployable forces through the Fleet Response Plan (FRP). The
    MPF(F) Squadron is only one part of the transformational seabasing
    capability as defined in the Seabasing JIC. Aircraft carriers,
    submarines, amphibious surface combatants, and logistics ships all
    contribute to this transformational capability and shape our Navy to
    meet current and emerging security responsibilities. The CNO has
    developed a shipbuilding plan that balances several factors to include
    operational requirements, affordability, and the ability of the
    industrial base to execute the plan. The force structure as defined in
    the ``Report to Congress on Annual Long-Range Plan for Construction of
    Naval Vessels for Fiscal Year 2007'' was developed using a capability-
    based approach and anticipated threats for the fiscal year 2020 time
    period. This balanced approach builds the Navy the Nation needs--a Navy
    that is both affordable and meets the future national security
    requirements outlined in the Quadrennial Defense Review (QDR) with
    acceptable risk. Force structure requirements were developed and
    validated through detailed joint campaign and mission level analysis,
    optimized through innovative sourcing initiatives (FRP, Sea Swap,
    forward posturing) that increase platform operational availability,
    balanced with shipbuilding industrial base requirements.
        General Mattis. Our blue water Navy remains uncontested due to the
    balance of investments across all type ships. Recent history has proved
    that our Nation will require continued investment in our Navy's
    amphibious force offering significant operational advantages in high-
    threat, austere, anti-access environments and offer the Joint Force
    Commander the greatest flexibility in conducting the full range of
    military operations. The future seabase will center around the MPF(F),
    and will offer the Joint Force Commander a national capability of at-
    sea arrival and assembly, selective offload of tailored capabilities,
    seabased sustainment of the MAGTF ashore, and the reconstitution and
    deployment of the MAGTF for follow-on missions. The MPF(F) offsets the
    lack of sufficient strategic air and sea lift by having vital combat
    power prepositioned afloat and ready to employ. The MPF(F) Squadron is
    only one part of the transformational seabasing capability as defined
    in the Seabasing JIC. Aircraft carriers, submarines, amphibious surface
    combatants, and logistics ships all contribute to this transformational
    capability and shape our Navy to meet current and emerging security
    responsibilities. America's ability to use international seas and
    waterways, as both maneuver space and an operating base unconstrained
    by foreign veto, allows our naval forces to project combat power into
    the littoral regions which contain more than half the world's
    population and more than 75 percent of its major urban areas.
        The strategic guidance and recent operational experience has
    institutionalized a shift in Marine Corps capability development.
    Amphibious capability and capacity represent key operational
    requirements to translate our dominance of the sea into relevant power
    and influence ashore. The ability to project credible joint combat
    power landward without fixed, vulnerable infrastructure concerns gives
    the Nation the ability to gain access at a time and place of our
    choice. These forces provide unparalleled flexibility to both political
    leaders and Joint Force Commanders. Historically, forcible entry
    capacity, based on a major combat contingency, was the primary
    consideration in determining the total amphibious lift requirement. In
    the new security era, the rotational requirements of maintaining
    forward postured forces may have equal, and perhaps even greater,
    significance in determining amphibious requirements.

                    forward-basing attack submarines in guam
        6. Senator Talent. Admiral Crenshaw, today, the Navy has three
    attack submarines forward-based in Guam. In conjunction with the Navy's
    recent announcement that it will focus 60 percent of the attack
    submarine force on operations in the Pacific, the force structure study
    makes aggressive assumptions that the number of attack submarines to be
    forward-based in Guam will be significantly increased. This increase to
    forward-basing allows for a reduction to today's submarine force
    without sacrificing operational effectiveness of the force.
    Alternatively, if the Navy is unable to execute these forward-basing
    assumptions, the future submarine force will be under-sized.
    Recognizing the importance of the forward-basing decision on the attack
    submarine force's size and effectiveness, what is the Navy's plan for
    basing additional attack submarines in Guam?
        Admiral Crenshaw. The Navy plans to homeport three attack
    submarines in Guam. There are presently two ships (U.S.S. City of
    Corpus Christi (SSN 705) and U.S.S. Houston (SSN 713)) homeported in
    Guam. U.S.S. Buffalo (SSN 715) will arrive in fiscal year 2007 as the
    third homeported ship. The Navy's Force Structure Assessment assumed
    three ships were homeported in Guam and three are sufficient to meet
    both warfighting and peacetime presence requirements.

        7. Senator Talent. Admiral Crenshaw, what assessments are being
    conducted to address vulnerabilities, facilities, and quality of
    service to support additional forward-based submarines?
        Admiral Crenshaw. We are in the process of developing a Global
    Submarine Infrastructure Plan (GSIP). This plan incorporates QDR
    guidance and future force structure plans. The GSIP addresses
    facilities, force protection, and quality of service for the submarine
    force worldwide. All submarine homeports, ports of call, maintenance
    and repair facilities, and crew swap locations are included in the
    plan. The GSIP will enable us to guide our submarine force ashore
    infrastructure investment both at home and at forward bases for years
    to come.

                 dd(x) destroyer and naval surface fire support
        8. Senator Talent. Admiral Crenshaw and General Mattis, the DD(X)
    program was initiated to fill the capability gap for naval surface fire
    support. The original requirement for 24-32 DD(X) ships, each with 2-
    155mm Advanced Gun Systems, was reduced to 12 ships, and then 10 ships
    in prior years, and is further reduced to 7 ships in the fiscal year
    2007 budget. What has changed in the analysis of requirements and
    capabilities that allows the 7-ship DD(X) class to meet the mission
    originally envisioned for 24-32 ships?
        Admiral Crenshaw. DD(X), recently renamed DDG-1000, will fill the
    capability gap in naval surface fire support with its Advanced Gun
    System (AGS). As part of the development of the fiscal year 2007
    budget, the Navy staff conducted a comprehensive review of joint
    warfighting demands through the 2020 time frame and the associated
    capability and capacity requirements. The Navy conducted extensive
    campaign analysis, against a wide spectrum of potential threats, to
    determine the sufficient mix of capabilities required to successfully
    defeat the threats. This demand was coupled with the routine, day-to-
    day operational demand for forces and other factors such as
    maintenance, training, and quality of life to develop an overall
    minimum force structure requirement. For DD(X), this corresponded to
    seven total ships.
        Currently, DD(X) is expected to operate exclusively as part of the
    ESG typically comprised of an LHA/LHD, an LPD, an LSD, and two to three
    surface combatants. In previous years, the Navy planned on operating 12
    ESGs, each with 2 DD(X). The analysis conducted as part of the fiscal
    year 2007 budget cycle indicates that nine ESGs, when coupled with an
    MPF(F) squadron, are sufficient to meet joint demands as depicted in
    the QDR with minimal risk. Additionally, analysis of the NSFS demand in
    the Office of the Secretary of Defense (OSD)/Joint Staff approved
    planning scenarios showed one vice two DD(X) per ESG as sufficient.
        The combination of these changes in demands for DD(X) reduced the
    minimum requirement to seven ships. Seven DD(X) Zumwalt class ships are
    sufficient to provide each forward deployed ESG (including the Forward
    Deployed Naval Force (FDNF) ESG) with a DD(X) while maintaining
    sufficient surge capacity to meet NSFS requirements to support joint
    forcible entry demands for amphibious operations in a conventional
    campaign.
        General Mattis. The Marine Corps analysis of requirements and
    capabilities for the DD(X), as the planned second phase of the NSFS
    roadmap, has not changed. DD(X), in conjunction with the DDG's Extended
    Range Guided Munition (ERGM) fires, is a program of record planned to
    satisfy the Marine Corps' NSFS requirements. With two 155mm AGS and 600
    Long Range Land Attack Projectiles per ship capable of engaging targets
    with precision accuracy in excess of 63nm (threshold), the DD(X)
    provides the range, lethality, and volume to address a larger piece of
    the target set, complementing the DDG's NSFS capabilities. DD(X)
    provides our first integrated, seabased counter-fire capability. In
    addition to its powerful sea strike capability, DD(X) will also provide
    significant capability as a sea shield asset for the seabase.
    Supporting analysis for the 24 ship requirement is contained in the
    2002 DD(X) Spiral Design Review, and is consistent with the DD(X)
    operational requirements document validated in 2004. Given the current
    fiscal environment, we have accepted risk with fewer DD(X)s which will
    result in some unaddressed targets and increased time to accomplish the
    mission during a forcible entry scenario.
        The Marine Corps believes strongly that the Navy is on the right
    track for delivering an effective NSFS capability. We have 230 years of
    common interest in this area and know that the transformational
    technology the Navy is developing will make NSFS relevant and vital to
    our concepts for conducting expeditionary maneuver warfare in the
    future. Our operational lessons from Iraq and Afghanistan emphasize the
    value of volume and precision fires. The same can be said for detecting
    enemy indirect fire weapons.

        9. Senator Talent. Admiral Crenshaw, what new assumptions are being
    introduced in the way the Navy plans to operate DD(X) to meet this
    mission?
        Admiral Crenshaw. DD(X), recently designated as DDG 1000, will
    operate in the same manner as the Navy's other surface combatants in
    terms of how it deploys, how frequently it deploys, and where it
    deploys. Currently, DD(X) is expected to operate in support of the
    combatant commanders' naval force presence requirements as part of the
    ESG, typically comprised of an LHA/LHD, an LPD, an LSD, and two to
    three surface combatants. The change in total ship requirements stemmed
    from analysis of the joint demand for DD(X)'s transformational
    operational capabilities, not a change in assumptions.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy
           dd(x) land attack destroyer and fire support requirements
        10. Senator Kennedy. General Gardner, the DD(X) land attack
    destroyer is being built largely to support shore fire support
    requirements. Originally, the Marine Corps said that they needed to
    have a firing rate from the DD(X) guns of 12 rounds per minute. Since
    then, the Navy changed the design to have a capability of firing 10
    rounds per minute. Now the Navy has announced that they only intend to
    buy seven ships, rather than a much larger number of DD(X) destroyers.
    Does this reduced DD(X) program meet the Marine Corps' requirements?
        General Gardner. The Marine Corps analysis of requirements and
    capabilities for the DD(X), as the planned second phase of the NSFS
    roadmap, has not changed. DD(X), in conjunction with the DDG's ERGM
    fires, is a program of record planned to satisfy the Marine Corps' NSFS
    requirements. With two 155mm AGS and 600 Long-Range Land Attack
    Projectiles per ship capable of engaging targets with precision
    accuracy in excess of 63nm (threshold), the DD(X) provides the range,
    lethality, and volume to address a larger piece of the target set,
    complementing the DDG's NSFS capabilities. DD(X) provides our first
    integrated, seabased counter-fire capability. In addition to its
    powerful sea strike capability, DD(X) will also provide significant
    capability as a sea shield asset for the seabase. Supporting analysis
    for the 24 ship requirement is contained in the 2002 DD(X) spiral
    design review, and is consistent with the DD(X) operational
    requirements document validated in 2004. Given the current fiscal
    environment, we have accepted risk with fewer DD(X)s which will result
    in some unaddressed targets and increased time to accomplish the
    mission during a forcible entry scenario. The Marine Corps accepted the
    DD(X)'s reduced firing rate from 12 to 10 rounds per minute, since the
    change in rate of fire does not affect the average number of kills
    (rounds) per magazine, a more important aspect of a NSFS capability.
        The Marine Corps believes strongly that the Navy is on the right
    track for delivering an effective NSFS capability. We have 230 years of
    common interest in this area and know that the transformational
    technology the Navy is developing will make NSFS relevant and vital to
    our concepts for conducting expeditionary maneuver warfare in the
    future. Our operational lessons from Iraq and Afghanistan emphasize the
    value of volume and precision fires. The same can be said for detecting
    enemy indirect fire weapons.

        11. Senator Kennedy. General Gardner, are there other measures that
    the Department of the Navy should be taking to compensate for this
    change?
        General Gardner. Recommendations for measures to compensate for the
    fiscal year 2007 DD(X) capability reductions are:

             Reinstatement of the auxiliary convertible magazine on
            DD(X). This increases the magazine capacity of the ship by 35
            percent, and reduces resupply requirements. The auxiliary
            magazine capability would provide an additional 320 round
            capacity at a cost of roughly $19 million on the lead ship, and
            is at the top of the buyback list.
             Acceleration of the ERGM initial operational
            capability (IOC) or providing more rounds and ships available
            to fire ERGM at the currently planned IOC of fiscal year 2011.
             Continued development of electromagnetic launch as a
            science and tecnhology (S&T) long-term capability.
             Incorporating a NSFS capability into all future
            planned surface combatants to maximize return on investment of
            AGS technology and enhance flexibility of the force.

        The Marine Corps believes strongly that the Navy is on the right
    track for delivering an effective NSFS capability. We have 230 years of
    common interest in this area and know that the transformational
    technology the Navy is developing will make NSFS relevant and vital to
    our concepts for conducting expeditionary maneuver warfare in the
    future. Our operational lessons from Iraq and Afghanistan emphasize the
    value of volume and precision fires. The same can be said for detecting
    enemy indirect fire weapons.
        Background information on the NSFS plan/DD(X) program is provided
    below:

              The Marine Corps analysis of requirements and capabilities
            for the DD(X), as the planned second phase of the NSFS roadmap,
            has not changed. DD(X), in conjunction with the DDG's ERGM
            fires, is a program of record planned to satisfy the Marine
            Corps' NSFS requirements. With two 155mm AGS and 600 Long Range
            Land Attack Projectiles per ship capable of engaging targets
            with precision accuracy in excess of 63nm (threshold), the
            DD(X) provides the range, lethality, and volume to address a
            larger piece of the target set, complementing the DDG's NSFS
            capabilities. DD(X) provides our first integrated, seabased
            counter-fire capability. In addition to its powerful sea strike
            capability, DD(X) will also provide significant capability as a
            sea shield asset for the seabase. Supporting analysis for the
            24-ship requirement is contained in the 2002 DD(X) spiral
            design review, and is consistent with the DD(X) operational
            requirements document validated in 2004. Given the current
            fiscal environment, we have accepted risk with fewer DD(X)s
            which will result in some unaddressed targets and increased
            time to accomplish the mission during a forcible entry
            scenario. The Marine Corps accepted the DD(X)'s reduced firing
            rate, from 12 to 10 rounds per minute, since the change in rate
            of fire does not affect the average number of kills (rounds)
            per magazine, a more important aspect of a NSFS capability.

                            mine warfare capability
        12. Senator Kennedy. Admiral Crenshaw, this subcommittee has had a
    longstanding interest in the Navy's mine countermeasures programs. I
    understand the Navy is moving its mine warfare capability from
    minesweepers and minehunters to the LCS. I understand there are some
    problems with the remote minehunting system that would be used as a
    central part of the LCS mine warfare module. How is that effort going,
    and how are the other parts of the LCS mine warfare system progressing?
        Admiral Crenshaw. The Remote Minehunting System program has
    required extra effort within the last year to improve the overall
    reliability of the system. Recent at-sea testing demonstrated
    significant progress toward resolving reliability issues. The extra
    effort has resulted in an additional development cost of $31 million
    during fiscal years 2006 and 2007. Additionally, fiscal year 2006
    procurement has been reduced from eight to four vehicles in order to
    allow us to request the reprogramming of the other $28 million within
    the Remote Minehunting System program. Also, due to the additional
    development efforts needed to improve reliability, the program's
    schedule has been reworked, and a full-rate production decision will be
    delayed by about 1 year. However, the new schedule still meets our
    commitment to deploy from a destroyer in 2007, as stated in the fiscal
    year 2007 U.S. Naval Mine Countermeasures Plan. The program will also
    be able to support the planned delivery to the LCS mine warfare mission
    module in 2007.
        Current AN/AQS-20A Sonar Mine Detecting Set testing is focused on
    the integration of the AN/AQS-20A with the MH-60S helicopter in
    preparation for developmental and operational testing in fiscal year
    2007. The testing program continues to overcome challenges to its
    schedule (weather delays, additional aircraft instrumentation,
    integration modifications) however, the program remains on track to
    support LCS with an AN/AQS-20A system and flight crew during the
    initial deployment.
        The Airborne Laser Mine Detection System (ALMDS) is receiving
    additional effort to fully demonstrate one of its critical capabilities
    during Operational Testing. Recently, the Assistant Secretary of the
    Navy for Research, Development, and Acquisition approved a re-baselined
    schedule that provides the additional time and funding needed to
    incorporate more capable components and software into the system. The
    additional required development will cause a 1-year delay, pushing the
    full-rate production decision to the end of 2008. However, the revised
    schedule ensures one unit will be available for LCS when required.
    Development costs have increased by approximately $21.6 million and
    will be offset by a reduction in the number of ALMDS units procured in
    fiscal years 2007 and 2008. Units used for the offset will be procured
    in fiscal years 2011 and 2012.
        The Organic Airborne and Surface Influence Sweep program is
    conducting contractor testing with efforts focused on improving towed
    dynamic stability. Alternative platform testing on the MH-53E
    helicopter is scheduled to begin in May 2006 with initial MH-60S
    flight-testing beginning in December 2006.
        The Airborne Mine Neutralization System program completed
    neutralizer tank testing in December 2005. The program will conduct
    open-ocean testing and alternative platform flight-testing at the end
    of 2006, followed by MH-60S testing in 2007.
        The Rapid Airborne Mine Clearance System (RAMICS) program is
    developing the initial prototype. The program has seen recent
    advancements such as the completion of the complex laser targeting
    gimbal. RAMICS does not begin testing on the MH-60S until the end of
    2008.

                              riverine capability
        13. Senator Kennedy. Admiral Edwards, I've been reading about the
    riverine capability the Navy is developing. When the Army and Marine
    Corps moved into Iraq, they failed to take heed of many lessons about
    personnel protective equipment. As the Navy takes over the river
    missions the marines are doing in Iraq, what will you be doing to
    ensure the sailors are properly prepared?
        Admiral Edwards. The Navy intends to ensure our sailors are
    properly equipped with the most advanced protective measures prior to
    taking over river missions from the marines in Iraq. These measures
    will include providing each deploying sailor with the best available
    (Interceptor) body armor with Small Arms Protective Inserts (SAPI) and
    equivalent head protection, rated at no less than National Institute of
    Justice (NIJ) Level III. These measures are capable of defeating 7.62mm
    X 39 AK-47 rounds. Riverine craft crewmen and boarding teams will also
    be equipped with flotation systems integrated with individual body
    armor systems. Additionally, each sailor will be equipped with full
    sets of individual protective equipment (IPE) that protects against
    possible chemical, biological, or radiological attack. Every deployable
    tactical vehicle assigned to each riverine squadron will be armored to
    the standard mandated by Commander, U.S. Central Command for Operation
    Iraqi Freedom, which will be at level I (factory installed) or level II
    (post-delivery installation) standard. Tactical vehicles will also be
    equipped with appropriate improvised explosive device (IED) electronic
    countermeasures (ECM) systems. Riverine craft initially provided by the
    marines and later organic to deploying Riverine Squadrons will be
    armored to a standard no less than NIJ level III and will also be
    equipped with IED ECM systems. Craft will also be equipped with high
    resolution/high magnification day/night mast-mounted imaging systems,
    complemented by personal and weapons mounted visual augmentation
    systems that will provide significantly enhanced tactical situational
    awareness.

                                   seabasing
        14. Senator Kennedy. Admiral Crenshaw, a central theme in the
    Navy's future capabilities is intended to be seabasing. We are very
    familiar with the previous Marine Corps discussions of ``Operational
    Maneuver from the Sea'' and ``Ship to Objective Maneuver.'' We know
    that the Department has decided on a seabasing concept, which you call
    the MPF(F), that departs from previous discussions of such concepts as
    mobile offshore basing. This new concept involves having a squadron of
    14 ships using some existing ship designs, as well as some new designs.
    As I understand it, with this new concept, you would have the
    capability to support one or two Marine Corps or Army brigades ashore.
    How much do you believe that the MPF(F) squadron will cost?
        Admiral Crenshaw. The Navy has determined that the one MPF(F)
    squadron of 14 ships will cost on average approximately $12.3 billion
    of new ship construction dollars. The composition of the 14 ships
    squadron includes two existing dense pack cargo ships, which will not
    require procurement dollars. MPF(F) is not the seabasing concept,
    rather it is a key enabler of seabasing. This squadron will accommodate
    one joint forcible entry operations capable MEB. It is also being
    designed to support the flow-through of sustainment for an additional
    Marine or Army brigade.

        15. Senator Kennedy. General Mattis, I understand that the Marine
    Corps would like at least one, and perhaps two, of these MPF(F)
    squadrons. How would these squadrons count toward your requirement to
    have 30 ships operationally available?
        General Mattis. In order to support JFEO, the Marine Corps
    shipbuilding requirement is two amphibious MEBs AE plus two MPF(F) MEBs
    (four MEBs total). The AE is the combat force leading the forcible
    entry of a contested/defended beach. The minimum lift requirement of
    the two MEB AE must consist of 30 operationally available amphibious
    ships, of which 10 must be operationally available big-deck aviation-
    capable ships to support the MEB Aviation Combat Element (ACE). The AE
    is distinctly different than the two MPF(F) MEBs. Each MPF(F) squadron
    will include one LHD, two LHA(R), three cargo and ammunition ships
    (TAKE), three fast logistics ships (T-AKR), three Mobile Loading
    Platform ships, and two legacy maritime prepositioning ships. This mix
    of ships will be capable of prepositioning critical equipment and 20
    days of supplies for our future MEB.
        Although one of the 14 MPF(F) ships, the LHD, is the same ship
    class as one of the 10 AE operationally available big-deck aviation-
    capable ships, further experimentation is required prior to suggesting
    that it can be used in the AE during the ``fight to the beach'' in
    joint forcible entry operations. This is primarily due to MPF(F) ships
    being manned by civilian mariners and the ships unique load-out as an
    afloat prepositioning capability with enhanced joint seabasing-related
    capabilities and technologies. We do, however, view the LHD and LHA(R)
    as having a secondary reinforcement role to amphibious platforms in the
    conduct of anti-access joint forcible entry operations. It is too early
    to commit MPF(F) as a substitute for amphibious ships. As mentioned
    above, more experimentation and testing are needed in order to provide
    ``proof of concept'' and capability before any amphibious fleet
    reductions can be seriously considered below the level necessary to
    meet 30 operationally available amphibious ships of the AE.

        16. Senator Kennedy. General Mattis, since three of the ships in
    the MPF(F) seabase would be LHA/LHD type amphibious assault ships,
    shouldn't we take some credit for such ships in meeting your
    requirements?
        General Mattis. In order to support JFEO, the Marine Corps
    shipbuilding requirement is two amphibious MEBs AE plus two MPF(F) MEBs
    (four MEBs total). The AE is the combat force leading the forcible
    entry of a contested/defended beach. The minimum lift requirement of
    the two MEB AE must consist of 30 operationally available amphibious
    ships, of which 10 must be operationally available big-deck aviation-
    capable ships to support the MER Aviation Combat Element (ACE). The AE
    is distinctly different than the two MPF(F) MEBs. Each MPF(F) squadron
    will include one LHD, two LHA(R), three cargo and ammunition ships (T-
    AKE), three fast logistics ships (T-AKR), three Mobile Loading Platform
    ships, and two legacy maritime prepositioning ships. This mix of ships
    will be capable of prepositioning critical equipment and 20 days of
    supplies for our future MEB.
        Although one of the 14 MPF(F) ships, the LHD, is the same ship
    class as one of the 10 AE operationally available big-deck aviation-
    capable ships, further experimentation is required prior to suggesting
    that it can be used in the AE during the ``fight to the beach'' in
    joint forcible entry operations. This is primarily due to MPF(F) ships
    being manned by civilian mariners and the ships unique load-out as an
    afloat prepositioning capability with enhanced joint seabasing-related
    capabilities and technologies. We do, however, view the LHD and LHA(R)
    as having a secondary reinforcement role to amphibious platforms in the
    conduct of anti-access joint forcible entry operations. It is too early
    to commit MPF(F) as a substitute for amphibious ships. As mentioned
    above, more experimentation and testing are needed in order to provide
    ``proof of concept'' and capability before any amphibious fleet
    reductions can be seriously considered below the level necessary to
    meet 30 operationally available amphibious ships of the AE.

             up-armored high mobility multipurpose wheeled vehicles
        17. Senator Kennedy. General Gardner, thank you for your
    explanation of the purpose of the unfunded requirement for armored high
    mobility multipurpose wheeled vehicles (HMMWVs). Could you clarify what
    the impact would be if this funding was not achieved?
        General Gardner. If we do not achieve funding, we will continue to
    use the vehicles currently on hand with the associated inefficiencies
    of trying to make aging equipment last longer. As verified by a new
    Inspector General (IG) report, our vehicles continue to age at an
    accelerated rate. Even the recently fielded up-armored HMMWVs (UAH)
    require depot level repair or replacement within as little as 2 years
    under current operating conditions in Iraq. When combat losses are
    added to an increased number of vehicles lost to increased maintenance
    there are simply fewer vehicles available to the commander in the
    field.

        18. Senator Kennedy. General Mattis, you noted that 90 percent of
    the HMMWVs operating outside the bases in Iraq are armored. We had been
    previously informed that all HMMWVs operating off-base were armored.
    Could you clarify your remark?
        General Mattis. All of our wheeled tactical vehicles that operate
    outside forward operating bases are armored at either level I or level
    II protection. All Marine Armor Kits (MAKs) requirements for our base
    HMMWV and A2 models were achieved in November 2005 (2,992 vehicles). As
    of May 1, 2006, we have fielded 1,750 M1114 HMMWVs. Our M1114
    operational requirement will be complete in July 2006 (2,502 vehicles)
    leaving 312 sustainment vehicles to be delivered by November 2006 for a
    total of 2,814 M1114s to meet the Marine Corps Central Command
    (MARCENT) requirement. The Medium Tactical Vehicle Replacement (MTVR)
    Armor System (MAS) requirements will be complete by the end of this
    month (May 2006).
        During the hearing, Lieutenant General Gardner responded to the
    chairman's question (asked on behalf of Senator Kennedy) about the
    status of HMMWV vehicle armoring. The following quote, ``We should be
    complete in July of this year. Right now, basically we have--probably
    90 percent of the troops going outside the wire are already in them,''
    was Lieutenant General Gardner's response referring to M1114 up-armored
    HMMWVs. We look forward to completing the fielding of our operational
    requirement of 2,502 M1114s by July 2006. By November of this year,
    through a replacement program, our forces in-theater will have 2,814
    M1114s and 1,034 HMMWV A2s with MAK (per MARCENT requirements).

                            long-term affordability
        19. Senator Kennedy. Admiral Crenshaw and General Gardner, I
    understand the CNO is doing a long-term aviation affordability review
    to parallel his shipbuilding study. What will this study entail and
    when will the Navy complete it?
        Admiral Crenshaw. The CNO is conducting an ongoing review of
    aircraft requirements and affordability for fiscal year 2008 through
    fiscal year 2020 to inform his decisions in the POM-08 process. POM-08
    will determine the fiscal years 2008-2013 future years development
    plan. The long-term aviation affordability review is covering the many
    elements that affect the Navy's aircraft plan, including the number of
    required aircraft, unit cost, annual procurement rate, and service life
    remaining on current inventory, and progress in new aircraft
    development programs. These procurement considerations must be weighed
    against questions concerning sustainment and growth potential in terms
    of meeting evolving warfighting requirements. Existing missions are
    also being evaluated in light of joint service requirements and
    capabilities.
        This ongoing aviation review is similar to the shipbuilding study
    only in that it attempts to inform important recapitalization
    decisions. It does not include a goal for a specific total number of
    aircraft like the 313 ships in the shipbuilding plan. Aircraft
    procurement planning generally does not have the same level of impact
    to the industrial base as shipbuilding. Therefore, this assessment, or
    study, does not produce a document similar to the 30-year shipbuilding
    plan delivered annually to Congress. While the internal Navy review
    supports POM 08, there is also a more comprehensive OSD report
    concerning TACAIR requirements which will report out in the October
    2006 timeframe. The result of this OSD effort will almost surely
    require us to conduct another aviation review to support the next
    budget cycle.
        General Gardner. The CNO is conducting an ongoing review of
    aircraft requirements and affordability for fiscal year 2008 through
    fiscal year 2020 to inform his decisions in the POM-08 process. POM-08
    will determine the fiscal years 2008-2013 FYDP. The long-term aviation
    affordability review is covering the many elements that affect the
    Navy's aircraft plan, including the number of required aircraft, unit
    cost, annual procurement rate, service life remaining on current
    inventory, and progress in new aircraft development programs such as
    JSF and Multimission Maritime Aircraft (MMA). These procurement
    considerations must be weighed against questions concerning legacy
    aircraft capacity and capability and include an assessment of remaining
    service life and growth potential in terms of meeting evolving war
    fighting and technology requirements. Existing missions are also being
    evaluated in light of joint service requirements and capabilities.
        This ongoing aviation review is similar to the shipbuilding study
    only in that it attempts to inform important recapitalization
    decisions. It does not include a goal for a specific total number of
    aircraft like the 313 ships in the shipbuilding plan. Aircraft
    procurement planning generally does not have the same level of impact
    as shipbuilding. Therefore, this assessment, or study, does not produce
    any document similar to the 30-year shipbuilding plan delivered
    annually to Congress. While the internal Navy review is complete for
    POM-08, there is a more comprehensive OSD report concerning TACAIR
    requirements which will report out in the October 2006 timeframe. The
    result of this OSD effort will almost surely require us to conduct
    another aviation review to support the next budget cycle.

                         expeditionary fighting vehicle
        20. Senator Kennedy. General Mattis, I am concerned about the force
    protection capabilities of the expeditionary fighting vehicle (EFV).
    The EFV's key performance parameter relating to armor protection has a
    threshold requirement of protecting against 14.5 millimeter rounds at
    300 meters and an objective requirement of protecting against 30
    millimeter rounds at 1,000 meters. I understand that the objective
    requirement will not be met for the base vehicle, and that the Marine
    Corps is not pursuing an add-on armor capability to meet the objective
    requirement.
        I am also concerned about the underbody protection which I
    understand only provides protection up to a 2.2 pound mine. This is
    significantly less than an up-armored HMMWV which provides protection
    against a 12 pound mine in the front and a 4 pound mine in the rear. Do
    not the Iraq lessons learned about armor protection also make you
    concerned about the survivability of the EFV? What do you intend to do
    about it?
        General Mattis. By design, the EFV's primary role in combat
    operations is in respect to the amphibious aspect of maneuver warfare.
    From the over the horizon swim, to breeching a defended shoreline, to
    quickly advancing deep inland to the objective, the EFV will protect
    our most valuable asset (the marine) per its intended design. The
    Marine Corps has designed the EFV to perform a mission that requires
    balance in its capabilities. Land and water speed, mobility, firepower
    and lethality, communications, and capacity to carry a reinforced rifle
    squad have been balanced along with the force protection and
    survivability capabilities. An increase in armor protection using
    today's technology would add weight, size, and cost to the EFV. As
    light weight armor technology further advances, we will procure
    materiel solutions to enhance the EFV where applicable.
        Global war on terrorism lessons learned with respect to the IED
    threat proves that use of IEDs is more consistent with sustained
    operations ashore following maneuver to the objective. During OEF/OIF
    decisive operations, IEDs were not a significant threat until after the
    Iraqi government was removed and coalition forces were assigned zones
    to conduct security and sustainment operations (SASO). Using tactics,
    techniques, and procedures, through lessons learned, our existing
    Assault Amphibian Vehicle (AAV) units participating in OIF SASO
    operations are primarily conducting ``dismounted'' operations and are
    also used as a Quick Reaction Force and in reinforcing roles. By
    design, our armored HMMWVs and MTVR trucks, and Light Armored Vehicles
    (LAVs) are the primary tactical vehicles used to conduct SASO
    operations.

                 joint improvised explosive device neutralizer
        21. Senator Kennedy. General Gardner, last month the media reported
    that the deployment of the Joint IED Neutralizer (JIN) to Iraq was
    delayed by the Joint IED Defeat Organization (JIEDDO) pending further
    testing. However, it was also reported that the Marine Corps decided to
    circumvent the testing schedule and send JIN units to al Anbar province
    for use by the marines there. According to the media, based upon its
    performance there, Marine commanders have said that they hope it can
    eventually be used throughout Iraq. To the extent that you can answer
    this in an open forum, why did the Marine Corps differ with the JIEDDO
    and decide to send JIN units to Iraq?
        General Gardner. In understanding the context of the question, the
    Marine Corps did not differ with the JIEDDO. The Marine Corps conducted
    an independent review of JIN when JIEDDO proffered systems previously
    declined by Multi-National Corps Iraq (MNC-I). At the conclusion of the
    Marine Corps review, JIEDDO sponsored a demonstration of JIN for the
    Commanding General of Marine Forces Central Command (CG MARCENT) and
    other senior Marine commanders at the Army National Training Center
    (NTC). Subsequent to this demonstration, CG MARCENT decided that an
    operational evaluation of JIN in its current state would place marines
    at risk without bringing a corresponding increase in capability and the
    Marine Corps did not deploy JIN to Central Command (CENTCOM). This
    decision was made by the warfighting commander for operational reasons
    and was not influenced by JIEDDO or the Marine supporting structure.

        22. Senator Kennedy. General Gardner, what has the Marine Corps
    learned, and what recommendations does the Marine Corps have with
    respect to further deployment of the JIN?
        General Gardner. [Deleted.]

                              resetting the force
        23. Senator Kennedy. General Gardner and Admiral Crenshaw, the
    Marine Corps estimate for ``resetting'' the Marine Corps from the Iraq
    conflict is $11.7 billion. Does this estimate include all of the
    funding for Marine equipment, particularly aircraft, procured through
    the Navy--so-called ``blue in support of green'' money?
        General Gardner. Of the $11.7 billion total Marine Corps reset the
    force estimate, approximately $2.7 billion is ``blue in support of
    green.'' Most of this requirement ($2.5 billion) is for procurement of
    aviation systems such as the MV-22, CH-53, or the restoration of other
    aircraft to serve as ``gap-fillers'' until successor platforms enter
    the inventory. The remaining requirement is spread across several
    appropriations, with $100 million for depot level maintenance of
    aviation assets and $100 million for weapons, ammunition, research and
    development, and other procurement.
        Admiral Crenshaw. The Navy submitted an estimate for ``resetting''
    the force following the Iraq conflict. With regard to aircraft, the
    Navy's estimate does not include Marine Corps aircraft.

                          submarine design capability
        24. Senator Kennedy. Admiral Crenshaw, I appreciate your concern
    for the potential loss of submarine design capability. While you are
    focusing your continued design work on cost reduction initiatives, I
    would ask you to look at modifying the Virginia class design to support
    a mixed gender crew. This would increase the potential pool of talent
    available to serve in our submarine force, perhaps reducing recruiting
    and retention costs. Would this be possible for a Virginia class
    modification and for future submarine designs?
        Admiral Crenshaw. The Navy recognizes assigning women to submarines
    offers potential advantages, and we continue to review this
    periodically. However, due to their very unique space limitations,
    equipment density, and design constraints, Navy policy currently
    remains unchanged. Our experience and commitment with integrating women
    on other platforms is not necessarily a model for change on submarines
    due to the unique submarine environment and mission.
        Although the Virginia class design incorporates improvements in
    habitability over previous submarine classes, it does not provide
    berthing and sanitary facilities of appropriate size for a mixed gender
    crew. To provide berthing and sanitary facilities of appropriate size
    for a mixed gender crew would require significant arrangement
    modifications to the Virginia's design. Redesign of the Virginia class
    to accommodate mixed gender crews would increase cost at a time when
    Navy's goal is to reduce Virginia's cost to $2.0 billion (fiscal year
    2005$).
        The submarine force continually reviews personnel recruitment and
    assignment policies to expand and diversify available talent. As the
    requirements for future submarine designs are developed, the
    incorporation of mixed gender crews will continue to be reviewed.

        [Whereupon at 5:30 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                             TUESDAY, APRIL 4, 2006

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

                   POSTURE OF THE U.S. TRANSPORTATION COMMAND

        The committee met, pursuant to notice, at 3:37 p.m. in SR-
    222, Russell Senate Office Building, Senator James M. Talent
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Talent and Kennedy.
        Majority staff members present: Stanley R. O'Connor, Jr.,
    professional staff member; and Sean G. Stackley, professional
    staff member.
        Minority staff member present: Creighton Greene,
    professional staff member.
        Staff assistants present: Micah H. Harris and Jessica L.
    Kingston.
        Committee members' assistants present: Christopher J. Paul,
    assistant to Senator McCain; Lindsey R. Neas, assistant to
    Senator Talent; and Mieke Y. Eoyang and Joseph Axelrad,
    assistants to Senator Kennedy.

          OPENING STATEMENT OF SENATOR JAMES TALENT, CHAIRMAN

        Senator Talent [presiding]. We'll go ahead and start the
    hearing. I know Senator Kennedy has been on the Senate floor
    debating, and I understand he is on the way. In the past, what
    we have done is gone ahead and begun hearing, and then when the
    Senator arrives, we'll just stop and have him give his opening
    comments and then proceed with the hearing.
        The subcommittee meets today to receive testimony on the
    posture of the United States Transportation Command
    (USTRANSCOM) and strategic lift capabilities in review of the
    National Defense Authorization Request for Fiscal Year 2007. We
    are very pleased to have with us today General Norton A.
    Schwartz, who is the Commander of USTRANSCOM, and General
    Duncan McNabb, who is the Commander of the Air Mobility Command
    (AMC). I want to welcome you gentlemen. Thank you for taking
    the time to be with us today to offer your opinions on a wide
    variety of important subjects, and especially I want to thank
    you for your outstanding leadership and service to the country
    in very crucial times.
        Our Nation's position of international leadership is
    inseparable from our ability to provide persistent strategic
    lift of personnel and material to every corner of the globe
    virtually on demand. Whether it's sustaining operations in Iraq
    and Afghanistan or performing the broad missions of
    peacekeeping operations, humanitarian relief operations, joint
    service operations, and emergent response throughout the world,
    the performance of the airmen, the soldiers, the sailors, and
    the merchant marines conducting these lift operations every
    hour of every day deserve our highest praise. It's an honor for
    me to say to you two how deeply proud we are of the men and
    women under your command serving around the world and to offer
    through you our most sincere gratitude for their service and
    their family sacrifice.
        The purpose of today's hearing is to discuss the posture of
    the USTRANSCOM and the vision for future strategic lift
    capabilities. We are particularly interested in your views of
    the effect current operations are having on the Nation's
    mobility forces, experience gained in support of the growing
    number of lift requirements, and challenges faced by the
    regional commanders. Today's first priority must be to meet the
    demands current operations in Iraq and Afghanistan are placing
    on our forces. At the same time, however, we are tasked with
    sizing and shaping the future force. In so doing, we must
    employ the lessons learned from today's operation to ensure our
    ultimate ability to meet future challenges to our national
    security.
        The subcommittee is interested in your current direction
    regarding the USTRANSCOM's force structure and the results of
    the Mobility Capability Study (MCS). I note with concern the
    variance between the underlying assumptions of the MCS and the
    more demanding conditions experienced by our lift forces as
    they adapt to uniquely stressing mission profiles and unplanned
    loading scenarios. In particular the C-17 Globemaster, which
    has been the workhorse for lift operations in Iraq and
    Afghanistan, is experiencing accelerated airframe wear and
    tear, leading ultimately to accelerated attrition.
        I understand that you have initiated a follow-on study, the
    Focus Mobility Analysis, to address the strategic airlift mix
    of aircraft. I'm certainly going to be interested in learning
    your reasons for that new analysis and the results when they
    are ready. In the interim, and in view of the influence that
    the MCS may have had on the Quadrennial Defense Review (QDR)
    and the fiscal year 2007 budget request, it is important that
    today's hearing follow through in the assessment best
    characterized by the Deputy Secretary as he stated at the
    Senate Armed Services Committee hearing on the QDR, that the
    Air Force may have to buy more than the 180 C-17 transport
    planes now envisioned because C-17s are wearing out rapidly in
    the war. This budget cycle provides a critical opportunity to
    act upon this fact of life observation, which is notably
    consistent with the Air Force's top unfunded requirement prior
    to any irreversible decisions regarding C-17 production.
        In conjunction with C-17 procurement planning, we are also
    interested in your updated assessment of ongoing efforts to
    modernize the C-5 Galaxy aircraft through the Avionics
    Modernization Program and the Reliability Enhancement and
    Reengining Program. These efforts are critical to meeting
    established airlift requirements in support of the national
    military strategy.
        As well, we welcome your insights regarding future force
    planning and the role to be formed by the Civil Reserve Air
    Force (CRAF). Recognizing the criticality of this lift
    component, we are interested in your assessment and
    recommendations regarding employment of CRAF assets for future
    defense planning scenarios.
        This subcommittee has played a significant role in support
    of strategic mobility in the past. We consider it a very
    important area of our oversight jurisdiction. We look forward
    to working with you and your staff as we move forward on this
    budget to provide the resources necessary for continued
    successful performance of these operations while also helping
    to shape the future USTRANSCOM.
        Again gentlemen, I thank you for joining us today. We look
    forward to the candid expression of your views on these various
    subjects as we have always had them in the past. I see Senator
    Kennedy hasn't arrived yet, so let's go ahead and start with
    your statements. General Schwartz, why don't you begin and give
    us your statement? Then when Senator Kennedy comes, at the
    first convenient opportunity, we will break so he can give his
    opening remarks.

