[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




                     U.S. GOVERNMENT PRINTING OFFICE

30-348 PDF                 WASHINGTON DC:  2007
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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\
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    \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.
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    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.]

                                 
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