      STATEMENT OF GEN. NORTON A. SCHWARTZ, USAF, COMMANDER, U.S.
                         TRANSPORTATION COMMAND

        General Schwartz. Chairman Talent, it truly is a privilege
    to be with you today representing the more than 152,000
    military and civilian men and women that comprise the
    USTRANSCOM and that today are serving the Nation around the
    world. USTRANSCOM's success begins with our people, their
    dedication, and their vision and hard work, which continue to
    improve our ability to support national objectives.
        Our people are the heroes who make it happen and get it
    done. We are a Nation at war, sir, and supporting the
    warfighter is our command's number one priority. USTRANSCOM's
    imperative is to provide outstanding support to the warfighter
    and the Nation by rapidly delivering combat power to the joint
    force commander, effectively linking operating forces to their
    sustainment processes and systems, redeploying forces who have
    served their time in combat, and moving wounded and injured
    troops to locations where they can receive the very best care.
        As the Department of Defense's distribution process owner,
    USTRANSCOM leads a collaborative effort within the logistics
    community to develop system-wide distribution system
    improvements. We execute USTRANSCOM's global mission through
    our component commands--the AMC of the Air Force, the Navy's
    Military Sealift Command, and of course, the Army's Military
    Surface Deployment and Distribution Command (SDDC). I am
    honored to have today the Commander of the AMC, General Duncan
    McNabb, with me before the subcommittee today.
        Our components provide the mobility resources and know-how
    in packages capable of seamless transition from peace to war.
    Despite the very substantial military force structure that the
    components do bring to bear, sir, USTRANSCOM will always be
    dependent on a mix of Government-owned and commercial assets.
    It is through the combination of military and commercial
    capabilities that USTRANSCOM fields a military transportation
    and distribution system that is unmatched anywhere on the
    planet. I could not be prouder of the USTRANSCOM team and our
    national partners. Today, we are supporting the global war on
    terrorism while recently providing humanitarian assistance and
    relief in both America and in nations abroad. Together, we are
    transforming the military deployment and distribution
    enterprise, ensuring our Nation's ability to project national
    military power wherever and whenever the need may arise. In all
    of this, our commitment is that a promise given by us will be a
    promise kept.
        I am grateful to you, sir, and the subcommittee for having
    us before you today for the essential support that you provide
    in enabling our capabilities, and I am ready to take any
    questions that you may have. Mr. Chairman, with your
    permission, may I ask that my prepared statement be submitted
    for the record?
        Senator Talent. Sure, without objection, and I appreciate
    your summarizing it, General. Again, I appreciate how you carry
    out your responsibilities. I have visited USTRANSCOM, and it's
    just unbelievable, the number of men and women and the amount
    of material that you move everyday, and you actually keep track
    of it all while you are doing it, and it's pretty incredible.
        General Schwartz. Not all of it.
        Senator Talent. I said your remarks would be candid and
    they are.
        General Schwartz. Yes, sir.
        [The prepared statement of General Schwartz follows:]
              Prepared Statement by Gen. Norton A. Schwartz, USAF
       introducing the united states transportation command (ustranscom)
    Mission/Organization
        As a unified combatant command (COCOM), USTRANSCOM provides the
    synchronized command and control, transportation, distribution, and
    sustainment which make possible projecting and maintaining national
    military power where needed, with the greatest speed and agility, the
    highest efficiency, and the most reliable level of trust and precision.
    USTRANSCOM's imperative is to provide outstanding support to the
    warfighter through effective operation of the Defense Transportation
    System (DTS) and by providing global patient movement. Further, as the
    Department of Defense's (DOD) Distribution Process Owner (DPO),
    USTRANSCOM leads a collaborative effort amongst the logistics community
    to develop system-wide distribution process improvements. To accomplish
    USTRANSCOM's global joint mission we rely upon our component commands:
    the Air Force's Air Mobility Command (AMC), the Navy's Military Sealift
    Command (MSC), and the Army's Surface Deployment and Distribution
    Command (SDDC). Our components provide mobility forces and assets in a
    force structure capable of seamless transition from peace to war. But
    there is one reality that will not change: we'll never be able to own
    all the aircraft and ships we need--USTRANSCOM will always depend on a
    mix of Government-owned and commercial assets. We simply cannot do
    business without our commercial partners. Together we ``Make it Happen
    and Get it Done.''
        Our wartime objectives are to get the warfighter to the fight,
    sustain the warfighter during the fight, rapidly maneuver the tactical
    warfighter, get the wounded warfighter to needed care, and return the
    warfighter home to family. Whether it is the lives of our sons and
    daughters, sums of wealth, or commercial partner contributions, the
    portion of our Nation's treasure entrusted to us is precious and we
    must be good stewards of that trust.
        The operating tempo (OPTEMPO) of the Nation's mobility forces
    remains high as they support the ever growing number of requirements
    and challenges faced by the regional combatant commanders. It is
    important to note that USTRANSCOM is only postured--from a force
    structure perspective--as a one major war force. Regardless, USTRANSCOM
    supports not one, but all combatant commanders simultaneously, placing
    a premium on our lift assets. Additionally, USTRANSCOM's ability to
    support multiple competing demands is constrained by access and force
    flow dynamics. Our limited transportation assets rely on an optimized
    force flow to meet demands.
    Enduring Themes
        In a dynamic political-military environment, requirements can
    quickly exceed capabilities. USTRANSCOM's challenge is to meet the
    warfighters' requirements while continuing our leading role in the
    transformation of the DOD supply chain. Three themes guide our course:

             Theme One: Investing in the care and quality of
            USTRANSCOM's most valuable resource--our people.
             Theme Two: Continued transformation of key processes,
            leveraging information technology to provide seamless, end-to-
            end distribution management for defense.
             Theme Three: Maintaining force readiness and
            continuous modernization to perform our global mobility
            mission.
                               ustranscom in 2005
    Meeting Our Commitments to the Nation
        The year 2005 found the Nation at war and USTRANSCOM met the
    expectations of a nation on a wartime footing. Our greatest commitment
    remained supporting the global war on terrorism and its three primary
    operations, Operations Iraqi Freedom (OIF), Enduring Freedom (OEF), and
    Noble Eagle (ONE). As in every year since 2001, OIF and OEF mobility
    requirements were sizeable: total deployment, redeployment,
    sustainment, and rest and recreation airlift by AMC moved 1,188,084
    passengers and 457,670 short tons. MSC and SDDC's contributions were
    equally striking with 169 vessels delivering 1.89 million short tons
    (36.9 million square feet). MSC's point-to-point tankers also delivered
    over 1.77 billion gallons of fuel supporting worldwide DOD
    requirements. Our airborne tankers, a critical power projection
    capability, offloaded 1,016.68 million pounds of fuel in support of OIF
    and OEF. Their role in ONE was also significant as tankers offloaded
    20.18 million pounds, replenishing combat air patrol fighters guarding
    major U.S. cities and critical infrastructure.
        Our most urgent responsibility in 2005 has been assisting U.S.
    Central Command (USCENTCOM) in defeating the terrorists and
    neutralizing the insurgency in Iraq. The magnitude of that effort was
    enormous. For example, MSC, only one of the three USTRANSCOM
    components, provided 11,302,666 square feet (565,133 short tons) of
    cargo to USCENTCOM. AMC and SDDC contributions were of similar scale.
        Of utmost importance for USCENTCOM was the movement of armored
    vehicles and add-on armor kits. In calendar year 2005, SDDC, via MSC
    organic and chartered ships and SDDC liner service vessels, shipped
    6,294 Level I Up-Armored Humvees (HMMWVs) or 115 percent of the 5,473
    required by USCENTCOM Army Forces (ARCENT). This total would fill 3.15
    large, medium speed, roll-on/roll-off (LMSR) Bob Hope class vessels.
    The timely delivery of Level II armor, factory-built, add-on-armor
    kits, has also been a pressing priority. During 2005, AMC airlifted
    14,909 short tons of Level II kits for ARCENT, totaling 25,827 kits.
    AMC also lifted 78 special purpose Improvised Explosive Device-
    resistant vehicles weighing 1,098 short tons. Between June and August
    2005, SDDC shipped 763 5-ton truck Level II kits weighing 2,270 short
    tons to ARCENT. USTRANSCOM also met Marine Corps armor needs by
    shipping 966 Level I Up-Armored HMMWVs amounting to 2,270 short tons
    and the airlift of 3,102 short tons of Level II armor, for a total of
    3,276 kits. The total Level II airlift tonnage for the Army and Marine
    Corps was equivalent to 798 fully loaded C-5 aircraft. Movement of
    Level III armor, a locally fabricated steel kit, was completed on 14
    February 2005.
        Force rotations of units to and from Iraq and Afghanistan have
    remained a cornerstone of our OIF/OEF mission. Between January and
    March 2005, AMC airlifted 250,000 passengers and over 11,000 short tons
    while MSC and SDDC moved more than 711,000 short tons via sealift. This
    year, USCENTCOM and USTRANSCOM adjusted rotations to meet increased
    security needs during Iraqi elections and minimized movements during
    the holiday season at home. When the current rotation completes in
    spring 2006, AMC will have moved 227,992 passengers and 17,313 short
    tons by air, along with 530,000 short tons moved by MSC and SDDC by
    surface.
        Other support requirements often have been inescapable during our
    OIF/OEF force rotations, such as unplanned natural disasters which
    required an immediate domestic response.
        After Hurricane Katrina devastated New Orleans and the Gulf Coast,
    DOD deployed 20 people to supplement Federal Emergency Management
    Agency (FEMA) operations planning at Fort Gillem, GA. Fourteen of the
    20 people came from USTRANSCOM and its component commands along with
    five from the Defense Logistics Agency (DLA) and one from the Maritime
    Administration (MARAD). The one-two punch of Hurricanes Katrina and
    Rita prompted a major response from our mobility forces. During
    Katrina, AMC used organic assets in the form of a contingency response
    group (CRG) to reestablish airfield operations followed closely by
    airlifting relief supplies totaling 339 sorties, 13,717 patients/
    evacuees and 5,170 short tons of relief supplies. Air National Guard
    (ANG) support operations totaled 3,087 sorties, 30,898 passengers, and
    10,834 short tons. SDDC support included the redeployment of 82nd
    Airborne and 24th Marine Expeditionary Unit equipment, consisting of
    1,342 pieces of equipment totaling 183,000 sq. ft. (9,150 short tons)
    of cargo, and the procurement of approximately 250 buses for movement
    of personnel. At the request of FEMA, MSC contracted 4 cruise ships
    berthing over 7,000 evacuees and relief workers, while the MSC vessels
    U.S.N.S. Pollux, Altair, and Bellatrix provided over 130 tons of water
    and 1.4 million gallons of fuel.
        Katrina and Rita thankfully were not as massively destructive as
    the tsunami which roared ashore in several Asian nations on December
    26, 2004. USTRANSCOM contributed to Operation Unified Assistance
    without interrupting or slowing the OIF/OEF ``surge'' rotation. Total
    airlift for the relief effort amounted to 2,943 passengers and 3,786
    short tons. One chartered ocean liner delivered 320 short tons of high
    energy biscuits and another vessel redeployed just under 2,000 short
    tons of equipment.
        Another tragedy was the 7.6 magnitude earthquake which killed
    thousands in Pakistan on October 6, 2005. This terrible situation
    threatened to become even worse since the seismic activity left
    thousands injured and homeless in remote locations with the approaching
    cold temperatures of winter. An AMC C-17 loaded with relief supplies
    left Bagram, Afghanistan for Pakistan on October 9, less than 48 hours
    after the earthquake, and additional supplies, including 21 urgently
    needed helicopters, were subsequently airlifted from bases in the
    United States to Pakistan. By late January 2006, AMC's airlift to
    Pakistan totaled 1,674 passengers and just over 5,549 short tons of
    critical relief supplies.
        Amid all these urgent requirements, USTRANSCOM turned over the
    management and reporting of the airlift and sealift for the National
    Science Foundation's (NSF) annual research in Antarctica to U.S.
    Pacific Command (USPACOM). Known as Operation Deep Freeze, mobility
    totals from the 2004-2005 season show how large the operation can be,
    with 573 airlift missions transporting a total of 7,032 passengers,
    5,340 short tons, and 696,214 gallons of fuel. Two MSC supply ships
    replenished the NSF station with 10,964 short tons and 6.1 million
    gallons of fuel. Despite the shift in oversight, USTRANSCOM still
    fulfills needs in Antarctica, providing a C-17 for the airlift mission
    from New Zealand to Antarctica and nine specially trained crews from
    the New York ANG to fly LC-130 missions.
        Our Nation's sons and daughters fight like they train and
    USTRANSCOM understands the importance of meeting our customers'
    training needs without sacrificing the effectiveness of wartime
    mobility operations. For example, by collaboratively managing
    transportation requirements with USCENTCOM, USTRANSCOM assisted
    USCENTCOM conduct of Exercise Bright Star, its longstanding field
    training exercise, for the first time since 2001. In contrast to the
    large-scale Bright Stars of the era before the global war on terrorism,
    Bright Star 05 held the number of airlifted forces to 14,038 passengers
    and 2,207 short tons. Three vessels moved 37,269 short tons for Bright
    Star, far fewer than in years past.
        Similarly, the combined USPACOM exercise in the Republic of Korea,
    Reception, Staging Onward Movement and Integration (RSO&I)/Foal Eagle
    and Unified View 2005, a shared effort by U.S. Joint Forces Command
    (USJFCOM) and USTRANSCOM to integrate deployment and distribution
    processes were also adjusted in scope. Collaborative requirements
    management to meet both critical training and wartime needs is
    essential and makes good sense.
        Conducting ``normal'' operations effectively in demanding times
    extended to the highly visible mission of providing Presidential
    airlift. AMC aircraft supported six foreign trips by President Bush
    during 2005. This support amounted to 5,263 passengers and 5,368 short
    tons, enabling the President to consult with the leaders of three
    allied nations in Western Europe, to pay his respects at the funeral of
    the late Pope John Paul II in Italy, to observe the 60th anniversary of
    the end of World War II in Europe, to take part in a Latin American
    summit meeting in Argentina, and to attend the Asia Pacific Economic
    Conference in South Korea.
        In 2005, USTRANSCOM continued meeting new DOD requirements
    supporting defense support to civilian authorities (DSCA) missions. In
    coordination with United States Northern Command's (USNORTHCOM) Joint
    Task Force Civil Support (JTF-CS), USTRANSCOM is refining ground and
    air transportation options to provide rapid access and deliver
    consequence management forces to chemical, biological, radiological,
    nuclear, and high yield explosive (CBRNE) affected sites. Additionally,
    USTRANSCOM, in coordination with USNORTHCOM's Joint Task Force National
    Capital Region (JTF-NCR), is tailoring rapid high-priority airlift for
    survivability and emergency medical evacuation of senior Government
    officials to ensure continuity of our Nation's governing bodies.
        In addition, USTRANSCOM provided immediate response airlift for
    three Quick Reaction Force (QRF) deployments, requiring 12 missions
    covering each U.S. QRF sector. AMC logged approximately 1,000 man-days
    supporting heightened QRF response postures for high-visibility world
    events, including the G8 Summit and Hurricane Katrina. These
    deployments honed joint processes with USNORTHCOM and exercised our
    immediate response capabilities.
        USTRANSCOM and AMC also provided wildland firefighting support. Air
    National Guard and Air Force Reserve C-130 units, equipped with the
    Modular Airborne Fire Fighting System (MAFFS), were used to knockdown
    emerging fires. MAFFS aircraft and crews flew 332 sorties and performed
    343 retardant airdrops, preventing millions of dollars in damage and
    saving countless acres of forest and wilderness areas. USTRANSCOM and
    AMC are working with the National Guard Bureau and National Interagency
    Fire Center to field a more reliable and capable MAFFS II system on the
    C-130/C-130J in July 2006.
        Patient movement, one of our more poignant missions, transports
    America's wounded and sick warriors, including battlefield casualties,
    to higher levels of care. During calendar year 2005, USTRANSCOM
    supported 24,942 Patient Movement Requests (PMR) worldwide.
    USTRANSCOM's Joint Patient Movement Requirements Center (JPMRC)
    performed as a patient movement management cell coordinating the
    movement of personnel from the war zones in Iraq and Afghanistan back
    to Europe and the United States. Their unparalleled level of care
    combined with the safe and efficient movement to higher levels of care
    enhanced patient survivability, reaching nearly 90 percent today. The
    DOD patient movement system, and in particular aeromedical evacuation,
    has transformed into a one-of-a-kind asymmetrical asset. No other
    nation on earth has the capability to care for and move her most vital
    possession, her people, as safely or effectively in war and in peace.
    USTRANSCOM moved 3,813 patients via the National Disaster Medical
    System during Hurricanes Katrina and Rita. We are proud of our
    unwavering commitment to bring every warfighter home from the fight.
    This promise given to our warfighters will continue to be a promise
    kept.
                      people: ustranscom's greatest asset
    Shortages/Areas of Concern
        Operational outcomes such as those recounted previously require
    exceptionally dedicated professionals. USTRANSCOM's mobility team,
    comprised of Active-Duty, Reserve, National Guard, civilian, and
    contractor personnel, is literally the engine that powers force
    projection. Meeting the needs of our people in terms of manning and
    quality-of-life issues leads to increased readiness, and higher
    retention, and is absolutely the right thing to do.
        The global war on terrorism is requiring us to employ our mobility
    assets in new and demanding ways. The stress is evident in several key
    fields. In order to meet the high demand for C-130s, the command hosted
    a global sourcing conference that affected other COCOMs and Services.
    Currently, we are using four U.S. European Command (USEUCOM), four
    USPACOM, and four Navy-assigned C-130s to offset high temporary duty
    (TDY) rates for USTRANSCOM-assigned C-130 units. In a post-mobilization
    setting (majority of Air Force Reserve Command (AFRC) C-130
    mobilization ends summer 2006, some residual ANG/AFRC mobilization
    capability remains) Active-Duty intratheater aircrew TDY rates will
    likely increase approximately 20 percent, if requirements remain
    constant. In addition, as C-17 Theater Direct Delivery (TDD) capability
    is used to further offset C-130 deployments, C-17 utilization and TDY
    rates will also increase. We face a similar scenario with tanker
    assets.
        More than any other COCOM, USTRANSCOM relies on the Reserve
    component (RC) for peacetime responsiveness and wartime capability. The
    RC provides approximately 56 percent of USTRANSCOM's personnel, 57
    percent of continental U.S. (CONUS) surface lift capability, and 59
    percent of airlift capability. In fact, the Air Reserve Component (ARC)
    operates 30 percent of outsize/oversize airlift fleet (C-5s and C-17s),
    owns more than 62 percent of the KC-135 force, and over 61 percent of
    our fleet of C-130s.
        High rates of RC volunteerism for intertheater airlift and tanker
    missions have filled a shortfall in capabilities the Active-Duty has
    been unable to provide. To put this in perspective, in fiscal year
    2001, RC support to USTRANSCOM staff accounted for 28.2 man-years.
    However, with the increased OPTEMPO generated by the global war on
    terrorism, support increased to 114.1 man-years in fiscal year 2002,
    96.2 man-years in fiscal year 2003, 95.4 man-years in fiscal year 2004,
    94.8 man-years in fiscal year 2005 and 89.4 man-years projected in
    fiscal year 2006. USTRANSCOM will depend on volunteerism to meet
    requirements for the foreseeable future.
        The President's executive order authorizing partial mobilization
    (up to 1 million reservists for up to 2 years) has proven crucial
    during OIF, OEF, and ONE. Although thousands of RC forces volunteered,
    USTRANSCOM and its components were required to mobilize thousands more.
    With the pending completion of involuntary mobilized tours of duty at
    the end of fiscal year 2006, the number of temporary duty days for the
    remaining intratheater airlift forces could increase as much as 33
    percent. It is essential to maintain RC mobilization agility and
    flexibility as we respond to warfighter needs in the future.
    Quality-of-Life Issues
        With the Nation maintaining an extended war footing, quality-of-
    life programs can alleviate some stress experienced by our people. The
    movement of service members' personal property is one such quality-of-
    life issue. SDDC is developing the Families First Program, a
    comprehensive plan to significantly revamp DOD household goods
    movements, which began with its Phase I implementation in 2004. Phases
    II and III are currently under development. Selecting transportation
    service providers based primarily upon performance and customer
    surveys, and the inclusion of full replacement value for lost or
    damaged personal property transported at government expense, are
    paradigm shifts and significant quality-of-life enhancements.
        It's imperative that as we demand so much, we watch out for our
    military family by providing proper manning and relieving unnecessary
    stress when and where possible. Projecting America's national military
    power depends on the heroic work of USTRANSCOM's people.
      transformation: distribution transformation and process improvement
    Distribution Process Owner (DPO)
        In its role as the DPO, USTRANSCOM's effort to improve deployment
    and distribution processes has yielded real results due in part to
    dedicated oversight. Within the DPO management structure, the DPO
    executive board is the senior decisionmaking forum charged with
    implementing DPO initiatives. With representation from the Director,
    DLA, Joint Staff (JS) logistics directorate (J4) and the Deputy Under
    Secretary of Defense for Logistics and Material Readiness, this forum
    ensures collaboration within the DOD and a single view of supply chain
    management challenges. To ensure the DPO executive board remains
    focused on COCOM and Service requirements, the Distribution
    Transformation Task Force (DTTF), with representation from each COCOM,
    Service, Office of the Secretary of Defense (OSD), DLA, and the Joint
    Staff, advises and works to solve near-term warfighter issues and
    refine COCOM support.
        USTRANSCOM and USCENTCOM are eliminating seams between strategic
    and theater distribution using the USCENTCOM Deployment and
    Distribution Operations Center (CDDOC). The CDDOC enables USCENTCOM to
    improve operations and avoid costs through a collaborative national
    partnership with USTRANSCOM, USJFCOM, DLA, and the Services, providing
    increased visibility over deployment and distribution flow. The CDDOC
    improved readiness by intensively managing critical items, such as add-
    on-armor kits to fulfill critical needs, and by carefully managing unit
    moves with the Single Ticket Program by moving deploying troops to the
    fight and redeploying them home more quickly. Single Ticket accelerated
    force movements, increased troop airlift efficiency, and pushed
    passenger seat utilization above 94 percent.
        Working with AMC and DLA, CDDOC has also championed the Pure Pallet
    Initiative. Individual 463L airlift pallets are built and shipped with
    cargo for a single customer, simplifying and accelerating the shipment
    process by removing the requirement to break down, sort, re-palletize
    and distribute items to individual customers. In a similar but
    unrelated initiative, CDDOC has teamed with AMC to improve 463L pallet
    inventory tracking, reducing cycle time and making an additional 18,000
    pallets available for use (a savings of $27.9 million). Also enacted
    with the Public Warehousing Corporation, is an inspection and repair
    procedure. Of 11,000 pallets inspected over 4,200 were returned to
    service, avoiding almost $1 million in depot repairs.
        Similarly, in cooperation with SDDC, USTRANSCOM's global container
    manager, USTRANSCOM has made significant progress in container
    management. By teaming with USCENTCOM and industry, USTRANSCOM has
    reduced container storage needs with improved material management
    processes. The cost of storing cargo in containers has been reduced
    from a high of $16 million per month to less than $11 million. Long-
    term process and contract changes to enhance container use are underway
    and are migrating to other COCOMs, including improvements such as
    tagging containers for better visibility and leveraging commercial
    systems to enhance material management.
        We have implemented a cost-management process that allowed us to
    capture savings and cost avoidances resulting from DPO-related
    improvements. From October 2004 through November 2005, USTRANSCOM
    avoided $345.12 million in extra costs by shifting transportation mode
    from airlift to sealift or from truck to rail, canceling redundant
    storage contracts after DLA built the new defense distribution center
    in Kuwait, changing the management and repair of 463L pallets,
    returning transportation equipment to the supply system, and upgrading
    a lower cost communications system/mode. Overall validated cost
    avoidances facilitated by the DPO were $638.42 million as of November
    2005. The CDDOC was responsible for $50.58 million of these costs.
        USTRANSCOM is taking CDDOC lessons learned and with the cooperation
    of the other COCOMs, applying them to other theaters, spearheading the
    standardization of a Joint Deployment and Distribution Operation Center
    (JDDOC). Each COCOM has established a permanent JDDOC, scaled for their
    region and assigned missions, and created by reorganizing existing
    theater structures to provide the authority and capability to
    synchronize deployment and distribution processes.
        The USPACOM JDDOC (PDDOC) was quickly tested in synchronizing the
    massive influx of humanitarian aid into the tsunami-devastated parts of
    South Asia in December 2004. PDDOC has also established forward
    elements in Korea and Japan, PDDOC-K and PDDOC-J, respectively. These
    organizations have been observed and assessed during Exercises RSO&I/
    Foal Eagle, Ulchi Focus Lens, and Terminal Fury, demonstrating their
    worth and codifying their relationships.
        USNORTHCOM's JDDOC (NDDOC) was also tested when Hurricane Katrina
    devastated the Gulf Coast. The NDDOC served as manager of deployment
    and distribution for USNORTHCOM and JTF-Katrina. NDDOC Sustainment
    Division's DLA representatives supported FEMA during relief operations
    with contracting support and the provision of supplies. Progress was
    made in establishing an effective process for sustainment flow between
    FEMA and Federal agencies, and promoting visibility of sustainment and
    retrograde material despite the lack of common in-transit visibility
    (ITV) tools and electronic data interchange (EDI) solutions.
        USEUCOM's JDDOC (EDDOC) reached initial operational capability in
    May 2005, and has leveraged DPO advisory team visits in conjunction
    with Exercises Sharp Focus and Flexible Response. U.S. Southern
    Command's (USSOUTHCOM) JDDOC (SDDOC) has reached full operational
    capability, refining its operations through the multi-nation Exercise
    New Horizons.
        In order to provide the best possible support to combatant
    commanders, Services, and agencies, USTRANSCOM is spearheading the
    development of deployment and distribution command and control (D2C2)
    concepts, procedures, and associated doctrine to enable the combatant
    commanders to manage theater logistics operations with more visibility,
    control, precision, and efficiency. USTRANSCOM's D2C2 assets will be
    trained to a common standard, possess common C2 information technology
    systems to ensure connectivity across the joint deployment and
    distribution enterprise, and will be able to reach back to the national
    partners to ensure the rapid deployment and distribution of forces and
    materiel. In addition to the JDDOC functional elements like Joint Task
    Force-Port Opening (JTF-PO) and the Director Mobility Forces-Surface
    (DM4-S) have been created to support deployment and distribution
    activities. A JTF-PO, established from USTRANSCOM aligned forces and
    deployed to regional combatant commanders, is capable of quickly
    opening and operating ports in specific theater locations. These forces
    will chop to the supported COCOM and will operate until being replaced.
    The DM4-S will synchronize and direct the movement of surface
    transportation resources to ensure uninterrupted throughput at ports of
    debarkation (air and sea) to the theater as prescribed by the Combined/
    Joint Force Land Component Commander.
        USTRANSCOM is also active in defining future warfighting concepts
    and needs and has partnered with the Army to develop a joint
    integrating concept (JIC) for distribution. Ultimately, this JIC will
    drive the creation of a Joint Deployment Distribution Enterprise with
    the wherewithal to ensure effective force movement and sustainment
    support to the warfighter.
        Forces to be deployed must be quickly and effectively sourced. In
    2005, USTRANSCOM was assigned the role as the single DOD Mobility Joint
    Force Provider in order to maintain visibility of global transportation
    capabilities and synchronize the availability of scarce mobility
    forces. In this role, USTRANSCOM is responsible for the efficient,
    rapid, worldwide availability of mobility forces in support of national
    security priorities.
        Similarly, and to solidify USTRANSCOM's role as the DPO, it was
    essential to amend the wording in the Unified Command Plan (UCP),
    language we expect to be approved by the Secretary of Defense and the
    President. We have recommended the UCP embody the mandate to employ our
    core competencies, to coordinate and supervise the DOD distribution
    system to provide interoperability, synchronization, and alignment of
    DOD wide, end-to-end distribution.
        USTRANSCOM is using a recently established research and development
    (R&D) funding line to partner with the Services, defense agencies,
    other non-DOD government organizations, industry, and academic
    communities to improve our force projection and distribution
    capabilities. This R&D line enables us to leverage future technologies
    to address intermodal inefficiencies and transform our processes.
    USTRANSCOM is seeking limited Research Development Test and Evaluation
    (RDT&E) budget, and acquisition authority to pursue intermodal
    distribution needs which are not addressed by existing R&D activities.
    Our proposal leaves traditional organize, train, and equip
    responsibilities with the Services, but aligns responsibility with
    authority by providing an assigned RDT&E mission, receipt of a modest
    RDT&E budget line, and codifying RDT&E acquisition authority.
        In order to ensure our initiatives are producing results for the
    warfighter, USTRANSCOM evaluates the distribution enterprise's
    institutional health through simple but comprehensive metric analysis.
    Distribution analysis measures the effectiveness of moving personnel
    and material to meet the warfighters' needs based on their
    requirements; the quantities ordered and delivered on the date
    specified. Examples of the analysis products include intermodal
    distribution, requisition wait time, and add-on armor reports.
    Intermodal distribution reports pertain to each COCOM's intermodal
    distribution lane (point of supply to point of use), and measure the
    lane's performance to determine lane effectiveness. Requisition wait
    time reports pertain to the Defense Distribution Depot Kuwait,
    Southwest Asia (DDKS) and the Theater Distribution Center (TDC). These
    reports flagged the need to reduce the average wait time from the DDKS
    and TDC from 22 days in March 2005 to a current 12.2 days and we are
    nearing the goal of 9 days. Finally, the add-on armor reports provide a
    daily snapshot of the armor kits leaving the contractor facility and
    arriving at Charleston AFB, Incirlik AB and Balad aerial ports. These
    reports support better modal transportation decisions while improving
    user confidence in USTRANSCOM distribution processes.
        In addition to improving the distribution process within the DPO
    framework, USTRANSCOM continues to engage in the Defense Business
    Systems Management Committee that oversees the development of world-
    class business operations in support of the warfighter. In particular,
    we're moving out as the distribution portfolio manager to streamline
    distribution systems to ensure effective use of information technology
    (IT) resources and to reduce duplicative system overlap and fill gaps
    in the Joint Deployment and Distribution Architecture (JDDA).
        One example of a cross-department improvement of business
    architecture is the Defense Enterprise Accounting and Management System
    (DEAMS), a joint initiative between USTRANSCOM, the Air Force, and the
    Defense Finance and Accounting Service. The overall objective of DEAMS
    is to implement a single integrated finance system to provide reliable,
    accurate, and timely information, which will service our Army, Air
    Force, and Navy components' working capital fund financial needs. It
    will also combine Transportation Working Capital Fund multiple legacy
    billing systems into a single billing module. Upon completion of the
    system integrator selection, the integration process is expected to
    begin by the second quarter of calendar year 2006.
        USTRANSCOM also looks to the commercial sector for transformational
    efficiencies. The Defense Transportation Coordination Initiative (DTCI)
    is a distribution initiative that contributes to logistics
    transformation and the Under Secretary of Defense for Acquisition,
    Technology, and Logistics' goal to integrate logistics. The DTCI
    concept will use a commercial transportation coordinator to integrate
    and synchronize the movement of DOD freight in the CONUS, improving
    effectiveness and efficiency of materiel movement. USTRANSCOM, in
    partnership with DLA, is leading the effort, and will award the
    contract in September 2006. Transition will commence beginning in
    October 2006 with actual phase in the first DOD site in January 2007.
    Defense Courier Service Returns to USTRANSCOM
        Another cross-department initiative is the return of the Defense
    Courier Service (DCS) to USTRANSCOM. This move began when Program
    Budget Decision (PBD) 410, dated 5 December 2003, directed the
    realignment. On 15 November 2005, the Defense Courier Division under
    USTRANSCOM Directorate of Operations (J3) assumed operational control
    of worldwide defense courier stations and continues to synchronize
    defense courier related activities for our global customers.
    USTRANSCOM Sustainment, Force Flow Conferences
        Collaboration is a must for USTRANSCOM success. In 2005, we
    continued implementation of Adaptive Planning and Collaborative Force
    Analysis, Sustainment, and Transportation Force Flow Modeling, by
    supporting nine Combatant Commander Operational/Concept Plan Force Flow
    Conferences for USEUCOM, USNORTHCOM, USPACOM, and U.S. Strategic
    Command (USSTRATCOM) as well as functional planning for USSOUTHCOM.
    Additionally, USTRANSCOM hosts biannual USCENTCOM-chaired force flow
    conferences to forecast force deployments, redeployments, and rotations
    in support of OEF/OIF operations. This collaborative effort allows the
    COCOM to shape the flow of forces to reflect operational requirements.
        This process has been further enhanced with the addition of a
    sustainment conference. Held in parallel for the first time in the fall
    of 2005, this Force Flow/Sustainment conference provides visibility of
    sustainment requirements providing a clearer picture of COCOM needs and
    enabling the two commands to prioritize movements during surge periods.
                    ustranscom's readiness and modernization
    Antiterrorism and Force Protection
        USTRANSCOM ability to accomplish its global mission rests on our
    ability to protect our personnel and assets. We are improving force
    protection through intelligence information sharing, physical
    countermeasures, and employee screening, partnering with COCOMs, our
    components, the Department of Homeland Security (DHS) and commercial
    industry. To better share information, SDDC is sponsoring surface
    secure classified communication efforts to integrate the Association of
    American Railroads (AAR) by late calendar year 2006. In addition, SDDC
    has explored similar capability discussions with the American Trucking
    Associations (ATA) to facilitate ATA gaining secure connectivity with
    SDC.
        As an interim solution, SDDC provides classified intelligence
    exchanges via Transportation Security Operations Center secure systems
    accessible by ATA and AAR representatives, and hosts weekly
    intelligence sharing sessions and secure telephone connectivity with
    maritime commercial partners. Protecting our military and commercial
    seaports will continue to be a serious challenge. USTRANSCOM and SDDC
    have continued to secure funding to further improve infrastructure
    security at the Military Ocean Terminal Sunny Point (MOTSU), North
    Carolina and the Military Ocean Terminal Concord (MOTCO), California.
    In 2005, waterside protective barriers at MOTSU were completed and
    $789,000 was invested for two new physical security improvements. As we
    upgrade and better fortify these installations from terrorism or
    natural disaster, the difficulty ahead lies in providing an adequate
    level of security force manning with sustained funding to support base
    operations and protect our vital national arms, ammunition, and
    explosives (AA&E) transshipment ports.
        In 2005, SDDC mobilized a small compliment of the remaining Army
    Reserve military police (MP) elements to augment SDDC civilian ports
    security. However, their departure and lack of backfill requires
    USTRANSCOM to seek alternatives such as contracting security personnel
    drawn from local sheriff/police departments during surge periods.
    However, availability of these security forces will be at risk during a
    local crisis, which makes this solution less than optimal. During a
    localized state crisis involving a strategic DOD seaport of
    embarkation, DOD may need to depend on augmentation under state control
    until military augmentation would be available.
        Controlling access to restricted transshipment areas is also
    essential to providing comprehensive force protection. USTRANSCOM and
    SDDC are working with OSD, the Transportation Security Administration
    (TSA), ATA, and several AA&E carriers to develop an appropriate DOD
    identification card, mandated by the Maritime Security Act.
        USTRANSCOM also continues to upgrade the access, control, and
    vetting of the transportation workforce that loads, unloads, and mans
    its strategic sealift fleet. MSC has standardized its ship visitor
    badge system, distributed new badges to its entire fleet and hired a
    new screener at the El Paso Intelligence Center.
        Operation Vigilant Mariner (OVM) continues to protect our sealift
    assets following the Secretary of Defense's designation of the Navy as
    executive agent for force protection of military sealift assets.
    Leading the way is the Maritime Force Protection Command (MARFPCOM),
    activated on 1 October 2004. Working in close coordination with MSC,
    MARFPCOM continues to provide point defense for sealift assets
    supporting contingency operations, using Active-Duty personnel and 54
    Reserve component teams ready to deploy.
        To protect its aircraft and aircrews from rapidly advancing and
    highly-proliferated infrared (IR) manportable air defense systems
    (MANPADS), AMC continues to field the Large Aircraft Infrared
    Countermeasures (LAIRCM) system, an extremely capable system that has
    successfully flown in combat on C-17s and C-130s. Likewise, AMC has
    established a requirement for a new capability called Advanced
    Situational Awareness and Countermeasures (ASACM), which will provide
    detection, identification, and location of radio frequency (RF)
    threats, increasing aircrews' survivability in an RF threat
    environment.
        Currently, AMC has no technical capability other than accepting
    cargo from ``known and trusted'' sources and performing random physical
    searches with canines to meet the need to non-intrusively inspect cargo
    prior to air transport, a method which leaves aircraft and passengers
    at risk. USTRANSCOM supported the ``explosive screening'' initiative by
    providing the majority of funding thus far and AMC plans to fund 172
    commercial off-the-shelf (COTS) FidoTM hand held systems in
    their fiscal year 2008-fiscal year 2013 POM. FidoTM is a
    vapor and particle explosive detection device currently optimized to
    detect TNT and DNT explosive materials, and black and smokeless powders
    and can screen cargo prior to pallet build-up, rolling stock, and other
    types of cargo entering into the DTS.
        USTRANSCOM's Critical Infrastructure Program (CIP) made excellent
    progress this past year, initiating information sharing with numerous
    DOD and interagency organizations such as the Department of
    Transportation and DHS. Those CIP actions support and are supported by
    our participation in the National Port Readiness Network, chaired by
    the MARAD, chartered to ensure seaport readiness to support military
    deployment, sustainment, and redeployment while minimizing commercial
    traffic disruption.
        With DOD's increasing role in combating the global proliferation of
    weapons of mass destruction and for providing relief in potentially
    hostile environments, USTRANSCOM's ability to detect, decontaminate,
    and operate in a CBRNE and/or toxic industrial material environment
    will continue to require attention and funding for the foreseeable
    future. We are making great strides in the areas of individual
    protective equipment, throughput capability, and technological
    improvements, but there is more work ahead in the areas of detection,
    decontamination, and policy development, with emphasis on a
    comprehensive DOD cleanliness policy.
        USTRANSCOM has embarked on meaningful intelligence reforms under
    the aegis of the DOD's remodeling defense intelligence (RDI)
    initiative, a Secretary of Defense effort to operationalize
    intelligence, improving the capacity to anticipate threats and warn of
    impending actions, and strengthening the COCOM's ability to conduct
    intelligence activities, through joint intelligence operations centers
    (JIOC).
        The Joint Intelligence Operations Center--Transportation
    (JIOCTRANS) will position USTRANSCOM to engage other JIOCs early in the
    planning process, to identify and prioritize requirements and codify
    our responsibilities to synchronize transportation intelligence across
    the far-flung, collaborative defense intelligence enterprise.
    Additionally, the Defense Intelligence Agency's (DIA) regional support
    center concept, in which DIA assumes the role of intelligence community
    IT service provider, will result in a consolidation of sensitive
    compartmented information (SCI) IT services and a reduction in
    intelligence IT billets.
        Another major pillar of RDI is the Defense Intelligence Analysis
    Program (DIAP). DIAP represents a major departure from past
    intelligence constructs as it emphasizes analysis over production, and
    in so doing will allow JIOCTRANS to move beyond transportation
    infrastructure analysis to analysis of transportation as a system of
    systems in support of COCOM planning and execution missions.
        Additionally, USTRANSCOM has created initiatives to enhance
    information-sharing between USTRANSCOM, its components, and selected
    coalition and commercial partners. The Intelligence Directorate has
    established the DTS Info-Share program as an unclassified internet-
    based system for sharing threat warning, incident, and trend reporting.
    USTRANSCOM conducts quarterly modal threat meetings between the DHS and
    transportation agencies for review of threats to and mitigation efforts
    for transportation nodes. The effort's end-state requires continued
    USTRANSCOM pursuit of new partnerships with DOD and non-DOD
    organizations, particularly DHS and TSA.
    Accelerated Deployment Planning & Improved Total Asset/In-Transit
            Visibility
        USTRANSCOM remains committed to accelerating the planning of
    deployments and upgrading in-transit visibility (ITV) at all points of
    the deployment and distribution pipeline. An important initiative,
    Focus Warfighter, was born out of our advanced concept technology
    demonstration, Agile Transportation for the 21st century (AT21). The
    USTRANSCOM DDOC reorganized, reorienting its processes to
    collaboratively plan with the COCOMs. The goal is to create a
    comprehensive plan that aligns and provides longer windows of
    visibility on various requirements such as exercises, troop rotations,
    deployment, sustainment, and redeployment and eventually gives regional
    commanders validation authority on missions like Special Assignment
    Airlift Missions (SAAMS) that currently are not in the COCOMs' purview.
    With awareness of all requirements we expect to be able to plan
    ``normal operations'' more efficiently and adjust more rapidly to
    crisis situations.
        AT21 also showed us COTS products can enhance and support our
    overall transportation planning and movement processes with the
    potential for significant savings. One such tool is Transportation
    Visualizer (TransViz), a visualization and collaboration tool used for
    strategic transportation planning. TransViz will revolutionize the way
    we analyze transportation movement information, share thoughts,
    evaluate courses of action, and make informed, effective and timely
    decisions. We expect TransViz to be operational at USTRANSCOM by March
    2006.
        The Global Transportation Network (GTN) integrates transportation
    information from over 23 DOD and 125 commercial source systems
    supporting USTRANSCOM's global mission. With the discontinuation of GTN
    for the 21st century (GTN 21), we are partnering with DLA and JS J4 to
    best meet our customers' ITV needs. Currently, we are bringing two
    similar systems, GTN and DLA's Integrated Data Environment, together
    under the same acquisition management framework.
        We have also implemented active Radio-Frequency Identification
    (RFID) technology at our major strategic air and sea ports to provide
    COCOMs detailed cargo movement tracking information. In addition,
    USTRANSCOM is partnering with DLA, Air Force, Army, and USPACOM to
    implement the Alaska, Active-Passive, Inter-modal Deployment (RAPID)
    project. RAPID will support an inter-modal, RFID-enabled supply chain
    that will integrate passive and active RFID data and improve asset
    visibility. The RAPID project will support shipments originating from
    the San Joaquin depot passing through distribution nodes on the west
    coast and in Alaska with Fort Richardson and Elmendorf Air Force Base
    as the end-users.
        USTRANSCOM recognizes the nature of our mission creates a need for
    more robust bandwidth resources and end-to-end connectivity with
    transportation elements and supported forces deployed throughout the
    world. As such, we fully support ongoing DOD programmatic efforts to
    expand terrestrial Global Information Grid enterprise bandwidth, and
    launch robust communications and blue-force asset tracking satellite
    constellations.
        USTRANSCOM is striving to achieve a common operating picture across
    the entire distribution operations continuum, from commodity source to
    point-of-effect. This emergent view via fused C2 information technology
    systems will be called the Warfighter's Distribution Dashboard. This
    ``dashboard'' will provide a three-dimensional environment that
    integrates deployment and distribution visualization and analysis tools
    with a wide array of available USTRANSCOM data feeds as layers within a
    geospatial environment, capturing the entire distribution battlespace
    in a single web-based location to facilitate rapid analysis and
    visualization of links, nodes, and lanes by all stakeholders. Ideally,
    the dashboard will exist within an operations center platform thus
    improving DDOC effectiveness and efficiency.
    Ongoing Studies
        In view of September 11 changes to our national military strategy
    and current operational experiences, defense strategy objectives have
    significantly changed. Accordingly, the JS J4 and OSD Program,
    Analysis, and Evaluation (PA&E) Directorate conducted the mobility
    capability study (MCS) which provides a starting point for analysis of
    pre-positioning, aerial refueling, airlift, sealift, surface
    deployment, and distribution capability required to support global
    COCOMs in 2012. USTRANSCOM supports JS and OSD efforts and agrees with
    the MCS assessment that the overall lift capability is about right,
    however, additional analysis must focus on the correct mix of C-17s, C-
    5s, and C-130 assets and aerial refueling and sealift recapitalization.
    As such, we initiated an internal focused mobility analysis to study
    strategic mobility from a USTRANSCOM perspective, concentrating on the
    strategic airlift mix of C-17s and C-5s, and sealift recapitalization
    alternatives. MCS will be our baseline, but we will explore how changes
    in key assumptions may impact the analytical outcome. We will also
    support the Intra Theater Lift Capability Study (ITLCS) Phases 1 and 2
    to identify the right mix and number of intra-theater aircraft assets.
    Air Mobility Readiness and Modernization
        Aerial refueling capability is an absolute necessity, as it makes
    possible rapid deployment of forces around the globe, and measured
    recapitalization of the tanker fleet is my highest acquisition
    priority. We envision the Replacement Tanker Aircraft (RTA) with a
    multi-mission capability. Configured with cargo floors/doors, and
    defensive systems, the RTA fleet will provide significant capability,
    complementing our inter/intra theater airlift fleets, as well as Civil
    Reserve Air Fleet (CRAF) transload operations, and aeromedical
    evacuation (AE) in a threat environment, something our current legacy
    fleets cannot do.
        At the anticipated procurement rate of 10-15 aircraft per year,
    recapitalization of the current 530 aircraft will take decades. With
    aggressive maintenance and corrosion control, the KC-135 can remain
    structurally viable until about 2040, but at an ever-increasing cost
    and with the realization that they will be 80 years old as the last
    replacement enters service.
        Though the KC-10 also appears viable until the 2040 timeframe, it
    must be modified to ensure the 59 KC-10s can operate in the future
    global airspace environment. AMC initiated a KC-10 aircraft
    modernization program to comply with international airspace
    requirements, address obsolescence concerns, and provide a growth path
    for future upgrades.
        USTRANSCOM needs the outsized and oversized capability provided by
    the fleet of 292 strategic airlift aircraft and relies on its viability
    to meet the airlift demands of our national defense strategy. As such,
    we must continue the moderate risk program of modernizing C-5s to
    improve reliability, availability, and access to international airspace
    and foreign airfields.
        We are also rapidly approaching a major milestone on C-17
    production, as long-lead items near completion for the 180th aircraft.
    We continue to rely heavily on our delivered C-17s, currently flying
    these aircraft well above their planned annual flying hour profile.
    Results of C-5 modernization coupled with aging C-130s, will have a
    direct impact on C-17 roles as both an inter- and intra-theater
    airlifter, and the amount of capacity it will shoulder compared to
    other aircraft in the airlift mix.
        The aging C-130 fleet faces obsolete parts, costly repairs,
    noncompliance with Air Traffic Management requirements, but most
    pressing in the active component are the number of center wing box
    cracks and associated unprogrammed repair costs. Eighty-two C-130
    aircraft Air Force-wide are currently grounded or restricted, and this
    combined with ARC demobilization of ARC C-130E/H personnel in 2006,
    places a distinct burden upon the Active-Duty fleet. The planned
    acquisition of 168 C-130Js to replace the C-130Es, was limited by PBD-
    753 to 53 aircraft. Although rescinded in May 2005, funding to reach 79
    C-130Js has only recently been restored. The retirement of C-130Es, if
    permitted by law, reduced C-130J procurement, and restricted and
    grounded aircraft would push the C-130 fleet below the MCS lower bound
    requirement of 395 combat delivery platforms required to meet the
    defense strategy as early as fiscal year 2007.
        Overall AE requirements have stabilized over the past year and are
    not expected to decrease for the foreseeable future. Active-Duty AE
    forces are filling a significant portion of deployed requirements;
    however, ARC assets are still required in both a volunteer and partial
    mobilization status. While the Air Force Surgeon General and Air Force
    Director of Operations are reviewing the force mix for AE, the majority
    of assets are expected to continue to reside in the Reserve component.
        Sufficient material handling equipment (MHE), both in capability
    and quantity is key to providing an effective cargo handling
    infrastructure required to conduct rapid mobility operations. The Air
    Force is modernizing its MHE fleet, procuring 318 Tunners and funding
    production of 385 of 512 required Halvorsen loaders through fiscal year
    2007. USTRANSCOM encourages the Air Force to continue acquisition and
    fielding of the remaining 153 Halvorsen loaders.
    Sealift Readiness and Modernization
        MSC and the MARAD surge fleets, maintained in the highest state of
    readiness provide critically essential lift capability for operations
    that our commercial partners cannot handle alone. These fleets,
    comprised of 8 Fast Sealift Ships (FSSs), 11 Large Medium-Speed Roll-
    On/Roll-Off (LMSR) ships, and 58 Ready Reserve Force (RRF) ships,
    average 33 years of age for an FSS and 35 years of age for an RRF ship,
    compared to the typical 15 to 20 year average economic life of a
    commercial vessel. It is imperative for USTRANSCOM, MSC, and our
    sealift partners to complete our analysis of recapitalization
    alternatives, as key elements of the fleets are nearing the end of
    their useful lives and will require recapitalization to meet future
    requirements.
        The age of MSC's tanker fleet is also a concern, as international
    regulations and commercial refinery standards limit the age of tankers
    loading and discharging at most worldwide oil terminals to a maximum of
    25 years. MSC's controlled fleet of four fuel tankers will pass their
    useful age in 2010. In preparation, we are pursuing the long-term
    charter of newer commercial tankers to transport DOD fuel. As a vast
    majority of U.S.-flagged tankers are active in Jones Act trade, the
    desire for additional international trade tankers for DOD cargo may
    result in opportunities for new tanker construction in U.S. shipyards.
        As the DPO, USTRANSCOM maintains the requirement to provide heavy
    lift and float-on/float-off (FLO/FLO) capabilities. The lack of U.S.-
    flagged FLO/FLO assets negatively impacts the ability to provide
    transport of vessels such as U.S. Coast Guard (USCG) patrol boats and
    U.S. Navy (USN) minesweepers that may not otherwise be capable of open
    ocean transit--due either to size or capability.
        The Offshore Petroleum Discharge System (OPDS) supports COCOM
    requirements by distributing fuel from a tanker offshore to forces
    operating on land. Only three Government-owned OPDSs exist, two
    deployed as part of MSC's Afloat Prepositioning Force, and one lay
    berthed in CONUS. Each of these ships is a single-hulled tanker over 40
    years old. USPACOM's validated requirement for delivery of 50 percent
    more fuel (1.7 million gallons) from 8 miles offshore under
    significantly more stringent environmental conditions has driven
    USTRANSCOM and MSC to initiate an OPDS transformation project to meet
    the new requirement. In January 2005, MSC awarded a contract to Edison
    Chouest Offshore for an OPDS replacement, including newer, more capable
    vessels, fuel-delivery systems, and personnel, to be delivered by June
    2007.
    Infrastructure Readiness and Modernization
        Beginning in the late 1990s, USTRANSCOM, USEUCOM, USCENTCOM,
    USPACOM, the JS, DLA, and the Services developed and implemented a
    comprehensive plan to improve strategic airlift. Over $1.2 billion in
    programmed construction projects to upgrade fuel hydrant systems, fuel
    storage, ramps, and runways at 13 key en route airbases in Europe and
    the Pacific were approved. Major construction began several years ago
    and will continue until achieving full operational capability by the
    end of fiscal year 2008, if funding remains on track. Once completed,
    this programmed en route infrastructure system will support wartime
    throughput requirements as validated by Mobility Requirements Study
    2005 (MRS-05) and MCS into Northeast and Southwest Asia.
        We have been working closely with OSD, the JS, and the COCOMs over
    the past 3 years to expand our global reach and influence into regions
    of potential instability, primarily in the Southern Hemisphere and
    Southeast Asia. As part of the Integrated Global Presence and Basing
    Strategy, civil and military airfields and seaports, known as
    cooperative security locations (CSLs), are being nominated and assessed
    for their ability to permit transshipment between air, sea, and surface
    modes of transport.
        USTRANSCOM in partnership with the COCOMs is identifying and
    assessing CSLs that can support a notional airlift flow of 1,500 short
    tons per day, as well as provide the capability to flow forces and
    sustainment seamlessly between neighboring COCOMs. Chosen CSLs will be
    integrated into the established strategic en route network in Europe
    and the Pacific to provide the vital link between CONUS and more remote
    corners of the world, enabling DOD to more effectively support the
    warfighter.
    Commercial Industry and Labor Teammates: Achieving the Right Mix of
            Commercial and Organic Capability
        USTRANSCOM readiness depends on maintaining a superb relationship
    with our commercial transportation partners and supporting labor
    organizations, allowing DOD to leverage significant capacity of
    commercial transportation in wartime with reduced peacetime cost. Under
    full activation, the CRAF provides 93 percent of our international
    passenger capacity, 39 percent of our international long-range air
    cargo capacity, and most of our international AE capability. The CRAF
    program affords peacetime business to participating airlines in
    exchange for their providing specified capacities in wartime, and as
    such participants deserve safeguards like the Federal Aviation
    Administration's Aviation War Risk Insurance to protect from loss or
    damage to capital investments incurred supporting DOD operations in
    accordance with the National Airlift Policy.
        The CRAF program relies upon a robust civil air industry therefore,
    we support the Fly America statute (49 U.S.C. 40118) and what we refer
    to as the Fly CRAF statute (49 U.S.C. 41106) as they serve to support
    and sustain this critical national asset. We continually review the
    program and its incentives, adjusting to keep the program viable in a
    dynamic environment.
        We have recently studied CRAF incentives and have submitted
    legislation intended to guarantee that a proper amount of ``assured
    business'' will be available in the future. Other forthcoming
    improvements include the restructuring of CRAF stages, aligning them
    more closely with expected wartime needs. Within the CRAF program we
    desire a U.S.-flagged commercial airline capability to carry outsize
    cargo and a new aeromedical evacuation ship set, able to convert
    several types of commercial aircraft for the AE mission, to improve
    operational flexibility and responsiveness.
        The Voluntary Intermodal Sealift Agreement (VISA) is the maritime
    equivalent of the CRAF program. In cooperation with USTRANSCOM, MARAD
    and the maritime industry developed VISA to provide DOD the commercial
    sealift and intermodal shipping services/systems necessary to meet
    national defense contingency requirements. USTRANSCOM and MARAD co-
    chair the Joint Planning and Advisory Group (JPAG). At JPAG meetings,
    ocean carriers participate in the planning process to assure that
    commercial sealift capacity will be available to support DOD
    contingency requirements. Under VISA, DOD has access to commercial, dry
    cargo, U.S,-flagged sealift capacity and intermodal infrastructure in
    return for peacetime business preference. Because pre-negotiated
    contracts with the carriers permit early access to additional lift
    capacity, the time required to close forces for the counterattack phase
    of war operations can be significantly shortened. VISA participants
    move over 95 percent of USTRANSCOM's global war on terrorism wartime
    sustainment cargo.
        The Maritime Security Program (MSP) provides financial assistance
    to offset the increased costs associated with operating a U.S.-flagged
    vessel. In return, participating carriers commit vessel capacity and
    their intermodal transportation resources for DOD use in the event of
    contingencies. A critical element of our commercial sealift program,
    MSP provides assured access to sealift/intermodal capacity and a
    readily available, highly-trained and qualified workforce of merchant
    mariners. The National Defense Authorization Act for Fiscal Year 2004,
    authorizing the expansion of the current MSP fleet from 47 to 60
    vessels, including 3 fuel tankers, went into effect 1 October 2005.
    MARAD is responsible for administering MSP to assure program
    compliance. This expansion is particularly critical should the U.S.
    find itself in a position where it must act with minimal allied support
    during time of war or national emergency. Additionally, the increase in
    the fleet size has had a direct, positive impact on the number of
    billets and mariners. Of the 13 new vessel participants, 11 were
    previously foreign-flagged and since re-flagged to U.S. colors. As
    participants in the MSP, these newly re-flagged vessels will have U.S.
    crews and provide a solid job base for the American Mariner.
    Advanced Lift Systems and Concepts of Tomorrow
        To properly support the combatant commander requirements in the
    future, the need for more responsive and flexible lift cannot be
    overemphasized. New mobility platforms as well as enhanced
    infrastructure technologies and process/organizational improvements are
    essential to meet the challenge of transporting greater volumes more
    quickly to distant theaters at yet greater distances. There are several
    initiatives now under consideration to facilitate these goals.
        The potential lack of availability of aerial ports and sea ports of
    debarkation overseas has generated an exploration into seabasing, based
    on the rapid deployment, assembly, command, projection, reconstitution,
    and re-employment of joint combat power from the sea. In September
    2005, a seabasing joint integrating concept was validated by the Joint
    Requirements Oversight Council, which recognized that seabasing
    improves power projection without access to secure foreign bases and
    the littoral regions.
        As the joint sea base evolves, the development of sea state
    mitigation capability (through sea state four), high speed connectors
    such as 40-knot plus vessels to transport personnel and equipment, high
    speed inter-theater sealift vessels from CONUS to the sea base, and the
    ability to utilize capabilities of both military and commercial cargo
    and fuel ships will be vital to sustain forces with little host nation
    support.
        With our military operations being conducted more and more in
    austere locations around the globe, coupled with new DOD and joint
    maneuver concepts, we find it increasingly important to develop a short
    take-off and landing (STOL) airlift capability. Current aircraft like
    the C-130 and C-17 do not provide the access we will need from future
    land and sea based operations. USTRANSCOM envisions new capabilities
    that can lift over 60,000 pounds to or from shorter, unprepared landing
    zones while providing improved survivability, speed, and range. These
    capabilities will enhance our operational flexibility and our reaction
    time to world crises.
        In addition, as with the development of STOL technology, USTRANSCOM
    envisions a future with a mobility airframe that serves as a common
    platform or a family of platforms adaptable for multiple uses. This
    approach enables a more affordable acquisition, enabling specialization
    of a core design during assembly, as opposed to wholly separate
    airframes and production lines for each mission. This can be a cost-
    effective way to meet our future aircraft replacement requirements.
        In light of all these technological challenges, AMC is currently
    assessing their combined feasibility with the Advanced Mobility
    Capability Concept (AMC-X). AMC-X is a capabilities-based future
    ``family of aircraft'' concept designed to provide swift, dominant, and
    survivable intra-theater maneuver for all joint customers in the post
    2020 timeframe. Variants of the AMC-X family have the potential to
    perform a variety of missions to meet the needs of multiple users and
    COCOMs. USTRANSCOM supports AMC in these efforts.
        Army transformation has changed doctrinal concepts from arraying
    forces in large contiguous formations to one of smaller dispersed
    operations in austere locations over greater tactical and operational
    distances. As such, the Army forecasted a need for a limited, time-
    sensitive organic light airlift capability in the form of a Future
    Cargo Aircraft (FCA) to support dispersed operations as their current
    fixed and rotary wing assets lack the speed, range, and payload
    capability to meet emerging requirements. Air Force platforms generally
    lack the necessary STOL capability. USTRANSCOM recognizes the Army
    requirement to support mission critical, time sensitive delivery
    directly to a brigade combat team and supports the current Army Sherpa
    replacement program, known as the FCA as currently programmed.
    USTRANSCOM is also coordinating with AMC on executing a capability
    based assessment that would define requirements for a Light Cargo
    Aircraft (LCA) to provide an intra-theater light airlift sustainment,
    as well as support to homeland security mobility operations capability,
    as part of the future force. In today's fiscally constrained joint
    environment, USTRANSCOM fully supports the Department's direction to
    field this new Army and Air Force capability as a joint program. The
    new FCA/LCA should definitely address evolving airlift requirements,
    future force design and be capable of employing advanced precision
    airdrop systems such as the Joint Precision Airdrop System (JPADS).
        USTRANSCOM recognizes military operations are being conducted in
    austere locations around the world and as such envisions the need for a
    precise direct delivery capability via airdrop. The JPADS is key to the
    resupply and sustainment of forces pursuing the adversary and engaged
    in combat.
        USTRANSCOM is also engaged with U.S. Army leadership to help
    facilitate transportability of the Future Combat System of Systems
    (FCS) and the brigade combat team: two essential ingredients to the
    Army's new, transformational dominant maneuver strategy. We fully
    support the development of these new, highly robust, lethal, and more
    survivable combat vehicles and will work with both the Army and Air
    Force to maximize transportability. The FCS Manned Ground Vehicle (MGV)
    is the largest vehicle in the FCS family. We anticipate theater airlift
    of the FCS MGV will be provided by AMC C-130s (one MGV) and C-17s (up
    to three MGVs). USTRANSCOM remains committed to supporting and refining
    the transportability and employment of the Army FCS.
                      final thoughts from general schwartz
        We are a nation at war and supporting the warfighter is
    USTRANSCOM's number one priority. We have been entrusted with the
    authority to lead and to transform and assigned the responsibility to
    serve the combatant commanders who will win this war. To that end,
    USTRANSCOM brings to bear a military deployment and distribution system
    that is unmatched anywhere in the world. USTRANSCOM's success begins
    with our people who with superb dedication, vision, and hard work
    continue to improve our support to the combatant commanders. Our people
    are the heroes who ``make it happen and get it done.''
        The enemy and battlespace environment are constantly evolving.
    We're changing the way we do business, not because we can, but because
    we must to be as adaptive and agile as we've ever been, at any time in
    our history. We are operating in a distributed battle space, not
    against a state enemy over established borders. We are challenged to be
    expeditionary, to anticipate the needs of our agile, highly mobile,
    rapidly deployable warfighters.
        Our Nation also demands that we rethink what we're doing, change
    mindsets, perspectives, the mix of assets, whatever it takes. The
    Nation's treasure is more precious than ever and gaining the trust and
    confidence of the Nation means being good stewards with all that is
    entrusted to us.
        USTRANSCOM's DPO initiatives are paying substantial dividends now
    in effective support to the warfighter and in efficient use of our
    national resources. Our readiness and modernization initiatives will
    ensure the combatant commander's ability to swiftly engage and defeat
    America's enemies. USTRANSCOM will continue to look to the future and
    advocate systems to move America's might at greater distances and
    speeds.
        I could not be prouder of the USTRANSCOM team and our national
    partners. Today, we are supporting the global war on terrorism, while
    providing unparalleled humanitarian relief in both America and nations
    abroad. Together we are transforming the military deployment and
    distribution system, ensuring our Nation's ability to project national
    military power--to ensure that America will face its enemies--whenever
    and wherever the need may arise. In all of this, a promise given by us
    will be a promise kept.

        Senator Talent. General McNabb.

       STATEMENT OF GEN. DUNCAN J. McNABB, USAF, COMMANDER, AIR
                            MOBILITY COMMAND

        General McNabb. Yes. Mr. Chairman, again, it's great to be
    here on behalf of the AMC and to represent them to this
    subcommittee and to you. We are the air component to General
    Schwartz, who is both my friend and my boss, and I would tell
    you we represent the 144,000 folks of the AMC, and that's
    Active-Duty, Guard, Reserve, and civilians. The AMC is very
    proud of providing global reach for America, and what it gives
    us is the strategic ability to move, and that strategic ability
    to move is one that I think is a true cornerstone of our
    national defense. I would say we provide the airlift and air
    refueling to take our warfighters to the fight, whether that's
    Operation Enduring Freedom (OEF) or Operation Iraqi Freedom
    (OIF). That's not only getting them to the fight, but
    sustaining them when they are there, providing disaster relief
    at home and abroad, like Hurricanes Katrina or Rita, or
    overseas, like tsunami relief or the recent Pakistan
    earthquake.
        Again, what General Schwartz mentioned is the aeromedical
    evacuation of our wounded to get them back to the best care
    available. It is probably one that both of us are about the
    proudest we could be of that system in working together with
    our great medical teams to figure out how we can take care of
    these great warriors. To give you an idea, today we flew 887
    sorties. We do that pretty much day in and day out. That
    averages out to about every 90 seconds to 2 minutes, we have an
    airplane landing or taking off around the world in different
    places. As you mentioned, as General Schwartz and I watch this,
    General Schwartz always seems to know the one that doesn't go
    that well. So, I would just say that as we watch that, we try
    to make sure that is done as safely as possible. They are, in
    fact, airplanes that are showing the American flag around the
    world. I would say that wherever that flag lands, it not only
    represents America, it is America to the people that we help
    around the world. Our airplanes are controlled and sequenced
    out of Scott Air Force Base, our Tanker Airlift Control Center.
    I would say that the way we do that is it's prioritized by
    General Schwartz as he works with the combatant commanders
    (COCOMs) that we serve, and they will sequence this, and we
    will control that from Scott. That portion is one that we truly
    are proud of because they will make sure that, as those
    airplanes go around the world, we are watching the threat, we
    are watching the weather, we are making sure that they are
    safe--all the kinds of things that you need to do to make sure
    that we can be nimble and quick when we have to change
    priorities, such as after a Pakistan earthquake or when there
    is a tsunami relief where we need to pick off airplanes very
    quickly to respond. Our enroute system is also one that we are
    very proud of because we can expand it and contract it very
    quickly so that when you think about our system, it is truly
    end-to-end. So, when you think about Katrina, the ability to
    send a contingency response group into New Orleans Airport to
    begin opening up that airfield to receive airplanes and get
    them on their way, it truly is awesome. Something that General
    Schwartz will talk about is extending that to a joint opening
    capability, but it's something that we do today that we are
    very proud of. You saw the same thing in Pakistan or anywhere
    else is where we look at that portion of it to make sure that
    that works.
        Senator Talent. It seems to me that that mission is
    increasing--that is, a worldwide relief mission. Have you
    noticed that? Would you describe it as a significant burden for
    you?
        General McNabb. Sir, what I would say is that we are
    getting better and better at it as looking at end-to-end so
    that as soon as you say go, we'll figure out how--what kind of
    bridge do you need to build to wherever we need to go to
    include maybe opening up airfields that say you know, we are
    going to go into this airfield, so what do we need to expand
    that airfield's capability for the system--sort of the
    throughput, if you will. That is being demanded faster. So,
    what we have done is we have created a system in which we are
    very responsive, that when the balloon goes up, we can very
    quickly expand the bridge overseas and carry that out. When we
    think about the expeditionary nature of our force, I would say
    that is one of the things that we are very proud of. Folks
    don't often realize that it's that portion that is more
    important than any other part because it allows you to build
    the structure so that you can fall in and keep this airlift and
    air refueling moving. Again, it gives General Schwartz and the
    combatant commanders a lot of flexibility to figure out where
    we need to go and how quickly we can go there. The other one
    that I would mention, that I think is very indicative today, is
    because of the war, we have the most battle-tested force we
    have ever had. So, what you get right now is lessons learned,
    and we look at things end-to-end, and we are able to focus on
    them and take that to the next level.
        General Schwartz, as not only the commander of USTRANSCOM,
    but also the distribution process owner, allows us to look
    across the joint side of that whole equation to make sure that
    we are getting that right. So, sir, I am very proud of our AMC
    and the warriors that I get the pleasure of leading and
    representing today. I look forward to your questions, and I
    would like to say one other thing is that we are very grateful
    that, despite the loss of a C-5 yesterday, everybody walked
    away from that alive. There was no loss of life. It does speak
    volumes about the ruggedness of our equipment and the training
    that goes into our crews to egress safely and also allow the
    standards that this committee and others have really pressed
    for in our aviation industry because the fact that that
    airplane didn't catch fire absolutely saved lives. Yesterday
    morning, when the airplane first went down I was very worried
    that we had lost lives. But as the day progressed and I kept
    getting information I was just amazed that the words came back
    that we have now accounted for everybody, and then it was
    everybody without life-threatening injuries. There were none.
    Last night, they had three folks that went through surgery--all
    successful. Again, it speaks volumes of our ability to do
    emergency response--bring that together, get folks to medical
    hospitals, secure the site, and take care of all those things.
    Again, it's one of the things that we are very grateful for,
    but if you would like me to go into more detail on that during
    the hearing, I would be glad to do that.
        Senator Talent. We are certainly grateful for that report.
    I am sure that when you have studied the accident thoroughly,
    you will conclude that one of the reasons there were no lives
    lost was the outstanding training and professionalism of the
    crew.
        General McNabb. Absolutely, sir.
        Senator Talent. It's incredible to me they could have had a
    crash like that without anybody being killed.
        General McNabb. Yes, sir, absolutely.
        Senator Talent. So, next time I am on an airline, I am
    really going to listen to the safety briefing.
        General McNabb. Yes, sir, absolutely.
        Senator Talent. Senator Kennedy is ready now.

                 STATEMENT OF SENATOR EDWARD M. KENNEDY

        Senator Kennedy. Thank you, Mr. Chairman, and I want to
    welcome General McNabb and General Schwartz and your associates
    to the committee. I think we are all mindful about the dangers
    that our servicemen and women in the Air Force, in this
    instance, are facing as they move through training, let alone
    being in the focus of combat. This is really something that all
    of us are very much aware of, and we appreciate the fact that--
    I think at the end of my time, I am interested in whether we
    had anybody from Massachusetts on that crew, but I'll talk to
    you a little later about that.
        General McNabb. Yes, sir.
        Senator Kennedy. Let me say we welcome you. As you well
    know, this committee has been enormously interested in the
    strategic lift. We were very much involved in establishing the
    USTRANSCOM, that we encouraged the Department of Defense to
    focus on strategic sealift issues and urged the Department to
    undertake the mobility requirement studies, and we authorized
    needed resources for strategic sealift. We are also the members
    of this committee that were there to help in the restructuring
    of the C-17 at the time when Senator Nunn was the chairman, and
    one of the only times we ever had a success against Sam Nunn
    was holding onto that program as well. It probably is the only
    mistake that he made in terms of our DOD and the Maritime
    Prepositioning Force. He was a tremendous leader and chairman.
    So, we are enormously interested and value very highly your
    recommendations. I think we are interested in hearing--I've had
    a chance the last evening to go through the past
    recommendations and reports over the period of the recent years
    and the varying requirements that have been there in terms of
    the numbers going back to 2001 and 2003 and so on. So, I think
    we are always looking at what is the real need. We are aware of
    what the administration has requested, but given the kinds of
    realities that we are facing--both in Afghanistan and certainly
    at the present time in Iraq, we want to examine closely what
    those needs are and what is the best way to meet those needs
    and to make sure that we are going to have the kind of support
    in terms of aircraft and variety that's going to meet our
    defense requirements. So, I want to thank you very much, Mr.
    Chairman, for having this hearing. I will look forward to
    asking some questions at the appropriate time.
        Senator Talent. Thank you, Senator. Let me just toss a
    general question out to you two generals here, and then we can
    follow up with some specific ones. I am interested in your view
    of how your textbook thinking regarding lift is panning out in
    view of the realities on the ground that you are facing. What
    would you say, just in your own mind, are the key lessons you
    have learned from today's operations regarding force
    utilization that you are going to take into account as you move
    forward? General, we entered this era, and you probably entered
    this job with certain presumptions or assumptions about what
    was going to happen. What has happened on the ground that has
    most changed your thinking in that regard? What would you say
    the key lessons learned are--and General McNabb also.
        General Schwartz. Mr. Chairman, I think for me, it has
    reemphasized the notion that we need versatility in the fleet
    mix, that having single purpose platforms in the era that we
    are now in is not that helpful. This allows the regional
    combatant commander and ourselves to organize ourselves
    according to the requirements of a specific mission or task, to
    do it with a variety of machines and what you have in the way
    that will best serve the mission. I think another realization
    has been that the days when we consider either maritime or
    airlift platforms invulnerable are long gone, and that it was
    at one time the thought that only combat aircraft are at risk,
    and that is no longer the case. It certainly calls for
    equipping our platforms as we have not completely. Certainly,
    we need to pursue the end game on this with the right kinds of
    self-protection equipment so that they can execute their
    missions even with adversaries that are difficult to identify
    on the battlefield. I think the final point I would make, sir,
    is that although I knew this instinctively coming in, I must
    reemphasize that the quality of our people is astounding. We
    are very fortunate. From the airmen to the sailor to the
    merchant mariner, we have a great team that in fact rocks and
    rolls on a routine basis, and it is preserving the quality of
    that force, I think, that we need to maintain focus on as well.
    We tend to look at platforms, but it is the entire family, I
    think, that needs attention too.
        Senator Talent. Yes, if there is one lesson I have learned
    from my 12 years on this committee or the one in the House,
    it's that we tend to be over optimistic about the ability of
    our equipment and our platforms to last or do what we want them
    to do or come in at the cost we want them to come in, but we
    tend to underestimate the ability of our people to make do with
    whatever it is we give them. That should lead us, though, I
    think to be even more persistent and dedicated to try and get
    them the best that we can. General McNabb, do you have a
    comment on the question?
        General McNabb. Yes, sir. I think that getting to the
    statement you just made is that if we can focus on warfighting
    effect as opposed to individual platforms, we really make a lot
    of money for the Nation and combat capability and also do right
    by the taxpayer. I think that, as General Schwartz mentioned,
    as we look at our mix of aircraft, if we can figure out
    innovative concepts of operations because we have a new airlift
    airplane like the C-17 that can move from the strategic to the
    theater role very nimbly, to augment the 130 when necessary,
    but do the strategic lift like the C-5, when necessary, it
    gives us great flexibility to bring an awful lot of effect
    where the combatant commanders require. I think that end-to-end
    focus of the fact that we know that it's much more than
    platforms, it's a system. From my standpoint, sometimes the
    most important thing in our system is our ground handling
    equipment. I remember when I was a tactical air control center
    (TACC) commander, I had 12 C-17s and 12 tunner loaders, which
    was our big loaders that could offload a DC-10 and 747 as well
    as a C-5 or C-17. I tail number managed both of those because
    wherever I put them, they had immediate effect, and it was
    easier to turn airplanes faster.
        The focus that this committee and others have spent on what
    is the proper enroute infrastructure for us to be able to fall
    into, you had mentioned talking about the contingency response
    groups, our ability to expand that very quickly allows us to
    get things done very quickly. That's my take and Senator
    Kennedy, you had an awful lot to do with it as we brought
    USTRANSCOM onboard. I was aide to General Cassidy during that
    period. Your help on both the C-17 and standing up USTRANSCOM,
    when you look at where USTRANSCOM has gone under General
    Schwartz and his predecessors, I would say that you can see the
    effect of that joint look across that is paying huge dividends
    for the Nation, looking at better ways of doing this. So, the
    flexibility that General Schwartz desires from me allows me to
    fill in with sealift and prepositioning equipment, but also see
    how we as a system work to the best advantage for the
    warfighting combatant commanders. The other portion I would say
    is that we focus on velocity and what the combatant commanders
    need not only today, but tomorrow as they transform for the
    future. I would tell you that when you think about it, General
    Abizaid is asking how do we get convoys off the road, how can
    we get our folks out of harm's way, when they ask General
    Schwartz, and he comes to me and says, ``how might we do
    this?'' We brought in C-17s and C-5s that took care of a lot of
    the big heavy lift, allowing the C-130s to take care of more of
    the ``eaches,'' and the fact that we had the flexibility to do
    that really paid some big dividends for the Nation and very big
    dividends on getting people off the road that we didn't have to
    have out there. So, it saved lives. So those are the big
    lessons learned, I think.
        Senator Talent. The flexibility, velocity, vulnerability--
    I'll ask more about that when we talk about the tanker. Let me
    just go a little bit into assumptions, which I just asked
    about, and then I'll defer to Senator Kennedy for whatever
    questions he may want to ask. We talked about assumptions
    versus what's actually happening on the ground, and let me
    refer to that in the context of the latest MCS, with which
    you're obviously both familiar and had a lot to do. The MCS
    made certain assumptions about missions and about how we would
    use the various platforms that we have and then came up with an
    estimation of what level of lift we would need and what mixes
    might be appropriate in the context of those assumptions and
    came up with a range, the base of which was 292 units, I guess,
    of lift, but that assumes that the assumptions on which the
    study was based turned out to be correct. You both would agree
    with that, I think. So, let's explore a couple of those. For
    example, and the one that I hear the most often, in your
    judgment, did the MCS underestimate the amount of intratheater
    lift that would have to be carried by C-17s? My understanding
    is that in USCENTCOM now, they are using C-17s consistently for
    intratheater lift and that the MCS didn't take that into
    account. Is that your understanding, and is that a concern that
    you would have? General Schwartz, perhaps you would like to
    take that.
        General Schwartz. Sure. Sir, the MCS in fact did not really
    deal with the intratheater lift requirement, it deferred that
    to a subsequent study, which is now underway and nearing
    conclusion. I think fundamentally, the circumstance that we
    have faced, as General McNabb alluded to earlier, in-theater is
    a little bit different in that we collectively made a conscious
    decision that we were going to try to minimize our footprint on
    the road networks in Iraq, and that naturally drove up the air
    requirement--and not just for airlift aircraft, certainly it is
    also true for C-130s and C-17s. It has also flown the blades
    off of CH-47s. C-23s of the Army are flying extensively as
    well. So, I think in this particular scenario, the analysis did
    not anticipate the improvised explosive device (IED)
    phenomenon, which we have seen. The consequence of that, sir,
    is that we have operated certain of the assets, C-17 in
    particular, at a greater rate than we had planned when we
    originally established the laydown, which was 1,000 hours for
    30 years. So, there is concern that we are operating certain
    pieces of our system at rates greater than we had anticipated.
    If you take a longer view of that, it is a legitimate concern.
    Interestingly, given that vehicles have relatively short lives,
    5 or 10 years, people don't have much problem with talking
    about recapitalizing tactical vehicles. On the other hand, when
    you are talking about major capital end items, like ships and
    like airplanes that last 40 or 50 years, the depreciation of
    those assets is not as visible and perhaps not as well
    appreciated. I think the argument that the Air Force has made,
    I agree with, and that the Deputy Secretary has addressed,
    which is that again, taking the longer view, we need to
    recognize that we are expending airframe life and that we need
    to posture ourselves to the extent that we can to recover, and
    reset that scenario as best we can.
        Senator Talent. That's kind of an accelerated depreciation,
    really, of the C-17 in particular because of the desire to
    avoid that footprint. Would you agree with that, General
    McNabb?
        General McNabb. Yes, sir. I think that again, if you think
    about MCS, it did ranges. It did ranges for the strategic lift,
    292 to 383. You mentioned the 292 number. It said that the
    capacity--and they didn't get into the types of aircraft, but
    it didn't do that on the 292 to 383 either. It just said we
    need about this capacity for intratheater, and it was 395 to
    674. Primarily, discussion and the reason that was a large
    range was because of how do you treat the homeland security
    mission. Do we have to dedicate airplanes here to handle
    homeland security? Then, it did the same thing on the tankers.
    One thing that the Department did on MCS was it said that we
    want this to be a study that never stops. It stays in
    conjunction with the operational availability studies, and we
    always get to the next question.
        So, the next question was okay, we have had a lot of
    discussion on the C-5/C-17, and that was actually answered in
    QDR, where we said okay, we have 292 to 383. Where do we come
    down on that? A lot of discussion on that was about where we
    should go and ended up that we figured 180 C-17s and 112
    modernized C-5s. So, that's kind of where the Department came
    down in the QDR on addressing the strategic level. On the
    theater level, on the intratheater, we need to have the same
    discussion, and they are studying that now to take a look at
    okay, what's the right mix to meet that intratheater
    requirement? As you said, that is one of the lessons learned
    that I think that we have figured, is that the C-17 has been
    asked to do more and more in the intratheater role--to move
    things like Stryker, to move in the Future Combat System (FCS),
    to move Patriots, to move the Multiple Launch Rocket System--
    things like that that we know is not maybe a strategic
    requirement, but it will be what the theater commander will
    need to be done there in those initial stages of the war. I
    think that portion of the study will be very critical in saying
    how do we want to size this to make sure that, from my
    standpoint, I have the flexibility to meet General Schwartz's
    requirements as he brings in the COCOMs and said okay, now we
    have to be set. But this is a little different war than what we
    have, and I think that's where we end up saying hey,
    multipurpose allows us the flexibility to deal with different
    situations and still do it in a reasonable standpoint from a
    cost resource standpoint. There are lots of ways to do that,
    but I do think that is one of the things that I--there is no
    question that we have really been flying the C-17 hard. It has
    actually performed probably even better than what people
    thought back in the 1980s when we designed it and we said we
    are going to build an airplane that complements the fleet. It
    was both the future C-5, and then it was also the C-130
    intratheater role. We built it that way. We made sure that it
    had air evacuation capabilities, and we built it around the
    back end. We built it with loadmasters in mind and how fast can
    we get stuff on and off an airplane so that we can increase its
    throughput.
        It has paid huge dividends, as you all have mentioned. I
    think one of the best things is that almost every Member of
    Congress has flown into Iraq or Afghanistan, or both, on either
    a C-17 or a C-130 and got to see firsthand the value of having
    an asset like that. So again, I think that there is an awful
    lot of room there, and I really am excited about the
    intratheater look that's going to take a look and make sure
    that we get that portion right as well.
        Senator Talent. So, to summarize, that low-end range of 180
    didn't take into account the need for intratheater lift. So, we
    may need just some more as a requirement. I hear you saying
    that. But then in any event, General Schwartz, you are saying
    that we need attrition aircraft because we are flying the wings
    off. Would you guys agree with both of those statements?
        General Schwartz. Yes, sir.
        General McNabb. Yes, sir.
        Senator Talent. Okay. Let me go to one other assumption,
    and Senator Kennedy has been very patient. I know he is
    interested in this also, so I'll probably hand it off to him
    and then come back and do some more on this. The load levels--
    the MCS assumed optimal loading--efficient loading of C-17. You
    mentioned, General McNabb, velocity, the importance of turning
    things around quickly. I was relating this to if you're running
    a trucking firm. In figuring how many trucks you need, you may
    assume that you always keep the truck fully loaded. But if the
    customer really needs it, you may have to deadhead.
        General McNabb. Yes, sir.
        Senator Talent. Has that happened with C-17, and is that an
    assumption that perhaps the MCS overlooked?
        General Schwartz. Sir, I'll pass to General McNabb in a
    second. This is true not only for airlift, but sealift as well.
    There are certain assumptions on stow factor for sealift--65
    versus 75 percent and a similar sort of assumptions for
    airlift. Bottom line is that our sense was, from an operator's
    point of view, that perhaps they were slightly optimistic--not
    excessively so, but in that range, maybe somewhat toward the
    optimistic side. Naturally, military planners tend to try to be
    very conservative worst case. Bottom line, though, however, is
    that as you indicated earlier, we tend to make good use of the
    platforms regardless of the empirical assumptions, and that has
    been our experience. For example, during Hurricanes Katrina and
    Rita, I think few would have imagined that we would have been
    combat loading C-5s out of Beaumont with patients as we did,
    and there are similar stories with the use of the assets in
    Iraq and Afghanistan as well.
        Senator Talent. General?
        General McNabb. Sir, I think again, there was a lot of
    discussion on load factors, and you'll have very good people
    disagree on how good you can get it or, however you do that.
    What I would say is that one thing that I know is that we are
    getting better at this. So, if you look back in hindsight on
    what we did in Operations Desert Shield and Desert Storm and
    what we do today and what we'll do tomorrow, I still think that
    there is an awful lot we can do to streamline that as we take
    it end-to-end, and you have the distribution process owner, you
    have everybody working together. One example is Defense
    Logistics Agency (DLA) building pure pallets that don't have to
    be transloaded when they get to Charleston or Dover, and we end
    up making the system better. While they each may take more time
    to do that at Susquehanna, for instance, because of the fact
    that you don't have to redo it at Dover and then redo it
    another time when you get it into theater, you have saved time
    overall in the system. So, those are the kinds of things that I
    look at. The overall command and control is something that I
    like to--you mentioned truckers, I mention National Association
    for Stock Car Auto Racing (NASCAR). I go to NASCAR and you win
    NASCAR in the pits. You get to the pits because you know what
    you are trying to do when the thing comes in so that you win
    and you know, seconds win races. We are trying to design our
    systems so that we are constantly getting better and better at
    that, and there are a lot of ways of getting at that. Again, I
    think the way USTRANSCOM approaches that from end-to-end under
    General Schwartz as the distribution process owner is one of
    the things that's paying huge dividends. From my part in the
    AMC, I am already finding that pays dividends because when we
    get the stuff and the receiver is ready to get it off the
    airfield and go on and do the next thing, or when I land at a
    place to pick things up, they are absolutely ready to go. They
    have already been sequenced. They already have the radio
    frequency tag all set to go. They are really ready to get out
    of town. I would tell you another example is the fact that we
    have a very battle-tested force, and most of the people--15
    years ago, there were units that had not deployed by air. There
    are almost no units today that haven't deployed by air, and you
    get better at this as you go. So, I think that what we want to
    do is take advantage of the lessons learned and take that to
    the next level.
        Senator Talent. So, we are getting better, but to this
    point, we haven't been able to use C-17 with as optimal a
    loadout as the MCS anticipated?
        General McNabb. Sir, my take on that is that when you think
    about MCS, you have to think about two full-out theater wars.
    My take is that we haven't been pushed to have to do that yet,
    so in many cases, we have done very good loadouts because of
    the way USTRANSCOM forecasts and so forth.
        Senator Talent. Fair enough.
        General McNabb. We have gotten better at it over time. That
    would be my take.
        Senator Talent. I think I hear you saying that you haven't
    to this point been pushed to the point where you have had to do
    that. Senator Kennedy?
        Senator Kennedy. Thank you very much, Senator Talent.
    General Schwartz, in your posture statement, you say that
    ``recapitalization of the tanker fleet is my highest
    acquisition priority.'' Does that mean that tanker
    modernization has a higher priority than buying additional C-17
    aircraft beyond the 180?
        General Schwartz. It does. In a resource-constrained
    environment, sir, if I have to make a choice between the first
    KC-X and the 181st or 201st or 221st C-17, I would opt for the
    new tanker, and here is why, sir, there are a couple of aspects
    to it. The truth of the matter is that again, the KC-135R is a
    grand airplane, but it is a single point airplane. Generally
    speaking, what it does is it refuels. What we need is a
    multimission tanker that can do both boom and basket refueling,
    that can do passenger lift, some cargo lift and have defensive
    systems that allow the airplane to go wherever we need to take
    it. The reason for that is this, sir, I'll give you an example.
    We are taking passengers today into Balad and into Baghdad on
    C-17s because it can protect itself. If I had an airplane that
    could carry passengers there with a defensive system like a new
    tanker, I would use that instead, and we would be able to
    better manage the workload on the C-17 fleet and apply it
    against the things that it does exceptionally well--moving
    cargo. Additionally, I think a key thing is that it is
    important to understand that we are a system, again, that
    involves both organic government assets and commercial
    resources. We depend heavily on a Civil Reserve Air Fleet
    (CRAF) on the air side, just as we do on the maritime side with
    our commercial partners. The airline industry is in distress.
    Three of my CRAF carriers are currently in bankruptcy--Delta,
    Northwest, and Gemini. What I need is to have a platform that
    gives me a little bit of insurance against continued stress in
    my CRAF family. KC-X, that multimission tanker, is the kind of
    platform that could buy me that insurance. So, in short, sir, I
    do believe that for America, for the Armed Forces, that we get
    better marginal value out of a new tanker than we do out of
    more than 200 C-17s.
        Senator Kennedy. Let me just--these other airlines, the
    other planes, I mean JetBlue and Southwest, they don't--they
    are planes that go for these low-cost carriers--are they
    sufficiently different as to be outside of the----
        General Schwartz. Sir, in fact----
        Senator Kennedy. I want to get--I don't want to spend a lot
    of time on that----
        General Schwartz. I understand.
        Senator Kennedy. --but I would be interested if you could
    give me a quick----
        General Schwartz. Quickly, there is a dynamic afoot in the
    industry to more efficient airplanes.
        Senator Kennedy. I see.
        General Schwartz. Fewer wide bodies, more narrow bodies,
    and that is not the kind of thing that we need, frankly. Now,
    passenger carrying is fine cargo is not, and the bottom line is
    that short-legged airplanes are not international operators. It
    is the international operations, and it is the--typically, the
    wider-body kind of aircraft that we seek.
        Senator Kennedy. Okay. Is tanker modernization more
    important than any of your other programs funded in the current
    budget or in the future years defense program?
        General Schwartz. Sir, as we put together the program, and
    I believe that the President's budget properly reflects this,
    we made judgments on priority. As you are aware, a solicitation
    should soon be released by the Air Force to respective vendors
    on providing proposals for the new tanker. I think that the
    arrangement that we have currently, which is to modify the C-
    5s, both reliability and avionics, to perhaps purchase a few
    more C-17s in the single digits, and to get after this new
    tanker is the right array for best use of the taxpayers'
    treasure.
        Senator Kennedy. I was just going to ask General McNabb on
    this, and perhaps General Schwartz can answer it. Someone
    suggested we could retire the C-5 and use the savings to buy
    the additional C-17s. So, I understand the C-17 costs roughly
    $200 million, and how much does it cost annually for the
    operative support of the C-5A aircraft?
        General McNabb. Sir, I'd have to take that for the record.
        Senator Kennedy. $3, $4, or $5 million, does that sound
    generally about right?
        General McNabb. Yes, sir.
        [The information referred to follows:]

        The average C-5A/B direct cost per flying hour is $20,844. The
    average annual flying hours per C-5A/B are 603 for the Active-Duty, 458
    for the Air Force Reserves, and 250 for the Air National Guard
    respectively. Therefore, the average annual direct operating costs per
    C-5A/B are $12.6 million for the Active-Duty, $9.5 million for the
    Reserves, and $5.2 million for the Guard respectively.

        Senator Kennedy. Yes.
        General Schwartz. Sir, let me just comment, though, that
    from a pragmatic point of view we need to modify the C-5s. The
    C-5 is a unique airplane. We need to do that. Now, the bottom
    line is that we should not compete C-5 and C-17, just like the
    study, and we have argued that you need 292 big airplanes. That
    is the bottom line.
        Senator Kennedy. All right.
        General McNabb. Sir, if I could jump in there.
        Senator Kennedy. Sure.
        General McNabb. I fully agree with that. I think that as
    you look at it, the whole thing was predicated on 292--you need
    180 C-17s and 112 C-5s. What we know is we are going to
    Avionics Modernization Program (AMP) all of the C-5s. We are
    testing one C-5A and two C-5Bs to see how they do with the new
    engines. I would tell you that as we look at that, one thing
    that we know is we have a lot of service life left in those C-
    5s. Right now, we have the C-5As in the Guard and Reserve
    equipped units. So, we don't fly, we use them as part of our
    surge fleet. They do a great job at maintaining them at a
    fairly low cost. I think that is working out very well, and
    they still have a lot of service life left. So, my take is, as
    General Schwartz's, the AMP does essential safety mods that are
    absolutely important to us. It also allows it to fly under the
    airspace environment that we have today and will have tomorrow.
    Then, the reengine portion: we'll get to see how the test goes,
    but I think most folks think that that's going to give us a
    significant increase in capability, and I think that we can
    call that later. But I, like General Schwartz, do not see those
    as competitive.
        Senator Kennedy. Thank you. General Schwartz, in your
    posture statement you note some potential problems with the
    tactical airlift. Your statements say the retirement of the C-
    130s, if permitted by law, would reduce C-130J procurement and
    restrict it, and grounded aircraft would push the C-130 below
    the MCS lower-bound requirement of 395 combat delivery
    platforms required to meet the defense strategy as early as
    2007. So, what steps are you taking to mitigate the potential
    shortfall?
        General Schwartz. Sir, General McNabb can address this in
    detail. Fundamentally, there are a couple of initiatives
    underway. Some include rewinging C-130s and improving their
    avionics as well. We are going to buy a total of 79 J model C-
    130s. That's needed. It's a good airplane, and I certainly
    endorse that. There is now a program of record called the Joint
    Combat Airlifter (JCA). Sir, that is the way of the future.
    Again, this is a question of versatility in the fleet mix. The
    answer to every tactical airlift problem is not the C-130 in
    the environment we are entering. Having a range of machines
    sort of like a mini C-130 that can do two, three, or four
    pallets into 2,000 feet, a C-130-type aircraft, and then
    perhaps the C-17 in an augmentation role is the right way to
    work the in-theater lift problem.
        General McNabb. Yes, sir, and I fully agree with that. I
    think that there is a way of shaping that fleet, and one of the
    things that that intra-theater study under the MCS is looking
    at is what is the right mix of airplanes. As you said, the
    capacity is about 400. We need a couple of the 79 Js with our
    current fleet of C-130 H2s and 3s. My take is we have a little
    bit over 300 really good 130s that will last us for a long
    time, especially if we get the AMP on those 130 H-2s and 3s to
    standardize them and again, put required safety mods on there
    so that we can fully use them. So, if you look to the future,
    one of the lessons learned from the war is as we look at what
    we are actually doing in theater is the 130s are moving folks
    around and normally two to three pallets, which is less than a
    130 load. The JCA might give us the smaller airplane that meets
    that niche, but also provides the persistence that the Army and
    our ground forces need.
        Senator Kennedy. Thank you very much. Very thorough and
    comprehensive responses to a lot of different questions here
    have been very helpful to me. Thank you, Mr. Chairman.
        Senator Talent. Thank you, Senator. With regard to the MCS,
    my understanding is that the original requirement for the
    Army's FCS was that it be C-130 transportable, and they are now
    moving towards--I don't know whether this is official or not--
    that at least part of that be C-17 transportable. Is that your
    understanding? Is that one of the reasons, General Schwartz,
    why you are saying you could use some more C-17s if the fiscal
    environment permits it?
        General Schwartz. Certainly. I think the key thing here,
    though, is that the Army has not fallen off the 130
    compatibility for FCS, and the reason is because they are
    trying to exert discipline on the development process. That's
    the right thing to do so that the FCS vehicle--or actually,
    it's a family of vehicles--might, in fact, be compatible with
    the C-130, but not in its full-up mode. In other words, it
    wouldn't have its full complement of exterior equipment, for
    example. You might have to take bumpers and fenders off and
    that sort of thing to get into the Herc. On the other hand,
    clearly, if it's on a C-17, it's a roll-on roll-off kind of
    operation. But the key thing is I know that General Schoomaker
    is focused like a laser on maintaining discipline in the
    development process so that he has a vehicle that is versatile,
    just like we prefer airplanes which are versatile, so he can go
    different ways. We will never be able to get it on a JCA
    probably, but to some extent, a Herc and certainly on a C-17. I
    think that the key thing, sir, is that there will be a need for
    tactical delivery of those machines. Depending on the timing of
    the requirement, if it's early in a deployment, it's difficult
    when you are surging your long-range insertion. If it is
    subsequent to the major deployment activity, say outside of 15
    to 30 days, that is a more manageable circumstance. So, I think
    my point would be that FCS will be both the 130 and a C-17 lift
    requirement and that the timing and of course, the scope of the
    battle we are speaking of will have a lot to do with whether
    there is leakage from the intertheater requirement of 292
    platforms.
        Senator Talent. It's amazing how all of this just depends
    on other assumptions you mentioned in the initial phases.
        General Schwartz. Without a doubt.
        Senator Talent. I know the MCS assumes that you have a lot
    of surge, obviously, in the first 30 days and that after that,
    it begins to fall out, which is the way that the MCS assumes or
    concludes that you can meet the two contingency requirements.
    Of course, war being what it is, we don't know whether there
    will be a substantial drop off in the first contingency after
    the first 30 days, do you?
        General McNabb. Sir, one of the things that they found in
    MCS is they looked at the inter- and intra-. Again, they looked
    at the intratheater capacity that they needed, but one thing
    that they found was the peak for intertheater was different
    than the peak for intratheater. So, one of the things that came
    up is well, we will be able to swing some assets. That's not
    surprising because as you think about sealift and you think
    about once Sea Line of Communication (SEALOC) closes--what we
    used to say about the C-17 is it was primarily strategic until
    SEALOC closure, and then it would swing to the intratheater
    role and do that. So, that is one way we would look at it. The
    only portion that isn't caught in there is during that peak,
    when you are doing the strategic flow, if there are
    intratheater requirements that require an outsized carrier like
    the C-17--and again, I can use Patriots or Strykers or FCS. If,
    in fact, they want to move them, that's the one that I really
    want to make sure that we get a focus on because that could
    happen early, and that is one thing that we are talking to the
    Army and the COCOMs about to just get a feel for are there
    requirements in there that you will have to have an airplane
    the size of the C-17 to do efficiently. Again, you can work
    around that. But again, that is not in MCS as it stands now.
        Senator Talent. Let me--without going through all these
    because I notice--time always goes by when you're having fun,
    doesn't it? General Schwartz, let me just ask then if it's
    still your view, and you addressed this subject before the
    House Armed Services Committee (HASC) and I'll get the C-17 put
    to bed here. I know that you can't just quantify these things
    down to absolutely the finest point. But it was your view
    before that committee, and I am wondering if it's still your
    view, that in view of the evident need for greater intratheater
    lift, the potential issues regarding FCS, the questions
    regarding a more prolonged phase IV, which I didn't go into at
    great length, that subject to the fiscal constraints that you
    mentioned before regarding the tanker, that you do think it
    would be good or you would like to have more than 180 C-17s,
    and what number would you think is appropriate?
        General Schwartz. I would say on the high side of 180 to
    190. The other aspect of this, Mr. Chairman, is there is a top
    line above which I am not very comfortable, and that, as I have
    testified previously, is in the neighborhood of 200. The reason
    for this is that if you have to manage a fleet, as I am
    expected to do, and that includes not just the Government-owned
    fleet, but the commercial resources as well who we depend on,
    that any time when you're not as stressed as we are now, in
    other words, a more peacetime mode, too many organic airplanes
    mean you either fly your organic airplanes empty when you train
    or you steal cargo from your commercial partners who need that
    to remain viable so that they are there to surge with you in
    war time. So, my sense is the ceiling on this is about 200. The
    spot for me, based on, again, the constraints that I see with
    regard to resources and the imperative for getting on with the
    tanker is in the high 180s.
        Senator Talent. Now, you said the ceiling, and I want to
    make certain that we choose your metaphor properly, you told
    the House you thought the sweet spot was around 200.
        General Schwartz. Right.
        Senator Talent. So, the sweet spot or the ceiling, and I
    understand fiscal constraints.
        General Schwartz. Yes.
        Senator Talent. It would be nice to have 200. You think you
    probably need because of attrition aircraft in the upper 180s
    or 190s?
        General Schwartz. Correct. Yes, sir.
        Senator Talent. Okay. I understand that if you are forced
    to a choice between the tanker and--that's a pretty tough
    choice to be forced to. But if you are forced to a choice, that
    you would choose to fund the tanker first. Let's go to that, as
    a matter of fact. We do need to recapitalize the aerial
    refueling fleet of the KC-135s, and I am wondering how you are
    going to make the timing of this work because there are 530 of
    the aircraft, and we would anticipate procuring 10 to 15 per
    year. It'll take quite a while, obviously, to procure.
    Moreover, you have expressed a desire to retire the 78 KC-135Es
    in fiscal year 2007 and the remaining 36 135E and D models the
    following year, which would obviously be before we would have
    the replacement aircraft. Since that one ended up producing the
    fleet, should we assume that we can do the actual aerial
    refueling requirements with 59 KC-10s and 417 KC-135s, which is
    what you would have left in the interim. Should we expect a
    one-for-one replacement strategy for recapitalizing the
    remaining KC-135 fleet? Also address--when you were talking
    before about lessons learned, you talked about the importance
    of trying to make these platforms less vulnerable. So, reflect
    on how that might affect your thinking as you procure this new
    tanker.
        General Schwartz. This is really more in General McNabb's
    lane, but let me just give you a general sense of things. The E
    model 135 fleet is not very productive outside the continental
    United States (CONUS). Twenty-nine aircraft are currently
    grounded--can't fly. Another 60 or so are restricted, and then
    the remainder of the 114 do largely CONUS, what we call
    Operation Noble Eagle missions, that is, national air defense
    kind of operations--training and so on. So, when we talk about
    what goes down range, it's not the E models. We would
    probably--if we retired all the E models and did not replace
    them, we'd have an 8 or 9 percent reduction in our refueling
    capability roughly. My view is that getting after the new
    tanker and making space for the crews--in other words, really
    getting the crews out of the E models and getting the
    maintainers out of the E models and applying them to an
    airplane that is very reliable, the KC-135R to get better
    utility out of that airplane is the best strategy. So, I am
    saying take down the old iron, realign the manpower to the more
    capable, more reliable, higher sorti-generating air asset. I
    think overall, we will be much better off. One final comment,
    there are those who believe that to have a multimission tanker
    is a bad idea because you'll never be able to use it as an
    airlifter because you'll have to refuel. My experience does not
    confirm that. Particularly, in terms of the global war on
    terrorism, if we are going to go to war with Iran or Korea or
    over Taiwan or a major scenario, the first 15 to 30 days are
    going to be air refueling intensive, but what I am talking
    about is the global war on terrorism, sir, for the next 15 or
    20 or 25 years. That is not an air refueling intensive
    scenario, and that's why a multimission airplane to me makes
    sense. Focusing this not on replacing R models to begin with,
    but rather the E models is the best approach. General McNabb?
        General McNabb. Sir, I agree with what General Schwartz
    mentioned. Our plan is, in fact, to take those crews and take
    those great maintainers and apply them against the KC-135R, and
    that's the reason you get the rather smaller decrement and
    capability as we want to retire those 114 E models. I think
    that that also sets us up well as we look at flowing new
    tankers to those units, that they will already have a robust
    maintenance base and a robust crew base. Our hope is that the
    new tanker will do for strategic mobility, and I would just say
    mobility in general, what the C-17 did between strategic and
    theater lift. We want the new tanker to be kind of that
    multipurpose that can be primarily a tanker, but then can
    augment the strategic lift equation when required--so do the
    same kind of thing, have the same kind of dramatic impact.
    Floors, doors, and defensive systems allow us to do that.
        Again, as General Schwartz had mentioned, if you look
    across a 30- to 50-year life cycle of an aircraft when we need
    to have those as absolute tankers when we are in a two-theater
    war scenario, but when you look across 50 years, there are
    going to be an awful lot of other times that we are going to be
    in a position where we can use that asset if it's properly
    configured to do some other things--for instance, augment CRAF.
    We talked earlier about the C-17 and the 180 and how did that
    all play out. I have mentioned before that my take on that is
    it's the leakage from that 180 airplanes that I worry a lot
    about. Right now, I have to use those airplanes to transload
    stuff from the CRAF, and that's why a new tanker that has
    floors, doors, and defensive systems that if the CRAF cannot go
    all the way forward, we can offload it to the tanker. Then
    folks will say well, ``if the balloon goes up and you need the
    tankers for air refueling,'' I, go ``Then I am exactly where I
    am now.'' But for most of the time, it'll be fine. So, from my
    standpoint, that'll be a very good use of the taxpayer money,
    and I think that when you go out to the COCOMs--and as they
    came in and said, ``here's the kinds of things we need in the
    new tanker,'' they mentioned six things, and they said we must
    have defensive systems, we must have realtime information in
    the cockpit, and we need the boom and drogue on the same
    sortie. There is no difference. You can very quickly do that.
    Receiver air refueling--that will allow us to use this airplane
    much more to change our concept of operations and not have
    airplanes come back with a lot of fuel aboard, which happens
    today. Aeromedical evacuation, night vision operations, and
    forward air refueling points. Right now, we will use C-17s and
    130s to take fuel bladders forward to take care of our forces
    on the ground. You can imagine the utility of having a tanker
    that could go in there with the fuel already set how great that
    would be. This went through the Joint Requirements Oversight
    Council, and this is what the COCOMs say they need now. I would
    say that we can bring this on, and this will have a huge impact
    on the way we do business. So, when you ask your question of
    whether or not you have to do a one-for-one replacement, I
    would say that I think it depends on the concept of operations,
    but I think that we can do better than that. But again, you
    will have to bring these airplanes in and increase the crew
    ratio on them and increase the utilization rates that we are
    going to do and how we are going to fly them. Again, I am real
    excited about what that new tanker represents. Much like the C-
    17 came in and changed how we did airlift, I'm thinking this
    new tanker is going to come in and allow us to change how we do
    air refueling.
        General Schwartz. If we replace one-for-one, we are not
    giving you your money's worth.
        Senator Talent. Okay. It sounds to me like a key are those
    defensive systems. This aircraft can't be vulnerable and do
    everything you want it to do.
        General McNabb. Not just that one.
        General Schwartz. Sir, that is certainly true for the new
    tanker, but there are existing assets that we need to equip
    with defensive systems as well. Certain very important person
    movement platforms, for example, are not so equipped, and they
    need to be without delay. That's an important imperative too.
        Senator Talent. We're going to have a vote soon, but I
    didn't want the hearing to go by without asking a sealift
    question because of----
        General Schwartz. General McNabb can take that one, sir.
    [Laughter.]
        Senator Talent. Yes. Well, let me keep it general then, and
    I am interested in particular--and we can submit others for the
    record.
        General Schwartz. Sure.
        Senator Talent. So, General Schwartz, just give me then
    your general views, your vision for recapitalizing our sealift
    assets. The Ready Reserve Force on average is 30-plus years
    old. Then, give me your thinking about how that would relate to
    the Navy's planned seabasing capabilities.
        General Schwartz. Right.
        Senator Talent. I'm still trying to get a firm grip on the
    seabasing concept in action, and I'd like to know what you
    think of it--not of the seabasing. That's obviously the Chief
    of Naval Operations (CNO), but how would you see our sealift
    assets interacting with that?
        General Schwartz. Yes, sir. The difference between the way
    the Ready Reserve Fleet, which is currently 58 platforms, sir,
    performed after Operations Desert Shield, Desert Storm, and for
    Operation Iraqi Freedom is night and day. We had readiness and
    reliability issues in the 1990s. Your committee decided enough
    of that and we're going to invest in the platforms, in their
    maintenance and so on so that when we call on them, they'll be
    ready. That has been the case for the last 3\1/2\ years, and it
    is something we need to continue. We will make some adjustments
    in the Ready Reserve Fleet, taking it down. We are going to
    reinvest those dollars in readiness and long-term service life
    extension so that the platforms will be good for 50 years.
    That's the front end strategy on the Ready Reserve Fleet. As
    you are aware, we have a number of specialty platforms that are
    in various stages of readiness. The fast sealift ships are on
    average 30 years old, of which we have eight. We have 11 large
    medium roll-on roll-off (RORO) platforms, and they range from
    25 years to just very recent production within the last 10
    years. Clearly, we need to look ahead on how to recapitalize
    the fast sealift capability. We don't need a lot, but the truth
    is there is no counterpart for fast sealift in commercial
    industry. There is no need for it. So, this is a unique
    military requirement. We don't need a ton of it. But
    particularly for those scenarios where we have to cycle these
    platforms more than one trip, you really gain a lot by having a
    27-, 32-, or 34-knot platform rather than 24 knots or below.
    Fast sealift is point one. Large Medium-Speed Roll-on/Roll-off
    Ships (LMSRs)--really the crown jewel, which are the vehicle
    carriers, there are two ways to do that. We need to have some
    in the organic fleet and we need to make these platforms last.
    But part of our strategy is to try to gain access to them in
    industry, and we have been increasing that through the Maritime
    Security Program.
        We have added several RORO platforms that are in commerce
    that cost us a couple million dollars a year to assure their
    availability when we call on them. But otherwise, the
    Government does not have to underwrite their maintenance and so
    on and so forth. That is a very high leverage way to maintain
    the Nation's sealift capacity, and we are working to increase
    the RORO contribution as compensation for taking out some of
    the oldest very low-utility ROROs in the Ready Reserve Fleet.
    So, a combination of things; MCS, sir, because it looked at
    2012, said the sealift is fine, and it is. But as we move
    beyond 2012 toward the end of the second decade, we will need
    to recapitalize. That is a Program Objective Memorandum (POM)-
    08 POM-10 issue for us, and we are not going to let that slip
    away. You asked me about seabasing. It's a good approach, but
    there are those who believe that the platforms that support the
    seabase should be dedicated. I'm not one of those. Dedicated
    platforms are a bad idea. No more than in the 50 years that
    General McNabb talked about will you be in a situation where
    tankers will be in a surge refueling mode. It is also difficult
    to conceive that you will have a seabase established
    indefinitely. So, the platforms that we build to support the
    seabase need to be multi-mission too so that when they are not
    required to have marines onboard, or Air Force ammunition or
    Army equipment, that they can be used in the common user fleet.
        In other words, tasked by USTRANSCOM for the benefit of the
    Armed Forces more broadly. That is an important imperative
    which I am working with the Navy and the Joint Staff to assure
    that we retain access to those platforms when they are not
    otherwise employed in a seabasing scenario--very important.
    Fourteen ships currently is what the Navy is thinking about.
    That is not a trivial-sized flotilla, and I believe it would be
    unfortunate if those platforms that lend themselves to the
    movement of equipment were not generally available to the rest
    of the Armed Forces.
        Senator Talent. Are you working with the Navy in terms of
    requirements for that since it's your position that you'll have
    access to them when they are not needed for seabasing purposes?
        General Schwartz. Indeed, sir.
        Senator Talent. All right. We may have some more questions
    for the record, and of course the committee members will have
    the opportunity to submit those. But subject to that, the
    hearing is adjourned. Thank you, gentlemen.
        General Schwartz. Thank you, Mr. Chairman.
        Senator Talent. Thank you again for your service and your
    testimony.
        General McNabb. Thank you, Mr. Chairman.
        Senator Talent. The hearing is adjourned.
        [Questions for the record with answers supplied follow:]
                   Question Submitted by Senator John McCain
                      c-130 modernization vs. replacement
        1. Senator McCain. General McNabb, the Air Force cannot fit all its
    program requirements into its limited procurement accounts. There are
    tough choices ahead concerning several resource-intensive programs and
    it will be imperative that fiscally sound decisions are made. There is
    an option to update the aging C-130 fleet that includes avionics
    modernization, a center wing box replacement, and an engine
    modification which will require fewer resources than procuring new C-
    130Js and/or Joint Cargo Aircraft (JCA). How can the Air Force justify
    using a great deal more resources in procuring new aircraft rather than
    pursuing the less expensive modernization program for the C-130 fleet?
        General McNabb. We are pursuing a dual strategy because neither
    approach alone provides the minimum capability required by the
    warfighter. This strategy combines targeted new aircraft acquisition
    with fleet modernization. First, we are acquiring 72 combat delivery C-
    130Js and the JCA to replace 170 aging C-130Es. The C-130J has proven
    to be a force multiplier operating in support of global war on
    terrorism. The JCA will close a capability gap identified by the Army
    during Operation Enduring Freedom (OEF) to resupply/sustain troops in
    remote mountainous regions and to support time sensitive combatant
    commander (COCOM) requirements.
        Second, we are modernizing the C-130H variants to make them
    compliant with safety and civil airspace mandates. The C-130 Avionics
    Modernization Program (AMP) provides a common cockpit configuration and
    reduces sustainment costs. Center wing box (CWB) replacement of the H-
    model aircraft is imperative to meet ongoing and future commitments.
        Our overall strategy reduces the planned combat delivery C-130J
    procurement from 150 to 72 aircraft. Retiring the E-models reduces the
    overall C-130 AMP and CWB replacement bill as well as the cost of
    sustaining a 41+ year old fleet. Additionally, I believe it prudent to
    replace the C-130E fleet with an aircraft capable of closing the
    capability gap and supporting ground forces well into the future.
                                     ______

                Questions Submitted by Senator Edward M. Kennedy
                  strategic lift to support a transformed army
        2. Senator Kennedy. General Schwartz, one of the concerns about the
    mobility requirements study (MRS-05) analysis was that it predated the
    major restructuring of the U.S. Army, which is now planning on modular
    brigades and the Future Combat System (FCS). Did the mobility
    capabilities study (MCS) remedy these deficiencies in the previous
    analysis?
        General Schwartz. The MCS ensured all Services updated required
    force structure expected in 2012 and did include Army modular brigades
    equipped with Stryker Combat Vehicles. The FCS will be fielded beyond
    2012 and therefore is not included in MCS. However, the footprint for
    both is similar. Maintaining the unit integrity of these brigades was
    considered in the deployment of these forces.

        3. Senator Kennedy. General Schwartz, are there other changed
    circumstances that MCS did not adequately consider? Are you confident
    that MCS and the Quadrennial Defense Review (QDR) allow us to gauge the
    proper demand for strategic airlift?
        General Schwartz. Our goal is to maintain enough flexibility to
    adapt and continue to support the COCOMs. I am inclined to agree with
    the MCS and QDR regarding strategic airlift with the 180 C-17s
    programmed and the C-5 modernization that could complete by fiscal year
    2020 for the scenarios examined. That said, up to an additional 20 C-
    17s would add to our confidence and flexibility in supporting
    unforeseen events. MCS work continues and is beginning to address the
    program needed for recapitalization of our air refueling fleet.

    avionics modernization plan and reliability enhancement and reengining
                                    program
        4. Senator Kennedy. General McNabb, in 2001, the Air Force
    sponsored analysis by the Institute for Defense Analyses (IDA) which
    concluded that upgrading the C-5 fleet, both C-5As and C-5Bs, with the
    Avionics Modernization Program (AMP) and the reliability enhancement
    and reengining program (RERP) was the most cost effective alternative
    for increasing strategic airlift capability. I appreciate your comments
    that you are waiting to see how the test program turns out for the C-5A
    AMP and RERP process. Has the Air Force seen anything thus far in the
    development of the AMP and RERP that would alter the previous Air Force
    and IDA conclusion?
        General McNabb. No, the Air Force has not seen anything in C-5 AMP
    or RERP development that would alter previous Air Force and IDA
    conclusions that upgrading the C-5 fleet with AMP and RERP is a cost
    effective alternative for increasing strategic airlift capability. The
    Aeronautical System Center (ASC) predicts that C-5 AMP operational test
    and evaluation (OT&E) will successfully validate all of AMP's key
    performance parameters (KPP). The Air Force predicts it will achieve
    similar success with RERP KPPs. However, RERP KPPs will not be
    validated until RERP OT&E is complete, estimated by fiscal year 2009.

        5. Senator Kennedy. General McNabb, assuming that the testing
    program validates the expected improvements in readiness, how do you
    intend to use the updated C-5A/B fleet to compensate for the
    unexpectedly high utilization rates the C-17 is seeing as a result of
    Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF)?
        General McNabb. A modernized C-5 fleet with defensive systems
    capability will fly intertheater direct-delivery to the warfighter. The
    demand for airlift still outweighs the supply. The MCS minimum number
    of 292 aircraft was predicated on modernized platforms whether C-17 or
    AMP/RERPed C5s. One of the critical assumptions of the MCS is that the
    C-5 modernization program will be successful. It will take both the
    full buy of C-17s and the modernization of the C-5 fleet to meet the
    minimum requirements of the MCS. The increased capability that a
    modernized C-5 fleet will provide should allow us to reach further down
    the Joint Chiefs of Staff (JCS) priority list and provide greater
    support to the warfighters. It will also provide us with greater
    operational flexibility by allowing us to take full advantage of the C-
    17's multi-mission capability in support of the warfighter's intra-
    theater airlift requirements.

        6. Senator Kennedy. General McNabb, the Air Force is on record that
    they are using up C-17 service life more quickly than anticipated. Once
    C-5 reliability improves, shouldn't we be able to increase its
    utilization and cut back on C-17 use for inter-theater lift, in effect
    buying back some service life?
        General McNabb. With improved reliability, C-5 utilization should
    increase. However, the demand for airlift outweighs the supply.
    Improved reliability and increased utilization that a modernized C-5
    fleet will provide should allow us to reach further down the priority
    list and provide greater support to the warfighters. It will also
    provide us with greater operational flexibility by allowing us to take
    full advantage of the C-17's multi-mission capability. Even after the
    C-5 is modernized, it is still a much more expensive asset to operate
    than a C-17. To keep the cost of operation down, we plan to put the
    majority of our C-5 fleet in our Air Reserve component, our ``surge''
    force.

                               protection systems
        7. Senator Kennedy. General McNabb, I know that the Air Force has
    previously equipped some of the C-130, C-141, and C-17 cargo aircraft
    with an add-on armor ballistic protection system. These kits provide
    protection to crew and critical systems from ground fire during
    approaches and departures, when the aircraft is most vulnerable to
    these threats. Has the Air Force evaluated the effectiveness of this
    system? If so, what is your assessment of the effectiveness of making
    these improvements?
        General McNabb. Based on developmental testing of the system used
    on C-130s and C-17s, Air Mobility Command is confident these systems
    provide necessary additional measures of protection where installed.

        8. Senator Kennedy. General McNabb, we all know that the C-5 was
    intended for strategic and not tactical transport applications. In the
    new environment we face, however, ``tactical'' threats could be present
    anywhere. I am sure that considering this new reality has led the Air
    Force to begin testing a version of the large aircraft infrared
    countermeasure (LAIRCM) system on a C-5B. Since the crews operating the
    C-5 fleet could be subject to such ``tactical'' threats as surface-to-
    air missiles, it would seem to be prudent to protect these crews from
    direct fire threats as well. Is the Air Force considering applying such
    add-on armor ballistic protection systems to aircraft in the C-5 fleet?
    If not, why not?
        General McNabb. In close coordination with Office of the Secretary
    of Defense (OSD) live fire test and evaluation (LFT&E) experts, Air
    Mobility Command is evaluating alternatives to add aircraft armor to
    the C-5 in much the same way armor was installed on the Lockheed C-141.

                   tactical airlift in the army and air force
        9. Senator Kennedy. General Schwartz, the Army intends to buy a
    Future Cargo Aircraft (FCA) as part of the Comanche helicopter
    cancellation 2 years ago. While this aircraft would not provide as much
    intra-theater lift capability as the C-130 aircraft, it would provide
    some capability. Now the Air Force is also intending to buy much the
    same aircraft under the Light Cargo Aircraft (LCA) program. I believe
    that the Department is now calling these programs the JCA. How does the
    JCA program for cargo aircraft affect your plans?
        General Schwartz. Most Vietnam-era C-130E/H aircraft show
    significant signs of aging due to extensive tactical airlift use. These
    intra-theater airlifters suffer from structural problems; evident from
    the center wing box failure resulting in 21 grounded aircraft with
    another 58 operating on flight restrictions. Grounded aircraft cost $7
    million to $9 million per aircraft to fix and restricted aircraft cost
    approximately $700,000 to repair, while only increasing aircraft
    lifespan by 3-5 years. The bottom-line is that grounded aircraft are of
    little long-term value to the Department of Defense and restricted
    aircraft are limited to training missions. If we do nothing to fix the
    aging C-130 problem, then we would fall below the MCS-stated threshold
    as early as fiscal year 2007. However, the Air Mobility Command's most
    recent mitigation plan relies, in part, upon JCA acquisition to ensure
    the MCS-stated threshold in intra-theater aircraft is not approached.

        10. Senator Kennedy. General Schwartz, how would you account for
    the contribution of such Army and Air Force cargo aircraft?
        General Schwartz. The Department of Defense is just beginning to
    shape the contributions that will be made by the JCA. The JCA will be
    an integral part of a focused logistics network necessary to support a
    dispersed and networked future combat force. Its flexibility, including
    robust takeoff and landing capability, will maximize operations across
    the spectrum of military operations. Access to unimproved landing areas
    will provide the joint force commander a throughput of priority supply,
    personnel, equipment, and materiel to the right place, at the right
    time, and in the right quantity, across the full range of military
    operations.

        11. Senator Kennedy. General Schwartz, have you and your staff been
    involved in considering how to proceed with the JCA program?
        General Schwartz. Yes, our involvement began over a year ago when
    the program solely resided within Army channels as the Future Cargo
    Aircraft. After Program Decision Memorandum (PDM) III directed that the
    program evolve into a joint Army and Air Force venture, we have been
    involved in shaping the future of the JCA. My staff and our air
    component, Air Mobility Command, are working in concert with the Army
    staff in the pursuit of this future joint airlifter.

              support for civilian-owned strategic lift resources
        12. Senator Kennedy. General Schwartz, the administration has asked
    for legislation that would require a minimum annual purchase of
    services from Civil Reserve Air Fleet (CRAF) providers. I understand
    that the Department believes that you need to do this to ensure that
    the CRAF aircraft owners will have sufficient commercial activity to
    ensure that their aircraft are available in wartime.
        I also understand that the Department of Defense (DOD) has recently
    reversed its policy of relying on commercial shipping companies first
    and relying on Government-owned or Government-controlled ships if
    commercial vessels are not available. Presumably, these peacetime cargo
    bookings help U.S.-flag operators have sufficient commercial activity
    to ensure that their ships or aircraft are available in wartime. Now,
    however, DOD has said that the priority should go to the Government-
    owned or Government-controlled vessels. How are these policies
    consistent?
        General Schwartz. The administration has submitted section 802 of
    the Fiscal Year 2007 DOD Authorization Bill, Minimum Annual Purchase
    for CRAF contracts, to allow the DOD to guarantee a minimum level of
    business to our commercial partners that more accurately reflects the
    services we expect them to provide. DOD currently guarantees a small
    part of our annual business based on known requirements at contract
    award with the remainder of our business being awarded throughout the
    year as needs develop. With fewer troops stationed overseas, the known
    requirements at award will continue to dwindle. Air carriers need
    guaranteed business contracts to obtain financing for fleet expansion
    and operating costs. The proposal should not result in any increased
    costs to the Government.
        It has been, and continues to be, USTRANSCOM policy to support the
    National Sealift Policy in that, ``The U.S.-owned commercial ocean
    carrier industry, to the extent it is capable, will be relied upon to
    provide sealift in peace, crisis, and war.'' This national directive is
    the foundation of our vessel selection process. The bedrock of this
    directive is to promote the U.S. sealift industry with Government
    business, resulting in an increase in jobs for the U.S. mariner and
    more business for U.S. flagged vessels. Vessels that are Government-
    owned or Government-controlled should not compete with commercial
    industry for business.
        Every attempt will be made to satisfy transportation requirements
    using commercial resources. However, when commercial resources and
    schedules cannot satisfy requirements, Government-owned or chartered
    vessels will be activated or utilized. These activated ships shall be
    employed appropriately to augment the commercial fleet in support of
    DOD requirements. These organic vessels will be used judiciously and
    with forethought to ensure they are not in competition with commercial
    industry whenever possible.
        During wartime and contingencies, we anticipate a surge of organic
    capacity to meet wartime requirements. That is not to say that
    commercial capacity will not be used, quite the contrary. We will fully
    seek commercial solutions early and often throughout the stages of a
    contingency in order to satisfy strategic requirements. Relying on the
    privately-owned, U.S.-flagged commercial merchant marine as a source
    for national defense sealift, benefits the United States military in
    many ways. For example, it provides global reach, access to valuable
    commercial inter-modal capacity, immediate guaranteed access, reduced
    U.S. military footprint, and a reserve of strategic capacity.

        13. Senator Kennedy. General Schwartz, does this mean that you do
    not need as much sealift augmentation in wartime as we had thought you
    would need?
        General Schwartz. Not at all. We continue to maintain a proper mix
    of organic and commercial assets to meet our sealift requirements. As
    our organic fleet ages and is removed from service, recapitalization
    options are considered. These options include the Maritime Security
    Program and contingency contracts with our commercial partners, new
    construction, modification to existing hulls, or other commercial
    ventures. The MCS determined that our current sealift capacity is
    adequate, and we will maintain that capacity with a mix of organic and
    commercial assets.

                          sell used c-17s and buy new
        14. Senator Kennedy. General McNabb, at various times, some have
    suggested that the Air Force sell some of its older C-17 aircraft and
    use the proceeds to buy new ones. Is there any such proposal that the
    Air Force is currently evaluating?
        General McNabb. While there have been discussions on the
    feasibility of selling used C-17s, the Air Force is not currently
    evaluating any proposals to sell older C-17 aircraft to offset the cost
    of new aircraft.

        [Whereupon at 4:54 p.m., the subcommittee adjourned]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2007

                                  ----------

                            THURSDAY, APRIL 6, 2006

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

                               NAVY SHIPBUILDING

        The subcommittee met, pursuant to notice, at 2:38 p.m. in
    room SR-232, Russell Senate Office Building, Senator James M.
    Talent (chairman of the subcommittee) presiding.
        Committee members present: Senators Talent, Collins,
    Lieberman, and Reed.
        Majority staff member present: Sean G. Stackley,
    professional staff member.
        Minority staff member present: Creighton Greene,
    professional staff member.
        Staff assistants present: Micah H. Harris and Benjamin L.
    Rubin.
        Committee members' assistants present: Mackenzie M. Eaglen,
    assistant to Senator Collins; Lindsey R. Neas, assistant to
    Senator Talent; Mieke Y. Eoyang, assistant to Senator Kennedy;
    and Frederick M. Downey, assistant to Senator Lieberman.

         OPENING STATEMENT OF SENATOR JAMES M. TALENT, CHAIRMAN

        Senator Talent. We will convene the hearing. I know Senator
    Kennedy is deeply involved in the immigration debate and may
    not be able to come. If he is able to come, of course we will
    defer to him for his opening statement when he arrives, as is
    convenient for him.
        The subcommittee meets today to receive testimony on the
    Navy shipbuilding program and the shipbuilding industrial base
    in review of the Department of Defense's (DOD) authorization
    request for fiscal year 2007.
        We are pleased to have with us today Dr. Delores M. Etter,
    the Assistant Secretary of the Navy for Research, Development,
    and Acquisition. Welcome, Dr. Etter.
        Dr. Etter. Thank you.
        Senator Talent. Ms. Allison Stiller, who is the Deputy
    Assistant Secretary of the Navy for Ships. Welcome, Ms.
    Stiller.
        Ms. Stiller. Thank you.
        Senator Talent. Rear Admiral Mark J. Edwards, the Director
    for Warfare Integration. Welcome again.
        Admiral Edwards. Thank you.
        Senator Talent. Rear Admiral Samuel J. Locklear, who is the
    Director for Programming.
        We will convene the second panel this afternoon with Damien
    Bloor of First Marine International, and John F. Schank of the
    RAND Corporation to discuss their respective studies regarding
    the shipbuilding industrial base. In my time as chairman of the
    subcommittee, I have had the opportunity to take aboard much
    testimony by the Navy on seapower matters. I have gained a
    great appreciation for the Navy's unique perspective on our
    national security. A perspective that has been born out through
    testimony and through time, that we are a maritime nation. The
    security of our Nation, the strength of our economy, the face
    of our diplomacy, and the course of our foreign policy have
    long been built upon the Navy's ability to maintain global
    presence and exercise freedom of maneuver upon the seas.
        Our primacy as a naval power is virtually unchallenged
    today, due in large part to prudent decisions made in these
    rooms, 10, 15, and 20 years ago. That is the nature of
    shipbuilding; we have to take the longer view. Decisions
    regarding the fleet's capabilities for the distant future are
    before us today. When we consider requirements for the future
    fleet, we must be careful that we do not undervalue that most
    fundamental of capabilities--numbers of ships. To the extent
    that we forego the difficult decisions to invest in that
    capability, we place at risk our primacy as a maritime nation
    and all the security that that affords.
        This time last year, the subcommittee expressed its extreme
    concern with the steady downward trends in the Navy
    shipbuilding program: reduced build rates, increased costs, a
    weakened industrial base, and the prospects of our Navy, which
    is currently at is smallest size in decades, ultimately falling
    well below 250 major combatants. Our concerns trace to the hard
    reality of those elements of our national military strategy
    which rely upon naval capability, whether engaged in the global
    war on terror or in major combat operations. We will certainly
    be challenged in regions of the world vital to our national
    interests, during the service lives of the ships whose keels we
    lay today.
        The Chief of Naval Operations (CNO) has responded to our
    concerns and brought forward with the 2007 President's budget,
    the Navy's long-range shipbuilding plan, which calls for a
    future fleet of 313 ships. We will continue to work closely
    with the Navy to gain a full understanding of the requirements
    and capabilities called for in this plan.
        The Navy's estimate to construct this force is on the order
    of $13.5 billion per year, which would represent a 50 percent
    increase above investments of the past 15 years. We are
    interested in hearing the Navy's plan to finance this
    investment and provide much needed budget stability.
        Additionally, the CNO has highlighted that the
    affordability of this plan will be enhanced by tight control
    over requirement changes and emphasis on threshold capability
    for ships under contract, that the Navy's expectation is that
    industry will respond to stabilize the program with efforts to
    reduce its costs.
        I am interested and the subcommittee is interested in your
    insights regarding these cost control efforts in the Navy's
    initiatives to improve the affordability of the shipbuilding
    program, particularly in light of the notably higher
    shipbuilding estimates we have received from the Congressional
    Budget Office (CBO).
        There are a number of new ship programs and new
    capabilities, either under construction or being introduced
    within the Future Years Defense Program (FYDP). The
    subcommittee is keenly interested in your progress bringing
    these programs forward: the next generation destroyer, the
    DD(X), the Littoral Combat Ship (LCS), the future aircraft
    carriers, CVN 21, and the Maritime Prepositioning Force or
    seabase ships. We look for greater clarity regarding your
    acquisition strategy for these ship programs, and your plan for
    managing risk, design, and production. As well, we continue to
    closely follow your progress on the more mature shipbuilding
    programs, the Virginia class submarine, and Amphibious Assault
    Ship programs, and listen for your recommendations regarding
    efficient procurement of these critical capabilities.
        Finally, we must consider the effect of the shipbuilding
    plan on the overall health and viability of our strategic
    shipbuilding industrial base. We look for the Department's
    assessment of this important topic and will engage with our
    second panel to gain the benefits of their insights and
    recommendations in this regard.
        Again, ladies and gentlemen, thank you for joining us today
    and we look forward to your testimony.
        Senator Reed, if you have an opening statement or comments
    you would like to make, you can feel free.
        Senator Reed. Thank you, Mr. Chairman. No, I do not. I am
    interested in hearing the panel. Welcome, ladies and gentleman.
        Senator Talent. I understand that Secretary Etter and
    Admiral Edwards have opening statements, so we will start with
    Secretary Etter.

     STATEMENT OF DR. DELORES M. ETTER, ASSISTANT SECRETARY OF THE
            NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION

        Dr. Etter. Thank you, Mr. Chairman, distinguished members
    of the subcommittee, it is a privilege to appear before the
    Seapower Subcommittee to discuss the Department of the Navy
    ship construction programs and the fiscal year 2007 budget
    request. I would like to thank you for your personal support
    and the committee's great support for all Navy and Marine Corps
    programs.
        I would like to submit our joint written statement for the
    record.
        Senator Talent. Without objection.
        Dr. Etter. There has been considerable activity within
    shipbuilding over the last year, and in fiscal year 2007 we
    will see the Navy's previous research and development (R&D)
    efforts begin to bear fruit. There are a variety of platforms
    and capabilities that will transform our fleet over the FYDP as
    we procure 51 new ships. To support that plan, we must align
    the industrial base for long-term force development through
    split funding, advance procurement, and cost saving
    initiatives. The Navy continues to analyze operational
    requirements, ship designs and costs, acquisition plans, and
    industrial base capability to further improve its shipbuilding
    plan.
        I would like to highlight the ships we propose procuring in
    fiscal year 2007. At the top of the list is DD(X), which is the
    centerpiece of a surface combatant family of ships that will
    deliver a broad range of capabilities. Since the award of the
    design agent contract in April 2002, the program has conducted
    extensive land-based and at-sea testing of the 10 critical
    engineering development models, and, as a result, is on track
    to mature these systems in time for ship installation. This
    level of technological maturity was a key fact in the Office of
    the Secretary of Defense's (OSD) granting Milestone B approval
    in November 2005. As you are aware, the Navy is proposing a
    dual lead ship acquisition strategy. The Navy is confident that
    this approach will motivate cooperative and collaborative
    completion of detail design, control costs on the lead ships,
    and allow a broader set of options for future acquisition
    strategy decisions. Our fiscal year 2007 budget request
    includes the first funding increment for two DD(X)s. The ship
    that I believe will prove to be transformational in terms of
    how we research, develop, and acquire capabilities is the LCS.
    This asset will bring much to the table in support of the
    uncertain security environment we operate in today and in the
    future.
        LCS will be different from any warship that has been built
    for the U.S. Navy. Its modular design, built to open-systems
    architecture standards, will provide flexibility and a means to
    rapidly reconfigure mission modules and payloads. The program
    provides the best balance of risk, affordability, and speed of
    construction. The LCS program is on track and within the cost
    caps established by Congress. Our fiscal year 2007 budget
    requests include funding for two LCSs.
        Our fiscal year 2007 budget request also includes funding
    for the ninth Virginia class submarine. This boat will be the
    fourth boat in the five boat multi-year procurement. The multi-
    year contracting approach provides the Navy with a savings of
    $80 million per boat. The Navy has proposed the first increment
    of split funding for the first amphibious assault ship
    replacement ship in fiscal year 2007. This ship is optimized to
    accommodate the future aviation combat element, which includes
    Joint Strike Fighter (JSF) and MV-22 aircraft. The Navy is also
    proposing procuring the 10th Lewis & Clark class auxiliary dry
    cargo and ammunition ship in fiscal year 2007. The first nine
    ships are under contract. The lead ship will deliver this
    spring. These ships will replace aging combat stores ammunition
    ships.
        Before closing, I would like to share with you a few of my
    thoughts on acquisition program volatility, a term that I am
    using to articulate the complex set of challenges that lead to
    cost, schedule, and performance issues for acquisition
    programs.
        Volatility, as defined by tending to vary often or widely,
    is fueled by five main factors in our acquisition programs;
    program complexity, requirements fluctuation, budget
    instability, schedule demands, and contractor and program
    manager optimism. These are the factors that are most likely to
    generate cost and schedule overruns and performance issues. I
    am actively working with my acquisition team to take specific
    actions to reduce acquisition program volatility. I look
    forward to working with Congress to mitigate the acquisition
    program volatility during this and future fiscal years.
        Mr. Chairman, I am grateful to the committee for the
    opportunity to discuss how the Department is working hard to
    change its approach to acquisition requirements and the
    delivery of the immense capability our shipbuilding programs
    bring to the Nation. These ships, submarines, and carriers are
    critical to the success of our missions in the global war on
    terrorism and to protect our country from the many threats it
    faces. Congressional support of the Navy shipbuilding program
    is essential to these capabilities. Thank you for your
    consideration. We look forward to the questions that you may
    have.
        Senator Talent. Thank you, Secretary Etter.
        [The joint prepared statement of Dr. Etter, Ms. Stiller,
    Rear Admiral Edwards, and Rear Admiral Locklear follows:]
    Joint Prepared Statement by Dr. Delores M. Etter, Allison Stiller, RADM
           Mark J. Edwards, USN, and RADM Samuel J. Locklear III, USN
                                  introduction
        Mr. Chairman, distinguished members of the subcommittee, thank you
    for this opportunity to appear before you to discuss the Department of
    the Navy's (DON) fiscal year 2007 shipbuilding programs.
                               current operations
        We are a Nation at war. Today your Navy and Marine Corps team is
    postured worldwide, fighting the global war on terrorism, deterring
    aggression by would-be foes, preserving freedom of the seas, and
    promoting peace and security. As of March 1, 2006, 126 ships are
    underway (45 percent) of which 92 (33 percent) are forward deployed.
    Navy has 4,959 Reserves and the Marine Corps has over 7,000 Reserves on
    Active-Duty.
        Today, marines remain committed to the prosecution of the global
    war on terrorism. Currently, there are over 35,000 marines forward
    deployed in support of regional combatant commanders. Their performance
    on the battlefield continues to validate their forward deployed
    posture, maneuver warfare doctrine, adaptive logistics backbone, the
    unique flexibility and scalability of the combined-arms Marine Air-
    Ground Task Force construct, and most importantly, their commitment to
    warfighting excellence as the world's foremost expeditionary
    warfighting organization.
        The 25,000 sailors and marines under the command of I Marine
    Expeditionary Force (MEF) in Al Anbar Province, Iraq and those marines
    assigned to transition teams have made significant progress in their
    efforts to develop capable, credible Iraqi security forces. In setting
    the conditions for the historic constitutional referendum and national
    elections, they have also distinguished themselves in places like
    Fallujah, Ramadi, and the Euphrates River Valley. In Afghanistan, we
    have 1,200 sailors and marines providing support to the increasingly
    capable Afghan National Army. As part of Combined Joint Task Force-76
    (CJTF-76), a Marine infantry battalion is conducting operations against
    the Taliban and anti-coalition militia in the northeastern portion of
    the country. Marine officers and senior enlisted leaders continue to
    train, mentor, and operate with their Afghan counterparts as part of
    Task Force Phoenix.
        There are over 10,000 sailors serving ashore throughout the Central
    Command (CENTCOM) area of responsibility (AOR) including more than
    4,000 in Iraq, and an additional 2,600 in Kuwait, that includes SEALs,
    Seabees, military police, explosive ordnance disposal, medical,
    intelligence, and civil affairs support personnel. Navy carrier and
    expeditionary strike groups continue to deploy in support of global war
    on terrorism and conduct combat operations in Iraq and Afghanistan. At
    the same time, the Navy and Marine Corps team conducted humanitarian
    assistance/disaster relief missions such as tsunami relief, Pakistani
    earthquake, and on our own Gulf Coast after Hurricanes Katrina and
    Rita. Naval forces in support of this effort consisted of 23 ships and
    a special purpose Marine Air-Ground Task Force (MAGTF) employing 2,500
    marines, providing command and control, evacuation, and humanitarian
    support to military and civilian personnel in affected regions.
    Additionally, 104 naval aircraft flew 1,103 sorties in support of
    search and rescue and other humanitarian assistance missions. These
    efforts resulted in the safe evacuation of 8,518 personnel and the
    rescue of an additional 1,582 people isolated by the disasters. In the
    weeks that followed, naval relief efforts provided a total of
    approximately 2.5 million pounds of food and water to people most
    severely affected by the disaster.
        The fiscal year 2007 budget request maximizes our Nation's return
    on its investment by positioning us to meet today's challenges--from
    peacekeeping/stability operations to global war on terrorism operations
    and small-scale contingencies--and by transforming the force for future
    challenges.
                     prepared today--preparing for tomorrow
        While the Navy and Marine Corps team is engaged in supporting the
    global war on terrorism, we also have a responsibility to prepare for
    future conflicts and contingencies. The Defense Department's Strategic
    Planning Guidance directs balanced capabilities for controlling four
    principal challenges: Traditional, Irregular, Catastrophic, and
    Disruptive. Our challenge is to determine the right balance of those
    capabilities that the Navy and Marine Corps team must provide to meet
    challenges across the operational spectrum.
        The enemy we are fighting today is different than those in our
    recent past. He is a transnational actor with no allegiance to
    sovereign nations or respect to conventional rules of war. He can
    strike us at will from markedly unforeseen directions. He will go to
    any length to inflict harm on America's people and damage to her soil.
    A different enemy requires different forms of warfighting capability, a
    capability based on military forces increasingly capable of operating
    independently in area denial and anti access environments without
    benefit of allied and/or host nation support. We must be able to
    maintain global presence with an increased relevance of the sea.
    Therefore, our ships will have more relevance operating under a variety
    of uses, all the while, maintaining ability to mass and conduct large-
    scale operations if required.
        America's ability to use international seas and waterways, as both
    maneuver space and an operating base unconstrained by foreign veto,
    allows our naval forces to project combat power into the littoral
    regions, which contain more than half the world's population and more
    than 75 percent of its major urban areas. Highly mobile and ready for
    combat, our forward-deployed expeditionary forces are critical
    instruments of U.S. diplomacy and central components of joint military
    force packages designed to quickly contain a crisis or defeat an
    emerging threat.
        The Navy and Marine Corps team of the future must be capabilities-
    based and threat-oriented. The United States needs an agile, adaptable,
    persistent, lethal, surge-ready force. The Navy and Marine Corps team
    must seek to identify the proper strategic balance of capabilities to
    ensure we have the agility, speed, flexibility, and lethality to
    respond to any threat from any adversary, whether that threat is
    conventional or asymmetric in nature. Through agility and persistence,
    our Navy and Marine Corps team must be poised to fight irregular
    warfare against a ``thinking enemy,'' able to act immediately against a
    fleeting target. The challenge is to simultaneously set the conditions
    for a major combat operation (MCO) while continuing to fight the global
    war on terrorism, with the understanding that the capabilities required
    for the global war on terrorism cannot necessarily be assumed to be a
    lesser-included case of an MCO. Our force must be the right mix of
    capabilities that balances persistence and agility with power and speed
    in order to fight the global war on terrorism while being prepared to
    win an MCO. To do so, it must be properly postured in terms of greater
    operational availability from platforms that are much more capable as a
    distributed, networked force. While the fabric of our fighting force
    will still be the power and speed needed to seize the initiative and
    swiftly defeat any regional threat, FORCEnet's pervasive awareness via
    command, control, communication, computer, intelligence, surveillance,
    and reconnaissance (C\4\ISR) will enable us to achieve essential
    effects with less mass. Because of its access from the sea, the Navy
    and Marine Corps are focusing significant effort and analysis in
    support of joint combat power projection by leveraging the maneuver
    space of the oceans through Seabasing.
                        seabasing--a national capability
        The Naval Power 21 vision defines the capabilities that the 21st
    Century Navy and Marine Corps team will deliver. Our overarching
    transformational operating concept is Seabasing; a national capability,
    for projecting and sustaining naval power and joint forces that assures
    joint access by leveraging the operational maneuver of sovereign,
    distributed, and networked forces operating globally from the sea.
    Seabasing unifies our capabilities for projecting offensive power,
    defensive power, command and control, mobility, and sustainment around
    the world. It will enable commanders to generate high tempo operational
    maneuver by making use of the sea as a means of gaining and maintaining
    advantage.
        The war against the Taliban and al Qaeda in Afghanistan provided a
    harsh dose of reality for those who assumed traditional threats and the
    availability of friendly, convenient land bases to project airpower and
    land forces. In the early phases of Operation Enduring Freedom (OEF),
    two forward-deployed marine expeditionary units formed Task Force 58
    and projected the first major U.S. ``conventional'' combat units into
    Afghanistan--more than 350 miles from its seabase of amphibious
    shipping. Yet, their operations were far from traditional or
    conventional expectations. We believe these recent experiences such as
    the prohibition of the 4th Infantry Division using Turkey in the early
    stages of Operation Iraqi Freedom (OIF) are compelling insights on how
    operations can be conducted in the future. As anti-access, military and
    political measures proliferate; even friendly nations may deny U.S.
    forces land basing and transit due to their own sovereign interests.
        Seabasing represents a complex capability, a system-of-systems able
    to move at will. Seabasing, enabled by joint integrated and operational
    concepts, is the employment of ships and vessels with organic strike
    fires and defensive shields of sensors and weapons, strike and
    transport aircraft, communications, and logistics. We will use the sea
    as maneuver space to create uncertainty for adversaries and protect the
    joint force while receiving, staging, and integrating scalable forces,
    at sea, that are capable of a broad range of missions. Its inherent
    freedom of movement, appropriate scalability, and sustainable
    persistent power provides full spectrum capabilities, from support of
    theater engagement strategies, to rapid response to natural or man made
    disasters, to MCOs from raids, to swift defeat of enemies, to scale of
    major combat and decisive operations. In order to achieve this
    capability, the Navy and Marine Corps must be forward based, forward
    deployed (on naval shipping), and forward engaged to maintain global
    presence as addressed in the 2006 Quadrennial Defense Review (QDR) to
    meet these challenges.
        The Seabased Navy will be distributed, netted, immediately
    employable and rapidly deployable, greatly increasing its operational
    availability through innovative concepts such as, for example, Sea Swap
    (where deemed appropriate) and the Fleet Response Plan (FRP). At the
    same time, innovative transformational platforms under development such
    as Maritime Prepositioning Force (Future) (MPF(F)), LHA(R), and high-
    speed connectors, will be instrumental to the Sea Base.
        The FRP is the maintenance, training, and operational framework
    through which the Navy meets global combatant commander demand signals
    for traditional (e.g., global war on terrorism, major combat
    operations, humanitarian assistance/disaster relief, shaping and
    stability operations, counter piracy, etc.) and emerging mission sets
    (e.g., riverine warfare, Navy Expeditionary Combat Command (NECC),
    medical outreach). The FRP is mission-driven, capabilities-based, and
    provides the right readiness at the right time (within fiscal
    constraints). It enables responsive and dependable forward presence.
    With the FRP we can deploy a more agile, flexible, and scalable naval
    force capable of surging quickly to deal with unexpected threats,
    humanitarian disasters, and contingency operations. Sea Swap is an
    initiative designed to keep a single hull continuously deployed in a
    given theater, replacing the entire crew at 6-month intervals. The
    primary objective is to effectively and efficiently increase forward
    naval presence without increasing operating cost.
                                  seapower 21
        We developed the Sea Power 21 vision in support of our National
    Military Strategy. The objective of Sea Power 21 is to ensure this
    nation possesses credible combat capability on scene to promote
    regional stability, to deter aggression throughout the world, to assure
    the access of joint forces and to fight and win should deterrence fail.
    Sea Power 21 guides the Navy's transformation from a threat--based
    platform centric structure to a capabilities-based, fully integrated
    force. The pillars of Sea Power 21--Sea Strike, Sea Shield, and
    Seabasing--are integrated by FORCEnet which will be the means by which
    the power of sensors, networks, weapons, warriors and platforms are
    harnessed in a networked combat force. This networked force will
    provide the strategic agility and persistence necessary to prevail in
    the continuing global war on terrorism, as well as the speed and
    overwhelming power to seize the initiative and swiftly defeat any
    regional peer competitor in MCOs. Extending FORCEnet to our allies and
    partners in the form of multinational information sharing networks will
    represent an unprecedented level of interoperability for both global
    war on terrorism and MCO. The immeasurable advantage of this effort is
    the effective association of a ``1,000-ship Navy'' built from our own
    core capabilities combined with the coordinated efforts of our allies
    and partners in today's challenging global environment. During the last
    year, the Chief of Naval Operations (CNO) established a focused effort
    to clearly define naval force structure requirements. The Navy recently
    submitted to Congress its 2007 Annual Long Range Plan for Construction
    of Naval Vessels. This plan begins our movement toward a more balanced
    force that meets the future national security requirements outlined in
    the fiscal year 2006 QDR with acceptable risk and is designed to
    replenish the fleet, while stabilizing workload and funding
    requirements. As this 30 year shipbuilding plan evolves over the next
    year, it will produce an investment plan that is both executable and
    affordable based on balancing several factors: Naval force operational
    capability; risk; and, the ability of the shipbuilding industrial base
    to execute the plan.
              fiscal year 2006 quadrennial defense review (qdr 06)
        The fiscal and temporal realities associated with the design and
    development of modern, sophisticated weapons systems requires a
    significantly different approach to procurement and operation of or
    forces and resources. It is this dynamic that is propelling the Navy
    forward in the transformational arena. As recognized in QDR 06, the
    size and capabilities of our force are driven by the challenges we will
    face. The capacity of the force is determined by its global posture in
    peacetime and the requirement to respond from this posture, as well as
    to surge, in crisis. In the case of our Navy, it is based upon the need
    for a ubiquitous but carefully tailored maritime presence that can
    provide our President and our allies with strategic options in support
    of dynamic security requirements. QDR 06 developed guidance to achieve
    the national defense and national military strategies and shaping the
    future force to improve capabilities and expand capacity to address
    four priorities:

             Defeat Terrorist Extremists;
             Defending the Homeland in Depth;
             Shaping the Choices of Countries at Strategic
            Crossroads; and
             Preventing Hostile State and Non-state Actors from
            Acquiring or Using Weapons of Mass Destruction.

        QDR 06 sets a 20-year course for the Department of Defense (DOD)
    and provides an opportunity to continue to reshape the U.S. Armed
    Forces to meet current and emerging security responsibilities. The QDR
    06 construct places new emphasis on the unique operational demands
    associated with homeland defense and the global war on terrorism,
    shifts focus from optimizing for conflicts in two particular regions to
    building a portfolio of capabilities with global reach and serves as a
    bridge from today's threat-based force to a future capabilities-based
    transformational force.
                                force structure
        Force structure requirements were developed and validated through
    detailed joint campaign and mission level analysis, optimized through
    innovative sourcing initiatives (FRP, Sea Swap, forward posturing) that
    increase platform operational availability, and balanced with
    shipbuilding industrial base requirements. This force structure was
    developed using a capabilities-based approach measured against the
    anticipated threats for the fiscal year 2020 timeframe. The future Navy
    will remain sea based, with global speed and persistence provided by
    forward deployed forces, supplemented by rapidly deployable forces
    through the FRP. To maximize return on investment, the Navy that fights
    the global war on terrorism and executes maritime security operations
    will be complementary to the Navy required to fight and win in any MCO.
    This capabilities-based, threat-oriented Navy can be disaggregated and
    distributed world wide to support combatant commander global war on
    terrorism demands. The resulting distributed and netted force, working
    in conjunction with our joint and maritime partners, will provide both
    actionable intelligence through persistent, maritime domain awareness,
    and the ability to take action where and when a threat is identified.
    The same force can be rapidly aggregated to provide the strength needed
    to defeat any potential adversary in an MCO. The warships represented
    by this shipbuilding plan will sustain operations in forward areas
    longer, be able to respond more quickly to emerging contingencies, and
    generate more sorties and simultaneous attacks against greater numbers
    of targets and with greater effect than our current fleet.
        Employing a capabilities-based approach to calculate the size and
    composition of the future force required to meet expected joint force
    demands in peace and in the most stressing construct of the Defense
    Planning Guidance, along with detailed assessments of risk associated
    with affordability and instabilities in the industrial base, the
    analysis concluded that a fleet of about 313 ships is the minimum force
    necessary to meet all the demands, and to pace the most advanced
    technological challengers well into the future, with an acceptable
    level of risk.
                          thirty-year naval force size
        The 30-year shipbuilding plan and the resulting ship inventory, as
    outlined in the fiscal year 2007 Annual Long-Range Plan for
    Construction of Naval Vessels, represent the baseline as reflected in
    the 2007 President's budget submission. There will be subsequent
    studies and analyses that will continue to balance affordability with
    capability and industrial base capacity. As part of the fiscal year
    2008 budget development process, the Navy will be exploring alternative
    approaches to attaining the future force structure and ship mix while
    retaining the necessary capabilities for joint force operations.
    Overall, this plan reflects the Navy's commitment to stabilize the
    demand signal to the industrial base while still achieving the
    appropriate balance of affordability and capability in all ship
    classes. Also, although there is risk with this plan, and not a lot of
    excess capacity to accommodate the unforeseen, we believe the risk is
    moderate and manageable. Areas of special interest include:
    Carriers
        Eleven aircraft carriers and their associated air wings are needed
    to ensure our ability to provide coverage in any foreseeable
    contingency and do so with meaningful, persistent combat power. While
    the Navy requirement for carriers remains a minimum of 11 operational
    vessels, past delays in beginning the CVN 21 program will result in the
    Navy's having only 10 operational carriers in fiscal year 2013 and
    fiscal year 2014. This shortfall will require some combination of
    shorter turn-around times between deployments, higher operational tempo
    (OPTEMPO) and personnel tempo (PERSTEMPO), and restructured carrier
    maintenance cycles.
    Nuclear Attack Submarines (SSN)
        A SSN force of 48 boats is needed to meet submarine tasking in
    support of Homeland defense, global war on terrorism/irregular warfare,
    and conventional campaigns. However, total SSN numbers will drop below
    48 between 2020 and 2034. Our remaining fast attack submarine force
    will require a combination of shorter turn-around times between
    deployments, higher OPTEMPO and PERSTEMPO, and restructured maintenance
    cycles to mitigate the impact of this force structure shortfall. Navy
    is also pursuing a number of cost reduction initiatives intended to
    lower SSN 774 acquisition costs to $2.0 billion (fiscal year 2005
    dollars) at a stable build rate of two-per-year commencing with fiscal
    year 2012 as cited in QDR 06.
    Amphibious Ships
        Our amphibious capability provides the joint forcible entry
    capacity necessary to support the sea base as a lodgment point for
    joint operations. The current DOD force-sizing construct requires the
    capability to respond to two major ``swiftly defeat the efforts''
    events--each of which could require a minimum of 15 capable amphibious
    ships. One of these crises may further necessitate the use of a MEF,
    thus requiring a total of 30 operationally available amphibious ships.
    The Marine Corps aviation combat element requires 10 large-deck
    amphibious ships to support a MEF. Today's 35 amphibious warships can
    surge the required 30 operationally available warships and provide the
    peacetime rotation base for Marine Expeditionary Units in up to three
    regions. As a Navy and Marine Corps team, we are striving to maintain
    the capability to project two Marine Expeditionary Brigades assault
    echelons in support of the combatant commander.
                             shipbuilding programs
        There has been considerable activity within shipbuilding over the
    last year. Currently, there are 37 naval ships under construction in
    the United States: 1 CVN, 13 DDGs, 1 LHD, 4 LPDs, 9 T-AKEs, 2 Littoral
    Combat Ships (LCS) and 7 Virginia class submarines. Four additional
    LPDs have ongoing contract negotiations. In 2005 the Department
    delivered the lead ship for our newest class of Amphibious Transport
    Dock Ships U.S.S. San Antonio, LPD 17, initiating a new era of
    amphibious assault capabilities that are aligned to the littoral
    regions. In January 2006, the Navy commissioned the LPD 17. The Navy
    also commissioned three DDGs in 2005. We also laid the keel for the
    eighth ship of the LHD class, the second and third Lewis & Clark
    Auxiliary Dry Cargo & Ammunition ship (T-AKE), and the third Virginia
    class submarine. In 2005, the Navy completed the engineered refueling
    overhaul (ERO) and conversion of the U.S.S. Ohio (SSGN 726) the first
    SSGN and redelivered the submarine to the fleet in February 2006. In
    March 2005, the Navy also completed the Refueling Complex Overhaul
    (RCOH) of CVN 69.
        Fiscal year 2007 will see the Navy's previous research and
    development (R&D) efforts begin to bear fruit. The first increment of
    procurement of the lead two DD(X) destroyers is programmed. Follow-on
    LCSs are programmed, which will accelerate the Navy's capabilities to
    defeat anti-access threats close to shore. Transformation is most
    apparent in fiscal year 2007 where new construction increases to seven
    ships from the four in President's fiscal year 2006 budget request. The
    total number of new ships procured over the Future Years Defense
    Program is 51, averaging 10 ships per year including DD(X), CG(X), LCS,
    T-AKE, Virginia class SSN, CVN 21, MPF(F) family of ships, LPD 17,
    JHSV, and LHA(R). Our fiscal year 2007 budget request calls for
    construction of seven ships: two Zumwalt class (DD(X)) destroyers, one
    Virginia class submarine; one Lewis & Clark (T-AKE) Class Auxiliary Dry
    Cargo & Ammunition ship; the LHA 6 Amphibious Assault Ship; and two
    LCS. In addition, we have requested funding for advance procurement of
    the 10th and 11th Virginia class submarines, the ninth San Antonio
    class Amphibious Transport Dock ship, and the CVN 21. Modernization
    efforts to be funded in fiscal year 2007 include the second increment
    of the split funded CVN 70 RCOH, the second year of advance procurement
    for CVN 71 RCOH, ERO of an SSBN, modernization of Ticonderoga class
    cruisers and Arleigh Burke class destroyers, and the service life
    extension for six Landing Craft Air Cushion (LCAC).
        A stable shipbuilding industry is essential to sustain minimum
    employment levels and retain critical skills to meet our requirements
    for an affordable and capable force structure. We must align the
    industrial base for long-term force development through split funding,
    advanced procurement, and cost savings incentives. We must build ships
    more efficiently, cost effectively, and quickly. To do this, we are
    committed to help provide stability in the shipbuilding plan and
    rigorously control requirements. Costs and production schedules must be
    kept within contractual limits. Industry must be viewed as a trusted
    partner while we provide a stable baseline upon which to plan.
        The Navy continues to analyze operational requirements, ship
    designs and costs, acquisition plans and tools, and industrial base
    capacity to further improve its shipbuilding plan. Full funding and
    support for execution of this plan is crucial to transforming the U.S.
    Navy to a force tuned to the 21st century and its evolving
    requirements.
    DD(X) Destroyer
        DD(X) is the centerpiece of a surface combatant family of ships
    that will deliver a broad range of capabilities. It is already
    providing the baseline for spiral development of technology and
    engineering to support a range of future ship classes such as LHA(R)
    and CVN 21. This advanced multi-mission destroyer will bring
    revolutionary improvements to precise time-critical strike and joint
    fires for our expeditionary and carrier strike groups of the future. It
    expands the battlespace by over 400 percent; has the radar cross
    section of a fishing boat; and is as quiet as a Los Angeles class
    submarine. DD(X) will also enable the transformation of our operations
    ashore. Its on-demand, persistent, time-critical strike revolutionizes
    our joint fire support and ground maneuver concepts of operation so
    that our strike fighter aircraft are freed for more difficult targets
    at greater ranges. DD(X) will provide credible forward presence while
    operating independently or as an integral part of naval, joint, or
    combined expeditionary forces. DD(X) has made tremendous progress in
    technological maturity. The 10 critical engineering development models
    (EDMs) provide high confidence in our ability to build the lead DD(X).
    Since the award of the DD(X) Design Agent contract in April 2002, the
    DD(X) Program has conducted extensive land-based and/or at-sea testing
    of the EDMs. As a result of these efforts, the DD(X) program has
    demonstrated fundamental capabilities prior to ship construction
    contract award, completed necessary testing to support a successful
    ship critical design review (CDR) this past fall, and is on track to
    mature systems in time for ship installation. This level of
    technological maturity was a key factor in the Office of the Secretary
    of Defense's (OSD) granting of Milestone B approval in November 2005.
        The fiscal year 2007 budget request includes $794 million in
    research, development, test, and evaluation, Navy (RDT&E,N) for
    continued software development and $2.6 billion in ship construction,
    Navy (SCN) for the first increment of the first and second DD(X). While
    the funding strategy for these ships is unique, the reasons for
    supporting a dual lead ship approach are compelling.
        Based on congressional direction that prohibits a winner-take-all
    strategy, the Navy has consulted with industry, OSD, and Congress to
    chart our way forward for the DD(X) program. Our key objectives are:

             Acquire the DD(X) class destroyers in as cost
            effective a manner as possible;
             Create pressures to control and reduce cost;
             Acquire these ships on a timeline that meets the
            warfighters' needs;
             Lower overall risk in the program;
             Treat each of our industry partners fairly; and
             Preserve a viable industrial capability for complex
            surface combatants.

        In order to accomplish these objectives, the Navy has defined a new
    way ahead: ``Dual Lead Ships''. This effort tries to create a strong,
    mutually dependent partnership between the shipyards and the Navy to
    reduce cost and improve collaboration. Importantly, the Navy's new
    strategy fully addresses industry's key issues and responds to
    congressional concerns. The key features are:

             Sole source lead ship detail design and construction
            contracts with the shipbuilders;
             Equal split of common detail design with each yard
            doing their respective production design;
             Shipyards procure electronics, ordnance, and
            integrated power system (IPS) from system developers as
            contractor-furnished equipment;
             Funding phased to synchronize start of fabrication
            dates in both shipyards;
             Importantly, the shipyards are mutually dependent on
            each other to urgently and cooperatively complete the DD(X)
            detail design;
             Sole source contracts to software and system
            developers;
             Transition to production of systems culminating in
            production readiness reviews;
             Complete software releases and provide to shipyards as
            Government-furnished information;
             Importantly, this approach lowers the cost to the Navy
            by avoiding incremental pass through fee costs; and
             Keep open the option for allocated procurement or
            various competitions in fiscal year 2009 and beyond.

        Navy is confident that the dual lead ship strategy is the
    acquisition approach that will motivate cooperative and collaborative
    completion of detail design. Further, being able to benchmark the lead
    ships against each other provides an unprecedented pressure and
    opportunity to control cost on the lead ships. Finally, because each
    builder will have completed significant construction on sections of the
    ships and will have completed detail design, the Navy will have
    information and options for future acquisition strategy decisions.
    Virginia (SSN 774) Class Attack Submarine
        The fiscal year 2007 budget request includes $1.8 billion for the
    9th ship, and $677 million for advance procurement for the 10th and
    11th ships of the Virginia class. A total of 10 Virginia class
    submarines are under contract. The first ship, U.S.S. Virginia (SSN
    774), was delivered in October 2004, conducted its first deployment in
    2005 and is currently undergoing post shakedown availability. This
    year's ship will be the fourth ship in the five-ship multi-year
    procurement (MYP). This MYP contracting approach provides the Navy
    savings of approximately $80 million per ship for a total savings of
    $400 million compared to ``block buy'' procurement. These ships
    currently continue to be built under the teaming approach directed by
    Congress in 1998, which maintains two nuclear submarine shipbuilders.
    Lewis and Clark Class Auxiliary Dry Cargo & Ammunition Ship (T-AKE)
        The fiscal year 2007 budget request includes $455 million for the
    10th ship. The first nine ships are under contract. Lead ship
    construction commenced in September 2003, with christening in May 2005.
    Projected delivery date of the lead ship is spring 2006. Projected
    delivery dates for the other ships are as follows: second, third, and
    fourth ships in fiscal year 2007; fifth, sixth, and seventh ships in
    fiscal year 2008 and the eighth ship in fiscal year 2009. Exercise of
    the option for the ninth ship occurred January 2006. The T-AKE is
    designed to replace aging combat stores (T-AFS) and ammunition (T-AE)
    shuttle ships. Working in concert with an oiler (T-AO), the team can
    perform a ``substitute'' station ship mission to allow the retirement
    of four fast combat support ships (AOE 1 class).
    LHA(R)
        The fiscal year 2007 budget requests $1.1 billion for the LHA 6,
    the lead LHA(R). LHA(R) is the replacement program for the aging LHA
    class ships that reach the end of their administratively extended
    service life between 2011 and 2015. LHA(R) is a modified LHD 1 class
    variant with enhanced aviation capabilities specifically designed to
    accommodate Marine Corps Joint Strike Fighter (JSF) and MV-22 aircraft
    of the future aviation combat element. LHA(R) also provides the
    improved service life that will accommodate the 21st century evolution
    of Marine Corps aviation. The program received Milestone B approval in
    January 2006 to award the detail design and construction contract for
    the first ship of the class. Ship delivery is scheduled for fiscal year
    2012.
    Littoral Combat Ship (LCS)
        LCS is being built from the keel up to be a part of a netted and
    distributed force. The key warfighting capability of LCS is its off-
    board systems: manned helicopters and unmanned aerial, surface and
    underwater vehicles. It is the off-board vehicles--with both sensors
    and weapons--that will enter the highest threat areas. Its modular
    design, built to open-systems architecture standards, provides
    flexibility and a means to rapidly reconfigure mission modules and
    payloads. Approximately 40 percent of LCS's payload volume will be
    reconfigurable. As technology matures, the Navy will not have to buy a
    new LCS seaframe, but will upgrade the mission modules or the unmanned
    systems. LCS will be different from any warship that has been built for
    the U.S. Navy. The program provides the best balance of risk with
    affordability and speed of construction. We have partnered with the
    Coast Guard and LCS shares a common three-dimensional radar with U.S.
    Coast Guard cutters. In addition, there are other nations interested in
    purchasing the seaframe.
        Two contracts were competitively awarded in May 2004, for detail
    design and construction of two different LCS seaframes. The
    construction is currently underway on the first seaframe of each
    design. The Navy is very pleased with the capabilities these two
    seaframes will bring. A recent validation of the seaframe capability
    development document (CDD) showed that these seaframes will not require
    major modifications to provide the required capabilities envisioned for
    this platform. To date, all milestones have been met on schedule. Two
    LCS seaframes are requested in fiscal year 2007. The LCS spiral
    development acquisition strategy will support construction of focused
    mission ships and mission packages with progressive capability
    improvements. Procurement of one Mine Warfare and one Surface Warfare
    mission packages is planned in fiscal year 2007. The Department is well
    positioned to proceed with LCS and deliver this needed capability to
    sailors as soon as possible.
    CVN 21 Class
        The CVN 21 program is designing the future aircraft carrier for the
    21st century, as the replacement for today's aircraft carriers,
    including the Nimitz class. The design provides significant
    improvements in capability along with total ownership cost reductions
    of over $5 billion per ship as compared to the Nimitz class. Overall,
    CVN 21 will increase sortie generation rate and improve survivability
    to better handle future threats. The new design nuclear propulsion
    plant and improved electric plant together provide nearly three times
    the electrical generation capacity of a Nimitz class carrier. This
    additional capacity allows for the introduction of new systems such as
    Electromagnetic Aircraft Launching System, Advanced Arresting Gear, and
    a new integrated warfare system that will leverage advances in open
    systems architecture to be affordably upgraded. Other features include
    an enhanced flight deck, improved weapons handling and aircraft
    servicing efficiency, and a flexible command and decision center
    allowing for future technology insertion. The fiscal year 2007 budget
    request includes $784 million of advance procurement for continued
    design, material procurement and advance construction. The Navy plan is
    to award the construction contract in fiscal year 2008.
    Nimitz Class Aircraft Carrier (CVN 68 Class)
        The RCOH program refuels, repairs, and modernizes Nimitz class
    aircraft carriers to provide up to 50 total years of service life. CVN
    68 class was originally based on a 30-year design life with refueling
    at an estimated 14 years. Ongoing analysis of the reactor cores show a
    nominal 23 year life prior to requirement to refuel allowing the RCOH
    schedule to be adjusted accordingly. The RCOH program recapitalizes
    these ships in lieu of procurement and is fundamental to sustaining the
    nuclear carrier force structure to meet current and future threats.
    RCOHs provide a bridge between maintaining current readiness
    requirements and preparing the platform for future readiness
    initiatives in support of Sea Power 21. They leverage technologies from
    other programs and platforms for insertion during this major
    recapitalization effort.
        The fiscal year 2007 budget request includes $954 million in the
    second of two funding increments for the U.S.S. Carl Vinson (CVN 70)
    RCOH execution. The fiscal year 2007 budget also includes $117 million
    in advance procurement funding for the U.S.S. Theodore Roosevelt (CVN
    71) RCOH scheduled to start fiscal year 2010.
    SSGN Conversions and Engineered Refueling Overhauls
        SSGN converted submarines will provide transformational warfighting
    capability carrying up to 154 Tomahawk cruise missiles and supporting
    deployed special operating forces. The SSGN conversions are being
    executed utilizing a public-private partnership, conducting the work in
    naval shipyards. The first SSGN, U.S.S. Ohio (SSGN 726), took about 3
    years to deliver from its production decision date. U.S.S. Ohio (SSGN
    726) was delivered to the fleet in February 2006. U.S.S. Florida (SSGN
    728) will be delivered in April 2006. The U.S.S. Michigan (SSGN 727)
    will be delivered December 2006 and the U.S.S. Georgia (SSGN 729) will
    be delivered in September 2007.
    SSBN Engineered Refueling Overhauls (EROs)
        In fiscal year 2007, the U.S.S. Alaska (SSBN 732) will begin its
    ERO at Norfolk Naval Shipyard. The fiscal year 2007 budget requests
    advance procurement funding for long lead time materials to support
    future EROs in 2008 and 2009. Continued support of these maintenance
    efforts will sustain our strategic deterrents well into the future.
    Submarine Technology Development and Insertion
        The Navy's submarine technology development efforts focus
    simultaneously on cost reduction and closure of warfighting gaps.
    Advanced submarine system development (ASSD) develops and demonstrates
    the most promising technologies including enablers for lower submarine
    acquisition and operation costs. Technologies in this line have
    applicability to all submarine platforms. The Navy is increasing the
    capabilities of the Virginia class through the insertion of appropriate
    advanced technology via two parallel approaches. The first approach is
    to procure major improvements through block buys as the most economical
    and efficient. The second approach for systems such as acoustic,
    tactical, and weapons systems is to make improvements through software
    updates under the applicable advanced processing build (APB) process.
        The Navy plans to introduce future major Virginia improvements in
    successive contract blocks provided they reduce acquisition cost and
    maintain tactical performance. The next contract block ship improvement
    opportunity will be the fiscal years 2009-2013 authorized ships. Major
    efforts under advanced submarine systems development include the joint
    Navy/DARPA Technology Barrier (Tango Bravo) Program to overcome
    selected technological barriers and enable design options for a
    reduced-cost submarine. Additional efforts include sonar/combat systems
    (e.g. advanced processing builds (APB) that transition to acoustic
    rapid commercial off-the-shelf (COTS) insertion), universal
    encapsulation for submarine launch of joint force weapons and sensors,
    hull and deployable sensor arrays, stealth components and systems, and
    composite structural materials (Virginia class advanced sail).
    Arleigh Burke (DDG 51) Class Destroyer
        The fiscal year 2007 budget request includes $356 million to
    continue funding program completion and shutdown costs. The Navy
    submitted a report to Congress detailing program completion
    requirements in November 2005, pursuant to the Fiscal Year 2006 Senate
    Appropriations Committee Report 109-141. The fiscal year 2007 budget
    request is consistent with this report and is essential to complete
    delivery of these mission capable ships. All 62 ships are under
    contract and the final ship will deliver in fiscal year 2011.
    DDG Modernization
        The fiscal year 2007 budget request includes $16 million in RDT&E,N
    and OPN appropriations to continue the process to bring needed mid-life
    DDG modernization enhancements to the mainstay of our surface fleet.
    The DDG Modernization Program will ensure that each ship in the class
    remains an affordable and viable warfighting asset throughout the
    entire projected 35-year service life. It is designed to reduce total
    ownership costs across the entire class through significant reductions
    in manning requirements and the application of technology to achieve
    improved quality of life for sailors, increased survivability, and
    improved maintainability. DDG 51 is scheduled to be the first legacy
    destroyer to receive the modernization upgrade in fiscal year 2010.
    Ticonderoga (CG 47) Cruiser Modernization Plan
        The fiscal year 2007 budget request includes $359 million across
    multiple appropriations to procure long lead time material for the
    modernization of Ticonderoga class cruisers occurring in fiscal years
    2008 and 2009. The guided missile modernization program was
    restructured in fiscal year 2006 in accordance with congressional
    direction. Under the restructured plan, the older Baseline 2 and 3
    ships will be modernized first. Funding began in fiscal year 2006 for
    long lead-time procurements for a fiscal year 2008 Baseline 2
    modernization availability of U.S.S. Bunker Hill (CG 52). The Navy's
    plan will permit these ships to realize their expected service life of
    35 years and substantially increase combat capability of all remaining
    22 CG 47 class ships. This modernization will reduce combat system and
    computer maintenance costs, replace obsolete combat systems, and extend
    mission relevance. It will also incorporate manpower improvements and
    quality of service enhancements from the smart-ship program.
    LPD 17
        The San Antonio (LPD 17) class of amphibious transport dock ships
    is optimized for operational flexibility and designed to meet Marine
    Air-Ground Task Force lift requirements and represents a critical
    element of the Navy and Marine Corps future in expeditionary warfare.
    The fiscal year 2007 budget includes $297 million of advanced
    procurement for the ninth ship of the class. The Navy plans to procure
    the ninth ship in fiscal year 2008. The lead ship was delivered in July
    2005, and commissioned in January 2006. Four follow on ships are
    currently under construction. New Orleans, LPD 18 was christened on
    November 20, 2004, and Mesa Verde, LPD 19 was christened January 15,
    2005. Construction also continues on Green Bay, LPD 20 and New York,
    LPD 21. Advance procurement contracts for LPD 22 and 23 have been
    awarded to support long-lead time material purchases for these ships.
    LPDs 22-25 are in negotiation.
    Maritime Prepositioning Force (Future)
        In addition to the 30 operationally available amphibious ships
    needed to employ a MEF during a forcible entry operation, the Maritime
    Prepositioning Force (Future) (MPF(F)) is the key enabler for
    Seabasing, providing support and sustainment for early entry Marine
    Expeditionary Brigade (MEB). MPF(F) enables four new capabilities: (1)
    at-sea arrival and assembly of the Sea Base echelon (of the MEB); (2)
    projection of one surface and one vertical battalion landing team in
    one 8-10 hour period of darkness; (3) long-term, sea-based sustainment;
    and (4) at-sea reconstitution and redeployment.
        These capabilities will be invaluable in supporting joint forcible
    entry operations, forward engagement, presence, and relationship
    building operations with allies and potential coalition partners by our
    forward deployed forces, as well as support of disaster relief and
    humanitarian operations. Additionally, this flexible asset can remain
    in support of post-conflict activities and forces ashore from a
    relatively secure location at sea.
        These future maritime prepositioning ships will serve a broader
    operational function than current prepositioning ships, creating
    greatly expanded operational flexibility and effectiveness. We envision
    a force that will enhance the responsiveness of the joint team by the
    at-sea assembly of a MEB that arrives by high-speed airlift or sealift
    from the United States or forward operating locations or bases. The
    MPF(F) squadrons will be capable of the ``selective offload'' of
    equipment and supplies, which will permit our force commanders to
    tailor mission packages to satisfy specific mission requirements. As a
    part of the Sea Base, MPF(F) will provide the ability to accomplish
    force closure and move equipment and troops ashore as a rapid response
    asset, interoperate with other ships in the Sea Base, provide
    sustainment to expeditionary forces ashore, and permit recovery and
    reconstitution of forces and equipment at-sea. As our shipbuilding
    programs and technology further mature, thorough experimentation is
    essential in order to provide informed decisions prior to long term
    commitments in the development of the MPF(F). Examples of planned
    experimentation include: interaction with the MPF maintenance cycle
    (MMC) to develop selective offload capability, at sea large medium-
    speed roll-on/roll-off (LMSR) ship equipment off-load/on-load, and R&D
    teams to continue to explore safe and efficient ways for at-sea cargo
    and passenger transfers by testing fendering (skin-to-skin)
    technologies, motion compensating cranes and ship to ship interface
    systems.
        The MPF(F) squadron will be comprised of two LHA replacement large-
    deck amphibious ships, one LHD large-deck amphibious ship, three T-AKE
    cargo ships, three LMSR cargo ships, three mobile landing platform
    ships with troops, and two legacy ``dense-pack'' MPF ships taken from
    existing squadrons. The mobile landing platforms, the only new-design
    ships in the plan, will be based on current technology. This mix of
    ships will be capable of prepositioning critical equipment and 20 days
    of supplies for our future MEB.
        The future MPF(F) squadron will be part of the transformational
    seabasing capability as defined in the Seabasing Joint Integrating
    Concept and will provide the key capability of a rapid response force
    of a 2015 MEB in support of the 1-4-2-1 strategy. MPF(F) with its
    associated aircraft, personnel, logistic chains, and surface and air
    connectors will provide rapid force closure and support forcible entry
    through at-sea arrival and assembly and force employment from the
    seabase. In addition, it will replace current aging maritime
    prepositioning ship (MPS) capability.
        The fiscal year 2007 budget request includes $86 million of
    national defense sealift R&D funds to develop technologies to support
    future sea basing needs in MPF(F). The first MPF(F) ships are planned
    for fiscal year 2009 with advanced funding scheduled in fiscal year
    2008. The proposed family of ships solution is a low cost, low risk
    solution for meeting the MPF(F) requirements. The solution leverages
    existing ship designs to control risk while allowing for broad
    participation of the industrial base.
    Joint High Speed Vessel
        The Navy High Speed Connector has been merged with the Army Theater
    Support Vessel to form the Joint High Speed Vessel (JHSV) program. This
    program will provide a high-speed intra-theater surface lift capability
    gap identified to implement Sea Power 21 and the Army Future Force
    operational concepts. The JHSV will be capable of supporting joint
    force needs for flexible, fast transport of troops and equipment for
    the future. Today's only alternative to meeting this gap is through the
    leasing of high-speed vessels for rapid troop and equipment transport.
    The WestPac Express is a high-speed surface vessel currently being
    leased by the Military Sealift Command and used to transport marines in
    the Western Pacific operating area. With the Navy designated as the
    lead Service, the Navy, Marine Corps, and Army are working together to
    develop the required documentation to meet a Milestone A decision in
    April 2006 with a lead ship contract award planned for fiscal year
    2008. The fiscal year 2007 budget request includes $14.2 million for
    concept studies and development of contract design.
    Landing Craft Air Cushion (LCAC) Service Life Extension Program
        Our fleet LCACs saw continued increased operational tempo
    supporting worldwide operations during the past year, underscoring the
    need for the LCAC Service Life Extension Program (SLEP). LCAC SLEP is a
    vital, ongoing effort to Operational Maneuver From The Sea and Ship To
    Objective Maneuver options for the naval forces. This will provide
    continued critical surface lift for the Marine Corps for the future as
    these upgrades offer greater flexibility and endurance options that
    allow naval forces to continue to remain expeditionary and versatile in
    support of global war on terrorism and into the future. The program,
    designed to extend the service life of LCACs to 30 years, had several
    notable accomplishments during the past year: LCAC 7, LCAC 8, and LCAC
    9 delivered ahead of schedule; and the SLEP crafts, LCAC 8 and LCAC 9,
    rendered assistance to the hurricane recovery effort on the Gulf Coast.
    The Navy is continuing the strategy of refurbishing vice replacing the
    buoyancy boxes and will competitively select the fiscal year 2006 and
    fiscal year 2007 SLEP work. The fiscal year 2007 budget request
    includes $111 million for SLEP of six craft.
                completion of prior year shipbuilding contracts
        The cost to complete shipbuilding programs under contract over
    fiscal years 2007-2009 is $1.07 billion. The fiscal year 2007 budget
    requests $556 million for shipbuilding cost to complete. The allocation
    of cost to complete funds is: $348.4 milion for CVN 77, $114 million
    for the SSN 774 class, and $93.4 million for the LPD 17 class.
        As of December 2005, CVN 77 construction is approximately 57
    percent complete. Following several detailed program evaluations with
    the shipbuilder in 2005, the Navy revised the CVN 77 program cost
    estimate to $6.057 billion. Section 122 of the fiscal year 1998
    National Defense Authorization Act imposed an original limitation on
    the total cost of procurement for the CVN 77 of $4.6 billion. Section
    122 also authorized the Secretary of the Navy to adjust the cost
    limitation under certain circumstances and required the Secretary to
    notify Congress annually of any adjustments made to the limitation. The
    Navy last adjusted the cost limitation to $5.357 billion in 2005,
    notifying Congress with the report submitted with the fiscal year 2006
    President's budget request. The remaining $700 million cost increase is
    the result of factors not covered by the Secretary's existing
    adjustment authority, including the costs of increased labor hours to
    construct the ship (including rising health care costs), increased
    material costs, and the anticipated costs required to cover the Federal
    Government's contractual liability to the point of total assumption by
    the shipbuilder, Northrop Grumman Newport News. As a result,
    congressional action is requested to amend Section 122 to increase the
    cost cap to $6.057 billion to accommodate the CVN 77 program cost
    estimate.
        The Virginia class program office is working with the shipbuilders
    to deliver the first four ships of the Class within the available
    funding. To accomplish this, descoping actions have been initiated on
    SSN 775, with similar descoping actions anticipated for SSN 777 to
    deliver on budget.
        The remaining six ships of the Virginia class are under a fixed
    price incentive (FPI) contract that was converted to a MYP for the
    sixth through tenth hulls (five ships) in fiscal year 2004. This
    contract includes steep share lines where the contractor bears 55
    percent of the overrun and special incentives to focus the shipbuilders
    on producing ships for the lowest possible cost. Early indications show
    significant savings ($400 million) on material purchases for these five
    ships. Future contracts will continue the use of MYP contracting,
    subject to congressional approval, and are planned to be FPI contracts
    with fair and achievable targets and steep penalties for cost overruns.
        In the San Antonio (LPD 17) program, the Navy has incorporated
    lessons learned from the construction and testing of the lead ship into
    plans for the follow ships. The fiscal year 2007 President's budget
    request is for $93.4 million and a total of $159 million across the
    Future Years Defense Program. The Navy continues to work to reduce
    contract changes and has implemented requirements-to-cost tradeoffs and
    contract scope reductions which result in a stable production baseline
    for the follow ships. The fiscal year 2007 President's budget request
    for the class reflects the use of ``realistic'' shipbuilding inflation
    projections. The Navy is pursuing an affordable conversion to a fixed
    price type contract for LPDs 18-21. We plan to procure future ships of
    this class using fixed price type contracts.
        During the last year, the Navy has worked closely with Congress to
    identify those prior year costs due to the impact of Hurricane Katrina.
    Congress has already appropriated funds to cover much of these costs in
    a supplemental appropriation. The Navy is committed to ensuring that
    these supplemental appropriations are spent only on Government
    responsible costs rising directly from the results of Katrina.
                                    summary
        Our mission remains bringing the fight to our enemies. The
    increasing dependence of our world on the seas, coupled with growing
    uncertainty of other nations' ability or desire to ensure access in a
    future conflict, will continue to drive the need for naval forces and
    the capability to project decisive joint power by access through the
    seas. The increased emphasis on the littorals and the global nature of
    the terrorist threat will demand the ability to strike where and when
    required, with the maritime domain serving as the key enabler for U.S.
    military force.
        Accordingly, we will execute the global war on terrorism while
    transforming for the future fight. We will continue to refine our
    operational concepts and appropriate technology investments to deliver
    the kind of dominant military power from the sea envisioned in Sea
    Power 21. We will continue to pursue the operational concepts for
    seabasing persistent combat power, even as we invest in technology and
    systems to enable naval vessels to deliver decisive, combat power in
    every tactical and operational dimension. We look forward to the future
    from a strong partnership with Congress that has brought the Navy and
    Marine Corps team many successes today. We thank you for your
    consideration.

        Senator Talent. Admiral Edwards.

      STATEMENT OF RADM MARK J. EDWARDS, USN, DIRECTOR OF WARFARE
       INTEGRATION, N8F, OFFICE OF THE CHIEF OF NAVAL OPERATIONS

        Admiral Edwards. Yes, sir. Chairman Talent, Senator
    Kennedy, Senator Reed, distinguished members of the
    subcommittee, it is a privilege for me to be here today as the
    Navy's lead warfare integration officer, to appear before you
    to discuss the Navy shipbuilding and industrial base. I am
    joined by Admiral Sam Locklear, the Navy's Director for
    Programming, and together we are here to assure the
    subcommittee that we have a stabilized shipbuilding plan and
    the means to execute it.
        When Admiral Mullen took over as CNO, he promised to
    deliver a capable, affordable, and stabilized shipbuilding plan
    that builds to a specific number. He has done that. It is the
    313-ship shipbuilding plan. We are going to execute this plan.
    To do this, Navy has committed to providing the resources. At
    the same time, we are going to reduce the costs and drive out
    instability. We intend to uphold our end of the bargain, and we
    need a similar commitment from industry to reduce the
    shipbuilding cost. The DOD conducted a detailed risk assessment
    of all classes of ship construction plans in preparation for
    the submission of the President's fiscal year 2007 budget. This
    review carefully considered options across the entire Navy/
    Marine Corps team and analyzed the future impacts to
    warfighting effectiveness and the Nation's shipbuilding
    industrial base. This plan provides balance and stability in
    warfighting. It should be noted that the fiscal year 2007
    budget was the first budget that this CNO could affect albeit
    in a minor sense. The fiscal year 2008 budget, currently under
    development is his first opportunity to affect changes. Let me
    assure you, we have this task and we will carry it out.
        Delay, disruption, or changes to the 313 shipbuilding plan
    will weaken our ability to field the right force in time to
    meet the warfighting requirements of 2020. Admiral Locklear and
    I look forward to answering your questions concerning the plan.
        Along with shipbuilding, I know the committee has a
    longstanding interest in seabasing. Seabasing is a
    transformational concept to overcome the challenges of speed
    and access. Transformation is required in order to ensure
    access when and where we need it. Denied access to coalition
    airfields is not without precedence. There are significant
    examples in recent years past of nations friendly to the United
    States denying us military access. The anticipated global
    environment requires the Nation to have a flexible, responsible
    response capable of addressing any situation independent of
    foreign base availability. That environment also requires the
    Nation to have a joint forcible entry capability in time to
    seize the initiative in support of national objectives.
        Forward deployed forces, carrier and expeditionary strike
    groups, surface action groups, and specified Army brigade
    combat teams will provide a rapid, initial response and form
    the nucleus of the seabase. Additional joint and/or coalition
    platforms and capabilities will join as required. Because of
    the dynamic nature of these missions and tasks, the seabase
    must be capable and scalable across the entire range of
    military operations from humanitarian assistance and disaster
    relief through opening access for major combat operations. The
    seabase is any combination of ships, aircraft, boats, people,
    joint or coalition tailored to meet the mission, but flexible
    enough to adapt to the changing mission requirements. The fact
    that the seabase is maneuverable and capable of remaining at
    sea over the horizon will reduce the dependence on other
    nations' foreign territory and improve security, as we send
    only the teeth of the force ashore to keep logistics still at
    sea.
        We are grateful for this committee's support for our Navy.
    Your continuing support is critical. We look forward to the
    future from a continued strong partnership with Congress, and
    we thank you for your consideration and are ready to answer
    your questions.
        Senator Talent. Thank you, Admiral. Let me just ask a
    general question and when the other committee members are here,
    I will defer to them and see what they cover, and then I will
    pick up some other questions.
        The shipbuilding plan, which I was relieved to see, I think
    is realistic in terms of numbers. It concludes we are going to
    need at least $13.4 billion per year. Now, setting aside for a
    second the fact that the CBO thinks costs need to be 20 to 30
    percent higher, and I have not always bought what CBO has said
    in the past but let's set that aside for a second. What are the
    Navy's plans to fence the budget in a way that can sustain that
    $13.4 billion? Where are you going to get the money, basically?
        Admiral Locklear. Mr. Chairman, thanks for that question.
    First of all, let me say that again when Admiral Mullen came in
    as CNO, he made the 313-ship plan his highest priority. As his
    programmer, I am on the final stages of determining how the
    budget proposal gets put together. After we talked about
    capability and analysis, that type of thing, he in no uncertain
    terms has directed me to find the money to ensure that we reach
    the goal of 313 ships by 2020. I would say that the $13.4
    billion, that is in fiscal year 2005 dollars. In fiscal year
    2007, we were unable to achieve that because he had not been
    here very long, but what we were able to do in 2007 throughout
    the preparation of that budget's submission and throughout the
    QDR was to be able to ensure that the shipbuilding plan the
    Navy had in 2007 did not become a significant bill payer for
    other things that might need to be done.
        In the Program Objective Memorandum (POM) 2008 process we
    are building, the plan through fiscal year 2013 is underway. As
    there is to everything we budget for, there will be some
    challenges. My expectation is that we will reach that fiscal
    year 2005 level of $13.4 billion about midway through the FYDP.
    We probably won't realize that right off, but it is a
    sustainable ramp that reaches that 2020 timeframe of when we
    will have the 313 ships. We are already moving in this process
    to pressurize all the other accounts that the Navy has. Our
    manpower accounts are a possibility in my view as a programmer,
    and we are pressurizing those accounts. We have the greatest
    sailors in the world. They have great compensation. We are
    grateful for all that you do to provide that. So we are dealing
    with trying to control those costs to control the size of the
    Navy, so it is affordable.
        When it comes to our readiness accounts, we are taking a
    very, very hard look at all aspects of our operating accounts
    to ensure that we are getting the maximum amount of operating
    efficiency for every dollar. It is my opinion that we will be
    able to realize this shipbuilding plan that the CNO has and
    that you will see it in the fiscal year 2008 President's
    budget.
        Senator Talent. 2008. Now, you mentioned the manpower
    accounts. We pushed sea swap pretty far. I am hearing you say
    manpower and readiness. Those accounts have given at the
    office. I mean Admiral Clark was pretty good in getting money
    out of that. Do you really think you are going to be able to
    find $5 billion out of those accounts?
        Admiral Locklear. No, sir. I guess what I meant to say was
    that we will ensure that we pressurize those two accounts for
    maximum efficiency. We continue to do that, as we should. As we
    go down the road, we will have other program decisions that
    have to be made. There will be other program areas that we will
    have to go look at very hard to ensure where they fall on the
    CNO's priority list. My expectation is that some of those
    programs will end up having to become billpayers for this plan.
        Senator Talent. Do you care to share with the committee
    which programs you may be thinking of?
        Admiral Locklear. I do not have, at this point in time, a
    firm enough understanding of which ones we would offer. Those
    would be part of the POM 2008 debate that we have internal to
    the Navy.
        Senator Talent. It is a concern I have. I think we just may
    need to confront the fact that we are going to have to get more
    money into the Navy budget overall. We have begun to take steps
    in the Senate to try and advise our colleagues of the need for
    this, as you are probably aware. Certainly, Senator Reed and
    Senator Lieberman were leaders in this effort, and I was
    involved in it. Senator Collins was also. We see these needs
    coming up and I don't know how you are going to get $5 billion,
    assuming that is enough for the Ship Construction, Navy (SCN)
    account, out of the rest of the Navy, given what we have had to
    do in the last few years. So, we are aware of that need. We
    want to work closely with you in trying to make certain that we
    have the funds to do this. This whole program depends on the
    stability of these funding accounts. I know you all agree with
    that. We are going to have to do something in order to get more
    money in those accounts. We might as well confront that as soon
    as possible. I know the chairman is concerned as well about
    that. I will go ahead and defer now to Senator Reed. I have
    other questions, but I don't know how long he has, so let's go
    to him.
        Senator Reed. Thank you very much, Mr. Chairman. Thank you
    for not only your good question, but your suggestion that we
    need more money, because I think I agree with you entirely on
    that. Secretary Etter, I understand that Congressman Bartlett
    asked for some unconstrained shipbuilding program in the House
    that would be prepared by the Navy. Are you doing something
    like that? A program that would lay out all the long-term
    shipbuilding without regard to budgets. I mean what you
    precisely need.
        Dr. Etter. He did ask us to look at that and we are looking
    at it at this point. We have not completed our review.
        Senator Reed. When you do complete that I would be
    interested in seeing it and I am sure the chairman would also.
    If you could provide that to this committee as well. Thank you
    very much.
        [The information referred to follows:]

        As part of our analysis this past year we examined the joint
    warfighting requirements for naval forces across the complete spectrum
    of operations. For traditional conflicts, we assessed the demands for
    both capability and capacity to counter the threats as laid out in the
    Defense Planning Guidance. Since no joint document exists defining the
    joint demands for the global war on terror and other nontraditional
    forms of conflict, we developed an analytically-based requirement
    through a combination of modeling and extensive inputs from the Navy
    component commanders worldwide. The Navy plan delivers sufficient
    capability and capacity to meet these demands, today and in the future.
        This should not imply that the force does not incur risk, it
    obviously does. The Navy plan minimizes risk in core Navy capabilities
    critical to the overall success of the joint force. Some of these areas
    include anti-submarine warfare, countering anti-access threats, and
    mine warfare (particularly mine countermeasures). In areas where there
    is significant joint capability and capacity, the plan accepts more
    risk to capitalize on joint interdependencies. It would be inaccurate
    to apply a strict modifier across all risk definitions. The campaign
    analysis, incorporating the Office of the Secretary of Defense approved
    models, assessed criteria consistent with defense planning scenarios in
    terms of ``what it takes to win'' major contingency operations. In all
    cases, the Navy plan meets the minimum force required ``to win'' the
    modeled campaigns, and in most areas with significant overmatch.
        As stated previously, the Navy plan minimizes risk in core Navy
    capabilities critical to the overall success of the joint force. In
    areas where there is significant joint capability and capacity, the
    plan accepts more risk to capitalize on joint interdependencies.
    Therefore, while the Navy may be taking more risk in certain warfare
    areas, the overall joint and/or (combined force that is brought to the
    fight reduces this risk significantly. To consider a Navy that would
    assume low risk in all warfare areas would be to consider a Navy that
    provides a force capable of winning a major conflict as a standalone
    force, contrary to current strategic and defense planning guidance.
    While a ``low risk'' Navy would most likely have greater capacity and
    capability, many of these capabilities would provide extensive
    overmatch when considering the joint force as a whole.

        Senator Reed. I will follow on and I think Senator
    Lieberman will also follow on in terms of questions about the
    submarine industrial base and this should come as no surprise.
    We are now at a situation where we are building one submarine a
    year. We are scheduled to go to two in fiscal year 2012. But
    even with this projected build rate, and you factor in
    retirement and other situations, we are going to dip down below
    48 submarines in the period of 2019-2035. Most people are very
    concerned at that level that we will not be able to conduct all
    the missions that the commanders of a combatant command need.
    In fact, we are going to ensure some strategic risk, which
    essentially raises a question of how we deal with this now, so
    we don't get into that situation. It compels me to suggest and
    I think my colleagues would also suggest, I hope, that we have
    to get a two-per-year build rate very quickly. Can you comment,
    Admiral?
        Admiral Edwards. Yes, sir. As you all know, sir, as far as
    the combatant commander (COCOM) requirement, we are right now
    satisfying probably 60 to 65 percent of that. However, our
    analysis that looks out to the 2020 timeframe says that we need
    10 submarines deployed worldwide at any one time. Forty-eight
    submarines is the number that provides that. As we go down to
    40, as you were mentioning, we have 7.5 submarines that we need
    deployed all the time for the warfighting aspects. The other
    2.5 are for presence only. So from a warfighting standpoint,
    our analysis shows that we have enough submarines to carry out
    the warfight. That would be at the expense of the presence
    requirement. It would be a balance on where we operate the rest
    of the submarine fleet. In addition, I think the committee also
    knows that we are planning to split the submarine homeporting,
    60 percent on the west coast and 40 percent on the east coast
    in order to mitigate some of the long time lines associated
    with the Pacific area of responsibility (AOR).
        The maintenance aspects of the Virginia class submarine are
    far superior to the SSN 688, as you also know it is a fantastic
    platform. So, we will get a bounce from the increased
    operational availability of the submarine.
        Senator Reed. I think this issue of operational risk is
    significant, even though your analysis suggests that we can
    meet the warfighter's requirements with 40 submarines. That is
    very close to the edge. I have to presume that is looking at,
    not the worst case, but probably the middle case or maybe even
    the best case. I know some others like Admiral Konetzni, the
    former deputy commander of all submarine forces, who suggest
    that when you get that low, the risk is not moderate, it is
    severe. It really could be a crisis. We also understand that it
    takes awhile to build a submarine, so if we don't reverse this
    process, we could wake up in 2013 or so with insufficient
    forces. I just want to urge you to look again. The related
    issue is, of course, the price of the submarine. The cheaper
    they are, the faster I think we get to two per year. But what
    the manufacturers tell us is that until they get to two a year,
    they really can't lower the price per submarine because of all
    the overhead cost and other costs. This is a program where I
    sense that the manufacturers are taking price out. There are
    some other Navy shipbuilding programs where the price keeps
    going up and up and up; in this one I think they got it in the
    right direction. It suggests to me this is another argument for
    two per year production very quickly to get the price down.
    Admiral, do you have comments?
        Admiral Edwards. Yes, sir. There are always puts and takes.
    If we move the submarine procurement rate to the left, and many
    say by fiscal year 2009, that money has to come from somewhere.
    So, you are going to pressurize the carrier, the large deck
    amphibs, the LCS, and the DD(X), so there is no free luncheon
    in here. We think we have a plan that is executable. That plan
    calls for two submarines by 2012. We think with the investments
    that we have made, we will get to the $2 billion per ship and I
    think you are right in this particular case, the industrial
    base is driving the cost and helping out there to drive the
    cost of the submarine down. So, that is what our program is.
        Senator Reed. I thank you. I don't want to monopolize time,
    just the number of changes I have seen in those procurement
    plans for submarines and stretching out the two-per-year
    suggests to me that I am not confident the same way as you are.
    Also I think the budget pressure that we are seeing building up
    this year, next year, and out several years is just as
    excruciating as what we might sense this budget cycle and next
    budget cycle. So, thank you very much. Thank you members.
        Admiral Edwards. Yes, sir.
        Senator Reed. Thank you very much.
        Senator Talent. If I can follow on something in one of
    Senator Reed's questions. Are there programs--I am sure there
    are programs, and the submarine is one of them--where if we
    could invest more money up front, you could save money within
    the FYDP? DD(X) may be a similar one. I am sure Senator Collins
    would want to follow on that. Would you agree with that,
    Admiral Edwards?
        Admiral Edwards. Yes, I do, sir. In fact, we have looked in
    2007, I think we have put some money in there across the FYDP
    about $154 million--and that money was going to drive the cost
    of the submarines down. We have not looked at the DD(X).
    Allison may have some more information on that.
        Ms. Stiller. Yes, sir. On DD(X), because of where we are in
    the detail design phase, what we have done is sat down with the
    requirements community and reviewed each of the individual
    requirements. There is some capability that we have decided to
    back off on that won't impact the key performance parameters of
    DD(X). For example, whether to make the storeroom into a
    convertible magazine that will save costs. So as we detail
    design the ship we won't put that into the design, so we won't
    have that cost up front. That is why we feel that on DD(X), as
    you have heard the lead ship at $3.3 billion, we feel we can
    get about $265 million out of the lead ship and we are actively
    working to do that in partnership with the requirements
    community. This is unlike the submarine where the detail design
    is complete and you are in production. We have put the
    investment, as Admiral Edwards said, at about $154 million
    across the FYDP to drive us down to the $2.2 billion per
    submarine in 2012.
        Senator Talent. If you would let the committee know,
    certainly with regard to Virginia class, but also any other
    programs, where speeding up an investment helps, instead of
    always pushing everything to the right, actually pushing
    something to the left a little bit. Where you would have some
    confidence that you would save some significant dollars within
    the FYDP, let's say, if you would give us that and document
    that so we can really begin trying to influence this process
    here. I think we are all committed to doing that. If we can
    show the Senate that we can actually save some money, then we
    maybe will be able to get these dollars. We really want to
    influence that process. I know Senator Kennedy feels--and I
    think Senator Warner also and Senator Levin--that this is the
    minimum that we need to do for the Navy. If we are serious
    about doing it, let's do it in a way that is going to save us
    money within the FYDP. If that means making the case for
    getting some more money upfront, let's do that. So if you would
    give us that and work with committee staff to document that, at
    least with the submarine, but potentially with the other
    programs, we would appreciate it.
        Admiral Edwards. Aye, Aye, sir.
        [The information referred to follows:]

        The Navy has $20 million in the fiscal year 2007 budget submission
    which is dedicated to cost reduction initiatives on Virginia class
    submarines to help achieve the $2 billion submarine (fiscal year 2005
    dollars) target. An additional $65 million would enable cost reduction
    initiatives such as the Large-Aperture Bow Array, Propulsion Plant
    changes, and non-propulsion electronics modernization efforts to begin.
    Accelerating this funding would allow cost reduction opportunities to
    be introduced to be production submarines earlier than currently
    planned. It should be noted that alone the $65 million addition is not
    the total amount required to achieve the $2 billion/submarine (fiscal
    year 2005 dollars) savings.
        General Dynamics Electric Boat currently employs about 3,500
    engineers and designers (including life cycle support). They are at an
    employment peak and are projected to ramp down as Virginia class and
    SSGN design efforts conclude. With current funding levels they are
    projected to be at 3,000 engineers and designers at the beginning of
    2007 and down to 2,600 by the end of fiscal year 2007. The addition of
    $65 million in RDT&E for Virginia class cost reduction initiatives will
    support 400 designers and engineers over 2007, allowing Electric Boat
    to maintain a level load of 3,000 designers/engineers throughout the
    year.

        Senator Talent. Senator Lieberman is next.
        Senator Lieberman. Senator Collins.
        Senator Collins. You were here first.
        Senator Lieberman. You are very gracious, Senator Collins.
    Thank you. I will not be long.
        Senator Talent. I should also mention that since you are
    older, she thought you should go first. [Laughter.]
        Senator Lieberman. Right again. A fact-based conclusion. I
    thank the witnesses for being here. Mr. Chairman, thank you.
    Thanks for your excellent leadership of this subcommittee. It
    has been a pleasure to work with you. Also, a pleasure to work
    with you on the floor for the Senate together. We have
    attempted to do what to many people may seem counter-intuitive
    because of the overall size of the DOD budget, but basically we
    don't think it is enough. I suppose everybody could find their
    excess spending within the budget. The other subcommittee--I am
    on Airland with Senator McCain and we are focused on how we can
    make the acquisition process more efficient, more cost
    effective. But Senator Talent has been a real leader in trying
    to raise up the budget for the DOD, because the fact is we are
    short changing all of the Services in my opinion in the
    acquisition of equipment systems needed for our defense. So, I
    thank you for what you said.
        Just building on the exchange that just occurred and to
    give you an example based on what Senator Reed was asking and
    Mr. Chairman what you said, we are very concerned. Some of us
    are focused, in our case on Electric Boat (EB) and the
    submarine budget, on the need--which the Navy, of course
    acknowledges--to go to two submarines a year. Otherwise we will
    fall below that 48 minimum requirement as the Chinese are
    building and others are building more submarines. At the same
    time the Navy, the CNO, and the Secretary are saying to EB and
    others, you have to bring your cost down. I am very proud I am
    not here to sign a contract but I have been in rooms that the
    executives at EB have said and they have been asked to cut the
    cost of this fantastic Virginia class submarine from
    essentially $2\1/2\ billion to $2 billion. The answer that I
    have heard people say at the top is we think we can do that if
    you would take us to two submarines a year. The sooner you do
    that, the sooner we will be able to cut it. So there is a very
    specific example of quite a substantial saving that can be
    achieved if we can move the two submarines a year forward. We
    are all going to be working together on that.
        In that regard, I wanted to ask--I suppose any of the
    witnesses who care to answer--one of the effects of this short
    funding of capital acquisitions by the DOD is having this
    effect at EB. Obviously there are two manufacturers of
    submarines. I think everybody acknowledges the fact that the
    premier and in some ways the only submarine design and engineer
    force is at EB. For the first time in almost 50 years, as you
    all know, there is no new submarine design on the drawing
    board. The current design programs are near completion. So, EB
    is in a position, at the status quo, where they are going to
    have to start laying off, in fact they have already started
    laying off designers. This is a very unique talent. I suppose
    it can always be replaced with training but it is going to take
    a long time. Our undersea superiority depends on the
    maintenance of this workforce.
        I was very pleased at the full committee hearing on the
    Navy budget, earlier in March. Secretary Winter remarked that
    losing this part of the submarine industrial base is an ``issue
    of great concern'' to him. I wonder if any of you would talk
    about this. Obviously, one possibility here is to look, as we
    are, for some new programs to design, not to make them up but
    real ones that would benefit the Navy and try to move it to
    this force. There have been some very creative assignment of
    work on some of the design work on the carrier, going to this
    unusually talented workforce. So, I would invite your general
    reaction to the problem and what you think we can do about it.
        Dr. Etter. I would like to say a few things to that,
    Senator Lieberman. I think you are exactly right. This is a
    very critical capability that the country must keep because we
    do intend to do future submarines. So, we must figure out what
    is the right number of designers that we need, and what are the
    kinds of activities that we can use to keep them involved in
    design. Those are things that are very important to us and we
    have a number of steps underway to help us with that.
        We have a RAND study that will be completed in the fall. It
    is going to look across the various skills within the designer
    set and that is going to help us identify the most important
    ones. We also are looking at other possibilities, including
    whether we can perhaps do some things with the Virginia class
    submarine to continue to improve things there.
        Senator Lieberman. Right.
        Dr. Etter. There is a whole range of things that we are
    looking at. One of the things that, of course, is a challenge
    is to try to figure out how do we do this in a way so that by
    the time we do need the submarine designers again, we still
    have those people available. It is not looking at really just
    trying to keep the entire design community that is there now
    because many of those would not be around when we get ready to
    do this. So, there are a lot of challenges. We understand the
    problem and we do think that within the next 6 months to a
    year, we are going to have some solutions to do this. Because
    of the design being completed for Virginia now and the Ohio
    class changes, this was not a surprise. So, it was something
    that all of us knew was coming. It is one we have to figure out
    how to deal with.
        Senator Lieberman. It is.
        Admiral Edwards. If I could follow on that?
        Senator Lieberman. Please, Admiral.
        Admiral Edwards. Sir, I am sorry.
        Senator Lieberman. No, go right ahead.
        Admiral Edwards. The fact is though, increasing production
    of the submarine now, the Virginia class submarine, does not
    solve that design issue.
        Senator Lieberman. It is a separate issue.
        Admiral Edwards. We have to decouple that and then we have
    to attack really those critical tasks that these designers do
    to make sure that those are kept alive as we go forward with
    the submarine program.
        Senator Lieberman. Do you have any thoughts about other
    kinds of shipbuilding in which these designers might be used?
        Dr. Etter. We do have other design activities going on, for
    example, the DD(X) is one of the areas we believe that some of
    these designers would be able to contribute.
        Senator Lieberman. That is good to hear. Of course, we live
    in this remarkable age of telecommunications advances, so that
    they can design from one place and the designs can be
    immediately transmitted and used back and forth in another
    place far away. I appreciate those answers. That is a real high
    priority I think for the country but obviously also for the
    submarine program and the workers who are there. Mr. Chairman,
    I think I am going to leave it there. I would ask your consent
    that I include a more general statement on the budget, which
    Senator Reed and you in some measure have already commented on,
    be printed in the record. I would thank you.
        [The prepared statement of Senator Lieberman follows:]
               Prepared Statement by Senator Joseph I. Lieberman
        Good afternoon and thank you for attending. I want to welcome all
    of the witnesses to our Seapower Subcommittee hearing, which continues
    our discussion of the Navy's proposed budget and its warfighting plans
    for the future.
        I applaud the Navy's ambitious long-range shipbuilding plan, which
    was submitted to Congress in February. Our current Navy fleet is at its
    smallest size since prior to World War I. However, I am worried about
    whether the administration has requested enough money for shipbuilding
    in the budget to achieve these goals.
        Shortchanging our shipbuilding account jeopardizes our Nation's
    security. I am afraid that our plan for submarine construction is
    woefully inadequate. The Navy's plan calls for a submarine fleet of 48
    boats. I believe this number is too low for the strategic threats we
    face. First, several submarine officers and Defense Department
    officials argue that fulfilling the day-to-day demands for attack
    submarines, particularly intelligence, surveillance, and reconnaissance
    (ISR) missions, would require a fleet of at least 70 submarines. We
    have been told that even with our current fleet of 54 submarines, the
    fleet can only provide combatant commanders with 65 percent of the
    ``presence with a purpose'' they requested. If our submarine fleet is
    too small now to perform the tasks that our warfighting commanders want
    done, we are inviting a level of risk that is unacceptable if we accept
    an even smaller fleet. Due to the proliferation of new trouble spots
    around the world, the need for undersea ISR has dramatically increased.
    A diminished submarine fleet cannot meet the demands of a post-
    September 11 world.
        The prognosis only gets worse. If we adopt the Navy's proposed
    plan, which delays an increase of submarine production to two boats a
    year in fiscal year 2012, we will fall below the minimal requirement of
    48 submarines in 2018. At that time, our intelligence estimates
    conclude that China will have a well-equipped, modernized submarine
    fleet of at least 50 boats. The Chinese are designing new classes of
    submarines with increased capabilities. At the same time, new
    submarines are being built elsewhere besides China, and they may be in
    the hands of future adversaries. If we do not move to produce two
    submarines a year as soon as possible, we are in serious danger of
    falling behind China, and we may have to accept dangerous risks
    elsewhere because we will have too few submarines.
        The submarine is not a Cold War legacy. In fact, the Virginia-class
    submarine was designed specifically for post-Cold War operations. It
    operates well in littoral waters, gathers intelligence, engages in
    strike operations and antisubmarine warfare, and provides Special
    Operations Forces with delivery and support. Because of its near-shore
    capabilities, our submarines can intercept signals that are invisible
    to reconnaissance satellites and other platforms. These unique and
    powerful features make the Virginia-class an indispensable weapon in
    our arsenal to fight the ``long war'' on terrorism. If we do not
    increase our build rate, we will not replace our aging Los Angeles-
    class submarines fast enough. As a result, we run the risk of turning a
    deaf ear and a blind eye to a gaping hole in our national security. We
    live in a world in which we sometimes cannot anticipate attacks upon
    our homeland and military. In this instance, we can prevent a looming
    threat on the horizon with decisive action.
        The very least we can do is escalate production to two submarines
    as soon as possible. If we do this, we will maintain the recommended
    force structure fleet of 48 boats until 2025. While I still believe a
    fleet of 48 boats is too small for the conventional and asymmetric
    challenges ahead of us, it does put us in a better position to reduce
    the production gap between the United States and its competitors.
        We have the brainpower and ability to design and build the best
    submarines in the world in the United States. If we don't act now, we
    may lose this capability, and it will be difficult to regain it. This
    is an issue of national concern. Submarine manufacturing companies are
    located in 47 States across the country. As a matter of national
    security and economic stability, we must take the necessary steps to
    preserve the submarine industrial base in the United States.
        I am especially concerned about our Nation's submarine designers.
    This is the first time in almost 50 years that we do not have a new
    submarine design on the table. As more designers and engineers are laid
    off--and we just laid off 154 workers from Electric Boat--they will
    likely leave the business and there are no replacements. The news only
    gets worse. It is anticipated that Electric Boat will be forced to lay
    off up to 2,400 additional workers before the end of the year. Even if
    those laid off do return to submarine work, there could be other delays
    in restarting production. If designers are out of work or employed
    elsewhere for more than two years, they will lose their security
    clearances. The process of reinstating those clearances can take over a
    year. It is imperative that we preserve our submarine design workforce
    before any additional layoffs occur. I intend to fight to include
    funding for design work in this bill.
        In addition, I think we should transition New London from the
    world's submarine center of excellence to the world's undersea warfare
    center of excellence. We should concentrate the east coast submarine
    force there, and base the LCS antisubmarine warfare and mine
    countermeasure modules there to build a true undersea warfare center of
    excellence. Devoting more resources to new design at Electric Boat
    would further strengthen the remarkable synergy among New London,
    Electric Boat, and the world's leading undersea expertise in the
    region.
        The Defense Science Board has described the attack submarine as the
    ``crown jewel'' of American defense. If we neglect our submarine
    production, we jeopardize our global undersea warfare superiority. We
    must move forward to devise a plan that will maintain a robust
    submarine force in the United States which can readily meet all of the
    challenges of warfighting, reconnaissance, and joint support placed
    upon it.

        Senator Talent. Thank you, Senator. To follow on what you
    asked about, could these designers perhaps be assigned to
    finding ways to reduce the cost of a submarine? In other words,
    we are trying to get from $2.6 billion to $2 billion. They
    designed it. Maybe, if we gave them this discreet assignment.
    Look at how the engineers are doing it. Look at how the
    operators are doing it in the shipyard. We will put a little
    money up front to pay for you trying to figure out how to save
    us money faster.
        Dr. Etter. There are activities like that going on.
    Allison, would you like to describe more of those?
        Ms. Stiller. Yes, sir. For the cost reduction, there is $20
    million of R&D in fiscal year 2007. As Admiral Edwards
    mentioned, there is $154 million across the FDYP that will
    employ some of these designers. As part of the RAND study, we
    have broken the design capabilities into 24 critical skill sets
    that we think need to be looked at. Some of those skill sets
    might be able to be accomplished on CVN 21 design or DD(X)
    design and others we feel are probably going to end up being
    very submarine-specific. So, we will have to look at the
    options. As Dr. Etter said, do you do more changes to the
    Virginia design or what are the other options? But some of
    those designers, yes, they are employed right now for cost
    reduction or will be with the fiscal year 2007 dollars.
        Senator Talent. All right. Senator Collins.
        Senator Collins. Thank you very much, Mr. Chairman. That is
    a great segue to an issue that we are working on at Bath Iron
    Works, which is to reduce the crew size of the DDG, applying
    some of the technology that is being developed for the DD(X).
    It sounds like you are proposing a similar effort to the one
    underway at Iron Works right now and I suggested a modest
    addition to the budget to continue that work. I think it offers
    great promise. First of all, I want to say that it is very nice
    to see Dr. Etter and Secretary Stiller again, and our admirals
    as well. That brings me back to the issue of the cost of the
    DD(X). I think lost in this debate has been the life cycle
    costs of the DD(X) with its smaller crew size. In fact, not
    only are there substantially greater capabilities over the DDG
    but that much smaller crew size also produces cost savings in
    the long run. I wonder, Dr. Etter, if you could comment on
    that? I always hear this great alarm over the $3.2 billion cost
    figure and yet, if you look at the life cycle cost and if you
    factor in inflation and the increased capabilities, it really
    is not a huge difference. Secretary Etter?
        Dr. Etter. Thank you. Yes, that is one of the important
    capabilities of DD(X). Reducing the crew size is something that
    is almost impossible to do once a ship is built. It is
    something you have to do from the very beginning, and build the
    design around that. So by using that as one of the key things
    that we wanted to put into this, we have greatly affected the
    life cycle cost of this ship. It also has been enabled by a lot
    of the new technologies that we have been working on, so it is
    a combination of new technologies and designing the ship in
    very different ways that has allowed us to do that.
        Senator Collins. Admiral Edwards, I noticed you were
    nodding. So, I want to ask you if you have anything to add?
        Admiral Edwards. We agree. I mean I am a huge proponent for
    the DD(X), but not only for crew size and life cycle costs, but
    for the tremendous warfighting capability that DD(X) is going
    to give with a much smaller crew. Just as you said, what we are
    learning from DD(X) and these technologies are also going
    forward and forward fitting the ships of the future, but also
    back fitting some good ideas on DDG, so that we will be able to
    take out 30 or 40 people, we think, on the DDG during their
    modernization.
        Senator Collins. That is significant. There is real cost in
    people, as we all have learned. If we can reduce by back
    fitting the DDGs, the crew size by 30 to 40 people, that offers
    significant savings. I think that is why that additional
    research is important. It also helps with the industrial base
    problem as far as evening out the workload a bit. I do want to
    also reinforce the issue that all of us have brought up and
    that the chairman so eloquently stated, and that is we have
    military requirements for more submarines. For two a year, not
    one a year. We have military requirements for more DD(X)s.
    Either 12 over the period of time, if you use Admiral Clark's
    figure or if you look at Admiral Mullen's proposed fleet, at
    least 7, and yet we are only budgeting for 5. So, it is not as
    if these ships and these submarines are not needed. They are
    needed. But what is happening is not only are we not meeting
    the military requirement, but also we are building an
    uneconomical production rate and that contributes greatly to
    the high costs. So, I wasn't surprised to hear my colleague,
    Senator Lieberman, say that perhaps as much as a half of
    billion dollars could be taken out of the cost. So, I think we
    need to work together to figure how we can build what we really
    need to build. It is going to lower the cost per unit. So, I
    hope we can work together on that. Admiral Edwards, do you
    think that would be a positive direction for the subcommittee?
        Admiral Edwards. Absolutely, I do. Yes, ma'am. We look
    forward to doing that.
        Senator Collins. Thank you. One final question, if I could,
    Mr. Chairman? I want to direct it to, I think Dr. Etter is the
    one to answer this. Admiral Hamilton recently did a briefing on
    the DD(X) program. It was a very helpful briefing. He said
    during the course of it that, I should try to find the exact
    quote, but it was something on the lines that we will never
    again talk of a one-shipyard winner-take-all strategy. I was
    very pleased to hear him say that. This Congress has enacted a
    prohibition in permanent law against going to a one-shipyard
    strategy. But I hope we are not just deferring that idea and
    instead that Hurricane Katrina's damage at Ingalls and a
    rethinking of the acquisition strategy has convinced, not only
    Admiral Hamilton, but also those of you who are in the civilian
    positions that that was an idea that should be abandoned
    forever.
        Dr. Etter. I would respond with two things. I think one of
    the things that we recognize from Hurricane Katrina, although
    we thought this but it has been driven home by Hurricane
    Katrina, is how important it is to have flexibility in our
    shipyards. Being able to have options there is very important
    to the country. As far as DD(X) goes, we are committed to the
    dual lead ship strategy. We think this strategy will help us
    get this ship at the right price with the capabilities that we
    need. As Admiral Edwards mentioned, it will make the wonderful
    new warfighting capabilities that are important. So, we think
    the current strategy we are on is really a good strategy and do
    not plan to do a winner-take-all.
        Senator Collins. Thank you. Thank you, Mr. Chairman.
        Senator Talent. Thank you, Senator. Admiral Locklear, let
    me ask you a question. When did you say you anticipated getting
    to that $13.4 billion, what year?
        Admiral Locklear. Yes, sir. In our current planning
    process, my expectation is that we will realize that $13.4
    billion fiscal year 2005 level about midway through this coming
    FDYP. I would anticipate about the 2011 timeframe based on a
    plan that we see being laid out. Now, I would like to emphasize
    again that critical to this, from a programming perspective, is
    stability. So, when we look at individual ship types or
    submarines or any other program and we decide to change where
    it lies in that program, it makes it very difficult to maintain
    that stability and to meet those goals. I would use, for
    example, the SSN to move that to the left. By having it, we are
    saying in two in 2012. I think we ensure, as I recall about a
    14-year period where we drop below the 48 total. To move it to
    the left 2 years, I understand, I am told that that will
    roughly cut in half the number of years where you would drop
    below that level. In order to do that you would not have to put
    advance procurement in--we looked very closely at this because
    it was appealing to us from the beginning. We looked at
    bringing advanced procurement to the left and then moving that
    ship to the left. What that did to us is that it gave us an
    additional bill of about $7.5 billion in the FDYP that we now
    have to account for. It also means that by moving it into
    fiscal year 2009, it now comes in competition with the money
    that I have set aside for the rest of the shipbuilding. So, as
    a programmer I am then forced to go to places where I can find
    that amount of money, which might be CVN 21, DD(X), programs
    that are all so near and dear to us. So, from my perspective
    you have to consider the return on investment that we would get
    from where we are today, to cut the time we would have fewer
    than 48 submarines down by 7 or 8 years. The cost to do that
    was difficult to plan into the program. So stability is
    critical in us being able to attain this and keep those ships
    in the places because they are such large capital investments.
    You know this better than I do, but in our program we have
    these big chunks of investment each year and sometimes they go
    up and down and whenever you move capital ships into the same
    year with a top line that is flat or can't be moved, that
    amount of movement in the program competes with everything else
    that I have to pay for in the Navy, which includes manpower
    already. So, it is critical that we maintain that stability to
    be able to get to the $13.4 billion about midway through the
    FDYP.
        Senator Talent. When you say critical to stability, let me
    see if I understand you correctly, you are saying that if we
    moved the second submarine to the left and this took money out
    of other programs that you had planned to buy and therefore
    created instability in those programs, then the cost of those
    ships might go up because you could not carry out your plan
    regarding those programs. Is that what you are saying?
        Admiral Locklear. Yes, sir. I categorize that as churn. We
    spend a lot of money in all of defense industry building things
    and costing more because of churn. Because the yards can't
    plan, the yards can't build. There is not predictability, so we
    create this churn. So we have to be very careful. We have to be
    cognizant and try very hard to eliminate that churn from our
    shipbuilding plan.
        Senator Talent. So, the shipyards know, let's say for
    DD(X), that if a certain amount is plugged in for fiscal year
    2011, that they get that amount for DD(X) and they don't lose
    it because we plugged a submarine in a year earlier or
    something like that.
        Admiral Locklear. Absolutely. Yes, sir.
        Senator Talent. But if we could find the submarine money,
    in addition of course, then you don't have these concerns
    regarding instability?
        Admiral Locklear. No concern whatsoever, sir.
        Senator Talent. Yes, you'll take additional money if we can
    get it, I am sure. I think you said fiscal year 2011, to get
    approximately to get to $13.5 billion, so would you expect to
    see increments you know evenly increasing every year to get to
    that figure? We are now at about $8.7 billion, so it is about
    $4.5-$5.5 billion. Would you expect to see a ramp up basically?
        Admiral Locklear. Yes, sir. I would expect to see a ramp
    up.
        Senator Talent. At approximately even increments? Is that
    what you would expect?
        Admiral Locklear. I am unable to tell you definitely that
    it would be an even increment. It will be a ramp up.
        Senator Talent. Okay.
        Admiral Edwards. It is hard, Mr. Chairman, to build average
    ships with average dollars.
        Senator Talent. Sure.
        Admiral Edwards. Because there are spikes in it. So, we can
    come back to you with that and give you the exact.
        Senator Talent. I would appreciate that and that is for our
    oversight purposes.
        [The information referred to follows:]

        The 30-year shipbuilding plan was designed to acquire the necessary
    capabilities to pace the threat, sustain near-term operational
    readiness and provide a clear and reliable demand signal to the
    industrial base. The Navy has determined that the average annual
    investment necessary to achieve and sustain the 313-ship force
    structure is approximately $13.4 billion in fiscal year 2005 dollars.
    The Navy is making the resource allocation decisions necessary to
    quickly increase shipbuilding funding to this average $13.4 billion
    level. The plan is balanced and sutainable with our current personnel
    and readiness requirements.

        Senator Talent. See we know you are serious about this
    plan. I think we are all serious too. If you are going to get
    to $13.5 billion by fiscal year 2011, you are going to be
    ramping up in the mean time. We want to be certain that what
    you are submitting is the ramp-up that you really believe we
    need to get to $13.5 billion. If in the process of getting your
    budget reviewed, that number is driven down because of budget
    constraints by people outside of the Department, we want to
    know that. If we don't have any idea about what that increment
    is going to be, we are not going to know whether that number
    was less than you actually want in a particular year and was
    driven down by budget constraints or was just the result of a
    normal fluctuation as you planned the program. So, I would like
    you to work with our staff to give us an idea of how quickly
    that ramp up is going to occur, so we can oversee if we see
    anything out of the norm and find out if there was some budget
    driven reduction in that number. I will just repeat again, I am
    serious about this. I think we are all serious. These words
    that I put in my statement and that you put in your statements
    are not just words, we have to have this naval power.
        Admiral Locklear, you mentioned that if we move the
    submarine to the left, so we go from 14 to 7 years without that
    presence that might destabilize some of the programs. But you
    mentioned that you are going to try to get money out of the
    readiness accounts and if you can do it without undermining
    readiness, that is fantastic. But, the fewer ships we have
    trying to cover, it just seems to me, the more stress on the
    fleet we do have and so that is going to work against your
    attempt to reduce readiness accounts and personnel accounts.
    You see this as a kind of thing where we can end up defeating
    our purposes, we are trying to save money on shipbuilding but
    that increases readiness costs or personnel costs because we
    are covering with a fleet that is too small. Then we have
    problems. Would you like to comment on that?
        Admiral Locklear. I couldn't agree with you more. Just in
    my initial comments what I tried to convey to you was that in
    the area of personnel readiness we continually pressurize those
    to the level that we feel we can. But those accounts are fairly
    pressurized, so I agree. As I said earlier, to accomplish this
    we are going to have to look at other areas in our program to
    be able to accomplish this, which we are doing now.
        Senator Talent. Right, and I'm not going to ask you to give
    us specifics that you are just developing now. At a certain
    point, of course, we are going to be very interested in the
    specifics.
        Admiral Edwards and Dr. Etter, let's go a little bit into
    how you are concretely planning to reduce contract changes,
    requirements creep, and how you anticipate the acquisition
    community is going to work with you in terms of stabilizing
    design. Now, the CNO has focused on the need to minimize change
    to ship contracts and requirements creep. I think we are all in
    agreement with that. It is an absolute imperative. Admiral,
    let's address the requirements standpoint. Tell us with a
    little more concreteness, if you can, how the CNO's directions
    are being translated into policy and practice. Maybe some
    specific examples that would give us confidence that you can
    really meet these program estimates. Share with us and make it
    a little bit more tangible for us.
        Admiral Edwards. Yes, sir.
        Senator Talent. So, we can see what you are doing.
        Admiral Edwards. One of the first things that the CNO
    directed back in July, when he came onboard was to set up a
    requirements board. We had one in the past that was called the
    Ships Characteristics Board. That has now morphed into what we
    call the Resources and Requirements Review Board (R\3\B). This
    is a board that can be, depending upon the topic, whether you
    are talking an acquisition category (ACAT) I program or an ACAT
    II. Whether you are talking about it being over budget or
    behind schedule and to what degree, we have a means of ramping
    up the oversight from a three-star resource sponsor, Admiral
    Crenshaw, up to the Vice Chief, who has a threshold limit, and
    then to the CNO himself. If we are going to impact a key
    parameter of the program or if a key parameter of the program
    is the major cost driver and we want to reduce the requirement,
    then that has to go before one of these boards and if it is a
    key performance parameter, that has to be made at the CNO
    level.
        Senator Talent. So either requirement changes going up or
    down.
        Admiral Edwards. Yes, sir.
        Senator Talent. So, this setup is going to allow you to
    identify high cost areas and see whether you can reduce the
    requirement in a way that doesn't really affect capability and
    reduce cost.
        Admiral Edwards. Absolutely. If it does affect capability,
    then we want to make sure that is not being done in a stove-
    pipe with people that don't understand the impact that may
    result in the joint requirement or from another Navy program
    that is relying on this capability. So, that has put a very
    stringent set of requirement parameters, both on the
    acquisition side of the house and also on the requirement side
    of the house. Over the past month we have probably had 4 or 5
    of these R\3\Bs meet. We have looked at programs that are
    behind schedule or have a cost over-run or are not meeting
    their parameters and are we willing to reduce the requirement?
    Are we willing to cut back on the program or do we want to
    cancel the program? So, that is a very concrete direction and
    action that the CNO has gone to in order to get his arms around
    it. We are not going to pressurize the acquisition side with
    requirements when we could live with less, and with a whole lot
    less dollars.
        Senator Talent. So, this R\3\B is naval officers. Is that
    who is on the board?
        Admiral Edwards. There are naval officers.
        Senator Talent. Also----
        Admiral Edwards. Allison is part of that.
        Senator Talent. Allison is on that?
        Admiral Edwards. Yes, sir. Dr. Etter would be part of that
    as it went up to the CNO's level, where it would be appropriate
    for her.
        Senator Talent. Okay. It sounds like--and the Vice Chief is
    going to play a key role in this.
        Admiral Edwards. The Vice Chief is the bulldog.
        Senator Talent. Okay. That is what I was going to--that is
    the term I was searching for.
        Admiral Edwards. Yes, sir.
        Senator Talent. What would trigger a review by the R\3\B?
    Is this something where the requirement board is looking or
    would some other level or officer be able to trigger a R\3\B?
        Admiral Locklear. As a matter of fact, the R\3\B now is
    already undertaking a look at all of our major programs within
    the Navy at this particular time. You can also trigger and
    request to go to the R\3\B. It can be done from almost any
    venue. It can be done from another resource sponsor within the
    Navy, if it has to do with the manpower implication or
    readiness implication. They can propose those types of topics
    to the R\3\B and have the R\3\B decide whether they need to
    bring them forward to basically look at them from a resourcing
    perspective.
        Senator Talent. Within the contracting or shipbuilding
    community, if they see a change that may be a problem, can they
    take this to them?
        Admiral Edwards. They will be required to.
        Ms. Stiller. Yes, sir. We do. We will. As the Admiral said,
    it has just gotten started. Especially with programs that are
    just beginning, as we complete the analysis of alternatives and
    we set the initial requirements, the requirements community, I
    think that will be a natural venue for this to be vetted. So,
    as the requirements documentation works through the system,
    everybody knows the costs.
        Admiral Edwards. Mr. Chairman, the costs of a program,
    especially a shipbuilding program, about 90 percent of the
    costs or 85 percent of the cost of the program is in the very
    initial stages of the program. So, you are adding up other
    alternatives and you are looking at options and you have not
    even gotten the design yet. But once you set on architecture
    and the requirements for the program, you very quickly lock in
    about 85 percent of your costs. As you go, even if you try to
    get then a requirement out you start to pay for the design
    change.
        Senator Talent. Sure, you generate a whole lot of costs.
        Admiral Edwards. So, you are kind of at a place here. If
    you can, as Allison said, start this process at the beginning
    that we would call the initial capabilities documentation,
    basically, you get the three-star, four-star look at that point
    and then we can identify where the cost drivers are and then we
    can start really managing.
        Senator Talent. Sure. Oh, I understand. It is hard. It is
    very difficult to change shipbuilding on the fly. Sometimes the
    best is the enemy of the good.
        Dr. Etter. If I could offer----
        Senator Talent. Yes.
        Dr. Etter. Another thing that we are doing particularly on
    the ships where we are adding new technologies is we are trying
    to keep off ramps for these, so that if we find that a
    technology is not maturing as quickly as we thought, we have an
    alterative. That is another way that we are trying to control
    costs. In fact, on DD(X) we did that in one of the 10 key
    technology areas. But, this is an important way that we are
    able to also have options. It is also an important thought
    because of this timing issue; you have to know when the off
    ramp is available because if we get too far in the design, we
    don't have those options anymore. This is another one of the
    benefits of having this review board.
        Senator Talent. All right, so the R\3\B then is both
    regularly overseeing the programs and also available for ideas
    or suggestions, either within the acquisitions community, the
    shipbuilding community, the Navy, or any of the above. I was
    going to ask you what the acquisition community was doing to
    ensure a stable design. Would you say this requirement board
    process is the center of what you are doing?
        Dr. Etter. I would not say it is the center; it is one
    aspect of it. It is one that is really driven more from the
    requirements side. Within the acquisition community, we have a
    number of things that we are doing to try to control costs.
    Certainly, one of the things that we are able to do early on is
    work through the acquisition strategy. If we are able to do
    multi-year programs and if we are able to do incremental
    funding for some of our larger systems, then that certainly
    helps us with costs because we can with multiple ships drive
    down the costs. The technology offramps are another example of
    what we do. Then we are constantly also looking to reduce
    requirements. Certainly, the requirement side is doing that but
    we also do that because our program managers are in many ways
    in the key position to see where changing a requirement
    slightly would impact the cost. We also have some programs
    where we have set aside dollars, where we work with industry to
    come up with ideas. I think in the submarine community, the
    capital expenditure (CAPEX) program is a great example. In the
    Virginia class, we have dollars that have been set aside and
    the contractors can propose things that they see that would
    allow us to cut costs. They make a proposal and if we agree
    then we will fund it. I think these are some of the examples of
    things that we have done. The bottom line of being ready to
    take off some capabilities if we need to is extremely important
    in order to stay on budget and on cost.
        Senator Talent. As you implement this, both on the
    acquisition and the requirement side, if you would share with
    staff here these concrete examples of successes that you are
    achieving, that would help us. I would like to be empowered
    with that as I make the case that you are using the money as
    efficiently as you can. I think that is important. We don't
    talk enough about our successes and you guys certainly get
    enough complaints about the failures or the problems. So, let's
    try to balance that out a little bit.
        Secretary Etter, how is the industry responding? What kind
    of investments would you expect in response to this
    shipbuilding plan? We know how capital intensive this industry
    is. Does it depend on their confidence that you actually can do
    it and how would you describe that level of confidence at this
    point, in your view? I probably ought to get them here and ask
    them that, but I will get your point of view. Just one other
    thing. What other actions are they taking to optimize
    shipbuilding and funding?
        Dr. Etter. I think having the shipbuilding plan should be
    very much a motivation to the industry because they can now, I
    believe, plan on longer-term stability. This is critical when
    you are going to do long-term investments. It is going to make
    a difference. We are still early in the process and I think it
    is going to be important that we show, as Admiral Locklear
    indicated, that we are committed to doing this. As far as some
    specific examples, I think I would ask Allison Stiller, who has
    a lot of discussions with the industry, on what she is hearing
    on this.
        Ms. Stiller. Yes, sir. In the case of the submarines, that
    Dr. Etter referred to, we have a program that, within the
    shipbuilding contracts, allows the shipbuilders to come and
    propose facility improvements in their yards. They show return
    on investment to us like they would to a corporate board. That
    will help reduce the cost of the submarine and production. We
    have invested to date about $30 million in Electric Boat
    location, Quonset Point and Groton, as well as Newport News. We
    also had an incentive like that on the carrier contract for CVN
    21. In fact, we co-invested in a facility with Newport News, to
    cut very thick steel, which is used on the flight deck. It is
    an incredible time saver. It has been a wonderful investment
    and we have seen it in action. We are also going to employ the
    same kind of incentive on DD(X) when we get into production on
    DD(X). But these are production type incentives that we are
    placing in the contracts. They have to show a return on
    investment. We give half the money upfront and half on the back
    end so that they are vested as well.
        In the case of Northrop Grumman Ship Systems with Hurricane
    Katrina, they are relooking at their entire facility to see
    where there was damage, and how to best re-facilitize their
    yard. A piece of how they are going about that is the First
    Marine International study, the benchmarking study that came
    out last year. It is yard specific and gives them thoughts on
    how they can better lay out their yard to be more efficient.
    Another example is Bath Iron Works and the land level facility
    that they invested in over the last several years.
        We have seen great improvements in the DDG procurement,
    coming down the learning curve and being able to outfit more on
    the land before you put the ship in the water. So, all of our
    yards have made some investments. Some have been co-shared with
    the Navy; some have been on their own; some have been State
    funded. In the case of Northrop Grumman Ship Systems with their
    facilities, this is their private insurance money that will
    cover the facilities but we are certainly working with them to
    give them thoughts.
        Senator Talent. If we do this plan and we certainly intend
    to do this plan, as I understand it and I have been briefed, we
    are talking 51 ships from the years 2007-2011. That is just 28
    major combatant ships and 23 LCS. Which, unless I am reading it
    wrong, means that the picture for the next 5 years in terms of
    rate of production for the six first tier shipyards is
    basically going to be the same as it was the last 5 years in
    terms of rate of production. So, given the fact that we need to
    increase confidence, we are trying to encourage them to
    optimize.
        We want them to know that the future is going to be
    different than the past. If that low rate of production, if I
    can call it that, is affecting their confidence, what impact do
    you think that is going to have on their ability to retain
    critical skills? Do you have concerns on those lines?
        Ms. Stiller. I don't think that there are concerns on the
    critical skills other than the submarine design base that we
    talked about earlier. I think with this plan they can plan and
    know that we are committed to the stability and they don't have
    to worry year to year; ``Are you serious?'' ``Is that ship
    really going to show up or not in the budget?'' It does give
    them a long-range view over the FDYP, the 5-year view to be
    able to plan for facilities, investment, or how to shape the
    workforce best or what improvements you want to make in the
    shipyard. So, yes, it is a stable rate that we have seen in the
    past, but I think it gives them more of a commitment that this
    is the rate and we are not going to fluctuate the rate.
        Senator Talent. So, you think there has been an adequate
    buyin to this plan by the shipbuilding community, subject
    obviously to them having confidence that it will be carried out
    at a stable funding level. You have a fair level of confidence
    that industry will respond appropriately to this rate of
    production. You see what I am getting at?
        Ms. Stiller. Yes, sir. I think we have to prove to them
    that we are committed to the stability. We have said it. This
    is the first year we have laid it out. We said we were going to
    build seven ships in fiscal year 2007 last year. We are saying
    that again this year. I think the proof is in the pudding and
    we have to continue to show that.
        Senator Talent. Again, it is essential that they see a plan
    and see it being carried out, which does suggest, Admiral
    Edwards and Admiral Locklear, that we get some pretty good idea
    of what this ramp-up is going to mean in actual dollars in the
    upcoming years, so that we can assure them as we do oversight
    that they are going to get that. Because we are going to
    challenge them and I don't have them in front of us right now.
        At the second panel, we are going to talk about these
    things. We expect them to perform. They have been telling me
    for 3 years that if we get a stable and adequate SCN account,
    you work with them on requirement changes and requirement
    creep. Acquisition works with them. They can deliver and they
    can optimize. We can expect them to deliver and to optimize. I
    think we covered the submarine build rate.
        Let's go to seabasing. I don't think it is any secret that
    I am still not as clear as I want to be on the seabase concept,
    Admiral Edwards. When Admiral Clark first outlined this as part
    of his concept for the Navy, it was the thing that I looked at
    and I thought, well I am not so sure. Things keep popping up
    that raise issues. For example, we had a hearing on lift.
    General Schwartz testified at that time that he had a priority
    that the seabase ships do not become single mission ships, just
    with seabasing. He felt they needed to support Transportation
    Command requirements also. They need to be lift vessels. Well,
    fine, but now we are talking about multi-mission ships with
    additional requirements and I am sitting here saying to myself,
    do we have an agreement about what these capabilities of these
    ships need to be so that we can get a stable design?
        Concerns are also being raised regarding vulnerabilities to
    the seabase. What kind of surface combatant strength are we
    going to have to devote to protecting them? So, the idea is an
    appealing one and I understand the Navy's desire to have this
    kind of inherent and organic capability. The Marines have told
    us that they would like to not to have to build the iron
    mountain. If you would, give me the current concept for the
    unique capability of a seabase, how those capabilities will be
    employed and safeguarded in a hostile environment and how you
    rank that capability among competing priorities. This is going
    to be a significant investment. Is it going to put pressure on
    our attempts to build surface combatants, submarines, and
    expeditionary strike capabilities and how would you address
    Transportation Command's concerns?
        Admiral Edwards. Yes, sir. Let me try this approach. Let's
    talk about seabasing today. We have examples of how this worked
    in Operations Desert Storm, Iraqi Freedom, Hurricane Katrina,
    and also the tsunami relief in all those areas, whether you are
    talking humanitarian assistance or major combat operations or
    war.
        Right now, seabasing requires a host nation support and a
    fixed port facility to get the whole Marine Corps Marine
    Expeditionary Brigade (MEB) and Marine Expeditionary Force
    (MEF) on the beach and into the fight. From World War II we had
    about 170 different bases around the world and it is down below
    50 now. Or 29, somewhere in that area. So, we are losing the
    ability to operate the Navy-Marine Corps in a style that we
    have been accustomed to in the past. So, what we have to look
    at is seabasing tomorrow and in the 2015 timeframe, which is
    going to use the whole maneuver space of the ocean as our
    operational area. We will have carrier strike groups (CSGs),
    expeditionary strike groups (ESGs), and surface combatants. We
    will assemble in a seabasing arrangement. It will be a joint
    force with Marines and also availability for Army and Air Force
    to flow through that phase. We will go right from the assembly
    area at sea to the objective area. That is critical. It won't
    go ashore and this iron mountain will be at sea and we will
    assemble at sea and close the force from the sea. This is
    actually an asymmetric capability that we will use both in the
    global war on terror and for major combat operations.
        So, I think as we see the world environment change this is
    a capability that we are going to need and one that we are very
    excited about and enthusiastic about.
        Senator Talent. If I can just--I don't want to interrupt
    you.
        Admiral Edwards. No, sir.
        Senator Talent. But if it is a convenient point, let me ask
    you a couple of questions about what you have said. Let's take
    the humanitarian assistance role. Again maybe there is
    something I am missing here.
        It certainly won't be the first time. But it would seem to
    me that for humanitarian assistance could we not expect
    cooperation from host countries? If the concern and reason we
    need seabasing is a concern that the next Turkey might not
    cooperate, is that risk great when we are talking about the
    humanitarian mission?
        Admiral Edwards. This is a scaleable capability. We
    wouldn't need an entire seabasing capability to do humanitarian
    assistance.
        Senator Talent. All right.
        Admiral Edwards. But in Indonesia, for example, there
    wasn't a lot of infrastructure there to fall in on.
        Senator Talent. So that was a case where a host country
    would cooperate but you just didn't have a secure base to
    operate from.
        Admiral Edwards. Also, some areas are sensitive that the
    United States is on the horizon instead of over the horizon,
    where they operate out of sight. Somalia was another case where
    it was a tough time to bring in a maritime preposition force
    and then off-load in piers and other areas. This capability is
    one I think that will be used in the future. I think it needs
    different capabilities than the seabasing force that we have
    today. You have to be able to selectively off-load, instead of
    put it ashore and then select the capability you want to take
    out as you go forward.
        The protection of this force is going to be paramount. We
    are going to have to dedicate our assets in order to do that.
    We will not let this force be assembled without a requisite
    defense for it. In that defense, it could be a carrier battle
    group. It can be another amphibious task group (ESG) or it can
    be surface combatants and submarines, which we have been
    deploying the ESGs with surface combatants in ESGs recently.
    So, the sea shield, both from surface, sub-surface, and
    ballistic missiles and cruise missiles, is going to have to be
    defended. What other priority would you have for it, if you had
    to use it?
        Senator Talent. Right. I can see that. If it is a major
    combat contingency, they are going to be there anyway probably.
        Admiral Edwards. Yes, sir.
        Senator Talent. Let me follow up on that. It seems to me
    from what you described that most of the size of the seabasing
    capability that you are contemplating is mostly necessary
    because of the major combat contingency requirement. In other
    words, if you are just concerned about humanitarian assistance
    or the global war on terror, you might need a seabasing
    capability but not--I think you have 12 ships, you are
    anticipating. Most of that capability is because of the
    possibility of another Operation Iraqi Freedom or something
    like that.
        Admiral Edwards. Yes, sir. To answer the question on
    General Schwartz as we go because I think there is an issue:
    seabasing is more than just the 12 ships. The Maritime
    Preposition Force (Future) (MPF(F)) is part of the seabasing
    concept, but it is not the whole concept. We are going to
    assemble the amphibious force. Part of that force would be the
    MPF(F). We have amphibious ships now, 35 of them. We have three
    maritime preposition forces, so that each one has about a MEB's
    worth of equipment on it that depending on what part of the
    world we are operating in, we can use that equipment. So, when
    we talk about seabasing, we are talking about the whole
    enchilada of capability here. You were right, if you are doing
    a global war on terror operation, then you need only one ship
    in that and some helicopters to do that or you may need the
    Mercy to be the seabasing focal point. It is scaleable, but it
    gives you--this capability will give that whole force the
    opportunity to do it at sea and not assemble ashore. Sam, let
    me give you an opportunity too.
        Admiral Locklear. Our number one joint partners are the
    Marines. The desire also was to be able to provide to the
    country about a two MEB forcible entry capability anywhere in
    the world, in 10 to 14 days in 8 to 10 hours of darkness, which
    are criteria the Marines say we need. We believe and the
    Marines believe that that is a capability that this country
    needs. So, as you look from the humanitarian size kind of
    seabase out to the joint seabases that you might realize in the
    future, as we lay dollars against that--one of our primary
    goals was to lay dollars against the seabase that enabled that
    capability first. That is if you take a look at how we designed
    and packaged the first--this thing that we call the seabase,
    with the 12 ships, it was designed around those criteria. Then
    we overlay the dollars on top of it. We made some trades to be
    able to get to where we are today with a technology that is
    available today.
        Now, to answer General Schwartz's question, in my opinion,
    that is a connector issue. This seabase, when it is built, will
    be able to be used if the investment is made by the DOD and
    connectors that will get all the joint partners onboard. But
    for the foreseeable future, we and our Marine Corps partners
    believe that was the preeminent capability for the Nation that
    we had to buy first.
        Senator Talent. That is one of the reasons I am inquiring
    so specifically into this, other than my concerns about whether
    this should have the priority that the Navy has given it. I am
    frank in telling you that I am not yet convinced. I am going to
    keep looking at it. I don't know how the rest of the committee
    feels about it. It is also because we are still at that point,
    as you said earlier, 85 to 90 percent of the costs are being
    driven here. You mentioned the requirement boards and I told
    you what General Schwartz said to me. This early planning
    process has to be very joint and you are going to have to
    include the Air Force. If they really have these lift ideas in
    mind, we don't want to be working ourselves into a situation
    where we are having to do with these ships what we are having
    to do with these other ships, now that are further down the
    line. Let's get this vision concrete and let's get it resolved
    early and let's stick with it. We certainly don't want the cost
    of these to go up. So I would be interested, as you work with
    General Schwartz and your counterpart, Secretary Etter, in how
    you are going to resolve the needs for additional sealift that
    he wants to realize through these ships. Either we do that or
    we don't. I know they are not going to recapitalize all their
    sealift. I am still vague on all this but I think we need to
    work that piece through. Do you have a comment, Ms. Stiller?
        Ms. Stiller. Yes, sir. Part of the MPF(F) squadron that we
    came up with as the family of ships includes the large, medium-
    speed roll-on roll-off ships, which the Army currently uses. So
    we were looking at the joint aspects of how you can make sure
    you are bringing an Army's worth of equipment into the fight as
    well. We have had discussions early on with the Air Force as
    well.
        Senator Talent. Yes, in fact, the staff had prepared a
    question for you, Dr. Etter, and you, Ms. Stiller, on exactly
    that question. How is the Department structured to manage the
    development and procurement of the seabase to ensure the range
    of end-to-end capabilities are fully integrated and also
    support joint operations? Do you have any further comments you
    want to add on that?
        Dr. Etter. No, I think that covers it.
        Senator Talent. Okay. Well we have another panel. I have a
    question about LCS, but I think I will submit that for the
    record. I thank you for your candor and the real sincerity I
    see here and the high priority that you are giving to this
    whole plan. There is only one other thing I wanted to add and
    then you can add a comment on that and then we will be done
    with this panel. We have this whole process. It seems to me it
    needs to be infused with a sense of priority about getting this
    plan done on time, and at the cost that we projected. There is
    a culture issue involved in all this. The one thing I know
    about culture is that if it doesn't come from the top and
    consistently and people through the process don't see the
    priority given it from the top, it doesn't work. I am convinced
    that the CNO is absolutely sincere in this. Secretary Wynne is.
    I think you all are also. So, I don't know what importance you
    would attach to that, but I think the people you work with in
    the Department, in the Navy, and in industry need to see that
    you are making decisions that show you are going to hang tough
    in this thing. You want to comment on that Secretary?
        Dr. Etter. Yes, I would just add that we are very committed
    to this. One point I would like to make is that any changes in
    the plan really do perturb the whole thing because it involves
    so many things that as you start to move things around it
    really does send us back to the drawing board to look at the
    whole thing again. So, we think the stability of the plan is
    very critical as we move forward to try to show that we can
    build ships to that plan.
        Senator Talent. I agree and if that was a euphemistic way
    of suggesting that Congress needs to be onboard too and not
    force any changes, I agree. In view of that though, we can all
    anticipate that there could be things in the plan that are
    going to run into concerns here of various kinds. So, let's
    anticipate that well in advance, try and deal with Senators who
    may have concerns and work that into the plan, so we don't run
    into some huge problem. Then if the only unanticipated change
    in the plan is more money, I think we can all deal with that.
    We will continue trying to work to get that. Thank you, and we
    will take the second panel. [Pause.]
        I thank the second panel for your patience. That first
    panel took a little longer than I anticipated, but I thought it
    was very useful. Our first witness in the second panel is Mr.
    Damien Bloor, Principal Consultant for First Marine
    International Limited (FMI) of the United Kingdom. You will
    probably get the prize for having come the longest way to
    testify this year. Mr. Bloor, we are very grateful to you for
    doing that.
        Our second witness will be John F. Schank of the RAND
    Corporation. We are very interested in your comments about
    shipbuilding.
        Mr. Bloor, please.

     STATEMENT OF DAMIEN BLOOR, PRINCIPAL CONSULTANT, FIRST MARINE
                 INTERNATIONAL LIMITED, UNITED KINGDOM

        Mr. Bloor. Thank you. Chairman Talent, I am a Principal
    Consultant with FMI, which is a UK-based, independent,
    specialist shipyard consultancy. In 2004, FMI was contracted by
    the Office of the Deputy Under Secretary of Defense for
    Industrial Policy to assist with the Global Shipbuilding
    Industrial Base Benchmarking Study.
        We were tasked to use the FMI benchmarking system to
    compare the practices of six large U.S. shipbuilders and seven
    leading international shipbuilders in Europe and Asia. Then to
    suggest changes to U.S. industry processes and Navy design and
    acquisition practices that would improve the performance of the
    naval shipbuilding enterprise as a whole. The study found that
    the overall average best practice rating for the six U.S. yards
    has increased substantially since 1999 although individual U.S.
    yards still have large gaps in some key areas.
        At the industry level the technology gap with the
    international shipbuilders is closing. Estimates of U.S.
    shipyard productivity indicated that although productivity
    generally lags behind international yards, there is a wide
    range across the industry. The core productivity of some yards
    compares well to builders of naval vessels overseas. However,
    the performance drop-off that occurs on the new first-of-class
    and vessels built earlier in a series appears to be much
    higher.
        The analysis also indicated that the naval acquisition
    practices increased shipyard work content by between 10 and 15
    percent above commercial norms. This has been called the
    customer factor.
        It also appears that U.S. naval vessels tend to be more
    complex and have more work content per unit of volume than some
    similar international vessels. There are few deficiencies in
    physical infrastructure. But in general, the industry is now
    well-equipped to achieve good levels of productivity. However,
    there are major opportunities to improve in the ``soft'' areas
    including design, production engineering, planning, estimating,
    logistics, accuracy control, and the organization of work.
    Deficiencies in these areas result in high levels of inherent
    work content, low productivity, high first-of-class performance
    drop-off, and poor cost and schedule adherence.
        The responsibility of the majority of the improvement
    suggested in the study report principally, in our opinion, lies
    with the industry. However, Congress, the Navy, and other
    Government departments could help. By engineering designs to
    reduce work content without compromising functionality, working
    with industry to develop pre-production processes to reduce
    first-of-class performance drop-off, review the acquisition
    rules, regulations, and practices to identify opportunities to
    reduce the customer factor stabilizing the ship acquisition
    program, improving shipyard incentives, and continuing to
    support performance improvement initiatives.
        In order of magnitude an estimate of the value of the
    potential savings confirms that there is considerable benefit
    in reaching the targets suggested in the report. A realistic
    timeframe to do this would be in the order of 5 years. We are
    currently engaging in part two of this study, which is focused
    on the military yards. I hope that you have found part one to
    be useful. I would be happy to answer any questions you may
    have. Thank you.
        [The prepared statement of Mr. Bloor follows:]
                       Prepared Statement by Damien Bloor
        First Marine International Limited (FMI) is a small, United Kingdom
    (U.K.)-based, independent, specialist maritime consultancy company
    formed in 1991. FMI consultants are, in the main, professional naval
    architects and marine engineers with shipyard management experience and
    knowledge of a wide range of shipbuilding market sectors. Members of
    the team have worked on projects in over 50 countries and were first
    involved together in the 1970s in the design and engineering of the
    some of the largest and most successful shipyards in the world.
        In June 2004, FMI was contracted by the Office of the Deputy Under
    Secretary of Defense (Industrial Policy) (ODUSD(IP)) to assist with the
    Department's Global Shipbuilding Industrial Base Benchmarking Study
    (GSIBBS) Part 1. FMI was tasked to:

              1. Compare the practices of the six U.S. first tier shipyards
            and seven leading international commercial and naval
            shipbuilders in Europe and Asia.
              2. Identify specific changes to U.S. shipbuilding industry
            processes and to U.S. Navy design and acquisition practices
            that would improve the performance of the shipbuilding
            enterprise.

        The FMI shipyard benchmarking system was used to make the
    comparisons as it was in a similar study in 1999/2000. The system
    allows the processes and practices applied in individual shipyards to
    be compared to others and to international best practice on a
    consistent basis.
        The study found that the overall average best practice rating for
    the six major U.S. yards has increased from 3.1 in 1999/2000 to 3.6 in
    2004. This is similar to the rates of improvement demonstrated by
    leading international commercial builders and confirms that there has
    been a marked increase in the rate of improvement in the U.S. yards
    over the last 5 years. This is the result of substantial capital
    expenditure by several yards and a concerted, industry-wide effort to
    employ higher levels of technology. Although individual U.S. yards
    still have some way to go, and there are some large gaps in key
    elements, at an industry level the technology gap with the
    international shipbuilders is closing. Some U.S. yards have clear
    strengths and the benchmarking team was impressed by the improvements
    that have resulted from the efforts of the last 5 years.
        Indicative estimates of U.S. shipyard productivity were made using
    a combination of proprietary and public domain data. The estimates took
    vessel complexity and the additional work that the shipyard is required
    to do as a consequence of working on Government, rather than
    commercial, contracts into account. This has been named the ``customer
    factor'' and was estimated to be between 10 percent and 15 percent for
    most U.S. naval vessels types. The analysis indicated that there was a
    wide range of productivity being achieved across the industry and that
    the core productivity of some yards compared quite well to builders of
    similar vessels overseas. However, the performance drop-off that occurs
    on a new first-of-class appeared to be much higher.
        The analysis of vessel work content indicated that U.S. naval
    vessels tend to be more complex and have more work content per unit of
    volume than some similar international vessels. Cost, risk, first-of-
    class performance drop-off, and the probability of cost and schedule
    overrun, all increase with vessel complexity. Therefore, if exposure to
    all of the above is to be minimized, overly complex vessels should be
    avoided.
        Some observers have commented that as the commercial vessels built
    by naval shipbuilders tend to be expensive, they must inherently be
    constructing equally expensive naval vessels. Other studies by FMI have
    shown that a naval builder can provide good value for money in the
    construction of naval vessels but be unable to compete in high-volume
    commercial markets. This said, both navies and naval builders can
    undoubtedly continue to make improvements by studying the most
    successful commercial models.
        Although there are a few infrastructure deficiencies, putting aside
    the effects of Hurricane Katrina, the industry is now generally well
    equipped to achieve internationally comparable levels of productivity
    in naval construction. However, there are major opportunities for
    improvement in the `soft' areas including design, production
    engineering, planning, estimating, logistics, accuracy control, and
    manpower and organization. Deficiencies in these areas results in high
    levels of inherent work content, high first-of-class performance drop-
    off, and poor cost and schedule adherence. The report titled ``First
    Marine International findings for the global shipbuilding industrial
    base benchmarking study,'' which presents FMI's findings in full,
    contains suggestions for improvements that can be effected through
    industry collaboration. Suggestions for individual yards have been made
    in proprietary shipyard reports.
        The responsibility for the majority of the improvements suggested
    principally lies with the industry; however, Congress, the Navy and
    other Government departments could take action to assist. The principal
    suggestions for the Navy and Government are:

             Gain a more in-depth understanding of the relationship
            between ship specification, complexity, and work content, and
            work with the design authorities to reduce the inherent work
            content of naval vessels while not compromising functionality.
             Work with industry to develop the pre-production
            processes to reduce first-of-class performance drop-off.
             Review the acquisition rules, regulations, and
            practices to determine if each adds value and work with the
            shipyards to find ways to reduce the effect these have on
            shipyard work content (i.e., reduce customer factor).
             Stabilize the ship acquisition program.
             Improve shipyard incentives.
             Continue to support performance improvement
            initiatives such as the National Shipbuilding Research Program
            (NSRP).

        The proposals made in the study are aimed at both improving
    shipyard productivity and reducing work content by:

             Increasing the use of best shipbuilding practices in
            U.S. shipyards,
             Making more effective use of the technology employed,
             Optimizing ship designs to reduce work content in U.S.
            naval vessels,
             Reducing the customer factor,
             Reducing first-of-class performance drop-off, and
             Improving the acquisition environment.

        An order-of-magnitude estimate of the value of the savings that can
    be made confirms that there would be considerable benefit in reaching
    the targets suggested in the report for the above actions. The time
    required to achieve the targets will depend on the motivation of the
    industry, Navy and Congress, and the availability of funding. However,
    a realistic time-frame would be in the order of 5 years.

        Senator Talent. Thank you. Mr. Schank.

             STATEMENT OF JOHN F. SCHANK, RAND CORPORATION

        Mr. Schank. Mr. Chairman, thank you for inviting me to
    appear before you today to discuss issues related to the future
    of the United States naval shipbuilding industrial base.
        For almost 15 years, we at the RAND Corporation have been
    exploring these issues in a number of studies funded by the
    United States Navy. Because of that experience, in 2001 we were
    asked by the United Kingdom's Ministry of Defense (MOD) to aid
    in conceiving and evaluating acquisition options for a new
    class of destroyers. They are Type 45s. Since then we have
    completed several other studies for the MOD, including
    supporting their future carrier program, their Astute submarine
    program, and an overall analysis of their shipbuilding
    industrial base.
        Mostly, these projects have been directed either by myself
    or by my colleagues, Mark Arena, who is here with me today, or
    John Birkler, who could not be here. We have prepared a summary
    of the messages for the MOD that we derived from our research
    for that agency. These include the need for long-term planning
    and its implications, ways to achieve design and production
    efficiencies, and the need to sustain resources. We have
    submitted our statement to be entered into the record.
        I will confine my spoken remarks to four of the nine
    potential lessons for the U.S. industrial base. We elaborate on
    all our recommendations and all the lessons in the written
    statement. These recommendations are tentative because we have
    not made a thorough study of the U.S. shipbuilding industry,
    but on the basis of our current knowledge and pending further
    research they represent some actions that could merit further
    consideration.
        Mr. Schank. Our first recommendation would be to smooth out
    demand peaks and valleys over the design and production cycle
    for each ship type by planning over the long-term. By long-
    term, we mean decades. We do not mean years. This should be
    done simultaneously for all ship types, so that the inevitable
    peaks and lulls of one type of ship can be balanced against
    those of another type of ship. It should be done simultaneously
    across all shipyards. This requires a centralized Navy plan
    across all programs.
        Second, we view competition as one approach to acquisition,
    not the approach. It is desirable that shipyards specialize,
    and in a market with a limited number of shipyards, competition
    may not always be feasible. A different view of competition may
    also be appropriate, rather than competition for work share,
    the way we typically think of competition. Competition could be
    directed for profit levels, award fees, or different shares or
    percentages of the work share. Also, competition could be
    conducted at the parent corporation level versus the individual
    shipyard level. This is one of the lessons we saw in the United
    Kingdom, where instead of contracting with the shipyards, they
    would contract with the parent company allowing the parent
    company to make decisions on allocation of workload across
    shipyards, depending on the situation at the time.
        Third, protecting and enhancing the design and integration
    industrial base. We have already talked a little bit about the
    submarine design base. As it has been mentioned, we at RAND are
    doing that study. Mark Arena and I are leading that effort. We
    know if there are long gaps between new ship designs within a
    class of ship, design and integration skills may be lost. These
    may be difficult to reconstitute. It is not just because there
    is a loss of domain knowledge. What is almost as important is
    the experience level of that knowledge. What we see with
    successful programs is a combination of the main knowledge and
    experience in the field. This is particularly true for complex
    platforms that specialize in capabilities such as submarines
    and nuclear propulsion. Here solutions may require a
    consolidated view of shipbuilding versus a shipyard specific
    view. That is, rather than focusing on a shipyard, we need to
    focus, we believe, on the industry and look at it from an
    industry perspective.
        Senator Talent. You mean in terms of preserving design
    capabilities. Look at it as an industry rather than within
    shipyards?
        Mr. Schank. Yes, sir.
        Senator Talent. You are focusing on design capabilities as
    opposed to other parts of the production process. So you think
    that is crucial in terms of----
        Mr. Schank. We think design is the most difficult
    capability to reconstitute. Design, testing, and integration--
    we think they are the most difficult skills, and the most
    critical skills, the hardest to reconstitute.
        Fourth, and my last point: Resist any impulse to shift more
    responsibility for assuring safety and performance to the
    private sector. DOD should not offer shipyards greater autonomy
    in making safety and performance-related decisions. If the yard
    takes on more liability for risk, contracting arrangements not
    withstanding, it is the Government who is the ultimate risk
    bearer and should remain responsible for cost-benefit tradeoffs
    and safety considerations. Note that these responsibilities
    require a sufficient cadre of skilled personnel to provide
    technical authority and oversight of design and production
    programs. Technical skills have to exist not only in the
    shipbuilding industrial base but also within the Navy to make
    technical decisions on safety and performance and to oversee
    the programs.
        Mr. Chairman, I would like to thank you for the opportunity
    to address the committee today. I will be happy to answer any
    questions you might have.
        [The prepared statement of Mr. Schank follows:]
                     Prepared Statement by John Schank \1\
    ---------------------------------------------------------------------------
        \1\ The opinions and conclusions expressed in this testimony are
    the author's alone and should not be interpreted as representing those
    of RAND or any of the sponsors of its research. This product is part of
    the RAND Corporation testimony series. RAND testimonies record
    testimony presented by RAND associates to Federal, State, or local
    legislative committees; government-appointed commissions and panels;
    and private review and oversight bodies. The RAND Corporation is a
    nonprofit research organization providing objective analysis and
    effective solutions that address the challenges facing the public and
    private sectors around the world. RAND's publications do not
    necessarily reflect the opinions of its research clients and sponsors.
    ---------------------------------------------------------------------------
        Mr. Chairman and distinguished members of the committee: Thank you
    for inviting me to appear before you today to discuss issues related to
    the future of the U.S. naval shipbuilding industrial base. For almost
    15 years, we at the RAND Corporation have been exploring these issues
    in a number of studies funded by the U.S. Navy. Because of that
    experience, in 2001 we were asked by the United Kingdom's (U.K.)
    Ministry of Defence (MOD) to aid in conceiving and evaluating
    acquisition options for a new class of destroyers, and we have since
    then completed several other studies for the MOD (see the appendix).
    Most of these projects have been directed either by myself or by my
    colleague John Birkler, who could not be here today, but I need to
    acknowledge the work of numerous RAND staff and other associates whose
    names I won't mention but who were responsible for the bulk of the
    research effort.
        I am going to focus on the work we have done for the U.K. MOD,
    because this work has particular relevance for decisions to be made at
    the strategic level about the future of the U.S. naval industrial base.
    Over the next decade and a half, the U.K. will embark upon its largest
    naval shipbuilding program in many years. This effort will be
    challenging, because it follows a period of reduced warship demand that
    has led to consolidation and reduction in the capacity of the U.K.
    shipbuilding industrial base and in the oversight resources available
    to the MOD. Demands on the U.S. naval shipbuilding industrial base have
    also been falling, resulting in concerns, for example, about the
    submarine design base. At the same time, the United States also faces a
    likely future increase in demand, as the Navy builds to a 313-ship
    fleet. Let me review some of the suggestions we made to the U.K. MOD in
    three respects--the need for long-range planning, ways to improve
    efficiency, and the need to sustain hard-to-replace resources--and then
    I will conclude with some possible implications for the United States.
                        the need for long-term planning
        One of the most important findings that has consistently arisen
    from our research for the MOD was the importance of a comprehensive,
    long-term MOD shipbuilding strategy or plan. By a strategic plan, we
    mean one that would require that the MOD define its shipbuilding goals
    and future courses of action for the next several decades, establish a
    schedule or roadmap to achieve its plans, and identify future
    investments that would be needed, for example in facilities or
    workforce skills.
        A strategic plan would help eliminate the ``boom and bust'' cycle
    that has plagued ship production and design in the United Kingdom. It
    would allow the MOD to make more efficient use of shipyard facilities
    and workforce skills and exploit the government's ``smart buyer''
    expertise. It would help the MOD better understand the financial
    implications of its acquisition strategy and anticipate problems by
    allowing it to independently assess shipyard demand. It should also
    lead to reduced cost and schedule risk through greater program
    certainty.
                       implications of long-term planning
        Long-term planning would obviously have implications for how the
    MOD would manage the industrial base, and we have made some specific
    suggestions in that regard. First, we recommended that the MOD attempt
    to smooth, or ``level-load,'' the production and design demands it
    places on the industrial base. Several factors specific to each class
    of ship would affect the loading. These include the interval between
    ship starts, the time required to design the first of class and to
    build each ship, the fleet size desired, and the expected time in
    service. Among the benefits of level-loading would be better workforce
    and facilities use, more stable costs, and a greater ability of the
    industrial base to make long-term investment decisions.
        Second, we observed that long-term planning might force the MOD to
    reevaluate its pro-competition policy. To best use the industrial base,
    competition might not always by the appropriate option. In some cases,
    there might not be enough viable contractors to enable competition--or,
    perhaps more to the point, enough contractors to let one of them lose.
    For some classes of ship, it might be in the MOD's interest to allocate
    work across shipyards. Competition would likely remain a viable option
    in most cases, but the desire to achieve it should be only one factor
    in considering how best to achieve value for money over the long term.
    (I will have more to say about competition later.)
        Third, to understand all the factors impinging on its plans, the
    MOD would have to work more closely with industry than previously. That
    might require the MOD to supply industry with more information
    regarding plans, budgets, and procurement options. But the result
    should be reduced risk in shipbuilding programs because the government
    would have more certain understanding of industrial capacity, as well
    as better progress indicators, such as earned-value metrics. At the
    same time, long-term planning might also encourage shipyards to work
    more closely together as they act to use complementary skills and
    facilities, promote skill synergies (such as for design), and give the
    MOD procurement options which result in greater industrial
    efficiencies.
        Finally, any long-term plan would have to be integrated across the
    MOD's own ship-acquisition entities. Currently, each class of ships is
    the purview of its own integrated project team, which makes acquisition
    decisions independent of the actions of other teams. Because one yard
    may build ships of different classes, a plan that accounted for
    multiple classes would be necessary if the total demand load on a yard
    is to be leveled over time.
               ways to achieve design and production efficiencies
        Based on our research, we have also suggested the MOD consider a
    number of ways to improve its design and production efficiencies,
    within the context of a long-term shipbuilding strategy. We made five
    such recommendations.
        First, the MOD should sustain its practice of placing multiship
    contracts to provide industry with incentives for training and long-
    term facility investment. Because they have received only limited
    orders for new ships and have faced a highly competitive market in
    recent years, many U.K. naval shipyards have not modernized facilities.
    Only with long-term contracts and prospects will the shipyards be able
    to justify this type of major investment. Such investments should
    permit greater efficiencies, which should result in savings to the MOD.
    It should be kept in mind, however, that such long-term contracts work
    better for mature designs and, therefore, may not always be appropriate
    for the first-of-class ship.
        Second, the MOD should facilitate a discussion among the shipyards
    and related firms about whether the industry should adopt a common,
    interoperable set of design tools or develop industry standards that
    would allow design work to be easily interchanged. As the MOD's
    shipbuilding program unfolds, U.K. shipyards and firms will probably
    need to share design resources. One difficulty in such sharing is that
    shipbuilders and design firms often have different computer-aided
    design and manufacturing tools. Thus, interchanging data and working
    cooperatively on a common design are difficult. Common design tools or
    standards for commonality would lead to common product models and
    databases and would benefit the MOD in life-cycle logistics support.
        Third, the MOD should work to mitigate peak demands that, in spite
    of careful planning, arise to strain, if not exceed, industrial
    capacity. Several mitigating options are available. Increasing the use
    of outsourcing would decrease the labor required to be resident in a
    shipyard. Subcontracting peak demand work to smaller shipyards with
    excess capacity could ease the burden on yards operating at capacity.
    Also, the MOD could consider relaxing the current defense industrial
    policy to allow peak workload to be performed outside the United
    Kingdom.
        Fourth, the MOD should recognize and try to reduce the high number
    of design and contract changes introduced after production has begun.
    These have been blamed for schedule slippage and cost increases in
    recent naval shipbuilding programs. The MOD could help itself out by
    ensuring that designs are mature before proceeding into production. The
    MOD could also speed production by responding more quickly to changes
    proposed by the shipyard to save time or money.
        Fifth and finally, the MOD could encourage other best practices to
    reduce cost and shorten build schedules. Our research has highlighted
    the potential benefits of increasing the use of advance outfitting in
    warship construction and encouraging the use of greater outsourcing,
    where appropriate. Notably, both of these require a mature design prior
    to production, which should by itself reduce cost and schedule
    slippage. Additionally, the use of commercially available equipment may
    be less costly than equipment conforming to traditional military
    standards and thus could be preferable if operations or safety are not
    adversely affected.
                              sustaining resources
        The desire to realize efficiencies should not, however, take
    precedence over the need to sustain design and production resources and
    oversight responsibilities over the long term. The MOD is emerging from
    an experiment in transferring responsibilities to the private sector
    that the private sector had insufficient incentive to exercise. The
    idea was to shift as much risk as possible to the prime contractor and,
    at the same time, as much of the authority for design decisions as
    possible. Not coincidentally, the MOD was losing the resources
    necessary to maintain design skills and, to some extent, oversight
    skills in house.
        In the case of the Astute submarine, the results of this experiment
    were unsatisfactory, as the terms of the prime contract for the first
    of class had to be dramatically revised after considerable cost
    escalation and schedule delays. The effect was to explicitly transfer
    the responsibility for the risk back to the MOD, where, as this turn of
    events demonstrated, it lay implicitly all the time anyway.
        We drew three lessons from this experience. First, as desirable as
    fixed-price contracts may generally be, the MOD should not let such
    contracts for high-risk, first-of-class designs of technically
    demanding projects. On the contrary, the MOD should consider dividing
    the project into different segments (steel-working, outfitting, etc.)
    and putting these up for separate, competitive bids. This is one way to
    maintain competition in an industry subject to short production runs.
        Second, the MOD must retain sufficient design and oversight
    expertise in house to see that its objectives are being met and to
    responsively engage the contractor. The MOD must be able to make
    technical decisions on issues that arise concerning tradeoffs between
    cost and performance or cost and safety. The MOD cannot expect a
    contractor, in making such tradeoffs, to arrive at the same results the
    MOD would. By the same token, the MOD must have the expertise to
    estimate costs independently.
        Third, the MOD must support the retention of design skills not only
    in house but by industry during periods of low demand for such skills.
    The atrophy of design resources in the attack submarine case played
    some role in the problems encountered with the Astute. Design skills
    might be retained through ``spiral development,'' that is, continuous
    design improvement, of a current class of ship, through continuous
    conceptual design of hypothetical future classes, or through
    development of prototypes. There might also be a role for collaboration
    with other countries facing peaks and troughs of design resource
    demand. The MOD must have, as well, the inhouse resources to support
    the R&D that will permit future advances in ship design.
                         lessons for the united states
        Now, what does all this mean for the United States? There are two
    important ways in which the U.K. and U.S. shipbuilding environments are
    similar. First, as I mentioned earlier, both countries are having to
    deal with the issue of sustaining design resources during lulls between
    classes at the same time, as they will be ramping up production for
    several classes of ship. Second, in both countries, naval demands
    dominate the shipbuilding sector. Neither country builds large ships
    for the global commercial or warship export markets. Thus, the MOD in
    the United Kingdom and the Department of Defense (DOD) in the United
    States essentially set demand conditions for the National shipbuilding
    industry: They decide the nature of the programs in terms of their
    number and size; the nature of the market, that is, whether it's run by
    competition or allocation; and, at least indirectly, the number of
    firms that will survive.
        Considering these similarities, we here make some tentative
    recommendations for the U.S. industrial base. They are tentative
    because we have not recently made a comprehensive study of the U.S.
    shipbuilding industry, but on the basis of our current knowledge, these
    are some actions that could merit consideration by DOD, pending further
    analysis:

             Smooth out demand peaks and troughs over the design
            and production cycle for each ship type by planning over the
            long term--that is, decades, not years. This should be done
            simultaneously for all ship types, so that the inevitable
            remaining peaks and lulls for one type can be balanced against
            lulls and peaks for another. Such planning must take into
            account the production interval, build duration, desired fleet
            size, and platform life for each class. Plans should hedge
            against risk by recognizing gaps that may be caused by lower-
            than-expected funding and how to mitigate them.
             Incorporate shipyards' prospects for obtaining non-
            Naval shipbuilding clients into long-range planning. The U.S.
            Coast Guard, for example, will be undertaking a shipbuilding
            program of substantial scope, though the ships will not involve
            the same demands as the large Navy ships do. At the same time,
            foreign military sales can be expected to decline.
             Resist any impulse to shift more responsibility for
            assurance of safety and performance to the private sector. DOD
            should not offer greater autonomy in making safety- and
            performance-related decisions at the price of more liability
            for risk. Contracting arrangements notwithstanding, the
            government is the ultimate risk-bearer and should remain
            responsible for cost-benefit tradeoffs.
             Make competition optional. Competition should not be
            the default method for obtaining value per dollar for certain
            ship types. It is desirable that shipyards specialize, and in a
            market with a limited number of yards, competition may not
            always be feasible. Competition is better achieved during the
            design phase or through subcontracting large segments of the
            production process.
             Be prepared to close and consolidate industry
            elements, however politically unpalatable. It may be true that
            every element makes some unique contribution, but it may not be
            true that every such contribution is worth what it takes to
            sustain it. In particular, it may be difficult to support a
            multifirm design base. At the same time, some thought should be
            given to maintaining diversity in the industrial base, so yards
            should not be closed simply on financial grounds. It may be
            that what is needed is not fewer shipyards but smaller ones.
             Protect and enhance the design and integration
            industrial base. With classes for some ship types following
            each other at longer intervals, design and integration skills
            may be lost. These may be difficult to reconstitute,
            particularly for such specialized capabilities as nuclear
            propulsion or submarines. Options for sustaining the design and
            integration base include spiral development and the design of
            prototypes or one-hull classes.
             Consider collaboration with key allies. It may be
            that, in a time of uncertain and variable demand, sharing
            industrial base resources with a trusted ally will, for certain
            ship types or equipment items, reduce costs with no security-
            related drawbacks.
             Standardize design tools across yards and the
            government. Using the same computer-aided design and
            manufacturing tools, or tools with compatible formats, could
            enable more rapid responsiveness on change requests and more
            seamless and economical collaboration across shipyards.
             Encourage more outsourcing and advance outfitting. For
            maximum effectiveness at enhancing efficiency, subcontractors
            should be involved as early as possible in the design-and-build
            process, and, where possible, large ships should be built in
            blocks that are mostly outfitted before they are assembled.

        I would like to thank you again for the opportunity to address the
    committee today, and I will be happy to answer any questions you might
    have.

        Senator Talent. First of all if the staff or you, whichever
    is the most convenient place to do it, would get me a written
    copy of the summary.
        Mr. Schank. I will.
        Senator Talent. If you could get me that I would appreciate
    that. You mentioned that--your last point was that the
    Department should be careful not to offer autonomy to the
    shipyards in terms of independently deciding safety
    performance, trading.
        Mr. Schank. Yes, trade-offs, cost benefits.
        Senator Talent. Give me an example of what you mean by
    that. What kind of thing in your judgment would be unwise?
        Mr. Schank. One of the things we learned from our work with
    the Astute program in the United Kingdom was that MOD was at a
    point where they tried to shift a lot of responsibility and
    risk to the private sector. This included design authority for
    the submarine and ability to make technical decisions. This did
    not work as well as they thought it would. The industrial base
    was not prepared to accept the responsibility and risk. Even if
    they were, there is some element of risk, safety, and
    performance that have to reside with the Navy and with the
    Government, that we can't transfer to a shipbuilder. I think
    safety is the primary example of that. It is the Navy, it is
    the Government, that is ultimately responsible for the safety
    of our sailors and crew members.
        Senator Talent. I'm not suggesting that I would want
    seriously to do this but, I am interested in why this was one
    of the four points that you chose to summarize. Is it just
    because you think the decisions that the private sector would
    make would be inappropriately weighted toward cost reduction or
    is there something about those decisions where the Government
    just optimizes better than the private sector?
        Mr. Schank. I think the Government optimizes better. I
    think the Government has a broader view. I think the Government
    metrics for decisionmaking are slightly different than
    industry's; as you mentioned, profit drives many of industry's
    decisions.
        I think the point is important, and why I made the point is
    that we see what happened in the United Kingdom MOD, we see
    that beginning to happen in our Naval Sea Systems Command; loss
    of resources, transfer of resources out of the command, and
    belt tightening. We think that had catastrophic consequences in
    the MOD. We think it can within the Navy. You need sufficient
    talent and sufficient skills to be able to be an informed buyer
    of a product. The Navy needs those skills to be an informed
    buyer of complex warships. They need the technical authority to
    be able to make decisions on safety, performance, and trade-
    offs. Our concern is that those kind of skills are beginning to
    be lost within the Navy and within the command structure.
        Senator Talent. I remember some of my old friends on the
    House side thought we could save a lot of money by reducing the
    acquisition force within the Department. This sounds to me like
    a note of caution against doing that too much.
        Mr. Schank. Yes, sir. Yes, sir, it is.
        Senator Talent. Now, you said we need to have reduced
    demand peaks and valleys. We are all in agreement with that,
    and that we need to do this simultaneously across all ship
    types and shipyards and basically what that means is we need a
    decades long plan.
        Mr. Schank. Yes, sir.
        Senator Talent. That takes into account all of these
    factors in order to optimize production, so that they meet
    requirements. Do you think that the plan, so far as you
    understand it, that the Navy is proposing is such a plan? Would
    you be prepared to say what deficiencies you think might be in
    it or have you not familiarized yourself enough?
        Mr. Schank. I am well aware of the plan. I think it is a
    good start. I think it is a necessary start. I think what is
    needed, and I am sure the Navy would agree, and I have heard
    it, is commitment to that plan, so that it is not just
    something on paper but it is something the shipyards can
    believe in and know will unfold. Yes, there will be changes. We
    can't predict the future perfectly. But those changes should be
    minimized as much as possible. The other part of it that I
    think is lacking that, again may not be possible at this point,
    looking out 30 years, is it does not tell the shipbuilders. It
    tells the shipbuilders how many and what type of ships we will
    build. For some of the shipbuilders that is fine. But it
    doesn't tell the shipbuilders where those ships will be built
    or where all their ships will be built. Again it may be at this
    point too early to do that but I think that is an issue where
    decisions need to be made soon or at least in the short-term or
    at least the next decade. We have talked about competition a
    lot. I bring that up in my talk here but it is not clear to me
    that we actually have competition. Competition for work share.
    I think we rightfully need to protect our industrial base
    assets and to do that we have to make sure there is enough work
    within our shipyards. That suggests that there has to be some
    level of allocation. When you are not building very many ships,
    you may end up allocating all the ships that are in your
    shipbuilding program and have nothing left to compete. If that
    is the way the future will be, then we should recognize that
    and we should tell the shipbuilders that.
        Senator Talent. That we are going to allocate rather than
    compete. You mentioned you can compete not just for work share
    but profit levels and award fees. Would you explain that a
    little bit more and give me some examples of what you mean.
        Mr. Schank. I think the DDG-51 program is an example where
    they evolved to a point where they allocated the ships to the
    two shipyards, but the profit levels were determined based on
    the performance of the shipyards. The shipyards that perform
    better would make a higher profit than the shipyards that did
    not perform better.
        Award fees from my perspective have not achieved the
    desired goal. I think they may need to be tied to some level of
    proficiency and productivity rather than to milestones being
    accomplished. It is not what you accomplish; it is how well you
    accomplish it. I think that is what we are looking for. We tend
    to write contracts and make decisions on the shipyard basis,
    but yet our six shipyards are owned by two major companies.
    Possibly, and we have not studied this, this is just a thought.
    Possibly, we should be contracting and thinking about
    negotiating at the corporate level and bundling contracts
    together. Awarding incentives or profits on that bundle of
    contracts on how well the corporation does compared to the
    other corporation, rather than on how well an individual
    shipyard performs on an individual ship.
        Senator Talent. Now, in doing that of course we have to
    recognize the reality that Senators represent shipyards rather
    than corporations.
        Mr. Schank. Yes.
        Senator Talent. I can say that since I don't have any
    shipyards in Missouri. You may be wondering why a Senator from
    Missouri is chairing the Seapower Subcommittee. I don't have in
    that sense a parochial stake in this but others do. Of course,
    they believe very passionately in the effectiveness of their
    workforces. So, if we were to do that I think we would have to
    work that out carefully to make sure that Senators felt that
    their workforces and their shipyards are being allocated
    effectively in that context.
        Mr. Bloor, I have not forgotten you. I just was following
    up on what Mr. Schank said. Do you have any comments on
    anything he said to this point? Any you particularly agree with
    or perhaps disagree with?
        Mr. Bloor. Not at the moment, no.
        Senator Talent. Okay. I was interested in your assessment
    and pleased that during the 5-year period between the surveys
    of the U.S. industrial base, you measured notable improvement
    and performance in most areas anyway. You highlighted that that
    improvement might be attributed to the capital investments made
    by the shipyards. Now, what interested me about that was that
    was during the period when the shipyards were operating with
    declining workloads. There probably has not been a greater
    period of instability and uncertainty in the industry than the
    period where you measure improvement. So, can you tell us what
    the nature of the capital improvements were that the shipyards
    made during the period? Will they offer us insights into the
    types of incentives that motivated that or what caused that in
    the face of the decline in workload?
        Mr. Bloor. Yes, the types of things that we saw where major
    investments and things like new cranage, panel lines, steel
    building facilities in general, some investments in
    construction sites, berths and so on and so forth. There has
    also been some investment in some of the softer areas in things
    like design tools and so on. We speculated for some time,
    during the report, about why this improvement had occurred. We
    didn't really reach a conclusion. However, we did represent our
    speculation in the document. That was that we felt perhaps it
    was a time of industry consolidations as the shipyards were
    being consolidated into two corporations. We thought the
    pressure being brought to bear by the individual corporations
    was probably driving performance to some extent. We also
    thought that the fall-off in naval demand and new construction
    demand had been anticipated for some time and we thought that
    may be some pressure toward driving performance improvement. We
    also believe it was a genuine desire almost across the industry
    to actually improve. It really impressed us to go around some
    shipyards and see what they had done. It was impressive.
        Senator Talent. So, when you tell us, both in hearings and
    privately, that they are eager to--if we can get them stable
    funding and stop changing the requirements all the time--that
    they really are eager to perform better, that would be
    consistent with what you found in your study.
        Mr. Bloor. Yes, I think so.
        Senator Talent. I am interested, if you would explain a
    little bit more what you meant by customer factor. I think I
    understand it but I want to understand it more precisely. You
    say it is estimated to be between 10 and 15 percent for most
    U.S. naval vessel types. Are you talking about productivity or
    cost increases? Just explain a little bit more preciously if
    you would.
        Mr. Bloor. The customer factor came about because we were
    trying to compare the performance of naval builders to
    commercial builders, for which we have a lot of data. But in
    doing that, it is important to understand exactly what work
    content the naval builders have to execute. Most of the
    measures that we have are based on a commercial contract where
    the shipyard is expected to do certain things as part of a
    commercial contract. When a shipyard builds for a government,
    inevitably, the shipyard has to do things over and above the
    construction of the vessel, which are not the norm in
    commercial shipbuilding or at least they might have to do more
    of something. So, we tried to get an understanding of how much
    additional work that was. It relates to all sorts of things.
    There is a list of them in the report. The things that spring
    to mind are things like for prime contracts, flow-down, and
    additional management time in reporting and attending
    meetings--things like the managements have changed orders.
    There is a whole raft of things, which do actually affect the
    cost.
        It was interesting because that represents an opportunity.
    We are not saying it is good or bad. We are saying this is
    about how much work seems to be tied up in these types of
    things. But it does represent an opportunity to make some
    savings. Perhaps some of the things are outside the control of
    the Navy but some may be within the control of the Navy. It is
    just we are recommending it should be investigated.
        Senator Talent. So I'm glad I asked the follow-up because
    when your statement says, ``the estimates took vessel
    complexity in the additional work the shipyarders required to
    do as a consequence of working on the government contracts.'' I
    thought that meant more complex requirements or perhaps
    requirement changes. But it sounds to me now like you are
    talking about what a layperson might say is paperwork or the
    need to satisfy FAR part regulations or bureaucratic demands,
    which again may be justified but aren't directly related to
    building a more capable vessel, necessarily.
        Mr. Bloor. Yes, the calculations or the estimate took both
    of those things into account. So, it was the additional
    paperwork and so on. But also the additional complexity of the
    vessel and the work content associated with that.
        Senator Talent. Would you care to give me any estimate of
    what percentage of costs might be attributable to the need to
    comply with acquisition regulations that don't exist in a
    commercial context?
        Mr. Bloor. I don't know whether we could--well, I think as
    a whole we thought as we said in the report between 10 and 15
    percent.
        Senator Talent. That might include some of just the more
    complex requirements, though.
        Mr. Bloor. The complex requirements of building the actual
    vessel itself?
        Senator Talent. I am sorry. I should have let you answer. I
    understood you to say that the 10 to 15 percent was both the
    need to satisfy regulatory demands but also attributable to the
    fact that the naval vessels have higher requirements than
    commercial vessels.
        Mr. Bloor. Oh, no, it was just the former.
        Senator Talent. So, it is your sense that 10 to 15 percent
    of the cost of the naval vessels attributable to the need to
    comply with the various acquisition regulations and go to more
    meetings and more oversight and that sort of thing.
        Mr. Bloor. Yes, but actually not the whole cost of the
    vessel but only the man-hours spent by the shipyard.
        Senator Talent. Okay. So that percentage of the labor cost
    or the man-hours on that?
        Mr. Bloor. Yes, and I should say that this is an estimate.
        Senator Talent. Sure. I think what Mr. Schank said cautions
    against reacting to that by going out and taking a meat cleaver
    to the acquisition, you know personnel or functions. But it
    does suggest that perhaps if we could get this body here to
    bless it, that it might be good to do some kind of a
    government-industry task force to ask themselves what we really
    need to have and don't need to have in terms of some of these
    regulations.
        Mr. Schank. Right.
        Senator Talent. My experience has been, though, that we
    will need to get an understanding here on this side of the
    table that this process is going on and a buy-in in Congress
    because most of those regulations are there because Congress
    put them there for one reason or another. So, we would need to
    get a buy-in over here, I think.
        Mr. Schank. One of the things, after doing research in
    naval shipbuilding here in the United States for a number of
    years, we had the opportunity to go to commercial shipbuilders
    in Europe and Asia. One of the things that struck us was how
    lean their overhead staffs were. Where in U.S. shipyards you
    would see clearly dozens, if not hundreds, of lawyers,
    accountants, just basically overhead-related people, you would
    see a mere handful in the commercial yards. Now again, part of
    it is due to the reporting requirements. We have requirements
    we lay onto shipbuilders to periodically report cost. That
    doesn't exist in the commercial world. They sign a contract and
    the deliverable is the ship. But it struck us as that part of
    the customer cost that Damien is talking about was very
    obvious, when you look at commercial shipbuilders versus naval
    shipbuilders. It is not just the United States; it is in other
    countries too. The United States and other European countries
    like the United Kingdom and France, where it was the same type
    of customer factor.
        Senator Talent. Now there was quite an overhead in those
    countries as well.
        Mr. Schank. Yes.
        Senator Talent. When you are building a naval vessel, it is
    probably more important in terms of the consequences to get it
    right than it is if you build a commercial vessel. Still,
    however it might be an area where we can work. I will talk to
    the staff afterwards, but again we are going to have to go into
    it with our eyes open over here. Because the Pentagon has had
    experience with trying to propose these kinds of reforms when
    Congress wasn't anticipating it and I don't think the result
    was such that people want to repeat the experience. So, we
    would have to work on that over here.
        Mr. Bloor, you mentioned that some of the things that the
    Government could do to improve productivity would be improve
    shipyard incentives. What kind of incentives are you talking
    about? Could you be a little more specific with that?
        Mr. Bloor. This is a huge area.
        Senator Talent. I will give you 2 minutes. How is that?
        Mr. Bloor. Okay.
        Senator Talent. No, take as much time as you need.
        Mr. Bloor. I think in a nutshell we think the incentives
    should be structured in a way that rewards shipyards for
    performing better than spending more man-hours. I think that is
    it in a nutshell.
        Senator Talent. So, that seems to agree with what Mr.
    Schank is saying, that we need some way of perhaps a more
    subjective evaluation or at least a more complex evaluation of
    what better performance is rather than taking one or two
    indexes and measuring it that way. Is that fair?
        Mr. Bloor. That might be part of it.
        Senator Talent. Did you agree with Mr. Schank's belief that
    protecting the design industrial base is a key? Would you agree
    with that?
        Mr. Bloor. I think that it is very important to maintain a
    good design industrial base and also to develop it, to be able
    to allow construction to be done more efficiently.
        Senator Talent. My understanding is that our warship
    construction has been noted for being more labor intensive
    compared to commercial shipbuilding practices with a lot of
    reliance in in-house capabilities. Would you agree with that?
    Would you compare that with practices in foreign shipyards?
    Could you draw some conclusions regarding the merits of the two
    approaches? Are we more labor intensive here this is for both
    of you--doing more in-house compared to what foreign shipyards
    do? Would you say that is a good thing, bad thing, or a neutral
    thing, if you agree with it?
        Mr. Bloor. I think that it is interesting; it is a trend in
    naval shipbuilding worldwide. The naval shipbuilders tend to do
    more work in-house than commercial shipbuilders. In recent
    years, commercial shipbuilders have been subcontracting a great
    deal of work to lower cost areas. So for example, some European
    yards contract to Eastern European yards. Yards in South Korea
    contract to China and things like that. We don't think that it
    is a bad thing that the naval shipyards do things in-house.
    However, we do think they should have sufficient volume to
    justify carrying out the work with a reasonable level of
    technology and therefore achieving reasonable levels of
    performance to justify doing the work in-house. If they can't,
    then perhaps they should consider subcontracting more. In our
    report, we did talk about considering some regional centers for
    consolidating the work in one area, which would justify higher
    levels of technology and production. So, for example, one might
    have a pipe shop in one area that would service all shipyards,
    it would be very high technology.
        Senator Talent. You want to comment, Mr. Schank?
        Mr. Schank. I would agree with Damien. Let me say a couple
    of things here. We did a fairly extensive study of outsourcing
    practices in the United States, United Kingdom, European Union,
    and Asian shipyards. We found that in commercial ships there is
    a fair amount of outsourcing or subcontracting, especially in
    the European Union. We don't see that as much in the Asian
    shipyards. They will hire temporary people but we make a
    distinction between hiring temporaries to meet short-term peaks
    versus turning a complete function like painting or piping over
    to another organization. We see that in Europe. We do not see
    it so much in Asia, certainly not in the United States or in
    the United Kingdom. But even in Asia and the European Union
    many shipbuilders that build military and commercial ships--and
    there aren't a lot that have been successful in doing both--
    will separate within their shipyard (physically separate) the
    building of the ships and typically the workforce. Often for
    security reasons they will only have permanent employees on the
    naval ships versus part-time employees or subcontractors.
    Whether that is a good or bad thing, I am not prepared to
    judge. It is just an observation. Could we do more
    subcontracting? Yes, we could. Should we? We should to help
    mitigate the peaks. One way to mitigate peaks is to bring in
    temporary help. We tend not to do that. Now, maybe because of
    our labor unions, it may restrict some of that.
        The other reason that I think is important in European
    shipbuilders and Damien can certainly comment on this, is it is
    often countries' labor practices that force them in particular
    directions. When we were visiting and talking with Spanish
    shipbuilders, again Spain is a very Catholic country, the
    gentleman I was talking with said, it is cheaper and easier for
    him to divorce his wife than it is to lay off one of his
    employees. Because of the national labor policies, it is almost
    like a university tenure system. Therefore, what many of the
    shipyards have migrated to is rather than having permanent
    employees and the problem of trying to adjust a workforce in
    light of peaks and valleys is that they use subcontractors or
    temporary hires.
        So, from my point of view you need to not only look at the
    practice but the reasons for the practice.
        Senator Talent. Okay, you mentioned that there aren't a lot
    of shipyards that are successful at doing both naval and
    commercial shipbuilding. Our shipyards have focused on the
    military shipbuilding.
        Mr. Schank. Yes, sir.
        Senator Talent. Do you think it is feasible for them to
    develop a competitive commercial capability? If so, what do you
    think they need to do?
        Mr. Schank. My personal view--and we have not studied this,
    but my personal view--we studied it for the United Kingdom and
    our recommendation was don't count on it. I don't think a
    country like the United Kingdom or the United States or even
    European Union countries can compete with the Asian countries
    in terms of their productivity and their labor rates. The labor
    rates in China are one tenth of what they are here. So, no, I
    don't see the United States being competitive in the commercial
    marketplace unless it is for specialized kinds of ships.
        Senator Talent. Would you agree, Mr. Bloor?
        Mr. Bloor. To some extent. I think in parts of the European
    Union at the moment there are good order books in shipbuilding
    and shipyards are full. Also, ship prices are very high. To be
    successful in commercial shipbuilding a shipyard needs to be
    configured differently then it should be to be successful in
    naval vessel building. That is actually one reason that
    shipyards tend to segregate naval shipbuilding and commercial
    shipbuilding. It is not just about security and those types of
    things. It is about culture and structure, and also to some
    extent quality standards. So, it is interesting that in some
    vessels in which the United States has good experience they can
    offer pretty good prices and are competitive, almost I think.
    But, in the vessels where they don't have so much experience
    and have not been able to get down the learning curve and all
    of those things, then they are less likely to be
    internationally competitive. As far as the large yards are
    concerned, I think it is quite a challenge to build commercial
    vessels in an international market and naval vessels as well.
        Senator Talent. Let me ask one more question and then I
    will let you gentleman go. I know you have focused on the
    first-tier shipyards. Do you have any opinion about the health
    of the vendor base? Do you know the second-tier suppliers for
    American shipyards?
        Mr. Schank. We have looked in that area in a number of our
    studies for the United States Navy. Let me segregate it into
    two parts. One that supports the nuclear propulsion industrial
    base and one for conventional ships. The nuclear propulsion
    industrial base is basically down to sole-source providers.
    Now, with the new carrier and with one submarine a year they
    can remain viable. The refueling/complex overhauls to the
    carriers help out the vendors. New cores go in, for example. A
    lot of the valves and so forth get replaced. On the
    conventional side, we are always surprised. There are always
    exceptions. There are always those companies that are hanging
    by their thumbnails. But we have always been surprised at how
    robust the second-tier vendor base is. What we find, and we
    conduct surveys very often, is that the Navy is often typically
    a minor customer in their product lines. Now, again there are
    exceptions. So, I don't want to paint the whole vendor base
    with the same brush. But we think that there is more robustness
    in that segment than we often give it credit for.
        Senator Talent. Do you have a comment, Mr. Bloor?
        Mr. Bloor. Yes, we haven't really looked at the vendor base
    specifically except to say that as far as I am aware, it is
    actually reducing and I do know that quite a few shipyards are
    having reduced choice in terms of where they can buy
    components. That is especially the case the more prescriptive
    contracts are so owners actually nominate certain suppliers--
    that is often the case--in naval work. Then it becomes more
    difficult to get good prices and have more choice. Of course,
    price goes up. A further restriction in the United States, of
    course is the sort of buy America type policies that often
    surround these contracts, which also further limit the choice
    and therefore the price.
        Senator Talent. I thank you gentlemen for your testimony.
    Mr. Bloor, thank you for coming such a long way. Mr. Schank,
    thank you for your comments.
        Mr. Schank. Much shorter for me, sir.
        Senator Talent. Yes, sir. The hearing is adjourned.

        [On May 18, 2006, Mr. Schank requested that the following
    information be included in the record.]

        [Questions for the record with answers supplied follow:]
                 Questions Submitted by Senator James M. Talent
                              submarine build rate
        1. Senator Talent. Ms. Stiller and Admiral Edwards, the Navy's
    shipbuilding program results in the attack submarine force dropping
    below the requirement for 48 boats, in large part due to the inability
    to replace the retiring 688 class at the same rate that they were
    constructed. The Chief of Naval Operations (CNO) has expressed his
    willingness to increase to a two-boat per year build rate when he can
    get the unit cost down to $2 billion.
        I believe we would all agree with the CNO's focus on affordability.
    There are, of course, added, pressing concerns with minimizing future
    shortfalls to submarine warfighting requirements, concerns with
    viability of the submarine industrial base, and pragmatic constraints
    which the Navy is dealing with regarding the top-line. What is the
    Navy's roadmap--what are the extraordinary measures that the Navy and
    industry are undertaking to satisfy the somewhat competing, yet
    critical objectives of warfighting requirements, affordability,
    industrial base, and budget constraints?
        Ms. Stiller and Admiral Edwards. Based on the requirements
    reflected in the Fiscal Year 2006 Quadrennial Defense Review (QDR), the
    Navy developed the 2007 Annual Long Range Plan for Construction of
    Naval Vessels. This plan balanced several factors, including naval
    force operational capability, affordability, and the ability of the
    shipbuilding industrial base to execute the plan.
        With respect to Virginia class submarines, we are committed to
    increasing the build rate at the earliest opportunity consistent with
    affordability. However, we need to ensure in recapitalizing this asset,
    we do not put ourselves in a position where we are once again faced
    with block obsolescence, which is the problem we are now facing with
    the Los Angeles class recapitalization. Today's challenge is to
    rationalize Virginia class investment in a way that provides an
    affordable ramp for its future replacement. We are pacing submarine
    procurements as we go forward so we are positioned in the future to
    address recapitalization requirements and not revisit our current
    affordability challenge.
        The requirement for 48 attack-submarines is focused on pacing the
    threat through fiscal year 2020 and the plan sustains the combined Los
    Angeles and Virginia Class submarine inventories at 48 through 2020.
    Only beyond 2020 do we drop below 48 submarines. When this drop occurs,
    there are several options the Navy can employ to mitigate the impact of
    the post-2020 inventory shortfall. The first option to consider is the
    decision to accelerate the Virginia Class procurement program and
    increase the build-rate above 2 per year for some period to avoid the
    ``bathtub'' completely. While this option would solve the problem,
    building this additional capacity earlier is an expensive option that
    addresses what is essentially a temporary problem and reintroduces the
    probability of block obsolescence in the future. This option would also
    have severe negative impacts on other sectors of the shipbuilding
    industrial base.
        Alternatively, there are management measures the Navy could
    institute in the post-2020 submarine force to ensure adequate combat
    capacity in the theater of interest. The Navy will likely take
    additional risk in non-warfighting missions in lower risk security
    environments (e.g., curtail ISR missions not associated with MCO
    constructs) to ensure a sufficient number of submarines are available
    in the theater that drives our requirement to 48 submarines. While this
    creates increased risk in those areas not fully supported by submarine
    patrols, it is risk consistent with the level of threat anticipated in
    these lower risk security environments. In addition, the Navy has begun
    shifting submarine structure towards the Pacific theater. This reduces
    response time and improves the relative availability of submarines in
    that theater. Ultimately, rebalancing the force between the east and
    west coasts of the United States provides the Navy with a more
    appropriately positioned force ready to respond to anticipated threats
    should they come to fruition.
        On balance, we have an optimum investment of resources over the
    long-term to preserve sufficient capability and capacity while
    recapitalizing other mission capabilities fundamental to operational
    success; other requirements such as carrier and surface combatant
    presence missions, CONPLAN 7500 execution, and expeditionary strike
    force operations. Trading anyone of these capabilities against
    submarines could result in the loss of a significant joint force
    enabler such as carrier presence, seabasing, or sea strike. Each of
    these joint enablers represents equally compelling demands for Navy
    resources--our current plan, as reflected in the President's budget,
    represents the best overall balance of these competing requirements and
    is therefore the most efficient allocation of available resources.

        2. Senator Talent. Ms. Stiller and Admiral Edwards, when is the
    earliest that you believe we will be able to reliably contract for two
    Virginia class submarines per year at $2 billion each, and what
    measures are necessary to achieve this level of cost performance?
        Ms. Stiller and Admiral Edwards. The option to accelerate the
    procurement of two SSNs per year to 2009 instead of 2012 was considered
    in the Navy's shipbuilding plan. This option, however, was rejected
    since it would add three submarines at a cost of $7 to $8 billion
    across the Future Years Defense Program (FYDP) at the expense of other
    vital naval programs.
        The Navy has also determined that by procuring two Virginia class
    submarines per year in fiscal year 2012 as part of a Multi-Year
    Procurement contract with Economic Order Quantity, the Navy will
    realize a cost savings equal to about half of what is needed to meet
    the Department's goal of $2 billion (in fiscal year 2005 dollars) per
    hull.
        The Navy has identified five areas that must be addressed to
    achieve the remaining cost savings in order to meet the fiscal year
    2012 threshold of $2 billion (in fiscal year 2005 dollars). First, the
    General Dynamics Electric Boat and Northrop Grumman Newport News team
    can redistribute work to the most efficient operations to maximize
    savings--a modification that is allowed under the current teaming
    arrangement. Second, the Navy must refrain from making requirements
    changes to the Virginia class design. Requirement creep can add
    significantly to the cost of a submarine. Third, the shipbuilders must
    meet the contractual requirements and apply lessons learned to the
    submarines now under construction. Fourth, the Navy and the
    shipbuilders must continue investing in producibility improvements
    through the capital expenditure funds set aside in the current Multi-
    Year Procurement contract. Fifth, the Navy needs to invest in design
    changes that will make the submarines easier, and therefore less
    costly, to build. These actions in concert with a continued, stable two
    per year build profile will help the Navy achieve the $2 billion (in
    fiscal year 2005 dollars)/boat target planned for in fiscal year 2012.

                          leasing foreign-built ships
        3. Senator Talent. Secretary Etter and Ms. Stiller, the Department
    executes long-term leases for foreign-built ships in support of
    military sealift requirements. These renewable, long-term leases,
    slightly less than 5 years in duration, potentially detract from U.S.
    shipyard construction of commercial-type ships for military
    application. Could you please place in context the extent to which the
    Navy, and its components, rely upon leasing foreign-built ships to meet
    its requirements?
        Dr. Etter and Ms. Stiller. The Military Sealift Command (MSC)
    charters ships from the commercial market to meet the requirements of
    DOD components and respond to changes in the operational environment.
    Very few commercial ships with high military utility have been
    constructed in U.S. shipyards in the past 20 years. Consequently, when
    MSC has a requirement to charter a vessel, nearly all of the offers are
    for foreign-built ships. In cases where the need is immediate or
    subject to change, due to the operational environment or other factors,
    a commercial charter is the only practical way to obtain the capability
    rather than a new construction program which can take up to 5 years for
    delivery of the first vessel. Current policy requires the use of U.S.
    flagged vessels before foreign flagged vessels, regardless of where
    they are built. U.S. flagged vessels may be built either in the United
    States or foreign shipyards but must meet, at a minimum, documentation
    requirements under 46 U.S.C. to qualify for U.S. flagging.
        MSC presently has 23 U.S. flagged vessels, but no foreign flagged
    vessels under charter to meet a variety of DOD requirements. Although
    all 23 vessels are operated by U.S. companies, only 7 of these ships
    were constructed in the United States. Additionally, all of these ships
    are crewed by U.S. citizen mariners and any reflagging work to bring
    the ships up to USCG standards was completed in U.S. shipyards.
        In those cases where we have long-term, consistent requirements
    that are best satisfied by the construction of new purpose-built
    vessels, then we have established and funded programs such as the Large
    Medium Speed Roll-on/Roll-off ships and the Dry Cargo/Ammunition
    Ships--T-AKE class, to meet these requirements. We are also moving
    ahead with the acquisition of the Joint High Speed Vessel as a
    replacement for the capability currently fulfilled by the Westpac
    Express Charter.

        4. Senator Talent. Secretary Etter and Ms. Stiller, what is the
    long-term plan regarding renewal of leases for these ships, and what
    would be the impact if the option to renew these leases were limited to
    2-year duration?
        Dr. Etter and Ms. Stiller. The Navy, with DOD, continuously
    evaluates the appropriate mix of government-owned and leased ships to
    meet U.S. contingency requirements, as well as peacetime classified or
    special moves (Patriot missiles, M-42 refueling containers, etc.). We
    are undertaking further excursions from the MCS that will evaluate the
    lift requirements and available lift capabilities to provide greater
    definition for out-year requirements. In the case where we have long-
    term, consistent requirements that are best satisfied by the
    construction of new purpose-built vessels, we will continue to
    establish and fund programs such as Joint High Speed Vessel as a
    replacement for the capability currently fulfilled by the Westpac
    Express Charter.
        With respect to limiting leasing periods to 2 years, the Navy
    opposes this legislation as it would have a severe negative impact on
    the ability of MSC to carry out its mission of providing sealift
    support for a wide variety of DOD activities. If enacted, the
    legislation would result in either mission degradation or an
    exponential increase in cost to the taxpayer. Generally, savings are
    achieved by longer charter contracts. Further, to promote a viable U.S.
    merchant marine and support a vigorous and competitive domestic ship
    construction and conversion industry longer leases are essential as an
    incentive for commercial carriers to invest in either U.S. built new
    construction or reflagging of foreign vessels.

        5. Senator Talent. Secretary Etter and Ms. Stiller, how would
    changes to this practice affect long-term plans for recapitalizing
    these support ships?
        Dr. Etter and Ms. Stiller. MSC charters ships from the commercial
    market to meet the requirements of DOD components and respond to
    changes in the operational environment. In reality, very few commercial
    ships with high military utility have been constructed in U.S.
    shipyards in the past 20 years. Consequently, when MSC has a
    requirement to charter a vessel, nearly all of the offers are for
    foreign-built ships. In cases where the need is immediate or subject to
    change, due to the operational environment or other factors, a
    commercial charter is the only practical way to obtain the capability
    rather than a new construction program which can take up to 5 years for
    delivery of the first vessel.
        Changing the current rules regarding leasing would have a severe
    negative impact on the ability of MSC to carry out its mission of
    providing sealift support for a wide variety of DOD activities. Any
    further restriction would result in either mission degradation or an
    exponential increase in cost to the taxpayer. Additionally, legislation
    further limiting the period of leases may be counterproductive to
    promoting a viable U.S. merchant marine and supporting a vigorous and
    competitive domestic ship construction and repair industry. Longer
    leases are essential to incentivize commercial carriers to invest in
    either U.S. built new construction or reflagging of foreign vessels.

                                   seabasing
        6. Senator Talent. Admiral Edwards, the Navy's seabase concept
    takes shape in the fiscal years 2007-2011 FYDP, with 12 Maritime
    Prepositioning Force (Future), (MPF(F)) ships plus sea-shore connectors
    included in the future force structure plan. Total cost for this
    capability is approximately $15 billion. In the course of the past
    year, the concepts for MPF(F) ships in support of seabasing have
    changed significantly; emerging in this FYDP as one of the centerpieces
    of the future force. How do you rank this capability amongst competing
    priorities; recognizing that the increasingly significant investment in
    the seabase comes to some extent at the expense of allowing gaps to
    form in submarine, surface combatant, and expeditionary strike
    capabilities?
        Admiral Edwards. The future Navy will remain seabased, with global
    speed and persistence provided by forward deployed forces, supplemented
    by rapidly deployable forces through the Fleet Response Plan (FRP). The
    MPF(F) Squadron is only one part of the transformational seabasing
    capability as defined in the Seabasing Joint Integration Concept (JIC),
    equally important as the aircraft carriers, submarines, amphibious,
    surface combatants or logistics ships required to realize this
    transformational capability and shape our Navy to meet current and
    emerging security responsibilities. The CNO has developed a
    shipbuilding plan that balances several factors to include operational
    requirements, affordability, and the ability of the industrial base to
    execute the plan. The force structure as defined in the ``Report to
    Congress on Annual Long-Range Plan for Construction of Naval Vessels
    for Fiscal Year 2007'' was developed using a capability-based approach
    and anticipated threats for the fiscal year 2020 time period. This
    balanced approach builds the Navy the Nation needs--a Navy that is both
    affordable and meets the future national security requirements outlined
    in QDR 06 with acceptable risk. Force structure requirements were
    developed and validated through detailed joint campaign and mission
    level analysis, optimized through innovative sourcing initiatives (FRP,
    Sea Swap, forward posturing) that increase platform operational
    availability, balanced with shipbuilding industrial base requirements.

        7. Senator Talent. Admiral Edwards, General Schwartz testified that
    his priority is to ensure that the seabase ships do not become single
    mission ships with limited utility to support the Transportation
    Command's (TRANSCOM) requirements. How will you address the TRANSCOM's
    requirements in your process for defining the MPF(F) ship capabilities?
        Admiral Edwards. DOD's sealift assets support TRANSCOM's time-
    phased transportation requirements to move forces in support of
    current/future war plans/fights. These assets can be divided into three
    broad categories: (1) preposition, (2) surge sealift, and (3) follow-on
    shipping.
        As a part of a seabase, the MPF(F) squadron has primary missions to
    preposition the 2015 Marine Expeditionary Brigade and be able to
    conduct sustained joint operations from the sea. As a prepositioned and
    combatant commander (COCOM) asset, MPF(F) fully supports TRANSCOM
    mobility requirements, closing a fully deployable and combat ready
    brigade to a theater within 10-14 days without the need for a seaport
    or airport in the joint operating area and independent of host nation
    support. This reduces TRANSCOM's surge sea and airlift requirements in
    support of early delivery of joint forces to COCOMs. The primary
    sealift asset in the MPF(F), the MPF(F) LMSR variant, is similar to
    LMSRs in Army prepo or those designated as surge sealift, but is
    specialized for the needs of conducting seabased operations (with added
    magazines, troop berthing, maintenance shops, etc). As with all assets
    used in the course of a campaign, operational requirements will
    determine individual asset availability for strategic sealift and the
    COCOM will prioritize requirements and make those ships available to
    TRANSCOM for the common user pool just as is done with the MPS ships
    today.

        8. Senator Talent. Secretary Etter, the seabase is essentially a
    high-order expeditionary ``system of systems.'' How is the Department
    structured to manage the development and procurement of the full range
    of end-to-end seabase capabilities to ensure they are fully integrated
    and also support joint operations?
        Dr. Etter. The Department is structured in a manner to oversee all
    ship configuration matters ranging from the ship's initial concept to
    decommissioning. This allows us to adjudicate capabilities/requirements
    in each program to identify excess capabilities in our programs and
    halt requirements creep while keeping the entire enterprise focused on
    reducing the unit procurement costs. This structure allows us to
    balance the demands of fleet capability, shipbuilding industrial base,
    and cost.
        The Department has also instituted policies and mechanisms, across
    all appropriations, to allow for tradeoffs to occur between cost and
    requirements within our shipbuilding programs to include systems and
    subsystems. We have imposed a discipline that limits changes during the
    critical phases of the major shipbuilding programs to those related to
    safety, contractual defects, unavailable contractor furnished
    equipment, testing and trails deficiencies and statutory/regulatory
    changes.
        These actions have allowed us to control the scope and timing of
    changes in a planned manner. The Navy is also engaged with the
    shipbuilding industry and sister Services to leverage interrelated
    acquisition programs so we can reduce our research and development
    costs and gain economies in production. The Navy, as designated lead
    Service for the seabasing JIC, as it precedes through the Joint Staff
    directed Capabilities Based Assessment (CBA), is continually ensuring
    that seabasing is looked at as a joint concept and that all Doctrine,
    Organizational, Training, Material, Leadership, Personnel and
    Facilities (DOTMLPF) solution sets that are identified to address
    capability gaps, as determined by the Seabasing Functional Needs
    Analysis (FNA), address joint requirements and not Service specific
    desires.
                                     ______

               Questions Submitted by Senator Joseph I. Lieberman
                        new london center of excellence
        9. Senator Lieberman. Admiral Edwards and Admiral Locklear, I think
    we should begin to transition New London from the world's best
    submarine center of excellence to the world's best undersea warfare
    center of excellence. Concentrating the east coast submarine force
    there, and basing the Littoral Combat Ship (LCS) antisubmarine warfare
    and countermine modules there would be a good start. Devoting more
    resources to new design at Electric Boat would further strengthen the
    remarkable synergy among New London, Electric Boat, and the world's
    leading undersea expertise in the region, and would go a long way in
    preserving the industrial base. What is your reaction to expanding New
    London's mission to a center of excellence for undersea warfare and how
    can we move toward this goal?
        Admiral Edwards and Admiral Locklear. We agree that a historical
    synergy in undersea warfare exists because of the proximity of the
    Submarine Base New London, Electric Boat Shipyard, and distinguished
    educational institutions in Southeastern New England. This synergy will
    continue to be a vital component of our national strategy in undersea
    warfare dominance.
        However, the Littoral Combat Ships and their mission packages must
    be able to augment U.S. strike groups wherever they may encounter
    threats to freedom of navigation, or to provide access to littoral
    regions that may be threatened by mines, submarines, or small boats.
    Logistic and fiscal reasons dictate that we collocate our mission
    packages with the ships and their crews, both in CONUS and overseas, to
    efficiently train sailors and deploy them rapidly to meet worldwide
    threats.
        Naval Submarine Base New London, and the Naval Undersea Warfare
    Center in Newport, Rhode Island, and its research and development
    laboratories, share close ties between themselves and with the
    University of Rhode Island, the University of Connecticut, and other
    educational, research, and industrial partners in the New England
    region. We look forward to continuing those valued relationships to
    further develop undersea technologies and capabilities that may be
    incorporated into future mission module upgrades.

                              submarine fleet size
        10. Senator Lieberman. Admiral Edwards and Admiral Locklear, I
    understand that in 2005, the CNO directed a study of existing force
    structures. Based upon this assessment, 48 attack submarines presented
    an ``acceptable risk'' and also allowed an affordable plan for
    shipbuilding. In contrast, a 1999 force structure study suggested a
    submarine fleet between 55 and 62. At a subcommittee hearing of the
    House Armed Services Committee last week, Admiral Munns conceded that
    the decision to move to 48 submarines was budget driven, given that
    there are unexecuted missions due to the size of our submarine fleet.
    Admiral Munns also classified this risk as ``moderate'' rather than
    ``low.''
        Why have we moved from a larger projected fleet that generates
    lower risk to a smaller fleet that allows moderate risk? Quite frankly,
    this movement does not make much sense to me, given that China has
    increased its submarine production, and certainly the world has become
    a more complicated, dangerous place since we entered the war on
    terrorism. Please explain how a reduction in the recommended submarine
    force structure size could have occurred when it is clear that the
    demand for surveillance and reconnaissance missions has increased.
        Admiral Edwards and Admiral Locklear. As mentioned, the Navy
    conducted a comprehensive assessment of warfighting requirements across
    all ship types in 2005, culminating in the submission of the Fiscal
    Year 2007 Long-Range Plan for the Construction of Naval Vessels. This
    capabilities-based force structure assessment determined the number of
    ships needed to source joint warfighting demands across the entire
    spectrum of operations--from steady state to surge levels of effort
    supporting conventional campaigns (MCOs), global war on terror/
    irregular warfare and Homeland defense. To assess the fleet as a whole,
    the battle force was segregated into ship types and analyzed
    independently. Then using campaign-level modeling and simulation of
    OSD-approved Defense Planning Scenarios through the 2020 timeframe and
    applying ``what it takes to win'' criteria to define an acceptable
    level of risk, the minimum warfighting demands for each ship-type was
    established under the most stressful sequence of operations. This
    analysis led to an attack submarine force structure recommendation of
    48 SSNs.
        From a warfighting capabilities perspective, SSNs are just a
    portion of the force required to ensure undersea and maritime
    dominance. The significant investments in other platforms (P-8A/MMA,
    MH-60R), system modernizations, off-board netted sensors, enhanced
    undersea FORCEnet, and continued research will ensure the joint force
    maintains its critical warfare advantage against all potential threats.
    The 2005 analysis indicates a combination of these capabilities is
    required for success. From a forward presence and intelligence
    collection perspective, sophisticated new-start platforms, such as
    Broad Area Maritime Surveillance (BAMS) and MMA, provide additional
    capability and capacity to perform a subset of ISR mission sets.
        The Navy will continue to work over the next decade to identify
    solutions to mitigate projected submarine capacity risks. Potential
    options include shifting submarine homeports to areas that require the
    highest priority warfighting and forward presence demands, optimizing
    future scheduling criteria, and/or changing submarine operating tempo.
    The Navy also is transitioning to a procurement rate of two SSN-774
    submarines per year in 2012, as described in the 30-year shipbuilding
    plan. This plan will help ensure sufficient submarine capacity exists
    to maintain maritime dominance, using a wide concept of operations that
    integrates the full spectrum of Navy capabilities, without sacrificing
    other critical Navy and joint capabilities.

                           submarine industrial base
        11. Senator Lieberman. Mr. Schank, I am very concerned that this
    country is in the process of losing a critical national asset in the
    form of our submarine design and engineer workforce. For the first time
    in almost 50 years, there is no new submarine design on the drawing
    board and current design programs are near completion. Without
    foresight to ensure that our future military requirements can be met,
    today's designers will not be there when we need them. For example, at
    Electric Boat in my home State of Connecticut, almost half of the
    engineers and designers may face termination by 2008. At the Senate
    Armed Services Committee hearing on the Navy's budget earlier in March,
    Secretary Winter remarked that losing the submarine industrial base is
    an issue of ``great concern'' to him. Our undersea superiority depends
    upon the maintenance of this workforce. What can you do and how can we
    stop the erosion of this vital workforce?
        Mr. Schank. We agree that nuclear submarine design skills are a
    critical national resource and an asset that must be sustained. Given
    there is no new submarine design effort currently underway or planned
    in the near future, our country faces the risk of losing that critical
    design capability. Recognizing this, the Navy has asked RAND to address
    the problem and to offer solutions. We are in the midst of that
    research effort and should have some findings and recommendations to
    the Navy by mid-summer. The critical questions include which skills
    will be required in the future, how many of those skill should be
    sustained until a new design program begins, and how to sustain those
    resources in a cost-effective manner. I should mention that Electric
    Boat and Newport News Shipbuilding have both been very helpful during
    the conduct of our analysis and has supplied various data and
    information that is supporting our research.

        12. Senator Lieberman. Mr. Schank, how can we preserve these
    critical skills?
        Mr. Schank. Our study will identify and evaluate various ways to
    sustain the critical nuclear submarine design skills. In our work on
    basically the same issue for the United Kingdom's Ministry of Defence
    (documented in The United Kingdom's Nuclear Submarine Industrial Base:
    Sustaining Design and Production Resources, RAND, MG-326/1-MOD), we
    listed several ways that nuclear submarine design skills might be
    maintained including: conducting spiral development of the current
    class, performing continuous conceptual designs with some potential
    prototypes, designing unmanned undersea vehicles, designing diesel
    submarines, development of new technologies, and collaborating with
    allies. Of these alternatives, we believe that spiral development of
    the Virginia class and collaboration on submarine design programs with
    our allies (in much the same way that Electric Boat assisted the U.K.
    with their Astute program) are the most viable options.

        13. Senator Lieberman. Mr. Schank, several reports indicate that
    the Chinese are building new submarines with increased capabilities,
    often capitalizing on Russian designs. Why is there no new submarine
    design on the drawing board?
        Mr. Schank. This is an area RAND has not studied and I do not feel
    qualified to comment on.

        14. Senator Lieberman. Mr. Schank, how does this decision impact
    our ability to address future strategic threats to the United States?
        Mr. Schank. Again, I do not mean to avoid your question, but RAND
    has not studied this issue and I cannot make any qualified assessment.

        15. Senator Lieberman. Mr. Schank, the submarine production
    industry is not confined to the northeast. The industry that supports
    submarine production includes 4,000 companies in 47 States. Since
    decreased submarine production affects the industrial base across the
    entire country, this is an issue of national importance. Has the Navy
    conducted any studies to examine the impact of reduced submarine
    production on the Nation's industrial base?
        Mr. Schank. I am not aware of any studies of the health of the
    vendor base that supports submarine production; that question might be
    directed to the Navy. As part of our study on sustaining nuclear
    submarine design resources, we are considering the design resources of
    the nuclear and non-nuclear vendors that support the nuclear submarine
    industrial base. We have sent out survey forms to approximately 60
    vendors identified by the shipbuilders as potentially having problems
    sustaining their design resources and have received a number of the
    completed survey forms. Our study will address sustaining the design
    resources of the vendors.

        16. Senator Lieberman. Mr. Schank, how long can the submarine
    industry sustain the low rate of production?
        Mr. Schank. I believe the industrial base can survive at the low
    production rate but that there is a cost involved. That is, low
    production adds to the cost of building a submarine, or any product.

        17. Senator Lieberman. Mr. Schank, if the Navy decides that
    submarine production must be increased quickly due to escalated
    threats, do you believe the submarine industry will have the necessary
    skilled workforce to meet this demand?
        Mr. Schank. Increasing production will require an increase in the
    workforce at Electric Boat and possibly at Newport News Shipbuilding
    (depending on the status of their carrier workload). Large increases in
    the workforce may be difficult since all shipbuilders are having a
    difficult time recruiting blue collar labor for their shipyards. Also,
    there have been difficulties in the past when production of Los Angeles
    class submarines increased. New workers have lower productivity
    compared to experienced workers and they also reduce the productivity
    of the experienced workforce through required training and mentoring.
    The end result is increased costs when production expands at too fast a
    rate. Given there is a desire to go to production rates of two
    submarines a year sometime in the future and the desire to reduce the
    cost of the Virginia class submarines, there is the need for a study to
    examine how to accomplish both those goals. For example, reducing the
    construction time of the submarines currently under contract could
    reduce costs but would also require an increase in some elements of the
    workforce. The increase in workforce could be managed in a cost
    effective way such that transition to two submarines a year would not
    bring about the loss in productivity that ordinarily results from rapid
    workforce expansion.

        18. Senator Lieberman. Mr. Schank, in order to increase our
    production, we must think about getting the submarine's cost down to $2
    billion. I understand that for this to happen, we will need our
    submarine designers to make important cost-savings alterations. Only
    our designers have the critical skills to reduce the cost of the
    Virginia class. But if our designers are laid off from their jobs, how
    can we move toward producing a more cost-efficient submarine? Please
    comment on this important problem, and how we can address it.
        Mr. Schank. As mentioned above, one way to sustain nuclear
    submarine design resources is to perform spiral development of the
    Virginia class. I believe the Navy is already performing such studies
    aimed at reducing the production cost of the Virginia class.

                     rand submarine design capability study
        19. Senator Lieberman. Mr. Schank, I understand that the Navy has
    commissioned RAND to study the potential impact of losing our Nation's
    submarine design capability. I also understand that the study will be
    completed this fall. Although I am sure the study will prove
    informative, I am concerned about its timing. By this fall, Electric
    Boat may have to lay off up to 900 designers. As an author of this
    forthcoming report, if we lose almost 1,000 designers this fall, how
    will the study help preserve our submarine design industrial base?
        Mr. Schank. We, and the Navy, recognize the urgency of the study
    results and the Navy has asked us to accelerate our research. We are
    doing that and hope to have the initial results of our analysis to the
    Navy by mid-summer.

        20. Senator Lieberman. Mr. Schank, even if the RAND study
    identifies the critical skill sets that we must maintain so that we are
    prepared when we design a new submarine, how will those plans be
    implemented if designers are already losing their jobs?
        Mr. Schank. There have been, and likely will continue to be for
    some time, a drop in the number of designers and engineers at Electric
    Boat. The key issue is to determine where that reduction should end and
    how to sustain the remaining resources such that the capability exists
    when needed. Our analysis will help the Navy decide the actions
    necessary to sustain appropriate numbers of the critical skills.

        21. Senator Lieberman. Mr. Schank, please give me a preview of the
    direction your study is taking--what are some good ideas which would
    help preserve the design industrial base in this country?
        Mr. Schank. It is too early in our analysis to provide any concrete
    findings and recommendations. We do believe that the problem should be
    viewed from an industry perspective versus an individual shipyard
    perspective. We do note that Electric Boat's designers and engineers
    are supporting the new aircraft carrier program. They could also
    support other new ship design programs such as the DD(X).

        [Whereupon, at 4:56 p.m., the subcommittee adjourned.]